Trial Lawyers Cite ‘Worst Corporate Conduct’ of 2018

December 31, 2018

Not surprisingly, the American Association for Justice—representing the country’s trial lawyers– takes a very different view of the civil justice system than does the U.S. Chamber’s Institute for Legal Reform’s (ILR).

The busIness-oriented ILR issues an annual list of the “most ridiculous lawsuits” of the year, and did so again for 2018. It’s the business group’s way of drawing attention to what it sees as abuse in the civil justice system.

The AAJ, on the other hand, has identified what it says are the “worst cases of corporate conduct” for 2018, cases that have brought various lawsuits and show why, in its view, the civil justice system is so important. The AAJ’s worst cases include predatory student lending by Navient, the failure by Takata to replace all of its defective air bags, and State Farm’s secret campaign to install a favorable judicial candidate on the Illinois Supreme Court.

The trial bar’s views can be found in its report, “Worst Corporate Conduct of 2018.

“This report contains eye-opening details about the shocking misconduct and lack of ethics pervading corporate culture. But the good news is, Americans can rely on civil justice to hold these bad actors accountable and change the way they do business,” said AAJ President Elise Sanguinetti. “When everyday Americans are lied to, abused, or injured, they don’t want a phony apology—they want the ability to exercise their constitutional right to hold unscrupulous corporations to account in court in front of a jury.”

The report also points to institutions that AAJ says could have stopped misconduct but failed to do so. It cites USA Gymnastics, Michigan State University and the U.S. Olympic Committee as examples for allegedly not reporting the sexual abuse of athletes by physician Larry Nassar’s that occurred over decades.

The AAJ report also takes a critical view of corporate CEOs’ so-called apologies for wrongdoing—or “sorry-not-sorry” campaigns– including Facebook’s over privacy violations, United Airlines for the death of a puppy placed in overhead bin by a flight attendant, Wells Fargo for a series of consumer financial scams and pizza maker Papa John’s founder John Schnatter over using a racial slur during a conference call.

“These apologies reflect less a newfound humility amongst America’s CEOs and more an understanding that “sorry” is a good strategy. The corporate apology is now an integral part of the MBA playbook,” the report says.

“The corporate apology is not a cure-all, but the theory goes that it can lessen the damage. But if a corporate apology is purely a business decision, as heartfelt as an earnings call, does it have any real value? Does anyone really believe Uber or Facebook or Wells Fargo is really sorry?”

The AAJ report covers the actions of corporations including student loan firm Navient, which despite being the smallest of the major student loan servicers has received more than three times the number of complaints than others for deceptive practices, according to AAJ.

The report also calls out Takata for its failure to replace all its defective air bags in vehicles across the country and General Motors for its apparent resistance to recalling those air bags.

The AAJ’s list of “worst corporate conduct of 2018” includes

Navient

Despite being the smallest of the three top student loan lenders, for-profit corporation Navient has more than three times as many complaints about its conduct as its competitors. AAJ says examples of Navient’s deceptive practices include making $4 billion by steering troubled borrowers into forbearance rather than more affordable repayment plans. Also, reporting severely and permanently disabled borrowers, including veterans, as defaulting on their loans when they had had them forgiven through federal disability programs.

BP, Chevron, ConocoPhillips, ExxonMobil, and Royal Dutch Shell

The world’s five largest publicly-traded oil companies are being sued by New York City claiming they have long known about but denied the environmental impact of global warming gases they cause. The suit seeks compensation to help pay for infrastructure damage from climate change and also seeks to pressure the companies into joining efforts to fight climate change. ExxonMobil is also being accused of misleading investors about the financial risks of climate change. Cities and counties in seven states along with groups representing fishermen and young Americans have also sued.

State Farm

In September 2018, State Farm agreed to pay $250 million to settle claims that the company secretly conspired to install its preferred candidate on the Illinois Supreme Court. The insurer then denied it so the justice, Lloyd Karmeier, would not have to recuse himself from the insurer’s appeal of a $1 billion verdict involving the use of aftermarket car parts. State Farm spent millions of dollars to elect Karmeier. State Farm settled a $250 million Racketeer Influenced and Corrupt Organizations Act (RICO) lawsuit just before the case was set to go to trial in September 2018.

General Motors/Takata

Takata’s exploding air bag scandal has been going on for several years but millions of Americans remain in danger from defective air bags that have yet to be replaced. The National Highway Traffic Safety Administration estimates that nearly 17 million out of 50 million recalled Takata inflators are in cars still on the road and 10 million more inflators are scheduled to be recalled in January. AAJ also faults General Motors, which it says has filed three petitions in two years to try and avoid having to recall its vehicles. In a filing with the Securities and Exchange Commission (SEC), GM admitted that it would save “approximately $1 billion” if it did not have to repair the defective air bags, according to the AAJ report.

Theranos

Biotech firm Theranos promised to revolutionize blood-testing, making it quicker, easier and cheaper. The company’s young 19-year-old founder Elizabeth Holmes was heralded as a visionary. Theranos said that medical conditions from diabetes to cancer could be detected from just a few drops of blood for just $2.99. However, the technology didn’t work. Theranos faked the lab tests and demonstrations and misled investors into thinking pharma companies had endorsed the technology. A Theranos employee blew the whistle on the fraud. Theranos was forced to shut down and years of blood test results were voided. Holmes was indicted on wire-fraud charges. The company settled civil cases with some investors and SEC fraud charges.

Nestlé

The world’s largest food and beverage company has been accused of using and condoning child and slave-labor and failing to end such practices in its supply chains. The multinational is heavily dependent on cocoa growers in West Africa, where an estimated 2.1 million children are engaged dangerous child labor. In October 2018, the Ninth Circuit reinstated a lawsuit accusing Nestlé USA and Cargill Co., of perpetuating child slavery at cocoa farms in Ivory Coast. The court ruled that not only had the companies failed to use their economic leverage to remove child and slave labor from the cocoa production process, but they had also “taken steps to perpetuate a system built on child slavery to depress labor costs.” Nestlé claims it is unable to exert its market power to stop forced labor in its supply chains. Another lawsuit filed in 2018 in Massachusetts seeks to use the market power of consumers to force Nestlé to change its ways.

USA Gymnastics/MSU

Larry Nassar, a physician at Michigan State University (MSU) and an official doctor for the USA women’s gymnastics team, sexually assaulted hundreds of girls and women for decades. People in both corporate-backed USA Gymnastics and at MSU were aware, yet the abuse continued for decades. Investigations were impeded. In 2015, the U.S. Department of Education found that MSU’s handling of sexual assault cases on campus had violated Title IX and placed the university under federal monitoring. The reckoning for officials at both USA Gymnastics and MSU is ongoing. Nassar was convicted and faces a minimum of 100 years in prison. In May 2018, MSU reached a $500 million settlement with 500 victims. In October 2018, three athletes sued USA Gymnastics under the RICO Act.

Source: Worst Corporate Conduct of 2018

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