Monthly Archives: May 2012

New Baby Spinach Recall by California-based Taylor Farms; Possible Salmonella Contamination

New Baby Spinach Recall by California based Taylor Farms; Possible Salmonella Contamination

Taylor Farms Issues Recall for Baby Spinach

Spinach-lovers beware: Taylor Farms Retail, Inc. is recalling Organic Baby Spinach after a U.S. Dept. of Agriculture test showed potential contamination with Salmonella. Taylor Farms is based out of Salinas, California.

Salmonella can cause serious and sometimes fatal infections in young children, frail or elderly people, and others with weakened immune systems.  Salmonella infections often result in fever, diarrhea (which may be bloody), nausea, vomiting and abdominal pain beginning 12-72 hours after infection.

The illness usually lasts four to seven days.  Salmonella can also infect the bloodstream and produce severe illnesses such as arterial infections (i.e., infected aneurysms), endocarditis and arthritis.


Compact Disposal Wars: InSinkErator Sued for Antitrust Violations by Competitor

Compact Disposal Wars: InSinkErator Sued for Antitrust Violations by Competitor

Compact Disposal Wars

Call it a disposal food fight. Compact disposal InSinkErator, installed in what seems to be every kitchen in America, has been sued by a competitor manufacturer of compact disposals, alleging anti-trust violations.

Anaheim Manufacturing, which says it is the nation’s second-largest food waste disposer manufacturer,  filed a lawsuit against InSinkErator’s parent company, St. Louis-based Emerson Electric Co., accusing Emerson of monopolizing the U.S. market for food waste disposals.




Netflix Agrees to Delete Users’ Video Histories and Queue Data As Part of Privacy Class Action Settlement

Netflix  Agrees to Delete Users Video Histories and Queue Data As Part of Privacy Class Action Settlement

No More Archived Histories and Queues

Netflix, as part of a settlement over privacy violations alleged in a class action brought last year, has agreed to delete users’ video history and queue data within 1 year of their termination of hte service.

Last year, the class action lawsuit was brought, accusing Netflix of violating the 1988 Video Privacy Protection Act (VPPA), which makes it illegal for video rental services to disclose viewers’ video habits without written consent.   Netflix recently settled the lawsuit for $9 million.

The VPPA has been a relic of the Reagan era, being signed into law after Reagan’s Supreme Court nominee Robert had his video rental history leaked and published. 

So, Netflix users, once you cancel your Netflix accounts, from now on, Netflix will delete your vidoe rental history and queue history within a year after your cancellation.   

Nieman Marcus Sued: Scorned Woman’s Lawsuit Alleges Skimming Profits and Refusal to Accept Return of $1.5 Million of “Gifts”

Nieman Marcus Sued:  Scorned Womans Lawsuit Alleges Skimming Profits and Refusal to Accept Return of $1.5 Million of Gifts
Nieman Marcus Sued

Luxury department store Nieman Marcus has been sued by a Dallas woman, Patricia Walker, for refusing to take back $1.4 million worth of merchandise. Apparently, Walker was in a traffic accident and spent three years recovering. Her husband at the time, Robert Tennison, began showering her with piles of gifts from Nieman Marcus.  Little did Walker know, however, that Tennis was having a secret affair with Favi Lo, Walker’s personal shopper at Nieman Marcus.  

 Tennison’s “gifts” purchased for Walker were made using her account, and earned Favi Lo very generous commissions from the sales.  When Walker attempted to return all of the gifts, Nieman Marcus refused without explanation. 

The upscale chain’s return policy is: ” If for any reason you are not satisfied, we will gladly accept your timely return of unworn, unwashed, or defective merchandise. Returned merchandise should include the vendor packaging and tags and be in the same condition as when it was received. Used merchandise cannot be returned unless defective. A pickup and/or restock fee may apply.”

Nieman Marcus Sued:  Scorned Womans Lawsuit Alleges Skimming Profits and Refusal to Accept Return of $1.5 Million of Gifts

Patricia Walker, Looking Refreshed

To get out of accepting the return, it appears that Nieman Marcus must take the position that the gifts were worn, washed, or used.  From Walker’s perspective, receiving a gift from a spouse is nice gesture;  but receiving a “gift” that a spouse purchases with your own money, while earning a commission for a store clerk with whom the spouse is having an adulterous relationship, seems to be slightly less than kind.  Although Nieman Marcus may be taking a hard line in refusing to accept return of the products, the real wrongdoers appear to be the husband or the personnel shopper, not Nieman Marcus.  I guess the lesson here is to keep an eye on either husband, personnel shopper, or hope that a traffic accident does not leave you bed-ridden for three years.

Lawsuit against Mary J. Blige’s Troubled Charity Raises the Issue: The Six Warnings Signs of an Irresponsible Charity

Lawsuit against Mary J. Blige’s Troubled Charity Raises the Issue:  The Six Warnings Signs of an Irresponsible Charity

Charity Problems for Mary J. Blige

The charity founded by R&B singer Mary J. Blige, the Foundation for the Advancement of Women Now, has been sued for “losing” $250,000 by the lender, TD Bank.  Apparently, the Foundation not only defaulted on the huge loan taken out from TD Bank, but it also has other management problems.  According to a recent NY Post article:

- The Foundation has now been sued by musicians who were stiffed for their performances at a 2011 fundraising gala.

- The Foundation failed to properly file its proper federal tax return with the IRS.

- It cannot account for $60,000 of perfume sales.

- Is presently going a change in “management.”

Some of the big-dollar donors to Blige’s charity have been Wal-Mart, Gucci, and Jay-Z, who sat on the board for a period of time, along with Jada Pinkett Smith.

The news about Mary’s charity raises some interesting issues, including ones I have dealt with in doing legal investigations of charities-gone-awry.  How can you tell if the charity you are giving to is responsible with donations, managed properly, and actually fulfilling the mission it publicizes to the outside word? Here are some warning signs.

Warning Sign #1 – Unusual Tax Records.  This is rarely an issue for large, internationally-known charities, such as Goodwill, Salvation Army, or Red Cross. But with smaller charities, including private foundations, taking a peek at the charity’s tax returns and other IRS documents can be extremely illuminating.  All public charities and private foundations are required by IRS laws to document their donations, distributions, and other activities, and make those records available to the public.  Through the review of IRS documents, donors can gain easy access to the inner-workings of a charity, specifically to identify who actually runs the charity, its members, their contributions, its donations, and its distributions.  These documents are publicly available, and can be accessed from various online sites.   Unusual tax records, such as insufficient documentation, odd donations, or unusual distributions tend to indicate that a charity is not being managed properly, or has lost its focus.  For example, in 2009, Mary J. Blige contributed $25,000 to her charity only, despite having album sale and performances totaling $43.5 million in 2008, according to the NY Post.  The donation of such small amounts to a charity by the principle (and named) donor could indicate that the charity or its mission is not serious.

Warning Sign #2 – High Turnover in Board Members.  The old saying is that charities are always in need of board members who can contribute the “Three T’s” – time, treasure, or talent.  But the relationship is often synergistic – most professionals who serve as board members with prominent, successful charities derive considerable benefits from such affiliations. High turnover among  board members, however, tends to be a bad sign. It could mean that board members who get into the charity find themselves looking for a way out.  It could also be a sign that the charity operates in a way that does not induce directors to stay long-term.  This has bad consequences.  Continuity among board members help give charities long-term stability, direction, and vision.

Warning Sign #3 – Incomplete or Unavailable Accounting Records.  A solid charity should always be able to give its donors, members, or officers a clear and accurate picture of its incoming donations, outgoing distributions, and expenses, including the percentage of its administrative costs vis-à-vis total donations, and what percentage of donations actually directly benefit the charity’s primary beneficiaries.  Bad charities struggle with these basic accounting principles.  Money goes “missing,” donations are not tracked properly, it is unclear where funds are going, and it is entirely uncertain whether the charity is even solvent.  These are signs that the charity is either being negligently overseen by board members who are not paying attention, or that the charity lacks basic financial management.

Warning Sign #4 – Wasted Funds.  Irresponsible charities not only have trouble managing money, they often squander valuable donations.  Some classic  examples involve the charity using significant funds for projects that are not really related to the purpose of the charity, holding extravagant events that seem disproportionate to the goals the charity seeks to accomplish,  or spending funds without the knowledge and approval of board members.  In some cases, charities can be managed so poorly that administrative costs end up eating into the bulk of donations.  Ultimately, charities are expected to serve their intended beneficiaries.  A charity that spends more simply to remain in operation than it does serving its intended beneficiaries could be suffering from irresponsible management.

Warning Sign #5 – Conflicts of Interest.  Another nasty trait of an irresponsible charity is its participation in events, transactions, or dealings that pose an unmistakable conflict of interest. These situations usually involve an individual closely tied to the charity who engages in self-dealing  or undertakes projects that satisfy the individual’s personal interests at the expense of the charity.  For example, a president of a charity that runs his own personal side-business out of the charity’s office, using resources and utilities paid for by the charity’s donations, is engaging in self-dealing.  A charity director who hires a family member that is paid wages from the charity’s donations could be engaging in a conflict of interest transaction.  There are many other examples.  Conflicts of interest among a charity’s leadership can be especially insidious because the individuals involved tend to take steps to conceal their activities, or understate the magnitude of the conflict of interest.  This sort of behavior often manifests itself by the individual taking control  over certain affairs, and then refusing to let anyone else become involved in them, or whitewashing procedures intended to disclose conflicts of interest.

Warning Sign #6 - Widespread Cluelessness.  Finally, an irresponsible charity can usually be identified simply through speaking to its board members, staff, and officers.  The governing body of a charity should not be clueless – they should know basic information about the charity, such as its purpose, mission, major projects, upcoming events, and the identities of all other board members, staff, and officers.  Charities in which there is widespread cluelessness about these facts are often charities that have de-railed off track.  Cluelessness can be a sign that the people involved with the charity are not paying attention or are left in the dark about the activities of the charity.  This can be dangerous not only to the charity’s donors, but to the board members, employees, and officers themselves.  Board members, officers, and employees that are either admittedly or unknowingly “asleep at the switch” expose themselves to liability, should something go wrong.  For some charities, this could mean a lawsuit; for others situations in which significant funds are being funneled, laundered, or misused, criminal charges can  result and jail sentences sought.

Mary J. Blige’s charity may be in some turmoil for the time being, but things could turn around.  For individuals wishing to give funds, goods, or services to charities, there is no reason to be overly suspicious – there are many reputable charities throughout the country that are well-managed and effectively serve their beneficiaries.  But keeping the warning signs above in mind could help identify irresponsible charities that have some growing yet to do.

Psychiatrist Sued for Giving Sexual Orientation “Conversion” Therapy – WITHOUT Patient’s Consent

Psychiatrist Sued for Giving Sexual Orientation Conversion Therapy   WITHOUT Patients Consent

Max Hirsh

This story is so sad, we don’t even know where to begin with it. Apparently, the Southern Poverty Law Center has sued an Oregon psychiatrist for practicing “conversion therapy,” intended to “change” the sexual oirentation of troubled teenage boys and girls, on a young patient, without the patient’s consent.

The patient was Max Hirsh, an openly gay young man.  Hirsh reported that when he would visit his psychiatrist, the topics would often veer into the topic of his sexuality, with the psychiatrist insisting that Hirsh was not gay, that Hirsh had failed at sports and with teenage women, and that he had a deficient relationship with older men.

The psychiatrist in question was not named,  which is not unusual in ethics complaints, as these are made to rectify the inappropriate conduct by the professional, without creating a public spectacle of the situation.


The 2-Minute Guide to the $2.5 Billion Securities Fraud Lawsuit Against Facebook: The Facts Facebook “Hid” from Ordinary Investors

The 2 Minute Guide to the $2.5 Billion Securities Fraud Lawsuit Against Facebook: The Facts Facebook “Hid” from Ordinary Investors

More Money, More Problems

Last week, a class action securities fraud lawsuit was also brought against Facebook in connection with the Facebook IPO, initiated by the law firm that obtained a $7 billion settlement with Enron.   The lawsuit was brought not only against Facebook, but also personally against Mark Zuckerberg and several others, including Facebook’s investment bank team and underwriters, such as Morgan Stanley.  The lawsuit alleges that Facebook and its chief investment team at Morgan Stanley failed to provide critical facts about the Facebook IPO with ordinary investors, but shared those sensitive facts with Morgan Stanley’s preferred investors.     

The class action lawsuit papers offer a good bit of detail about the nature of the omitted facts.   They are essentially as follows:

  • Facebook made representations to potential investors in its Prospectus and other IPO paperwork identifying certain events as “risks” that “could” lower Facebook’s revenues.  
  • These scenarios included more users accessing Facebook via mobile means (i.e., on their cell phones);  ad space purchasers not being given clear metrics or measurements about how much value they were getting out of purchasing Facebook ads; new laws or regulations that would make Facebook’s operations more difficult, and other events.  Facebook stated that these and other events could drive down their revenues and make the comapny less profitable over the long-term.
  • The main representation at issue in the class action involves the risk of more users using mobile devices to access Facebook. Apparently, Facebook disclosed in its SEC filings that it makes more money when users access Facebook on their computers rather than their cell phones and other mobile device, because there are more advertising opportunities available on the web-page version of Facebook. 
  • The class action alleges that at the same time Facebook was describing these events, including increase mobile use, as mere “possibilities,” they were happening or had substantially happened already.   The lawsuit alleges that Facebook was actually already undergoing a sharp decline in revenues, and had in fact told its underwriters to lower their revenue forecasts, because so many users were using Facebook via mobile decides.
  • Morgan Stanley, in the middle of the IPO roadshow, apparently became aware of the huge reduction in revenues due to the increase in mobile users of Facebook, and cut its revenue estimates.  According to the lawsuit papers, Morgan Stanley’s mid-stride cut in forecasts was highly unusual and a rare occurrence in the IPO world. 
  • Facebook ended up filing amended IPO paperwork with the SEC.
  • The lawsuit alleges that Morgan Stanley’s news about Facebook’s revenue problems were not shared broadly, and instead, shared with only preferred investors.
  • According to the lawsuit, ordinary investors who were not given any notice of the problems with Facebook’s revenue models simply bought the shares on May 18, 2012, when Facebook went public, resulting in a multi-billion dollar windfall to the Facebook team, its investment bankers, and underwriters.  The lawsuit asserts that Morgan Stanley’s “preferred” investors knew about the problems with Facebook’s revenue models, and could plan their investment strategy accordingly (in some cases, short-selling shares), while ordinary consumers were left in the dark, and thus, suffered monetary loss. 
  • The class action estimates the losses made by ordinary investors to be approximately $2.5 billion.

 If the facts alleged by the lawsuit are true, it could very well constitute securities fraud.  As has been the case with short-selling on prior occasions (including the subprime mortgage crisis), it would be the very essence of securities fraud for wealthy investment banks to turn a profit based on the ignorance of ordinary purchasers of Facebook stock about the fact that Facebook was having revenue problems pre-IPO. 

 Flurry of Investigations. Since then, there has been a blizzard of activity as a number of authorities have announced investigations of the Facebook IPO.  The Financial Industry Regulatory Authority has announced it intends to review the negative news Morgan Stanley shared with institutional investors in the days before the IPO.   The SEC also announced that it would be “exploring issues” surrounding the Facebook IPO, without providing specifics.  Congress has opened a congressional inquiry, and so has the State of Massachusetts.

 Next Steps in the Lawsuit.  As far as the lawsuit is concerned, once the defendants are all properly served with summonses, they will have about 30 days to respond, though they could ask for extensions of time to do so.  The New York federal court overseeing the matter will probably set an initial status conference which will establish the litigation dates and deadlines in the matter.  Once the discovery (fact-gathering)  process begins, Facebook users and investors may obtain a much clearer picture of the facts that were given to preferred investors, but not ordinary investors, and whether the omission is “material” enough to constitute securities fraud under the 1933 Securities Act. 



Another Federal Judge Strikes Down Defense Against Marriage Act

Another Federal Judge Strikes Down Defense Against Marriage Act

Two Down, Many to Go

Another federal court judge has ruled that the Defense of Marriage Act is unconstitutional.   U.S. District Judge Claudia Wilken has ruled that DOMA, passed in 1996, violates constitutional laws because it denies  federal benefits to same-sex spouses married under California law, according to The Huffington Post.

This past February, a San Fransisco judge also declared the federal law unconstitutional in a separate case. The ruling is under appeal and set to go before the 9th U.S. Circuit Court of Appeals in September.


Delta Airlines Sued by Petowner for Cooking Dogs Flown in Cargo

Delta Airlines Sued by Petowner for Cooking Dogs Flown in Cargo

Dogs Dead After Flight on Delta

Delta Airlines has been sued by a Utah petowner, Barbara Burgett,  for the way it handled her 11 dogs (1 male and 10 puppies) that were flown in cargo.   Apparently, the dogs were being shipped internationally from Hungary to Salt Lake City, and three died by the time they arrived. Burgett blames Delta for failing to give them water, food, and keeping them in roasting 120 degree temperatures for many hours.

Two things.

Bulldogs Flying from Hungary? First, I am surprised that Delta even permitted the dogs (that were French Bulldogs) to be shipped internationally. These days, most airlines do not allow a variety of bulldog breeds from being shipped via air at all, much less internationally.  The reason is that bulldogs have very short snouts, meaning that they have more restrictive air and nose passages, which prevents them from being able to get enough air when they are in high altitudes and because of  stress and hyperventilation that airline travel can cause animals.  A number of airlines ban various bulldog breeds  and other short-snouted breeds from traveling in cargo.  Because these dogs are too large to travel in coach as a carry-on, they can end up with no way of being able to travel via air.

Pets as “Property.” The other big issue for this petowner is going to be collecting damages from the lawsuit – Burgett’s lawsuit is apparently seeking $4 million.   As hard as it is to hear, pets are treated as “personal property” by the law, meaning that a petowner who loses their pet is only usually entitled to attempt to collect the amount the paid for the pet, and possibly vet expenses.  Although losing a pet can be like losing a family member, in the eyes of the law, pets are only treated as property, and in a lawsuit, you can usually only recover what you paid for the property.   Unless Burgett paid $4 million for the dogs, which would be outrageously high, she will have little chance of actually recovering that much as compensatory damages.   

When we flew our dogs from the mid-west to the west coast in the summertime, we were worried about exactly the same unfortunate circumstances that befell this woman.  Although it is not common for dogs to die during airline travel, it does affect different breeds more often than others. 

So please, owners of short-snouted dogs – beware of the risks of flying your dogs and ship them via air only when necessary and during cool seasons if you have to.


Wilmer Valderrama Sued for Being a Noisy Neighbor

Wilmer Valderrama Sued for Being a Noisy Neighbor

Valderrama Accused of Being a Bad Neighbor

Former “That 70′s Show” star and Lindsay Lohan hearthrob Wilmer Valderrama has been sued for being a bad neighbor.  Apparently, Valderrama has been throwing “wild parties” at his home, refusing to take his neighbor’s noise complaints seriously.

Valderrama’s legal woes raise a good point – what can you do when you get stuck with a bad neighbor?

Rentals and Condos. It is generally easier dealing with a bad neighbor when living in apartment communities, condos, or townhouse properties.  Usually, the property management sets forth rules requiring quiet hours between certain times, like 10 PM – 6 PM, and prohibiting music or noise to be heard from outside of the tenant’s unit.   Tenants are obligated to abide by rules and regulations when they move in, and violations are generally assessed as fines against the property owner.

Homes and Homeowners. But when living next door to a noisy homeowner, there are fewer options.  Noise violations can be reported to local non-emergency law enforcement authorities, or a private security company, if one is hired by a homeowner’s association or community.   However, the only real legal option is to bring a lawsuit for nuisance, similar to the one that was brought against Valderrama.  Nuisance lawsuits essentially make a claim that a propertyowner engages in such offensive activity on the property that it prevents the complaining neighbor from quiet enjoyment of their own property

Nuisance  lawsuits are not easy to prove, and damages usually are not recoverable — meaning that the relief given to the complaining party is often an injunction, which is basically a permanent restraining order barring the noisy neighbor from making more noise.  But, if the noisy neighbor disregards the injunction order, the affected neighbors usually have to go back to court and ask that the court hold contempt proceedings or issue sanctions for the noisy neighbor’s disobedience of court order.  It can all be very expensive.

 Alternative non-legal ways of handling noisy neighbors is attempting to talk to them, or making requests in writing.  But these can lead to friction and confrontation, especially if there are age, lifestyle, or other disparities between the neighbors.   For Valderrama’s neighbor, talking did not work, neither did writing letters.  Lawsuits are often the last resort, but sometimes they may be the only way to get uncoooperative neighbors to pay attention.