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Lawsuits Of The Year: 2014

Twelve months' worth of the most notorious local ventures into the legal system.

Lawsuits Of The Year: 2014

Just the FAX, ma'am

Could a tiny FCC infraction drive a White Bear Lake printer out of business?

Remember fax machines? Once they were a cutting-edge technology, but most of what made them important has been superseded by the advent of cheap printers, PDFs and high-speed computers.

Doug Walburg, who owns Mariposa Publishing in White Bear Lake, remembers faxes only too well. An omission he made on one advertising fax he sent out half a dozen years ago has brought him a lawsuit that could end up costing him almost $48 million.

The suit was initiated by Michael Nack, an attorney in St. Louis. Nack was unhappy at receiving an unrequested fax with no opt-out possibility (and, really, whose day would not be completely ruined by such an occurrence?). Omitting the opt-out box in a fax is a federal offense that carries with it a fine of $500 to $1,500 per fax sent. That, Walburg points out, would quickly add up to a fine that would drive him out of business.

Nack’s no-opt-out irritation with faxes has surfaced in previous lawsuits. For those and the current suit, he hired St. Louis attorney Max Margulis, who specializes in fax cases. He has prosecuted over 2,000, mostly class action fax-related suits. For this suit Nack created an aggrieved class composed of all the people who had received opt-out-less faxes from Walburg. While members of the class will participate in any winnings, the lawyer who brings the case takes one-third of the money off the top.

Some would accuse the people behind the suit of pursuing it only for money. But Margulis says these suits are protection for those who receive unwanted faxes, and he is only following federal law. “If someone gets hundreds of [unwanted] faxes,” he says, “they have to call hundreds of people to opt out. And the regulations in this case, set by the FCC, are pretty clear: That any advertising fax letter . . . had to have a clear opt-out notice.” Otherwise, Margulis warns, recipients of the unwanted faxes would lose the use of their fax machine, paper and toner.

Not surprisingly, Walburg’s attorney Tim Wolf has a different view. “I’m not aware,” he says, “of any social benefit associated with this case.” The case has wound through several courts, all the way up to the U.S. Supreme Court. It refused to review the case and sent it back to the trial court in early 2014.

Wolf says the case looks a lot like making use of federal law for personal benefit. That, he says, is one reason he has filed a petition with the FCC to change the regulation under which the suit is brought. In his petition, Wolf says that the “practical consequences” of not overturning the decision against Mariposa would be “to permit parties to obtain crippling monetary damages on the basis of unlawful FCC regulations.”

In November, the FCC found in favor of granting Walburg a waiver for the opt-out box, sparing him the liability delineated in the federal Telephone Consumer Protection Act.

“I’m relieved,” Walburg told the Star Tribune. “It’s been kind of stressful having a $48 million lawsuit against you.”

Things are heating up at Globe

Yet again, two for-profit universities are taken to court.

The jointly owned Globe University (GU) and Minnesota School of Business (MSB) have been sued so often these last few years, you’d think they might consider offering a course on how to run afoul of the law. They’ve faced intense scrutiny for, among other things, the high cost of the degrees they offer, poor graduation rates, leaving their students deep in debt and consumer fraud.

Last year a former Globe dean turned whistleblower, Heidi Weber, accused the school of violating multiple accreditation standards, falsifying job placement numbers and using unethical tactics to mislead students. A second suit, brought by a former MSB dean, accused his former employer of exaggerating its job placement record and inflating its graduation rate. Both won their suits.

Former students have sued the company on multiple occasions. Now the Minnesota attorney general’s office is suing the schools, alleging four major complaints that they say add up to consumer fraud and a violation of the Uniform Deceptive Trade Practices act:

Misleading marketing
The lawsuit states that it is only after enrolling (and paying class fees) that some students find out the criminal justice degree offered by GU will not qualify them to become police officers in Minnesota. And though Globe says that information is fully spelled out in both their catalogue and their written enrollment agreement, their advertising seems to offer a different message. One of the school’s ads shows a police officer in uniform with a badge saying, “Make the world a better place. Earn a criminal justice degree.”

Misrepresented job opportunities
The lawsuit says Globe’s website promises “a lifetime job placement service. [Globe’s] career services department works diligently with students and graduates [to secure employment].” But students joined in the AG’s lawsuit tell a far different story. After completing his MSB business management bachelor’s degree, “T.S.” says he was “placed” in a job that required a high school education and paid $12 an hour. He has been unable to find a business management position and now works as a bartender.

Shady sales tactics
Businessweek’s title for its article on this lawsuit was “How to Run a Business School Like the Wolf of Wall Street.” Stories about students facing the school’s high-pressure salesmanship abound. When E.C., a former student and participant in the lawsuit, told her Globe advisor that she needed time to think about enrolling, she was told she needed to enroll that day to secure a spot at the school.

Misleading information about the transfer of credits
Globe/MSB boast to their students that they are nationally accredited. What they don’t emphasize to students, says the attorney general, is their credits are unlikely to be transferrable to any Minnesota university. After earning his business associate degree, J.G. transferred to Metropolitan State University to complete a bachelor’s degree. Because Metropolitan State, like most Minnesota universities and colleges, does not accept MSB’s credits, J.G., who already had $30,000 in student loans, had to start his business schooling all over again at Metro State.

Naomi McDonald, a spokesperson for the two schools, says the AG’s suit unreasonably inflates the problem, and “ignores both the school’s written disclosures . . . as well as the student’s written acknowledgement of those disclosures.” She says the attorney general “identified approximately 34 of over 10,000 students . . . who ‘claimed’ that they didn’t read or understand our school’s clearly described disclosures.”

Since 2010, enrollment at the Globe/MSB campuses has plummeted from over 10,000, to just 4,900, according to Kyle McCarthy, writing in the Huffington Post. Last June, McCarthy reports, the school was forced to close its Shakopee facility due to low enrollment.

Hennepin County District Court has scheduled a December 2015 trial.

Battle of the monster corporations

‘It really came down to the money.’

When giants rumble it often takes a giant to bring clarity to the situation. And so when Starbucks Coffee decided in 2010 to unilaterally break its contract with Kraft Foods, Kraft called in Robins Kaplan’s Mike Ciresi to help arbitrate the fight.

The nasty divorce started with a wedding, as always. Starbucks wanted a higher profile in grocery stores, and Kraft had the distribution force to accomplish that. It looked like the perfect fit. So Starbucks signed an agreement in 1998 that gave Kraft exclusive right to sell, market and distribute its bagged and bottled coffee in grocery stores across the nation.

Kraft performed admirably. When the agreement was signed, Starbucks grocery sales were only $50 million a year. By the time of the divorce, Kraft had raised that to about $500 million a year. It also multiplied by 10 the number of grocery stores that sold Starbucks products.

The problem for Starbucks was that its contract with Kraft locked it out of much of the fast-growing coffee “pod” market. It stipulated that Starbucks could make brew-cups only for the Kraft-owned Tassimo machine. But Keurig had captured the market, and that market was closed to Starbucks.

Starbucks wanted out of its contract with Kraft, and offered $750 million to terminate it. It’s not noted whether Kraft snickered at that, but they did turn it down. In 2010, four years before the contract’s end, Starbucks decided to break with Kraft.

Starbucks claimed that Kraft had breached the deal by devising advertising programs without Starbucks’ feedback, and by failing to provide market projections and timely budgets.

When the $750 million offer was rejected, the two companies went into arbitration. Before its resolution, Starbucks decided to abandon the agreement. And with that, Mike Ciresi was called.

Kraft’s general counsel Marc Firestone knew Ciresi from representing Philip Morris in the 1994 tobacco lawsuit, and this time wanted him on his side. Ciresi was hired to lead the arbitration. The arbitrators concluded Starbucks owed $2.7 billion to Kraft. That’s a lotta lattes.

Ciresi told ReelLawyers.com that “Starbucks, and specifically Howard Schultz, wanted to get the business back, but didn’t want to pay for it, so he alleged a breach in the contract. It really came down to the money. Starbucks valued the business at about $700 million and Kraft at about $2.9 billion, and the decision was $2.75 billion.”

Kluwe-less

A whistle-blowing Viking sues to change NFL culture.

If you think the NFL has seen trouble this year, imagine what mayhem would have resulted if an NFL coach had said “Let’s round up all the African-Americans, send them to an island and nuke it till it glows.”

Vikings special teams coach Mike Priefer might well be able to imagine such a comment, seeing as last year he said that exact thing, only he said “gays” instead of “African-Americans.” Then-Vikings punter Chris Kluwe was there and was not amused. He berated the coach for the statement and, he says, the coach replied that it was just a joke among friends. Some joke.

In a year that’s seen the disgraceful behavior of Ray Rice, Sam Hurd and Adrian Peterson, among others, Vikings fans can be proud they had a player like Kluwe, who got himself in trouble for his zealous fight against what he considered injustice.

Kluwe, says his attorney Clayton Halunen, is a person of strong convictions. “It was a dream for him,” Halunen says, “to end up in the NFL. But when the amendment barring gay marriage came up in Minnesota, he was against it with every fiber of his being. He became a leader in the fight against the amendment and was willing to risk his career to do that. He knew he could lose his job.”

The state constitutional amendment barring gay marriage was defeated in the 2012 election, and the following May, Gov. Mark Dayton signed into law a bill that allows same-sex couples to officially marry. That same month Kluwe was let go by the Vikings.

Kluwe decided to sue. He believed that he lost his job in retaliation for outspokenness, both against Priefer and the amendment.

The pre-suit draft complaint his lawyer presented to the Vikings alleges, among other things, that he was a victim of:

  • Breach of contract
  • Religious discrimination. Kluwe, “cheerfully agnostic,” claimed that Priefer had many times warned him he was going to hell—with the gays—because he wasn’t a Christian.
  • Age discrimination. Kluwe says the coach had warned him he was, at 32, “past his peak.”
  • Reprisal. Because of his strong and very public views on gay marriage.

“The comment about ‘nuking’ the island,” says Halunen, “was the last straw for Kluwe. He tried to get a number of players who heard the comment to sign an affidavit about it, and he went to management to make them aware of it. And then, several weeks later, his contract was not renewed.”

The Vikings say that his release had nothing to do with his advocacy and had everything to do with his performance on the field. They suspended Priefer for three games (later reduced to two) after he acknowledged making the “nuke ’em” statement. They also commissioned an investigatory team, led by former Chief Justice of the Minnesota Supreme Court Eric Magnuson, to determine whether the contract nonrenewal was based on retaliation or on ability.

The report found “The record fails to support the claim that the Vikings released Kluwe because of his activism on behalf of same-sex marriage, but instead because of his declining punting performance in 2012 and potentially because of the distraction caused by Kluwe’s activism as opposed to the substance of such [italics ours].”

After that, Kluwe and the Vikings went into discussions to find a resolution acceptable to both sides. Though Kluwe did not get his “dream job” back, the Vikings agreed to substantial efforts to benefit the GLBT community, including donating a “significant” amount of money to five GLBT charities, implementing a zero-tolerance policy for anti-gay comments, and sponsoring a national symposium, to be held this year in Minneapolis, on homophobia in professional sports.

Though Kluwe received no monetary settlement, Halunen says “the suit for him was never, ever about money,” but about “changing and opening the dialogue on homophobia in professional sports.”

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