Week Adjourned: 5.24.14 – Google, US Foodservice, Citigroup

The week’s top class action lawsuits and settlements for the week ending May 24, 2014. Top stories include Google, US Foodservice and Citigroup.

GoogleLogoTop Class Action Lawsuits

Heads Up Google AdWords Users…Google’s been hit with a national unfair business practices class action lawsuit alleging the god of all things Internet unlawfully denies payments to thousands of website owners and operators who place ads on their sites sold through Google AdWords.

The Google AdWords lawsuit, filed in the U.S. District Court for the Northern District of California, alleges that Google abruptly cancels website owners’ AdSense accounts often without explanation shortly before payments are due, and refuses to pay for the ads that ran prior to the cancelation.

According to the lawsuit, Google’s popular AdSense program translates annually to billions of dollars payable to website operators that host its ads via AdSense. Google’s AdSense advertising program induces website operators to host space for ads on their websites. Each time a visitor to the website interacts with the ad, the ad publisher who hosts the ad earns payment.

The complaint claims that the contracts and terms of service Google requires web publishers to sign are unconscionably one-sided, giving Google free reign to embark on what the lawsuit claims are actions devoid of good faith or fair dealing.

The complaint states, “Given Google’s contractual terms purportedly permitting it to withhold payment to publishers with disabled accounts, and in light of the experience of the plaintiff in seeing this policy actually effected, the total of earned funds that Google has refused to pay its AdSense publishers could be enormous.”

The lawsuit claims Google is in violation of contracts with users and in violation of the implied covenant of good faith and fair dealing, unjust enrichment, and violation of the California Unfair Competition Law.

The named plaintiff, Free Range Content, Inc., is a California corporation that owns and operates Repost.us. Free Range Content first noticed a spike in AdSense earnings in Feb. 2014. At the end of Feb. 2014, Google issued a report stating that the plaintiff’s estimated earnings for the covered period were over $40,000–a number that seemed far too high. Then on March 4, 2014, two days before a scheduled March 6, 2014 call with an AdSense representative was slated to occur, the plaintiff received word from the AdSense program that Google had disabled its account.

The lawsuit seeks damages for all U.S. Google AdSense publishers whose AdSense account was disabled or terminated, and whose last AdSense program payment was withheld permanently by Google.

Top Settlements

Major RICO settlement this week…thought to be among the largest civil Racketeer Influenced and Corrupt Organization Law (RICO) class action settlements in recent history: We’re talking $297 million—a preliminary agreement between plaintiffs in a multidistrict unfair business practices class action against U.S. Foodservice, Inc. and its former parent company, Koninklijke Ahold, N.V. The settlement agreement is pending approval by the United States District Court for the District of Connecticut.

This US Foodservice agreement was reached on behalf of a class of customers, primarily hospitals and restaurants, who purchased products from U.S. Foodservice under cost-plus arrangements between 1998 and 2005.

The class claimed that it was defrauded by U.S. Foodservice when it created six companies that it controlled to inflate the “cost component” of the products that were subject to the arrangement.

Citigroup Employee Shareholder Settlement…Bank employees got screwed too—and this week they got some justice, with the agreement of a $8.5 million settlement ending a securities class action lawsuit pending against Citigroup. The lawsuit, brought by Citigroup employee shareholders, alleged the company concealed its exposure to subprime mortgages prior to its stock price dropping.

The settlement class includes over 7,000 Citigroup employees who acquired securities between November 2006 and June 2009. Yikes! The damage seems endless. Probably is.

Under the terms of the agreement a $2.3 million settlement fund will be established, to include six payments of approximately $50,000 each to the six lead plaintiffs, as an incentive award for their service to the case. The Erisa lawsuit was brought in 2009 by former Citigroup employees who alleged the company prevented employees who had purchased the bank’s stock from obtaining information about subprime losses by means of a series of materially misleading statements and omissions concerning its subprime exposure, overall business outlook and financial results.

The lawsuit was originally filed in California, but was later consolidated into a multidistrict securities litigation against Citigroup through New York.

Ok—Folkswe’re done herehave a great weekend and we’ll see you at the bar!

Week Adjourned: 8.6.11

Top Class Actions

Let’s hope that WebMD has a cure for what ails it… which would be a securities class action. The online health information company was served this week, reportedly, over allegations that certain of its officers and directors violated the Securities Exchange Act of 1934. (Given the number of securities suits that cite this particular infraction, I’m going to assume that the SEA is not a popular read).

FYI—in case your computer’s been down for the past 10 years—WebMD provides health information services to consumers, physicians and other healthcare professionals, employers, and health plans through its public and private online portals, mobile applications, and health-focused publications in the United States.

The lawsuit was filed on behalf of purchasers of the common stock of WebMD Health Corp. (“WebMD” or the “Company”) between February 23, 2011 and July 15, 2011, inclusive (the “Class Period”).

The complaint alleges that, during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and prospects. Specifically, defendants misrepresented and/or failed to disclose the following adverse facts: (i) that WebMD was experiencing sponsorship cancellations due to extended legal and regulatory reviews; (ii) that WebMD’s customers, including several consumer product companies, were delaying advertising on the Company’s website as a result of smaller advertising budgets; and (iii) as a result of the foregoing, defendants lacked a reasonable basis for their positive statements about the Company and its prospects.

On July 18, 2011, WebMD announced its preliminary second quarter financial results and lowered its financial guidance for 2011. In reaction to the Company’s announcement, the price of WebMD stock fell $14.01 per share, or 30%, to close at $32.48 per share, on extremely heavy trading volume.

Top Settlements

All you new parents out there—heads-up—the Department of Health and Human Services recently settled a lawsuit brought by the parents of a toddler who allegedly sustained injuries as a result of receiving immunizations. Details as to which immunizations were administered were not released, unfortunately.

The settlement for $8,713,625, agreed by the parents, included future lost earnings, past and future pain and suffering, past and future medical expenses, attendant care, rehabilitation, and residential expenses for their child.

The parents alleged the child began suffering febrile seizures within 24 hours of having the immunizations.

Apparently, results of testing revealed that the child had suffered a stroke, lack of muscle coordination, loss of hearing and loss of sight. The parents also alleged that the child suffered significant delays, including speech, intellect and fine motor skills development. At the age of nine, the child required a G-tube for nutrition and was not potty trained. It is worth noting that this is not a common situation, but that is precisely what makes it all the more heart-wrenching.

Wachovia Pick-A-Pay proposed setlement anything but picayune… Here’s one for the records—as in size of potential settlement—if it’s approved that is. A Wachovia securities class action, led by The Orange County Employees’ Retirement System, the Louisiana Sheriffs’ Pension and Relief Fund, and the Southeastern Pennsylvania Transportation Authority, the court-appointed representatives of a class of investors who purchased certain Wachovia Corporation (Wachovia) bonds and preferred securities pursuant or traceable to numerous public offerings between July 31, 2006 and May 29, 2008, may have reached a settlement—in the amount of $627 million. Shut the front door!

According to the press release, the combined $627 million recovery is among the 15 largest securities class action recoveries in history. It also is believed to be the largest settlement ever in a class action case asserting only claims under the Securities Act of 1933. The case also represents one of the handful of largest securities class action recoveries ever obtained where there were no parallel civil or criminal securities fraud actions brought by government authorities.

The lawsuit was based on allegations that the Wachovia offering materials at issue misrepresented and/or omitted to disclose material facts concerning the nature and quality of Wachovia’s multi-billion dollar option-ARM (adjustable rate mortgage) “Pick-A-Pay” mortgage loan portfolio, and that Wachovia’s publicly disclosed loan loss reserves were materially inadequate at all relevant times, in violation of Generally Accepted Accounting Principles (“GAAP”). So—it all comes back to mortgages…

The lawsuit alleges that the undisclosed problems in the “Pick-A-Pay” mortgage loan portfolio brought Wachovia to the brink of insolvency by September 2008. Cast your mind back—Wachovia was one of the largest financial institutions to be “bailed out” during the financial crisis, when Wells Fargo & Company agreed to acquire it in early October 2008.

Both settlements must be reviewed and approved after formal notice is provided to the class.

OK. That’s it for this week. See you at the Bar.