Business Paper Makes Big Bucks in Fending Off Class Action

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Investor’s Business Daily won about half a million dollars in attorneys’ fees this month after successfully throwing out a class action lawsuit filed on behalf of its former sales agents.


The suit alleged that the Los Angeles-based newspaper, its sales and marketing subsidiaries and its sister company, William O’Neil & Co. Inc., violated California’s labor codes by implementing “charge-backs” against 400 sales agents.


“Charge-backs” occurred when the paper took back the commission paid to a sales agent whose customer cancelled a subscription within 16 weeks of a sale. The suit alleges that the paper took back the wages even as it received pro rata subscription payments and additional advertising revenue driven by the higher circulation figures.


A Los Angeles Superior Court awarded the paper $530,000 in attorneys’ fees and $20,000 after throwing the lawsuit out of court in September.


The plaintiff’s lawyers were “playing with semantics” in their overtime claims, said Belle Mason, a partner at Silver & Freedman PLC, who represents the paper. She said the entire sales industry uses the same commission system and that the state’s labor codes pertain only to employee wages pulled out to compensate for business losses.


Without such a commission system, employees “could be waiting a long time to get any money, which is why companies started advancing commissions,” she said.


Eric Epstein, a Los Angeles attorney who represents the sales agents, has appealed the ruling and also expects to appeal the decision on attorneys’ fees. “There is a labor code section that basically states once wages are earned, they can’t take them back,” he said.



Shear suit


A Torrance aerospace firm is set to go to trial next month in a lawsuit against NASA’s top contractor for its Space Shuttle, alleging it helped steal the designs for an integral component on the space vehicle for a competing firm.


Hi-Shear Technology Corp. seeks $11 million in compensatory damages from United Space Alliance for allegedly giving the company’s list of subcontractors for its “separation bolts” to Pacific Scientific Energetic Materials Co. The Chandler, Ariz.-based company then made use of the vendors and their knowledge of the bolts to win a contract with United Space five years ago, the suit alleges.


Separation bolts are an integral space shuttle component, holding the external fuel tank and the solid rocket booster in place during takeoff. They later fracture on command, allowing the booster to fall back to earth.


United Space is a joint venture of Boeing Co. and Lockheed Martin Corp. The case is scheduled for trial July 5 in the 18th Judicial Circuit Court in Brevard County, Fla.


“(United Space) expressly represented to Hi-Shear that its only purpose for obtaining this vendor list was to conduct a routine quality assurance evaluation of Hi-Shear’s performance under the contracts,” the suit states. “Contrary to its representations (United Space) provided it to Pacific Scientific and other third parties to facilitate the replacement of Hi-Shear as the supplier of separation bolts for the Space Shuttle.”


Until March 2000, Hi-Shear’s bolts had been used on every Space Shuttle mission. At that time, United Space began to solicit Hi-Shear’s sub-tier vendors to perform the same work for Pacific, the suit states.


Defense attorney Mike Levin, a partner with Orlando-based Baker & Hostetler LLP, denied that United Space committed any wrongdoing.



*Staff reporter Amanda Bronstad can be reached at (323) 549-5225, ext. 225, or at

[email protected]

. Staff reporter David Greenberg contributed to this column.

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