Class Action Waiver is Unconsionable

Posted on July 25, 2007 by Robert Boggs

In a 6-3 opinion in the case of Scott v. Cingular Wireless Corporation (no cite yet) the Washington State Supreme Court held last week that a waiver of class actions contained in a consumer contract was unconscionable and unenforceable. The plaintiffs sought to bring a class action alleging that Cingular had overcharged consumers between $1 and $40 for roaming and hidden charges. The waiver appeared in a paragraph that mandated binding arbitration and provided that Cingular would pay the cost of the arbitration unless it was frivolous and pay the consumer’s attorney fees if the consumer recovered at least the demand amount. It then went on to say that “You and Cingular agree that You and Cingular may bring claims against the other only in your or its individual capacity, and not as a plaintiff or class member in any purported class …”

The court found that the waiver was unconscionable based on public policy grounds. The court stated that since 1971 the State’s Consumer Protection Act has encouraged consumers to be quasi-civilian attorneys general by allowing them to privately enforce the provisions of the Consumer Protection Act. They further stated that the courts have favored class actions as the only way that consumers can take action against an offending company when individual claims are so small that they are not worth bringing. By waiving class actions the contract in effect prohibits anyone from bringing an action against Cingular and thereby defeats the intent of the State’s Consumer Protection Act.

But wait a minute said the dissent. The contract provided that Cingular, if the plaintiff recovered at least the demand amount, would pay the plaintiff’s attorney fees and costs. Therefore even though the amount sought is small the plaintiff is able to bring the suit because of this fee provision. But, said the majority, the plaintiff would have to collect every dollar of its demand. If the demand was for $100 and the recovery was for $99 no attorney fees would be paid and therefore it would all be too risky for the plaintiff/consumer.

The dissent predicted that this case was a sweeping rule that would invalidate all such clauses without regard to the specific terms of the contracts. I do not think so. If Cingular would change this paragraph to the effect that it would pay all attorney fees no matter what, then, if the majority means what they say, the paragraph should pass muster.

 

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Your duty is to the client, not cocounsel!

Posted on October 20, 2006 by Robert Boggs

On Thursday of this week the Washington State Supreme Court issued an opinion on a case of interest to the legal profession. The case was Mazon v. Krafchick  (2006). Mr. Mazon and Mr. Krafchick were two attorneys who partnered up on an electrocution case. They divided up their responsibilities. Mr. Mazon was to draft the complaint and Mr. Krafchick was to file and serve the same. Mr. Mazon drafted the complaint and Mr. Krafchick filed the suit. It was on the eve of the statute of limitations. Once the suit was filed, under Washington rules,  the statute of limitations would have been tolled 90 days for service of process. Unfortunately Mr. Krafchick served the suit one day past the statute of limitations and of course the case was subsequently dismissed. Mr. Krafchick’s paralegal was in charge of seeing that the complaint was served and apparently told Mr. Krafchick that it had been served timely when in actuality it had not.

The client sued both attorneys for malpractice. The suit was settled by the attorney’s malpractice carrier which happened to be the same company for both attorneys. The total payout was $1.3 million dollars of which $1,250,000 was assigned to Mr. Krafchick and $50,000 was assigned to Mr. Mazon.

 Mr. Mazon then sued Mr. Krafchick for the lost contingency fee on the case ($325,000), his insurance deductible and the $50,000. The Supreme Court upheld the trial court’s dismissal of the case on summary judgment.

            The Supreme Court ruled that the attorneys had no duty to each other only to the client. They stated:

Thus, the court rejected Mazon's claim on the basis that recovering damages for a prospective contingency fee lost through a misfeasance of cocounsel assumes the duty to conduct the lawsuit in a manner that does not diminish or eliminate the fee each expects to collect.  We agree a duty to protect prospective fees would create potential impermissible conflicts with the duty of loyalty the attorneys owe their clients.

As cocounsel, both attorneys owe an undivided duty of loyalty to the client.  The decisions about how to pursue a case must be based on the client's best inerest, not the attorneys'.  The undivided duty of loyalty means that each attorney owes a duty to pursue the case in the client's best interest, even if that means not completing the case and forgoing a potential contingency fee.

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