In this episode of Civilly Speaking, host Sean Harris talks with Patrick Perotti, an attorney from northeast Ohio. Patrick is a national leader in the field of consumer class actions. Throughout this episode, Patrick explains the importance of class actions and how he fights for consumers who lose money due to illegal actions. He also shares insight on how non-class action attorneys may encounter class action issues with their clients and what to do if they think there is a case.

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Sean: Hello, I’m your host, Sean Harris, and this is Episode 54 of Civilly Speaking, brought to you by the Ohio Association for Justice. Today is January 21st, and I’m here with our guest, Patrick Perotti. Pat is an attorney at Dworken & Bernstein in Cleveland. Patrick, thanks very much for joining us here on Civilly Speaking.

Patrick: Thanks for having me.

Sean: So our topic today generally is class actions. Talk to us about how attorneys in Ohio who may not practice specifically in that area may come across or encounter class action issues with their clients.

Patrick: Sad fact Sean is that according to Consumer Financial Protection Bureau, every month thousands and thousands and thousands of Americans are overcharged and cheated on various financial and other types of transactions totaling annually hundreds of millions of dollars. So we’re talking I’m not talking about the breast implants and pharmaceutical of those types of cases. I’m talking about a simple stay at a hotel or the use of Verizon or something involving your utility bill, something where numbers are involved in and at the end of the day, there will be amounts taken out or bogus interest rates put on that you have not authorized and are illegal and they cost you and your clients, lots of money.

Sean: And how would a consumer or a lawyer for that matter know that these charges were illegal or unauthorized or any of that?

Patrick: And that’s the other sad thing, is most of the time people don’t know. So what would happen for purposes of this podcast is a lawyer who does personal injury or real estate or something else, not class actions would have a client and at the end of their conference about their normal legal matter, client would say, hey, Henry, take a look at this bill I just got when I checked out of Marriott. What’s this resort fee thing for twenty-nine dollars? Are they allowed to do that? And of course, Henry, who doesn’t do class actions or consumer fraud, doesn’t really know the answer. And at the same time, we as lawyers are supposed to be promoting justice in all contexts and in all fields. And the way that this works is rather than a lawyer trying to guess about it, all they have to do is give us a call or call any other class action lawyer who does consumer fraud and the question can be vetted in our case for a no charge. We will do the research. We will look at exactly what charges on the bill, what the assessment was for the bank or whatever else it is, and we’ll find out whether it’s legal or not. And if it’s not legal, then action can be taken. And ninety-nine times out of 100, when you’re talking about a big organization like a telecommunications company or an airline or a hotel or anything like that, it didn’t get done to Joe, the client, it got done to thousands and thousands of people.

Sean: And are there things, fees, charges, things that you’ve seen over the years that make your, you know, make your eyebrows go up and the hair in the back of your neck stand up and you say oh wait that doesn’t seem right?

Patrick: Well, there are and the difficult thing is the ones that are the worst really, are the ones that the customer can’t identify, the ones where they are really being duped and they can’t look at their bill and say, hey, that’s not right that’s not part of my bills and in order to do this, various industries have reached and have developed certain approaches in the real estate and title industry. They have what’s called by the court, junk fees. If you’ve ever sold or bought a house, you know, a thing called a HUD-1, long form and it has a number of lines on it. Sixty-seven or eighty-seven or something different lines and each line is a different charge. And most of these charges are listed with a name, but the names are things like warehouse fee tax service fee, reprocessing fees, administrative overage fee and even people in the real estate industry as lawyers look at it, say, what the hell does that mean? And the answer is nine times out of ten, it means absolutely nothing. And it means simply an amount of money that this defendant company has tacked on to the bill because they can using an official sounding title to mislead customers in a not questioning or challenging the assessment of that additional money. So when we’re talking about a sale of a house for, let’s say, $150,000 and they just toss on an extra nineteen dollars here or twenty one dollars there, you know, it’s the idea of next thing you know, it’s real money. They expect that most people will not make a fuss over twenty-one dollars and a hundred and fifty-thousand-dollar transaction. And people say, well, okay, so who cares? Who cares if they overcharged me or somebody else twenty-one dollars? Well, the answer is what happens when they do that to a hundred thousand people? What happens to them when they do that to a million people? What happens when they charge, let’s say, one hundred and fifty dollars on some of these transactions to somebody who’s on a fixed income or somebody who’s elderly or somebody who’s receiving food stamps or care source can’t afford to pay their normal bills and that money is the next medical bill payment or the next purchase of food or the next payment of the heat bill. This is an insidious, terrible practice that happens in the United States. And we as lawyers have to step up and help to step in.

Sean: And I take it that our job has gotten harder in recent years because the United States Supreme Court has largely upheld class action waivers in consumer contracts.

Patrick: What you’re talking about is essentially arbitration clauses and the U.S. Supreme Court has upheld arbitration clauses in virtually all types of consumer contracts against any challenge that they are invalid or fraudulent or unconscionable and that case was Concepcion vs. AT&T. But the U.S. Supreme Court has really not ever said that class action waivers are necessarily akin or on the same power as an arbitration clause, because the arbitration clause is being upheld, because it has protection under the Federal Arbitration Act, which I think is 9 USC section 1, et seq, and the Supreme Court said, look, if Congress said that these types of clauses shall be valid except as otherwise provided, then that means that the clauses are valid and of course, you can’t step in and invalidate them. That arbitration provision in 9 U.S.C. section one doesn’t talk at all about class actions or class action waivers. So, I would encourage anybody who is facing a potential lawsuit where you have a class action waiver and not an arbitration clause, which is not common, but if you do or if the arbitration clauses otherwise invalid and they still want to try to push the class action waiver, you should fight that vigorously and people like Paul Bland at Public Justice and a number of other lawyers around the country are specialists in this field and they would be glad to help you because it’s likely that most courts will not uphold the class-action waiver on its own because that has to meet general Unconscionability ability requirements because there is no federal statute that backs that kind of provision up.

Sean: Interesting. And I guess I thought I always kind of thought of it as, two sides of the same coin that if they were mandated mandating arbitration then, then you couldn’t have a class action?

Patrick: Well, I mean, think about it. That’s a really, really, really good point and so you see this language in the contract and it says you shall arbitrate, well okay that sounds like something under the Arbitration Act, the Federal Arbitration Act of nineteen, whatever it is, twenty-six or whatever it was, then it has a second paragraph and it says and by the way, you shall not have a class action. You say, wait, wait, wait, wait, wait. What’s the purpose here? Are you trying to get people to arbitrate this dispute or are you trying to get people to not bring the dispute at all because it’s too small of an amount of money knowing that they’re not going to go to court or to arbitration if it’s only eighteen dollars? So these class action provisions say you can’t have a class action in arbitration. Well, why is that? What’s the objective of that? That certainly doesn’t move people toward the resolution of the dispute and arbitral forum that moves people to not resolving the disputes at all and the defendant company walking away with their middle finger in the air saying, tough luck guys, we can do whatever we want. It’s a license to steal. So, this is probably one of the worst blows to consumer protection that has happened in the last three or four decades is this, these arbitration clauses and the accompanying carte blanche they get from the state and federal courts.

Sean: Pat, talk to us about, you know a lot of times we hear from talking heads and pundits about, you know, that class action, they just give out, you know, coupons and this is really just for the lawyers, but there really is a societal benefit to bringing these claims in a class action.

Patrick: Now, as whenever I give a CLE or another presentation, I always ask the audience, I say, what’s the main purpose of a class action? And people raise their hand and they say it’s to get me my money back. And I do the buzzer noise and I say, no, that’s really not the main purpose of a class action. It’s not to get you your nine dollars back. The main purpose of the kind of class action that we’re talking about here and that is overcharges. The main purpose of those class actions is deterrence. It’s the disgorged from the wrongdoer, not the nine dollars, but the nine million dollars they’ve collected over 1 million people and by doing that, you discourage them from repeating fraudulent conduct in the future but more important, when you disgorge a lot of money from, let’s say, a bank, that bank is being sued in a public proceeding, in a state or federal court and there’s a specific group of people that are watching that lawsuit. Guess who it is? It’s the trade organization for banks and it’s other banks and their lawyers. So if Chase gets hit with a lawsuit, it’s likely or if Allstate gets hit with a lawsuit, it’s likely that State Farm or in the case of Chase, PNC or somebody else is probably doing the exact same thing. So in one of their brethren gets hit, they all watch, they see what happens, what’s going to happen to this case. And if this case results in that defendant having to give back all the money that they stole from the customers, and that’s not only going to stop that banker or credit card company, your telephone company or whatever else from doing in the future, it’s going to stop the member of the entire industry from doing it because they know that they can’t get away with it and they’re probably going to be the next ones on the train track to get sued. And so, yes, it is a very, very, very important public policy device that was created by the U.S. Supreme Court that, you know, people say who created class action? Liberal, money hungry plaintiffs’ lawyers? No, it was created by US Supreme Court justices who adopted the equity provisions from England and Federal Rule 23 for the specific purpose, and I’m indirectly quoting to prevent misconduct, which is done a large number of people in small amounts, but for a great total. So it doesn’t matter if you cheat one person out of a dollar and then you do it a million times or you cheat a person out of a million dollars. It’s the same thing. It’s still a same total. And the law is designed to try to prevent that conduct and try to redress that conduct and avoid it happening in the future and that’s exactly what class actions are for. They’re not to make money for lawyers. They’re to stop misconduct by large corporations.

Sean: Well, I was going to ask you about that. What when you said it’s not to make money for lawyers? What is in it for counsel?

Patrick: Same thing is in it for a lawyer in any other case that we take on a contingency basis, you take a case for somebody who gets in a car accident and the guy says, hey, I can’t afford to pay you I don’t have any money, I just got in a car accident and I have no job. You say we’ll take it on a contingency and that’s a time-honored tradition and practice in the legal profession that was designed to specifically help clients so that they wouldn’t have to pay money upfront in order to get justice. They can go into the court for the next, in the case of class action, sometimes fifteen years, and a lawyer doesn’t get paid a dime. But they have to spend advance costs, they have to spend thousands and thousands of hours of their time at the risk at the end of the day of getting nothing and the only way we get something on a contingency is if we get something back for our client and so just like we get a percentage of whatever we get for the car accident victim, same thing in a class action, you get a percentage of whatever fund you develop that causes the defendant to have a responsibility to reimburse those class members.

Sean: And Pat, are there emerging areas or new kinds of cases that you’re seeing recently in and expect to see in the future in this area?

Patrick: Well, we saw a we saw a flash for a while, in matter of fact it is still going on of mislabeling cases. I don’t do a lot of those where, for example, it says artisan spring water and if you go to the company plant, you see them taking the bottles and put them under a faucet and turn the faucet on and filling them and put the cap on.

Sean: Perfect.

Patrick: That’s not artisan spring water, that’s from the public water source. So that that would be a consumer fraud. You’re misrepresenting to the customers what they’re buying. But I’m more interested in cases where the defendants are doing something where they are directly taking, not the value of a product away from a customer, but where they are taking money away from the customer. We had a group of cases, billions of dollars’ worth of them to litigate across the country and it was what was called re-ordering in bank card transactions. What the banks would do is, you know, how you have a bank card and if you overdraft gets me thirty five dollars, that’s okay, because if you overdraft rate thirty five dollars. But what happens when the bank plays around with the order of the transaction so that you have a two-hundred-dollar limit and you spend, let’s say fifty, fifty, fifty, fifty, you’re within the limit and then you spend two hundred and one dollars well then you’ve gone over the limit. So you have one overdraft. What happens if the bank took the two hundred and one dollars from the end of the week and moved it to the front of the transactions or pretended like it happened on Monday? Then they say, oh, your over drafted by two hundred and one dollars plus fifty plus fifty plus fifty, you were over drafted five times. And believe it or not, banks across the country were doing that and it was called re-ordering and they came up with the idea because a company called Carreker, which handles bank computer administration programs. I sat down with them. We have the meeting minutes and the notes and they said, we know how you can make a bunch of more money. What you should do is you should move these transactions around you can create overdrafts. The banks said well, is that going to be legal? Carreker said yes, just put this one clause in your in your fine print and the clause says we reserve the right to order the sequence of transactions in any way we see fit. So they’ve put that in the contracts and when they get sued, the courts said, wait a minute, wait, wait. They said there’s also a covenant of good faith and fair dealing and contracts. You put this in there with the specific intent cheating your customers because you defined overdraft as a situation in which the account at the time of the transaction does not have sufficient funds to cover the transaction. Well, in truth, at the time of these fifty-dollar transactions, each time there were sufficient funds. So the bank is playing a game and they were caught with their pants down and their hands in the cookie jar and they had to repay billions of dollars. So a lot of these things aren’t just tacking on an extra charge to a bill. These are tactics or plans or schemes that somebody sits down with the specific purpose of cheating customers and that’s why lawyers are here in the class action field to say somebody is going to police you because I mean, Attorney General Yost is a great guy, he’s doing a good job. Mike DeWine was an A.G., did a great job, but does they’re the government they only have so many people enforcing these things. We are private attorneys general when we do class action. We are there for the purpose of making sure that the laws are followed as an adjunct to what the government is trying to do with our tax money with its enforcement people. So that’s why I encourage lawyers any time they say they see something individually or a client ask them a question they don’t know the answer, give us a call. We’ll take a look at it for you. We’ll research it and if it’s a good case, either we’ll bring it for your client or you’re welcome to co-counsel with us and we can both bring it. You can learn some stuff about class actions. We can stop the conduct. We can make ourselves an attorney fee and we can do justice.

Sean: Patrick, thank you very much for being here today on Civilly Speaking. We appreciate it.

Patrick: Hey, thanks for having me. I appreciate it to.

Sean: And thanks to all our listeners out there. If you like our show and want to learn more, check out or leave us a review on iTunes and we’ll see you on the next episode of Civilly Speaking.