Posted On: April 28, 2006 by Michael J. Hassen Email This Post

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California Class Action Cases--Supreme Court To Review Gentry v. Superior Court Which Enforced Class Action Waiver In Arbitration Clause

California Supreme Court Grants Review in Gentry Case

In a prior article, we discussed the California appellate court opinion enforcing a pre-employment arbitration agreement containing a class action waiver. Gentry v. Superior Court, 135 Cal.App.4th 944 (Cal.App. 2006).

On April 26, 2006, the California Supreme Court granted review of Gentry. Under California law, the decision cannot be cited during the pendency of the appeal.

Posted On: April 26, 2006 by Michael J. Hassen Email This Post

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Defense of Class Action Cases and Multidistrict Litigation (MDL)

Amendment of MDL (Judicial Panel on Multidistrict Litigation) Panel Rules of Procedure

Prior articles have discussed class actions and MDL (multidistrict litigation), and have provided the statutory and procedural rules governing MDL. On April 19, 2005, the Judicial Panel on Multidistrict Litigation published an order partially suspending Panel Rule 5.12(a), concerning the manner of filing papers, “insofar as papers submitted for filing requiring an original and eleven copies shall be reduced to four copies along with an original.” For the convenience of the reader, the order itself may be found at the link provided.

Download PDF file of Order re Panel Rule 5.12(a)

Posted On: April 16, 2006 by Michael J. Hassen Email This Post

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Class Action Defense Cases--Murphy Brothers v. Michetti Pipe Stringing

Removal Period Under 28 U.S.C. § 1446 Begins To Run Upon Service Of Complaint U.S. Supreme Court Holds

CAFA (Class Action Fairness Act of 2005) was enacted to greatly expand access to federal courts in class actions. In class actions, defendants often benefit if they can remove the case to federal court. While CAFA contains special rules concern removal and appealability of orders granting or denying motions for remand, removal of cases to federal court generally is governed by 28 U.S.C. § 1446.

Generally, a defendant must remove an action to federal court within 30 days of receipt “by service or otherwise” of the “initial pleading.” Prior to United States Supreme Court opinion in Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 119 S.Ct. 1322 (1999), federal courts were divided on whether receipt of a courtesy copy of the complaint started the 30-day removal period. Compare Valle Trade, Inc. v. Plastic Specialties & Technologies, Inc., 880 F. Supp. 499, 500 (S.D. Tex. 1995) (“Receipt of a ‘courtesy copy’ of the petition constitutes sufficient notice under the statute.”); Uhles v. F.W. Woolworth Co., 715 F. Supp. 297, 297-98 (C.D. Cal. 1989) (30-day removal period begins upon receipt of initial pleadings by any means, “irrespective of the technicalities of state service of process laws”), with Apache Nitrogen Products, Inc. v. Harbor Ins. Co., 145 F.R.D. 674, 680 (D. Ariz. 1993) (holding defendant must be served to commence removal period).

The United States Supreme Court finally resolved the question in Murphy Brothers v. Michetti Pipe, holding that receipt of a “courtesy copy” of a complaint is not sufficient to trigger the time period for removal. Rather, “a named defendant’s time to remove is triggered by simultaneous service of the summons and complaint, or receipt of the complaint, “through service or otherwise,” after and apart from service of the summons, but not by mere receipt of the complaint unattended by any formal service.” 526 U.S. at 347-48.

Posted On: April 16, 2006 by Michael J. Hassen Email This Post

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Class Action Defense Cases--Abrego Abrego v. Dow Chemical

CAFA (Class Action Fairness Act of 2005) Requires Defendant Establish Removal Jurisdiction in "Mass Action" Cases and Jurisdictional Discovery Discretionary Ninth Circuit Holds

CAFA greatly expands access to federal courts to class action defendants, as well as to defendants in "mass action" cases. One question federal courts have grappled with is whether Congress intended to shift the burden from a class action defendant to establish removal jurisdiction, to a class action plaintiff to prove that the matter should be remanded to state court. On April 4, 2006, the Ninth Circuit held that CAFA does not shift the burden of proof to plaintiffs in mass action cases. Abrego Abrego v. Dow Chemical Co., 443 F.3d 676 (9th Cir. 2006).

Abrego Abrego involved a mass action brought by 1160 Panamanian workers against Dow Chemical for alleged distribution and use in Panama of a pesticide banned in the United States. Dow removed the case to federal court under 28 U.S.C. § 1332(d)(11), added by CAFA to provide federal court jurisdiction over "mass actions." (The requirements of mass actions are discussed in a separate article.) In response to plaintiffs' motion to remand the action to state court, Dow argued:

[U]nder CAFA and contrary to preexisting removal jurisdiction law: (1) plaintiffs bear the burden of refuting the district court’s removal jurisdiction; (2) a “mass action” is removable regardless of whether there is jurisdiction over all plaintiffs whose claims are necessary to qualify the action as a mass action; and (3) the district court must allow jurisdictional discovery to determine the amount in controversy.

443 F.3d at 677-78. The district court found that Dow had failed to establish removal jurisdiction and remanded the case to state court. Id., at 679.

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Posted On: April 11, 2006 by Michael J. Hassen Email This Post

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Class Action Defense Cases--Braud v. Transport Service Company

Post-CAFA (Class Action Fairness Act of 2005) Amendment of Complaint to Add Defendant Allows Removal to Federal Court by that Defendant of Suit Filed Prior to CAFA’s Effective Date Fifth Circuit Holds

On April 6, 2006, the Fifth Circuit Court of Appeals considered “an issue of first impression for this court: whether amending a complaint to add a defendant ‘commences’ a new suit under the Class Action Fairness Act of 2005 (CAFA),” Braud v. Transport Service Co. of Illinois, 445 F.3d 801, 802 (5th Cir. 2006).

In Braud, the class action petition was filed in August 2004. In April 2005 (after CAFA’s February 18, 2005 effective date), plaintiffs amended their petition to add an additional party-defendant, Ineos. Ineos timely removed the action to federal court on the ground of CAFA. Braud, at 802. In considering plaintiffs’ motion for remand, the district court concluded that the amendment did not draw the action into the ambit of CAFA and remanded the matter to state court. The Fifth Circuit reversed.

The sole question on appeal was whether the addition of a new defendant affected the applicability of CAFA. Braud recognized that whether the action was “commenced” after CAFA’s effective date turns entirely upon state law. Braud, at 803. In this regard, the Court explained that the question is not one of “retroactivity” but of “commencement”: “the issue is not whether CAFA should apply to suits commenced before February 18, 2005, but whether the addition of a new defendant commences a new suit.” Id., at 804. In other words, if adding a party-defendant constitutes a new action under state law, then CAFA applies by its terms, not because of retroactivity.

The Fifth Circuit “agree[d] with the Seventh Circuit that amendments that add a defendant commence the civil action as to the added party,” Braud, at 804. It based this holding on two grounds. First, “caselaw holds that generally a party brought into court by an amendment, and who has, for the first time, an opportunity to make defense to the action, has a right to treat the proceeding, as to him, as commenced by the process which brings him into court.” Id. at 805 (citations omitted). Second, “the addition of a new defendant opens a new window of removal under 1446(b).” Id. The full opinion is well worth reading.

Download PDF file of Braud v. Transport Service Company

Posted On: April 11, 2006 by Michael J. Hassen Email This Post

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Best Buy v. Superior Court: Class Action Lawyer Permitted, Over Defense Objection, Precertification Discovery To Identify Substitute Class Action Representative California Court Holds

Plaintiff Lawyer, not Allowed to be Class Counsel and Class Representative, Rewarded with Discovery to Find New Class Action Plaintiffs

Class action case law in California "prohibits a lawyer from serving both as class representative and as counsel for the class, " Best Buy Stores, L.P. v. Superior Court, 137 Cal.App.4th 772, 774 (Cal.App. 2006) (citing Apple Computer, Inc. v. Superior Court, 126 Cal.App.4th 1253 (Cal.App. 2005). On February 6, 2004, a plaintiff's lawyer sought to do just that, filing a putative class action to his own name against Best Buy for alleged violations of the CLRA (Consumer Legal Remedies Act, California Civil Code §§ 1750 et seq.), unfair competition, unjust enrichment based on the theory that the "restocking fee" Best Buy charged for returned merchandise was illegal. Best Buy, at 774. Defense attorneys moved to dismiss the case, and the trial court issued an order to show cause why the motion should not be granted. Id.

The plaintiff lawyer requested that the court compel Best Buy (through a third party) to send a letter to a sampling of members of the putative class so that he could find a new class representative: the trial court granted the motion. Best Buy, at 775. Best Buy filed a petition for writ of mandate in the California Court of Appeal. The defense opposed this class action discovery order as a form of "illegal solicitation"; the appellate court disagreed with this characterization. Id., at 777. The Court agreed, however, that the privacy rights of Best Buy customers needed additional protection. Accordingly, at page 778 it held as follows:

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Posted On: April 3, 2006 by Michael J. Hassen Email This Post

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Merrill Lynch v. Dabit Class Action Defense Case

SLUSA (Securities Litigation Uniform Standards Act) and Pre-emption

SLUSA (Securities Litigation Uniform Standards Act) was enacted by Congress in 1998 to affect sweeping changes to federal securities laws class actions. SLUSA addresses numerous federal securities laws class actions issues including pleading, class representation, discovery, liability, attorney fee awards, expenses and more. SLUSA also sought to pre-empt state law securities class action litigation, but the Circuit Courts disagreed on the breadth of that pre-emption.

In Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, __ U.S. ___, 126 S.Ct. 1503 (2006), the United States Supreme Court issued its opinion. This opinion addresses whether the Securities Litigation Uniform Standards Act (SLUSA) “only pre-empts state-law class-action claims brought by plaintiffs who have a private remedy under federal law,” as the Second Circuit held in Dabit v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 395 F.3d 25 (2005), or whether SLUSA “also pre-empts state-law class-action claims for which federal law provides no private remedy,” as the Seventh Circuit held in Kircher v. Putnam Funds Trust, 403 F.3d 478 (7th Cir. 2005). The Supreme Court agreed with the Seventh Circuit, holding that SLUSA's pre-emption provision was intended to be read broadly, and pre-empted state-law class-action claims brought not only by purchasers and sellers of securities, but also by holders of securities. As so read, SLUSA pre-empted state-law claims alleging the fraudulent manipulation of stock prices.

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Posted On: April 2, 2006 by Michael J. Hassen Email This Post

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Defense of Class Actions Issues: Judicial Panel Rules for Multidistrict Litigation (MDL)

MDL (Multidistrict Litigation) Judicial Panel Rules of Procedure

When multiple actions, class action or otherwise, involving the same facts are pending in different federal district courts, 28 U.S.C. § 1407 sets forth the procedure for the transfer of the actions to a single federal court for coordination or consolidation. This is known as “multi-district litigation” (MDL), and is discussed in a separate article. The Judicial Panel on Multidistrict Litigation oversees MDL cases, and has published Rules of Procedure governing MDL cases. For the convenience of the reader, a link to those rules may be found here.

Download PDF file of Judicial Panel Rules of Procedure

Posted On: April 2, 2006 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Schumacher v. Tyson: South Dakota Federal Court Denies Defense Motion For Summary Judgment In Class Action Lawsuit Under Packers And Stockyards Act

Producers Adequately Alleged Violation of Federal Packers and Stockyards Act (PSA) and Raised Genuine Issues of Material Fact as to Knowledge that Federal Government’s Published Prices for Boxed Beef were Inaccurate

For the few defense attorneys who may benefit from this information, we note that on March 30, 2006, a federal district court denied a defense motion for summary judgment in a class action filed by cattle producers against beef packers under the federal Packers and Stockyards Act (PSA), 7 U.S.C. §§ 181 et seq. The class action alleged that at the time they negotiated for the purchase of cattle, the beef packers knew that the rates for boxed beef published by the federal government were inaccurate. The district court held that the cattle producers had adequately alleged PSA claims and had raised genuine issues of fact in support of those claims. Schumacher v. Tyson Fresh Meats, Inc., 434 F.Supp.2d 748 (D. S.D. 2006).

Download PDF file of Schumacher v. Tyson Fresh Meats