Class Action Defense Blog

In Split Decision, California Supreme Court Holds that State's Ban on Same Sex Marriages is Unconstitutional; Concurring and Dissenting Opinions Conclude that Legality of Same Sex Marriages is a Legislative rather than Judicial Matter

While the six cases consolidated for argument before the California Supreme Court were not class action lawsuits, the author has received numerous inquiries from attorneys, both from within the State of California and from sister states, inquiring into the status of the California Supreme Court decision in the same sex marriage cases. Accordingly, while the decision does not arise out of a class action, the author notes that today the Supreme Court issued its opinion and, by a 4-3 vote, struck down California's ban on same sex marriages as unconstitutional. In re Marriage Cases, ___ Cal.4th ___ (Cal. May 15, 2008). Chief Justice George wrote the majority opinion, joined by Justices Kennard (who also penned a short concurring opinion), Werdegar and Moreno. Two concurring and dissenting opinions were filed: one by Justice Baxter, joined by Justice Chin, and one by Justice Corrigan. The court's opinions may be found below. The file is large, so please be patient.

Download PDF file of In re Marriage Cases

Posted In: Topics of Interest

ERISA Class Action Alleging Failure to Pay Benefits Premised on Strained Reading of Long-Term Disability Insurance Policies and Defense Entitled to Partial Summary Judgment as to certain Class Action Claims New York Federal Court Holds

Plaintiffs filed a putative class action lawsuit against Unum Provident Corporation, Unum Life Insurance Company of America, First Unum Life Insurance Company and Colonial Life and Accident Insurance Company (collectively, “Unum”) alleging violations of ERISA (Employee Retirement Income Security Act). Loughman v. Unum Provident Corp., 530 F.Supp.2d 1121, 2008 WL 515916, *1 (S.D.N.Y. February 25, 2008). The policies underlying the class action are “substantially similar” and “provide for the payment of benefits only in the event that an employee suffers a long-term disability and, consequently, contain language establishing an elimination period.” Id. The second amended class action complaint alleged that Unum improperly terminated long-term disability (LTD) benefits and wrongfully withheld LTD benefits during “the so-called ‘elimination period’”; defense attorneys moved for partially summary judgment with respect certain class action claims on the ground that no LTD benefits are due during the elimination periods in the respective policies. Id. The district court agreed and dismissed the class action with prejudice.

The heart of the class action is as follows: plaintiffs sought disability benefits based on the argument that, while LTD benefits are not payable during the elimination period, the policies require that “once the elimination period has run, a policyholder is entitled to receive retroactive benefits for the prior 180 days of disability.” Loughman, at *2. As a matter of contract interpretation, the district court disagreed. After explaining that ambiguity in a contract may not be premised on a “strained” reading of its terms, see id., at *3, the court rejected plaintiffs’ interpretation of the policies because the class action claims “hinge on their selective reading of a provision of the Policies outside the context of the Policies as a whole,” id., at *4. The federal court explained at page *4 that “plaintiffs construe the phrase ‘[t]he benefit will be paid for the period of disability’ to mean that they are entitled to benefits for the entire period in which they are disabled, regardless of other language in the Policies limiting the period for which benefits must be paid.” But this superficial reading of the policy language ignores the balance of its terms.

Continue reading "ERISA Class Action Defense Cases–Loughman v. Unum: New York Federal Court Grants Defense Summary Judgment Motion In ERISA Class Action Holding Policies Excluded Plainly Coverage During Elimination Period" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

Antitrust Class Action by Assignees of Direct Purchasers of Antidepressant Wellbutrin SR Satisfied Rule 23 Class Action Requirements Pennsylvania Federal Court Holds

Plaintiffs filed a class action complaint against SmithKline Beecham Corporation dba GlaxoSmithKline (GSK) alleging antitrust violations arising out of its manufacture and sale of the antidepressant drug Wellbutrin SR. The class action purports to be filed on behalf of “direct purchasers” of the drug, and the class action complaint alleges “(1) Defendant unlawfully extended its monopoly over Wellbutrin SR by making fraudulent assertions to the United States Patent and Trademark Office and by engaging in ‘sham’ litigation against generic drug manufacturers seeking to market less expensive versions of the drug; (2) Because the litigation delayed the market entry of generic versions of Wellbutrin SR, the class members were forced to pay unnecessarily high prices for the drug because no generic alternatives were available for nearly two years after Defendant’s patent monopoly would have expired; and (3) Defendant filed the baseless infringement suits against the generic manufacturers solely to preserve its monopoly during the pendency of the infringement litigation.” In re Wellbutrin SR Direct Purchaser Antitrust Litig., ___ F.Supp.2d ___ (E.D. Pa. May 2, 2008) [Slip Opn., at 1-2 (footnotes omitted)]. In essence, plaintiffs allege defendant violated Section 2 of the Sherman Act by requiring that they pay inflated prices “from the time Defendant’s monopoly was extended until the time the price of [the drug] reached competitive levels.” Id., at 4. Defense attorneys moved to dismiss claims in the various class action complaints, and the district court dismissed the claims alleging fraudulent prosecution of a patent and the antitrust claims seeking injunctive relief. Id., at 2 n.4. Plaintiffs moved the district court to certify the litigation as a class action, id., at 2; defense attorneys opposed class action treatment on the grounds that plaintiffs were not adequate representatives of the class and that the definition of the class is overly broad. The district court rejected the defense arguments and certified the litigation as a class action.

The district court had no difficulty in concluding that Rule 23(a)’s numerosity, commonality and typicality requirements had been satisfied. See In re Wellbutrin, at 4-8. With respect to the adequacy of representation of Rule 23(a)(4), defense attorneys did not challenge the qualifications of plaintiffs’ counsel, who the court found to be qualified to represent the class. See id., at 8. Rather, the defense argued (1) that plaintiffs could not represent the class because they are assignees of the direct purchasers (not direct purchasers themselves), (2) that a unique defense exists as to one of the named plaintiffs, “rendering it inadequate to represent the class”; and (3) that “significant conflicts” exist among the class members. Id., at 8-9. The district court rejected each argument. First, it noted that circuit case authority permits the assignment of antitrust claims, see id., at 9-10. Second, it rejected the claim that a defense challenge to the validity of the assignment to named-plaintiff SAJ Distributors will consume SAJ’s attention, id., at 10; as the issue is not likely to be a “major focus” of the class action litigation, the district court concluded that “it is not an issue that will distract SAJ to the detriment of the class itself,” id., at 11. Finally, the district court refused to follow Valley Drug Co. v. Geneva Pharmaceuticals, Inc., 350 F.3d 1181 (11th Cir. 2003), cited in support of the defense claim of a conflict between national drug wholesalers and downstream retail distributors such that the challenged activity may have been financially beneficial to the national wholesalers, explaining at page 14 that “the controlling question is whether the class members suffered an overcharge: if an overcharge occurred, all class members are entitled to recover, whether or not some plaintiffs experienced a net benefit while others experienced a net loss.”

Continue reading "GlaxoSmithKline Class Action Defense Cases–In re Wellbutrin: Pennsylvania Federal Court Certifies Class Action Against GlaxoSmithKline In Antitrust Class Action By Direct Purchasers Of Antidepressant Drug" »

Posted In: Certification of Class Actions, Class Action Court Decisions

Class Action Complaint Alleging Failure to Pay Employees for Time Incurred Doffing and Donning Protective Gear Satisfied Rule 23 Requirements for Class Action Certification Wisconsin Federal Court Holds

Plaintiffs filed a labor law class action against their employer, Kraft Foods, alleging violations of the Federal Labor Standards Act (FLSA) for failure to pay them for time spent doffing and donning protective gear at a meat processing plant; the class action complaint alleged that employees were required “to put on several items of safety and sanitation equipment and then walk to their work stations” before clocking in for the day, and were required to reverse the process after clocking out at the end of the day. Spoerle v. Kraft Foods Global, Inc., ___ F.Supp.2d ___ (W.D. Wis. May 5, 2008) [Slip Opn., at 1]. As the court explained at page 4, Kraft “requires that all hourly employees wear certain company-provided items in the performance of their jobs: footwear…, hair nets, beard nets…, protective headgear…, polyester frocks, and ear plugs or ear muffs,” and that some employees are required to wear cotton shirts and/or safety glasses. Employees are required to don this gear before swiping in, and to doff the gear after swiping out, id., at 5. The time incurred by employees to comply with this requirement varies, as does the time incurred in walking to/from the employee’s workstations. Id., at 1. The gravamen of the class action is that Kraft’s failure to pay for this “off the clock” time violates federal and state labor laws. Id. Defense attorneys moved for summary judgment on the grounds that the time at issue was not compensable because it fell within the scope of various exceptions under the FLSA; the district court denied the motion. See Spoerle v. Kraft Foods Global, Inc., 527 F.Supp.2d 860 (W.D. Wis. 2007). Plaintiffs moved the court to certify a collective action under the FLSA and a Rule 23(b)(3) class action under Wisconsin state law, Spoerle, at 2; the district court granted plaintiffs’ motion, finding this to be “an easy case” for certification of a class action, id., at 3.

The federal court first addressed the defense argument that the state and federal class action claims could not be prosecuted in the same action, based on the theory that “a plaintiff should not be allowed to maintain a representative action involving both federal and state law wage claims because of the procedural differences between the two types of claims.” Spoerle, at 8. This argument is premised on the fact that employees must affirmatively “opt in” to the FLSA class action to be members of the class, but the same employees are deemed members of the state law class action unless they affirmatively “opt out.” Id. According to defense attorneys, “potential plaintiffs will be hopelessly confused by the differences between the two claims and will be unable to make an intelligent decision regarding whether to opt in or out of the lawsuit,” id.; this confusion is exacerbated by plaintiffs’ unilateral and premature notice to the class, which “contained inaccurate information,” id., at 9. The district court agreed that “plaintiffs made a foolish blunder,” id., at 9, but concluded that any confusion could be addressed through carefully drafted notices, id., at 8-9.

Continue reading "Kraft FLSA Class Action Defense Cases–Spoerle v. Kraft: Wisconsin Federal Court Certifies Class Action Of Class Action Complaint Alleging Labor Law Violations For Failure To Compensate Employees For Doffing/Donning Protective Gear" »

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Summary Judgment in Favor of Defense in ERISA Class Action Proper because Class Action Claims that Defendants should not have Invested in Company Stock ran Counter to Terms of Eligible Individual Account Plan (EIAP) and because Negligent Misrepresentations Alleged in Class Action Complaint were not made in Fiduciary Capacity Fifth Circuit Holds

Plaintiff filed a class action against his employer, Reliant Energy, Inc. (REI) and the Benefits Committee of his employer’s savings plan alleging violations of ERISA (Employee Retirement Income Security Act). The Plan is an Eligible Individual Account Plan (EIAP) under ERISA, and the class action complaint alleged that defendants breached fiduciary duties owed to current and former participants in the Plan in that defendants “had a fiduciary duty to liquidate the Common Stock Fund and cease purchasing REI shares, notwithstanding the Plan's express contrary requirements.” Kirschbaum v. Reliant Energy, Inc., ___ F.3d ___, 2008 WL 1838324, *1 (5th Cir. April 25, 2008). The district court granted plaintiff’s motion to certify the litigation as a class action, id. Defense attorneys moved for summary judgment on the ground that defendants satisfied their legal duties to the class: The district court granted summary judgment as to all class action claims, and entered judgment in favor of defendants on the class action complaint. Id. Plaintiff appealed, and the Fifth Circuit affirmed.

Under the Plan participants were permitted to invest up to 16% of their compensation in a number of funds, “ranging from riskier, growth-oriented funds to more stable mutual funds”; one of these options was the REI Common Stock Fund which essentially consisted of REI common stock. Kirschbaum, at *1. Moreover, “REI agreed to match up to the first six percent of an employee's contribution with shares of REI common stock allocated to the employee's Common Stock Fund account,” but the matching contributions had to stay in Common Stock Fund until the employee was 55 years old and had 10 years of service with the company. Id. After the disclosure of certain “sham transactions” by REI employees and another energy trader, the stock dropped 40% causing a substantial loss in the value of the Common Stock Fund, id. REI later admitted that the trades in question inflated REI’s revenue by 10% over a three-year period. Id. Plaintiff filed his class action complaint alleging that defendants were “responsible under ERISA to make good the losses the Plan sustained on REI common stock.” Id., at *2. Specifically, the class action alleged that defendants knew REI stock “was not a prudent investment” and that they owed a fiduciary duty to discontinue purchasing REI stock, to sell the Plan’s holdings of REI stock, and to discontinue the Common Stock Fund. Id. The district court certified the litigation as a class action, but agreed with defense attorneys that summary judgment was appropriate as to each of the class action claims because “the Plan afforded [defendants] no discretion to terminate the fund or halt investments in it” and, accordingly, “defendants had no fiduciary duty to do so.” Id.

Continue reading "ERISA Class Action Defense Cases–Kirschbaum v. Reliant Energy: Fifth Circuit Affirms Summary Judgment In Favor Of Defense In ERISA Class Action Complaint Holding Class Action Claims" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

To assist class action defense attorneys anticipate the types of cases against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers May 2 – 8, 2008, during which time 39 new class action lawsuits were filed. Readers know that labor law class actions almost always top the list of new class action cases, often by a wide margin, and this proved true yet again. During the time period covered by this post, 17 new class actions were filed alleging various labor law violations (44% of the total number of new class action lawsuits during the past week). The only other category of class action lawsuits that even managed to break the 10% threshold involved California unfair business practice claims, which include false advertising claims, with nine (9) new class actions (23%).

Posted In: Class Actions In The News

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407and Transfers Actions to District of Maryland

Four (4) class action lawsuits were filed in Arizona, Florida, Illinois and New York against various defendants, including Michelin North America and American Honda Motor relating to the PAX “run-flat” tire system manufactured by Michelin and installed in certain Hondas and Acuras sold in the United States. In re Michelin North Am., Inc. PAX Sys. Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 15, 2008) [Slip Opn., at 1]. Defense attorneys for Michelin filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class action litigation pursuant to 28 U.S.C. § 1407 in the District of Maryland; defense attorneys for Honda supported the motion. Id. All plaintiffs agreed that pretrial coordination was appropriate, but they argued for transfer to the Northern District of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, concluding that this “will eliminate duplicative discovery; avoid inconsistent pretrial rulings; and conserve the resources of the parties, their counsel and the judiciary.” Id. The Panel also agreed with defense attorneys that the District of Maryland was the appropriate transferee court, noting that “the wave of putative statewide class action lawsuits relating to the PAX System began with an action removed to the District of Maryland” and that the Maryland district court judge has “had an opportunity to familiarize himself with issues in this litigation.” Id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Transfers Actions to Western District of Washington

Seven (7) class action lawsuits (5 in Washington and 2 in New York) were filed against various defendants, including Washington Mutual, “arising from alleged misrepresentations or omissions concerning WaMu’s financial condition with respect to its subprime home loan portfolio.” In re Washington Mutual, Inc., Securities, Derivative & “ERISA” Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 21, 2008) [Slip Opn., at 1]. Defense attorneys for common defendant Washington Mutual filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class action litigation pursuant to 28 U.S.C. § 1407 in the Western District of Washington, where five class actions already were pending; no party opposed pretrial coordination, but plaintiffs’ lawyers in the New York class actions argued for that district as the transferee court. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the defense that the Western District of Washington was the appropriate transferee court because most of the actions were pending there and because WaMu is headquartered in Seattle. Id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions, PSLRA/SLUSA Class Actions

As Master of Class Action Complaint Plaintiffs Successfully Limited Amount in Controversy so as to Preclude Removal Jurisdiction on Diversity Grounds or under CAFA (Class Action Fairness Act) Necessitating Remand of Class Action to State Court, but South Carolina Federal Court Expressly Limits Plaintiffs’ Individual and Class Action Recovery to Limits Pleaded in Class Action Complaint

Plaintiffs filed a putative class action lawsuit in South Carolina state court against GAF Materials “alleging claims for negligence, negligent representation, breach of warranty, breach of implied warranties, fraud, a violation of the South Carolina Unfair Trade Practices Act (‘SCUPTA’), and unjust enrichment.” Brooks v. GAF Materials Corp., 532 F.Supp.2d 779, 780 (D.S.C. 2008). The class action complaint alleges the class “suffered property damage as a result of the Defendant's defective roofing materials” and seeks compensatory and punitive damages, but in order to avoid removal jurisdiction the class action complaint expressly states that the “amount in controversy for the entire proposed Class does not exceed five million dollars” and that “[t]he Plaintiffs' individual recovery, as well as any putative Class Members individual recovery, exclusive of interest and costs, is not to exceed $74,999.00.” Id. Defense attorneys removed the suit to federal court under the Class Action Fairness Act (CAFA), and plaintiffs’ moved to remand the action to state court. Id. Defense attorneys originally removed the class action in May 2006, but the district court granted plaintiffs’ motion to remand “because the amount in controversy does not exceed $75,000, exclusive of interest and costs, for diversity jurisdiction under 28 U.S.C. § 1332.” Id., at 780. After plaintiffs amended their class action complaint, defense attorneys again removed the action to federal court but the district court remanded the action “for lack of jurisdiction based on the one-year cap on removal set forth in 28 U.S.C. § 1446(b),” id., at 780-81, but the court subsequently rescinded its remand order and requested briefing on whether the amount in controversy exceeded $5 million for purposes of CAFA removal jurisdiction, id., at 781.The district court granted the motion.

In analyzing whether the Class Action Fairness Act authorized removal of this lawsuit, the district court stressed that “Plaintiffs have placed a clear limitation on damages in their complaint.” Brooks, at 782. The Court held at page 782, “the court declines to ‘adopt any approach under which the court will be required to undertake its own independent review of the amount in controversy despite a specific limitation on damages in the plaintiff's complaint.’” As the master of their complaint, plaintiffs are entitled to limit damages sought therein in order to avoid removal jurisdiction, and they effectively did so here. Id. Accordingly, the district court granted plaintiffs’ motion to remand the class action to state court, finding that the amount in controversy requirement had not been met. Id., at 782-83. However, the federal court expressly barred plaintiffs from playing games with removal. The court’s remand order expressly states, “with respect to all claims, the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney's fees, exceeding five million dollars ($5,000,000), exclusive of interest and costs for the putative class action, and the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney's fees, exceeding seventy-four thousand nine hundred ninety-nine dollars ($74,999.00), exclusive of interest and costs, for any individual claims.” Id., at 783.

Continue reading "CAFA Class Action Defense Cases–Brooks v. GAF: South Carolina Federal Court Remand Class Action To State Court For Lack Of Requisite Amount In Controversy But Expressly Prohibits Plaintiffs From Recovering Damages In Excess Of Prayer" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

District Court Properly Dismissed Securities Fraud Class Action Without Leave to Amend because Class Action Complaint Failed to Satisfy Private Securities Litigation Reform Act (PSLRA) Pleading Requirements Eighth Circuit Holds

Plaintiff filed a class action complaint against Possis Medical and two individuals alleging securities fraud violations. The class action alleged that after Possis Medical decided in 2001 to study whether its non-surgical catheter system, designed to remove blood clots, could be used for other medical procedures, it “made several public statements regarding the study's potentially favorable impact on company revenues”; however, in August 2004, Possis Medical released the results of its study “which did not support expanded…usage.” The precipitous drop in stock value led plaintiff to file her putative class action. Cornelia I. Crowell GST Trust v. Possis Medical, Inc., 519 F.3d 778, 781 (8th Cir. 2008). Defense attorneys moved to dismiss the class action on the ground that the class action complaint “failed to meet the heightened pleading standards” required by the Private Securities Litigation Reform Act (PSLRA), id. The district court granted the motion and dismissed the class action complaint, without granting leave to amend, on the ground that the pleadings were insufficient under the PSLRA. Id. Plaintiff appealed, arguing that the class action adequately alleged securities fraud or, alternatively, that the district court erred in failing to grant leave to file an amended class action complaint, id. The Eighth Circuit affirmed.

With respect to the motion to dismiss the class action, the district court found that the complaint “failed to establish that Possis Medical had misrepresented a material fact or acted with the required scienter.” Crowell Trust, at 782. The Eighth Circuit agreed. First, the class action failed to “provide the level of detail” required to support the misrepresentation element: “‘[R]ote allegations that the defendants knowingly made false statements of material fact’ alone are insufficient.” Id. (quoting In re Navarre Corp. Sec. Litig., 299 F.3d 735, 745 (8th Cir. 2002)). The Circuit Court held that the anonymous statements relied on by plaintiff failed to provide the necessary “who, what, when, where and how” of the allegedly actionable statements. Id., at 782. Moreover, the scienter element was missing because the court cannot focus on isolated acts but rather must consider “‘whether all the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any allegation, scrutinized in isolation meets that standard.’” Id. (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., ___ U.S. ___, 127 S.Ct. 2499, 2502 (2007)). The mere fact that the study was important was insufficient to establish scienter, id., at 783.

With respect to the denial of leave to amend, the Circuit Court noted that plaintiff “failed to dem