Consumer Trust Fund Proposed : State Justices Support Idea in Levi Settlement

The state Supreme Court called Thursday for creation of a novel, nonprofit group to safeguard consumers against corporate misdeeds, approved a cash award to a million people who bought Levi jeans in the early 1970s, and took a swipe at Gov. George Deukmejian.

Led by Chief Justice Rose Elizabeth Bird, the court by a 5-2 vote affirmed a lower court decision in an antitrust suit against Levi Strauss & Co. that awards a few dollars each to roughly 1.2 million Californians who bought 37 million men’s and boys’ jeans in the early 1970s.

But the lasting importance of the ruling apparently will be the consumer trust fund, a concept that would be the first of its type in the nation if it is put into operation as consumer groups described in briefs to the court.

The idea of a fund has “considerable merit,” Bird wrote. She cited a proposal by consumer groups, including Consumer’s Union, that suggests that a nonprofit corporation be set up to work on consumer protection projects, including research, education and litigation.

Such a group could also receive money from future class-action suits, the consumer groups said. Its board could be made up of appointees by the governor and attorney general.

The justices, however, left the details of such an organization up to an as-yet-unnamed trial court.

Calling the ruling a major victory, Robert Gnaizda of Public Advocates said: “For the first time, it allows consumers to join together to effectively combat corporate fraud, false advertising and price fixing.” Public Advocates, a public interest law firm, was one of several consumer groups that urged the court to order the trust established.

‘Had Enough Litigation’

However, a lawyer for Levi Strauss & Co., M. Laurence Popfsky, said the “notion that the money would be devoted to that kind of consumer trust--a litigation war chest--is likely to attract opposition, potentially from Levi. We’ve had enough litigation in this society.”

Without such a consumer trust fund, the court said, relatively few people will benefit from the $12.25 million that was paid in 1981 by Levi to settle an antitrust suit brought by the state attorney general in 1976.

The court majority was generally critical of the settlement, but concluded that no purpose would be served by overturning the agreement nearly six years after it was struck.

The justices said that among the problems, checks to most households would amount to only $10 to $12. The attorney general, meanwhile, will get $1.2 million for filing the suit. Another $2 million will pay the state for administering the fund and mailing out the checks.

The court also criticized what it viewed as publicity-seeking tactics by Deukmejian, who was attorney general and running for governor in 1981 when the settlement was struck.

The then-attorney general initially planned to appear in television spots during a two-week media blitz to announce that blue jean buyers could collect “pocket money.” But he abandoned that idea in the face of criticism and chose actor Michael Landon to appear on the television spots.

‘Substantial Free Publicity’

“Hence,” Bird wrote, “it appears that the only substantial beneficiaries of the settlement were a few large claimants--including the state--and the attorney general, who gained not only the fee award for his office but also substantial free publicity for his then upcoming gubernatorial campaign.”

Deukmejian could not be reached for comment on Bird’s statement.

Justice Malcolm Lucas, joined by Stanley Mosk, charged in a dissent that Bird’s idea of creating the fund for unclaimed money is an “untested device.”

The case stems from Federal Trade Commission charges that Levi illegally fixed the retail price on men’s and boys’ blue jeans between 1972 and 1976.

Then-Atty. Gen. Evelle J. Younger sued Levi in 1976 and immediately filed a settlement in the case. Consumer groups protested that settlement, and that set the suit on a decade-long legal odyssey that is not over yet.

The case will return to a San Francisco Superior Court judge, who must work out final details for paying the government, the many lawyers involved and consumers and setting up the trust fund.

Gnaizda and other lawyers involved in the suit said they would not be involved in any consumer trust fund. They did say that they hoped that the trust would be a nonprofit corporation run by people outside government or business.

Since 1981, when Levi Strauss settled the case, the $12.25 million has been gathering interest. Noting that lawyers involved in the case completed their arguments to the court in June, 1984, Atty. Gen. John Van de Kamp criticized the court for taking so long to decide the case.

Delay Criticized

Van de Kamp pointed out that many Levi customers who filed claims for money in 1981 have since moved. The delay by the court “makes it harder to get that money back to the consumers who made the claims,” he said.

According to the ruling, any unclaimed cash is to be put into the consumer trust fund.

Van de Kamp predicted that the fund will be “used to benefit consumers in some way or other,” but stopped short of endorsing the idea that it will be used to sue over corporate misdeeds.

The ruling did not say whether the trust will be funded solely by the money that is not collected by consumers who filed legitimate claims five years ago, or whether the fund also would be fattened by interest on the $12.25 million.

Interest on the original $12.25 million accounts for the bulk of money at stake for any sort of consumer-oriented trust. Van de Kamp said he will ask the court to clarify its ruling.

Gnaizda said that if the interest is included in the fund, the new consumer group will have an immediate endowment of up to $10 million. Yearly interest alone on $10 million would make the new trust the wealthiest consumer group in California, Gnaizda said.

Bird was joined in the majority by Justices Allen Broussard, Cruz Reynoso and Joseph Grodin, and Alameda County Superior Court Judge John Sutter, sitting by temporary assignment.

Rehearing on 2 Death Cases

The court Thursday also agreed to rehear two death penalty cases that a slim majority reversed--along with nine other death penalty cases--on New Year’s Eve.

The court will rehear cases involving Billy Ray Hamilton, who killed three people in Fresno, and Marvin Pete Walker Jr., who killed a teen-age boy in a San Jose robbery and wounded another.

Justices Edward Panelli, Grodin, Mosk and Lucas voted to take a second look at the two cases. The same justices voted to rehear a third death penalty case last month that initially was reversed on New Year’s Eve.

The move suggests that the court is preparing to uphold the death sentences. The court rarely grants a rehearing. But when it does, it generally overturns its earlier decision.