Judge announces compensation plans for tens of thousands of residents affected by one of America’s worst public health cases.
A federal judge has approved a $626m settlement for victims of the lead water crisis in Flint, Michigan, in a case brought by tens of thousands of residents affected by the contaminated water.
Announcing the settlement on Tuesday, district judge Judith Levy called it a “remarkable achievement” that “sets forth a comprehensive compensation program and timeline that is consistent for every qualifying participant”.
Most of the money will come from the state of Michigan, which was accused of repeatedly overlooking the risks of using the Flint River without properly treating the water.
“This is a historic and momentous day for the residents of Flint, who will finally begin to see justice served,” said Ted Leopold, one of the lead attorneys in the litigation.
It’s been four years since a chemical compound called GenX was discovered in the Cape Fear River and area drinking wells. GenX has been used by Fayetteville company Chemours to make non-stick cookware.
According to a recently released report from the EPA, the effect on humans is potentially worse than first thought.
“Animal studies following oral exposure have shown health effects including on the liver, kidneys, the immune system, development of offspring, and an association with cancer” the report stated.
“The people who are experiencing those injuries and diseases are very concerned that it’s the water that they’ve been drinking, in some cases for 40 years, that’s causing this,” said Gary Jackson. He is an attorney with the law firm James Scott Farrin. His team joins two other law firms that represent a consolidated federal class-action lawsuit against Chemours and parent company Dupont.
Beginning in 2019, the EPA stopped releasing crucial toxics reports. Even agency staffers have a hard time accessing them.
The Environmental Protection Agency has withheld information from the public since January 2019 about the dangers posed by more than 1,200 chemicals. By law, companies must give the EPA any evidence they possess that a chemical presents “a substantial risk of injury to health or the environment.” Until recently, the agency had been making these reports — known as 8(e) reports, for the section of the Toxic Substances Control Act that requires them — available to the public. In 2017, for instance, the EPA posted 481 substantial risk reports from industry on ChemView, a searchable public database of chemical information maintained by the agency. And in 2018, it added another 569 8(e) reports to the site. But since 2019, the EPA has only posted one of the reports to its public website.
During this time, chemical companies have continued to submit the critical studies to the agency, according to two EPA staff members with knowledge of the matter. Since January 2019, the EPA has received at least 1,240 reports documenting the risk of chemicals’ serious harms, including eye corrosion, damage to the brain and nervous system, chronic toxicity to honeybees, and cancer in both people and animals. PFAS compounds are among the chemical subjects of these notifications.
An EPA spokesperson acknowledged the problem in an emailed response to questions from The Intercept. “Due to overarching (staff and contractor) resource limitations, the agency was not able to continue the regular publication of 8(e) submissions in ChemView, a very manual process, after 1/1/2019.” The statement went on to note: “The TSCA program is underfunded. The previous Administration never asked Congress for the necessary resources to reflect the agency’s new responsibilities under amended TSCA. These shortfalls have implications that matter to all stakeholders, not just industry.” Despite the funding challenges, the EPA pledged to try to rectify the situation.
June 22 was a great day for Alfi, Inc, a tech company in Miami Beach, Florida, which sells facial recognition advertising software. After going public in early May at $3.75 per share and dipping to a low of $2.41, the stock had risen above $16.
On June 21, an article published on Yahoo! reported that Alfi’s stock was going “parabolic,” citing a bullish video interview conducted by Benzinga, a financial news outlet. “We’ve been given a big bat and we’re swinging,” Alfi’s chief executive, Paul Pereira, was quoted as saying. The original Benzinga video included air horn sound effects for emphasis.
What the Yahoo! story didn’t report was that, starting June 10, Alfi had paid Benzinga to promote the company with articles and videos. Benzinga, which is based in Detroit and employs an editorial staff of around 30 people, publishes hundreds of stories per day, including paid promotions written by a dedicated team, Luke Jacobi, Benzinga’s director of operations, told CJR. One sponsored content package, including videos and “review style press release article[s]” to be syndicated to websites including Yahoo!, costs $5,750, according to marketing materials shared with advertisers.
While some astute Yahoo! readers may have noticed the small Benzinga logo near the headline, few are likely to know what it means, or that Alfi had paid for the original story. The original and syndicated versions were nearly identical, down to the same lead image of a neon arrow pointing upwards. But there was one important difference. The Benzinga version included a small advertiser disclosure, while the syndicated version on Yahoo! did not.
This Alfi story was one of more than a hundred paid promotional articles originally published by Benzinga, then syndicated to better-known financial news websites like Yahoo!, Yahoo! Finance, and Markets Insider (from the website Insider) to appear without disclosures over the past six months, according to a review by CJR. It’s not clear how many readers saw them, but, in the company’s marketing materials, Benzinga says it has received 150 million monthly impressions through its syndication partnerships.
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The Securities and Exchange Act of 1933 made it illegal to promote a stock in exchange for payment without disclosing that payment, a response to crooked tip sheets and newspaper items of the day. Joshua Mitts, a professor at Columbia Law School who advises the Department of Justice on market manipulation and securities fraud violation, says the act of digital syndication makes the enforcement of the rules more complicated.
“These duties apply to the speaker — to the one injecting the information into the market,” said Mitts. Initially, that speaker is Benzinga, with proper disclosure. Then, it’s a secondary site, without one. “Now you’re asking a different question, a very interesting one, which is, ‘what about a platform that’s rebroadcasting what is in effect — has now become — a materially misleading statement?’”
“It’s a difficult claim for a regulator to bring,” said Laura Posner, a lawyer specializing in securities litigation and investor protection.
In 2017, the SEC charged 27 firms and individuals for promoting stocks on news websites in exchange for undisclosed payments. The stories appeared on sites including Yahoo! Finance and Benzinga, according to the SEC — but the sites themselves weren’t named as defendants in the complaint. In an “investor alert” at the time, the SEC warned readers to look out for more undisclosed paid promotions in the future. “Even if articles on an investment research website appear to be an unbiased source of information or provide commentary on multiple stocks, they may be part of an undisclosed paid stock promotion,” the warning read.
WHAT TO KNOW:
- Arbitration cases grow in 2020, industry group report shows
- House lawmakers want to stop mandatory agreements
The number of employment disputes resolved in arbitration climbed by roughly 66% between 2018 and 2020, according to new data, despite pressure from the #MeToo movement and efforts by Fortune 500 companies and lawmakers to curb agreements that keep claims out of court.
Companies closed just over 5,000 workplace arbitration cases in 2020, up from more than 3,000 cases in 2018, according to an American Association for Justice report released Wednesday.
The data appears to back a growing trend of companies using arbitration agreements to resolve worker claims through private dispute resolution. The practice has been bolstered by U.S. Supreme Court decisions over the past decade, but it’s been targeted in the wake of the #MeToo movement by worker groups, shareholders, and legislatures as harmful to workers because of a lack of transparency in the process.
Some employers—including Facebook Inc., Alphabet Inc.’s Google, Microsoft Corp., Uber Technologies Inc., Lyft Inc., and Wells Fargo & Co.—have said they would drop mandatory arbitration for sexual harassment and assault claims. But companies also have dug their heels into enforcing arbitration pacts when workers allege wage-and-hour and other types of discrimination violations, leading to repeated clashes in court.
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The new report comes as the House Judiciary Committee considers legislation (H.R. 963) that would eliminate the use of mandatory arbitration in employment and consumer agreements. The bill will almost certainly face headwinds from business groups and Republicans, who argue that arbitration is a faster and more efficient way to resolve disputes than the court system.
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Federal Legislation
States previously have attempted to curb arbitration in cases of sexual harassment, but courts have mostly held that the Federal Arbitration Act preempts those measures. One notable exception is a California law a federal appeals court revived in September that is pending further review.
In light of the power of federal law, Congress is considering the Forced Arbitration Injustice Repeal Act, which would amend federal law to ban mandatory arbitration agreements for employment, consumer, antitrust, or civil rights disputes.
The U.S. Chamber of Commerce has fought the FAIR Act and argued to lawmakers that the bill promotes, “expensive class action litigation that does little to help businesses, consumers and employees and serves principally to benefit the attorneys who file class action lawsuits.” It cites studies from the Institute for Legal Reform that show instead that employees can prevail and recover more money than they could in court.
Congress also is weighing a separate bill to end the enforceability of mandatory arbitration agreements for workers alleging sexual harassment or assault.
Mass Filings
The AAJ report found that companies, including Amazon.com Inc., American Express Co., and AT&T, at times faced more than 10, and sometimes over 100, arbitration filings in a single day.
This could be an indication that companies are being hit with “mass arbitration” claims, attorneys said. Gig companies, including DoorDash Inc. and Postmates Inc., have faced that tactic in recent years, forcing the companies to pay millions in arbitration fees up front.
Those tactics, however, are rare and can only be handled en masse by large firms that have the resources, said Joe Sellers, a partner with Cohen, Milstein, Sellers & Toll PLLC. He represents workers in litigation and arbitration disputes.
The cost of arbitration fees to companies in those situations can be high and far more burdensome than proceeding in court.
“There are several phenomena going on at the same time. There’s a temptation by companies to use these agreements to avoid class claims, but they may be forced to incur large amounts of transaction costs to handle multiple claims that are very similar,” he said. “The increased use of arbitration is largely a hedge against the class actions.”
The Environmental Protection Agency released an assessment Monday showing that GenX, a chemical made at a Bladen County plant, is more toxic than previously believed.
The toxicity assessment for hexafluoropropylene oxide dimer acid and its ammonium salt, which the EPA calls GenX chemicals, determined a daily ingestion level at which a person is unlikely to face adverse health effects, according to the EPA website. During a similar review in 2018, agency officials set that chronic “reference dose” at a level more than 26 times this year’s assessment.
The EPA’s review talked about possible health effects.
“Animal studies following oral exposure have shown health effects including on the liver, kidneys, the immune system, development of offspring, and an association with cancer,” it said. “Based on available information across studies of different sexes, life stages, and durations of exposure, the liver appears to be particularly sensitive from oral exposure to GenX chemicals.”
EPA officials say the assessment will help public health officials determine the risks associated with GenX.
The Chemours company manufactures GenX at its plant in Bladen County. The chemical also is a byproduct of other processes there.
GenX belongs to a family of compounds known as per- and polyfluoroalkyl substances. The compounds are sometimes called “forever chemicals” because they don’t break down easily.
The U.S. Environmental Protection Agency on Tuesday announced it is taking steps toward regulating toxic so-called forever chemicals as hazardous waste under the Resource Conservation and Recovery Act, a move the agency said will help strengthen accountability for polluters.
The agency said it is initiating the process of adding four per- and polyfluoroalkyl substances, or PFAS, as hazardous constituents under RCRA, which will subject them to corrective actions under the statute and establish a base for further efforts to regulate PFAS as hazardous waste in the future.
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Theodore Leopold, a partner at Cohen Milstein Sellers & Toll PLLC who is co-lead counsel in a prominent PFAS-related suit targeting DuPont Co. and Chemours Co. over alleged chemical dumping in North Carolina, told Law360 that the RCRA announcement is a significant step and that, with more time and studies, it will become even clearer that PFAS chemicals are a danger to health and the environment.
“Sadly, many of these newer findings are things the industry has known about for years but have consciously tried to play down,” he said. “Classifying these chemicals as ‘hazardous’ only reinforces the need to address these extremely dangerous chemicals as soon as possible.”
WHAT TO KNOW:
- Investors can pursue claims on due diligence statements
- Allegations on glyphosate safety, litigation risks fall short
Bayer AG investors adequately alleged the company misled them about the due diligence it conducted ahead of its acquisition of Roundup herbicide maker Monsanto Co., a federal judge in California said.
Investors also accused the pharmaceutical and life sciences firm of making misleading statements about the safety of glyphosate—Roundup’s active ingredient—and how Bayer accounted for post-purchase legal risks, but those allegations aren’t sufficient to move forward, the U.S. District Court for the Northern District of California said.
Bayer’s acquisition of Monsanto closed in 2018. “Before, during, and after the acquisition, Monsanto was, and remains today, embroiled in litigation alleging that the chemical glyphosate, the active ingredient in Monsanto’s Roundup product, causes cancer,” Judge Richard Seeborg’s order said.
The investors adequately pleaded that Bayer made misleading statements and omissions about the due diligence it undertook prior to purchasing Monsanto. The company’s statements could have caused a reasonable investor to think that “Bayer had assessed Monsanto’s litigation risks, and had reviewed non-public information to inform that review,” Seeborg said.
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Cohen Milstein Sellers & Toll PLLC represents the investors as lead counsel.
A California federal judge on Tuesday granted preliminary approval to a class action settlement he had twice rejected as defective, greenlighting a deal that would require Dignity Health to pay over $100 million to workers who claim the health system underfunded its pension plan by $1.8 billion via erroneous use of ERISA’s church-plan exemption.
Nearly nine years after beneficiaries sued Dignity Health claiming it misused an Employee Retirement Income Security Act exemption intended for churches and their affiliates, leading to significant underfunding of its pension plan, U.S. District Judge Jon S. Tigar ruled Tuesday that the court’s previous concerns regarding collusion had been resolved.
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The case, which began in 2013, centered on the use of an ERISA exemption intended for churches and their affiliates. The exemption gives those that qualify the ability to ignore ERISA’s requirements for benefit plans, including its funding rules.
Dignity Health claimed the exemption, saying it was affiliated with the Catholic Church.
Its workers, however, argued that the hospital system was not closely enough associated with the church to qualify, but that Dignity used the exemption anyway and then underfunded its plan by more than $1 billion, according to court documents.
The case spent years traveling all the way to the U.S. Supreme Court before returning to Judge Tigar, who ruled in 2018 that Dignity Health could not beat the claims against it on a motion to dismiss.
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On Tuesday, Judge Tigar said he initially rejected the deal because a previous version of the proposed settlement had contained a clear sailing clause and implied reversion clauses that raised concerns of collusion.
The judge said the court also previously could not evaluate the reasonableness of the amount plaintiffs planned to seek in attorneys’ fees because the class’s total recovery was insufficiently certain. Further, plaintiffs had previously not adequately shown why certification of two subgroups was not required.
But the judge said that in their renewed motion for preliminary approval and revised settlement, the parties had resolved the court’s concerns.
The main settlement class consists of more than 91,000 participants and beneficiaries of the plan, and the vesting subclass includes more than 3,200 former participants in the cash balance portion of the plan who terminated employment between April 1, 2013, and March 27, 2019, and who completed at least three but less than five years of vesting service.
The judge appointed Keller Rohrback LLP and Cohen Milstein Sellers & Toll PLLC as class counsel and appointed Izard, Kindall & Raabe LLP as counsel for the vesting subclass.
A final approval hearing in the case is scheduled for March 3, 2022.
In 2019, investors won $96 million in arbitration awards against firms and advisors that they accused of misconduct. But some of those investors never saw a dime.
Almost a third of the arbitration awards, totaling $19 million, went unpaid, according to data from industry self-regulator Finra.
That dismal statistic underscores a pernicious problem in the wealth management industry: Arbitration is supposed to provide investors with a recourse when they feel they’ve been wronged by their financial advisor. However, too often the remedy turns out to be no such thing.
“When you’re talking about these unpaid awards, we’re typically talking about retail investors who are often seniors,” says Laura Posner, a partner at New York law firm Cohen Milstein and the former bureau chief for the New Jersey Bureau of Securities. “We’ve set up a system that too often fails, whereas the goal should be to protect them.”
Now, an association of securities regulators is seeking to mitigate the problem by harmonizing regulations and toughening consequences for firms and advisors who fail to pay arbitration awards owed to investors.
The proposed model rule would make it an unethical business practice for a broker-dealer, agent, investment advisor or registered representative to fail to pay an arbitration award or fine entered against them. That in turn could tee up enforcement actions, such as revoking a license, by members of the North American Securities Administrators Association (Nasaa), which represents regulators in the United States, Canada and Mexico.
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A new guideline. The proposal would create a template that state securities regulators could adopt and modify as a new regulation. It would also harmonize rules for broker-dealers and registered investment advisors, or RIAs. That’s an important issue since a broker can in theory rack up unpaid arbitration awards and then register as an RIA elsewhere.
Nasaa is soliciting public feedback on its proposal. After the public comment period concludes, the proposal can be presented to Nasaa members for approval and adopted as new regulations by regulators.
“In making this rule, we hope more awards will be paid because people want to be registered and if they aren’t paying awards, then they will only get one bite at the apple. They won’t be able to reincarnate elsewhere,” Standifer says.
The reforms are especially needed because going to state or federal court isn’t an option for many investors since firms often require customers opening accounts to agree to arbitrate any disputes. Customer complaints are typically heard in arbitration proceedings run by Finra, though they can be heard in privately run meditation forums.
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Recovery pool? Piaba, an association of attorneys who represent investors in arbitration, has called upon Finra and other regulators to create a national investor recovery pool that could make wronged investors whole in instances when arbitration awards go unpaid. The pool could potentially be funded by Finra or brokerage firms, which are members of Finra.
“If the goal is to protect people from suffering devastating injuries, would it be best to install seat belts before the car accident, or after?” Piaba asked in a report on unpaid arbitration awards, its third, issued last month.
A representative for Finra says it is working to reduce the number of unpaid awards, which typically result from firms and brokers declaring bankruptcy or going out of business.
“Finra appreciates that Piaba recognizes that customer recovery can be a challenge across the financial services industry and dispute resolution forums, and we remain committed to working with all stakeholders on this important issue,” the representative said.
Finra maintains a public database of brokers who have unpaid arbitration awards. Its statistics also show that firms with unpaid arbitration awards tend to be small, employing a median number of 61 registered representatives.
Finra has the power to suspend or bar from the industry individuals or firms that fail to pay arbitration awards. The regulator adds that many unpaid arbitration awards are against firms or individuals whose registration has been terminated, suspended, canceled, or revoked, or who have been expelled.
The regulator’s website notes that just as in federal and state court systems, its arbitration forum does not ensure payment of damages awarded. “Arbitration claimants have access to the same collection tools as in a court judgment: if a respondent fails to pay an arbitration award, the claimant may take the award to court and have it converted to a judgment. The claimant may then attempt to collect on the judgment using the court’s collection procedures,” the website states.
But that may be small comfort to investors who’ve lost money, particularly as it would entail having to hire an attorney for both the arbitration and court processes, all to collect an award for money they’ve already lost.
“I hope that Finra makes some real changes in this space so we don’t have this problem going forward,” Posner, the attorney, says. “This isn’t a new problem. It was an issue when I was a regulator in 2015. You’re talking about another $20 million or $25 million [in unpaid awards] every year.”