Class Action Defense Blog

As a service to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for class actions 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. Our hope is that the class action defense lawyer may better anticipate claims against which they must defend. This report covers the time period from July 21 - July 27, 2006. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. Approximately 48 class action lawsuits were filed in these California state and federal courts during that time period, of which 16 involved employment law claims (33%) - again claiming the dubious honor of "first place." Antitrust class action filings were a distant second with 6 new lawsuits (13%) four of which were nothing more than new filings against British Airways et al. Five (5) new class action lawsuits (10%) alleged violations of the Auto Sales Finance Act.

Posted In: Class Actions In The News, Class Actions In The News

The Los Angeles Times reports that yesterday an Arkansas judge approved the $90 million settlement of the click-fraud class action lawsuit against Google. While more than 70 objections to the proposed settlement had been filed, Google's class action defense attorneys noted that all but one of Google's 20 largest advertisers approved of the settlement. The court reportedly downplayed the concerns of small advertisers, and concluded that the terms of the settlement were "fair, reasonable and adequate." The article, entitled "Judge OKs Google's Click-Fraud Settlement," may be found in the Business Section of the July 28, 2006 edition of the Los Angeles Times.

Posted In: Class Actions In The News, Class Actions In The News

California Court Dismisses Class Action Agreeing With Defense Attorneys that Federal Fair Credit Report Act (FCRA) Does Not Require Terms of Equity Line Offer in Mailer to be a Specific Dollar Figure or Interest Rate, and that No Private Right of Action Exists for Alleged Violations of § 1681m's Disclosure Requirements

A putative class action was filed against a lender for allegedly violating the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., by sending out unsolicited mailers offering equity lines of credit in broad amounts (in plaintiff's case, $15,000 - $300,000) at a range of interest rates (in plaintiff's case, 5.65% - 16.9%), and by failing to include the disclosures required by § 1681m(d). Putkowski v. Irwin Home Equity Corp., 423 F.Supp.2d 1053, 1055-56 (N.D. Cal. 2006). Defense attorneys moved to dismiss the class action; plaintiff's lawyer argued that the mailer was nothing more than a "sales pitch" and that it did not constitute a "firm offer" under the FCRA because it "failed to state the rate of interest to be charged or the amount of credit to be extended." Id., at 1057. The class action defense team also argued that no private right of action exists for alleged violations of § 1681m. The district court agreed with the defense.

Defense attorneys argued that "firm offers of credit" under the FCRA may be "conditional" - that it need not specify the amount of the loan offered or the interest rate, and that "the offeror may later withdraw the offer if the consumer does not meet the creditworthiness criteria." Putkowski, at 1058. The district court distinguished Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004) [holding mailer failed to comply with FCRA], and found that the terms of the "offer" set forth in the mailer sent to plaintiff were sufficient "firm" to satisfy FCRA. Id., at 1059-60.

Continue reading "Putkowski v. Irwin Home Equity-FCRA Class Action Defense Cases: Mailer Offering Pre-Approved Equity Line From $15,000-$300,000 At Interest From 5.65%-16.9% Is "Firm Offer Of Credit" Under Federal FCRA (Fair Credit Reporting Act) California Court Holds" »

Posted In: FCRA Class Actions, Class Action Court Decisions

Federal Court Also Holds that Liability for Violations of Fair Credit Reporting Act (FCRA), and that "Willful" Noncompliance Under FCRA's Punitive Damage Provision Includes Reckless Disregard

In two class action lawsuits filed against insurance companies for alleged violations of the federal Fair Credit Reporting Act separate statement motion to compel responses, 15 U.S.C. §§ 1681 et seq., (1) class action defense attorneys representing Hartford moved for summary judgment on the grounds that the initial rate set for a new policy holder cannot constitute an "adverse action" because there is no "increase" in the rate charged; and (2) class action defense attorneys representing GEICO sought summary judgment claiming the class representative lacked standing, that it did not contract to issue the plaintiff a policy, and that the premium charged would have been the same even if it had not considered plaintiff's credit history. In each case, the district court granted summary judgment in favor of the insurers; the Ninth Circuit consolidated the cases for purposes of its opinion.

In a case of first impression, the Ninth Circuit Court of Appeals held that if the rate initially set by an insurance company would have been lower but for its reliance on a consumer's credit report, then a notice of adverse action must be provided under the FCRA. Reynolds v. Hartford Fin. Serv. Group, Inc., 435 F.3d 1081 (9th Cir. 2006). Congress enacted the FCRA to ensure fair and accurate reporting of credit information affecting consumers. The statutory scheme has been characterized by courts as both comprehensive and complex. One aspect of the FCRA requires that consumers be informed of "adverse actions" taken in reliance on credit reports so that they can dispute or explain any negative information contained in such reports. "Adverse action notices advise consumers that an adverse action has been taken against them, and the nature of that action, and alerts them that they may view a copy of the consumer report that triggered the adverse action free of charge and correct any errors affecting their economic well-being." Id., at 1085.

Continue reading "Reynolds v. Hartford-Class Action Defense Cases: "Adverse Action" Under Federal FCRA (Fair Credit Reporting Act) Applies To Initial Premium Set By Insurer Ninth Circuit Holds In Case Of First Impression" »

Posted In: FCRA Class Actions, Class Action Court Decisions

28 U.S.C. § 1447(d) Bars Review of Class Action Defense Appeal of Order Remanding Case to State Court on Grounds that Federal Court Lacked Subject Matter Jurisdiction Over Action

Roberts v. BJC Health System, 452 F.3d 737 (8th Cir. 2006), concerned a putative class action filed in Missouri state court alleging that certain medical procedures were systematically "miscoded" so that patients were overcharged for the procedures. The defense removed the action to federal court on the grounds of federal question subject matter jurisdiction, asserting that ERISA completely preempted the class action claims. In response to plaintiffs' motion for remand, the district court concluded that it lacked subject matter jurisdiction over the putative class action because the plaintiffs had not suffered any injury in fact, and therefore lacked standing. Id., at 738. Because plaintiffs lacked standing, the court never reached the issue of whether ERISA preempted plaintiffs' putative class action. Defense attorneys appealed, arguing that the case should have been dismissed; plaintiffs responded that the remand order was not appealable because it was based on lack of jurisdiction. Id.

On June 21, 2006, the Eighth Circuit agreed and dismissed the appeal. The Court reaffirmed well-settled law that "[w]hen a district court remands a case based on a lack of subject matter jurisdiction under [28 U.S.C. § 1447(c)], 'a court of appeals lacks jurisdiction to entertain an appeal of the remand order.'" Roberts, at 739 (citation omitted). The Circuit Court recognized that its decision "creates a potential Catch-22 for the parties" in that "the state court might dismiss the action for lack of jurisdiction because of ERISA preemption." Id. The Court's solution was to suggest that plaintiffs find a class member that had suffered an injury in fact. Id.

Download PDF file of Roberts v. BJC Health System

Posted In: Removal & Remand, Class Action Court Decisions

On July 21st, we posted an article concerning Hepting v. AT&T Corp., ___ F.Supp.2d ___ (N.D. Cal. July 20, 2006), where a San Francisco federal district court refused to dismiss a putative class action against AT&T for its participation in the government's warrantless surveillance program. In part, the California federal court rejected a defense argument by AT&T and the federal government (which had intervened in the putative class action) that the claims were barred by the state secrets privilege. Adam Liptak of the New York Times reports today that on July 25th a Chicago federal court dismissed similar claim against AT&T believing that the two decisions were not necessarily inconsistent. Liptak summarizes the Illinois decision as explaining that "The Chicago case concerns records of phone calls, including when they are placed, how long they lasted and the phone numbers involved. The San Francisco case, by contrast, mainly concerns an N.S.A. program aimed not at a vast sweep of customers' records but at the contents of a more limited number of communications."

Mr. Liptak's article, entitled "Judge Rejects Customer Suit Over Records From AT&T," may be found in the July 26, 2006 edition of the New York Times.

Posted In: Class Actions In The News

California Court Rejects Putative Class Action by Shareholder Whose Stock Escheated to the State Against Corporation Confirming Absolute Immunity Defense to UPL Claims

In a class action defense case of first impression, on July 19, 2006, a California appellate court upheld a court order sustaining a demurrer to a putative class action complaint against a corporation for alleged violations of California’s Unclaimed Property law (UPL), California Code Civ. Proc., §§1500-1582. Harris v. Verizon Communications, ___ Cal.App.4th ___, 2006 WL 20008884 (Cal.App. July 19, 2006). The putative class action was premised on the corporation’s alleged failure to provide notice required by the UPL. Specifically, plaintiff Gene Harris worked for GTE Corporation in the 1970s and 1980s, receiving shares in the corporation as a “fringe benefit.” Slip Opn., at 3. In 1990, without notice to Harris and without his knowledge, GTE transferred his shares to the State Controller. In accordance with California law, the Controller sold the shares and held the proceeds; eventually Harris submitted a claim and was 1999 the Controller sent him the funds held on his behalf. Id.

Despite receiving the funds, Harris filed two class actions. In September 2001, Harris filed a putative class action lawsuit against the State Controller for failure to provide notice to shareholders before selling stock that had escheated to the State. Slip Opn., at 3. That case was resolved in favor of the defense in 2004, when a California appellate court held that the UPL “do[es] not require the Controller to provide notice to apparent owners of escheated stock before the Controller sells the stock.” Harris v. Westly, 116 Cal.App.4thh 214, 224 (Cal.App. 2004). In October 2001, Harris filed a putative class action against GTE for delivering his shares of stock to the Controller without notice. Slip Opn., at 4. The defense demurred; the trial court dismissed the class action against GTE, agreeing that GTE had an absolute immunity defense under the UPL. Id.

Continue reading "Verizon Class Action Defense Case-Harris v. Verizon: Corporations That Comply With California Unclaimed Property Law (UPL) By Delivering Duplicate Stock Certificates To State Controller Have Absolute Immunity Against Suit From Shareholders" »

Posted In: Class Action Court Decisions

Federal District Court Grants Motion to Strike Third-Party Complaint for Indemnity/Contribution Against Parent

Plaintiffs Kristen and William McSherry Jr. ("William Jr.") filed suit against Capital One FSB and others alleging violations of the federal Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and Truth in Lending Act (TILA), together with Washington state law claims for defamation and invasion of privacy. McSherry v. Capital One FSB, ___ F.R.D. ___, 2006 WL 1420839 (W.D. Wash. 2006). Capital One filed a third-party complaint against plaintiff's father, William McSherry Sr., ("William Sr.") for indemnity and contribution because "[a]ccording to several documents in the record, including Plaintiffs' complaint, it appears that the debt allegedly incurred by [William Jr.], may have been incurred by [William Sr.]." Slip Opn., at 2. The district court granted plaintiffs' motion to strike, finding that "[w]hile it does appear that Capital One's allegedly tortuous actions or omissions would not have occurred but for [William Sr.'s] alleged actions, this is not enough." Id., at 1 and 12.

The federal court began with a summary of federal law on impleader actions, noting that it must be based on "an assertion of the third-party defendant's derivative liability to the third-party plaintiff" and that it "cannot be used to assert any . . . rights to recovery arising from the same transaction or occurrence as the underlying action." Slip Opn., at 3-4 (citation omitted). Here, the plaintiffs' complaint was carefully drafted to seek damages solely based on Capital One's acts or omissions in response to communications from plaintiffs concerning the debt:

Continue reading "McSherry v. Capital One-Class Action Defense Issues: No Right Of Indemnity Under FCRA (Fair Credit Reporting Act) Or TILA (Truth In Lending Act) Federal Court Holds" »

Posted In: FCRA Class Actions, Class Action Court Decisions, RESPA/TILA Class Actions

As a resource for the class action defense lawyer defending against class actions under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., we provide the text of the FCRA on this site for attorneys.

§ 1681b. Permissible purposes of consumer reports

(a) In general.

Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other:

(1) In response to the order of a court having jurisdiction to issue such an order, or a subpoena issued in connection with proceedings before a Federal grand jury.

(2) In accordance with the written instructions of the consumer to whom it relates.

(3) To a person which it has reason to believe

(A) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer; or

(B) intends to use the information for employment purposes; or

(C) intends to use the information in connection with the underwriting of insurance involving the consumer; or

(D) intends to use the information in connection with a determination of the consumer's eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant' s financial responsibility or status; or

(E) intends to use the information, as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation; or

(F) otherwise has a legitimate business need for the information

(i) in connection with a business transaction that is initiated by the consumer; or

(ii) to review an account to determine whether the consumer continues to meet the terms of the account.

(4) In response to a request by the head of a State or local child support enforcement agency (or a State or local government official authorized by the head of such an agency), if the person making the request certifies to the consumer reporting agency that

(A) the consumer report is needed for the purpose of establishing an individual’s capacity to make child support payments or determining the appropriate level of such payments;

(B) the paternity of the consumer for the child to which the obligation relates has been established or acknowledged by the consumer in accordance with State laws under which the obligation arises (if required by those laws);

(C) the person has provided at least 10 days’ prior notice to the consumer whose report is requested, by certified or registered mail to the last known address of the consumer, that the report will be requested; and

(D) the consumer report will be kept confidential, will be used solely for a purpose described in subparagraph (A), and will not be used in connection with any other civil, administrative, or criminal proceeding, or for any other purpose.

(5) To an agency administering a State plan under Section 454 of Title 42 for use to set an initial or modified child support award.

Continue reading "15 U.S.C. § 1681b – Permissible purposes of consumer reports: Statutory Language for the Defense Lawyer of Class Action Lawsuits Under the FCRA (Fair Credit Reporting Act)" »

Posted In: FCRA Class Actions, Statutes & Rules

Class Action Defense Attorneys Urged to Advise Clients about FACTA Requirements

Congress has amended the Fair Credit Reporting Act to include the Fair and Accurate Credit Transactions Act. That statute requires that credit card receipts provided to customers be modified so that the credit card number shown on the receipt is truncated and so that the expiration date is omitted. Defense attorneys are encouraged to be proactive in warning their clients about the statute, which takes effect in December 2006. The author predicts that this will be a ripe area for class action litigation.

Posted In: Class Actions In The News, FCRA Class Actions

California Supreme Court's Decision Adds "Standing" to Class Action Defense Arsenal Against UCL Claims Pending at Time of Proposition 64's Passage

California's Unfair Competition Law (UCL), California Bus. & Prof. Code, §§ 17200 et seq., was enacted "to protect consumers and competitors" alike from unfair competition in commercial markets for goods and services "by promoting fair competition," Kasky v. Nike, 27 Cal.4th 939, 949 (Cal. 2002). While government entities may enforce the provisions of the UCL, California law also permits private parties to enforce its terms. Generally, however, the UCL was not intended to provide a means of redressing a personal injury; rather, California's statutory scheme permits a party on behalf of the public (other consumers or competitors) to enjoin an unlawful or unfair business practice. These so-called "representative actions" are often filed as class actions. The California Supreme Court today resolved the issue of whether Proposition 64, approved in November 2004, applies to cases pending at the time of its passage. Californians for Disability Rights v. Mervyn's, ___ Cal.4th ___ (Cal. July 24, 2006).

The scope of the UCL is extremely broad. It defines "unfair competition" to "include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code." The Supreme Court has referred to this as "sweeping language" and declared that it is intended to cover "'anything that can properly be called a business practice and that at the same time is forbidden by law.'" Bank of the West v. Superior Court, 2 Cal.4th 1254, 1266 (Cal. 1992) (citation omitted). As the court explained, "[i]n essence, an action based on Business and Professions Code section 17200 to redress an unlawful business practice 'borrows' violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder." Farmers Ins. Exchange v. Superior Court, 2 Cal.4th 377, 383 (Cal. 1992) (citation omitted).

Continue reading "Mervyn's Class Action Defense Case-Californians for Disability Rights v. Mervyn's: California Supreme Court Holds Proposition 64 Applies "Retroactively" To Section 17200 Unfair Competition Law (UCL) Claims" »

Posted In: Class Actions In The News, Class Action Court Decisions

As a resource for the defense lawyer defending against class actions under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., we provide the text of the FCRA on this site for attorneys.

§ 1681a. Definitions; rules of construction

(a) Definitions and rules of construction set forth in this section are applicable for the purposes of this title.

(b) The term “person” means any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity.

(c) The term “consumer” means an individual.

(d) Consumer Report

(1) In general.

The term "consumer report" means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to e used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer' s eligibility for

(A) credit or insurance to be used primarily for personal, family, or household purposes;

(B) employment purposes; or

(C) any other purpose authorized under section 1681b of this title.

(2) Exclusions.

Except as provided in paragraph (3), the term "consumer report" does not include

(A) subject to section 1681s-3 of this title, any

(i) report containing information solely as to transactions or experiences between the consumer and the person making the report;

(ii) communication of that information among persons related by common ownership or affiliated by corporate control; or

(iii) communication of other information among persons related by common ownership or affiliated by corporate control, if it is clearly and conspicuously disclosed to the consumer that the information may be communicated among such persons and the consumer is given the opportunity, before the time that the information is initially communicated, to direct that such information not be communicated among such persons;

(B) any authorization or approval of a specific extension of credit directly or indirectly by the issuer of a credit card or similar device;

(C) any report in which a person who has been requested by a third party to make a specific extension of credit directly or indirectly to a consumer conveys his or her decision with respect to such request, if the third party advises the consumer of the name and address of the person to whom the request was made, and such person makes the disclosures to the consumer required under section § 1681m of this title; or

(D) a communication described in subsection (o) or (x).

(3) Restriction on sharing of medical information.

Except for information or any communication of information disclosed as provided in section 1681b(g)(3), the exclusions in paragraph (2) shall not apply with respect to information disclosed to any person related by common ownership or affiliated by corporate control, if the information is–

(A) medical information;

(B) an individualized list or description based on the payment transactions of the consumer for medical products or services; or

(C) an aggregate list of identified consumers based on payment transactions for medical products or services.

Continue reading "15 U.S.C. § 1681a – Definitions; rules of construction: Statutory Language of the FCRA (Fair Credit Reporting Act) for the Class Action Defense Lawyer" »

Posted In: FCRA Class Actions, Statutes & Rules

In 1970, Congress enacted the FCRA (Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq.) to "require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information," 15 U.S.C. § 1681(b). Congress did so based on its recognition that, “There is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer' s right to privacy.” § 1681(a)(4). And to ensure that its goals were met, Congress enacted a section of the FCRA that specifically prohibits consumer reporting agencies from avoiding the effects of the law through “corporate” or “technological circumvention,” see §1681x. Courts have referred to the FCRA's statutory scheme as both "comprehensive," FTC v. Manager, Retail Credit Co., 515 F.2d 988, 989 (D.C. Cir. 1975), and "complex," Skwira v. United States, 344 F.3d 64, 74 (1st Cir. 2003). We provide but a brief overview here.

A "consumer reporting agency" is defined as "any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports." 15 U.S.C. § 1681a(f).

Continue reading "General Overview Of The Federal Fair Credit Reporting Act (FCRA): Class Action Defense Issues" »

Posted In: FCRA Class Actions

In 1970, Congress enacted the FCRA (Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq.) to "require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information," 15 U.S.C. § 1681(b). As a service to class action defense attorneys defending against such claims, we provide here the text of the relevant statutory provisions of the FCRA. We have endeavored to make this accurate as of January 1, 2006. It includes those amendments to the FCRA contained in the Fair and Accurate Credit Transactions Act of 2003 (FACT), Public Law 108-159, as well as those in Section 506 of the Gramm-Leach-Bliley Act. Public Law 106-102. We begin with the text of 15 U.S.C. § 1681:

§ 1681. Congressional findings and statement of purpose

(a) Accuracy and fairness of credit reporting.

The Congress makes the following findings:

(1) The banking system is dependent upon fair and accurate credit reporting. Inaccurate credit reports directly impair the efficiency of the banking system, and unfair credit reporting methods undermine the public confidence which is essential to the continued functioning of the banking system.

(2) An elaborate mechanism has been developed for investigating and evaluating the credit worthiness, credit standing, credit capacity, character, and general reputation of consumers.

(3) Consumer reporting agencies have assumed a vital role in assembling and evaluating consumer credit and other information on consumers.

(4) There is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer' s right to privacy.

(b) Reasonable procedures.

It is the purpose of this title to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this title.

Posted In: FCRA Class Actions, Statutes & Rules

Green Tree v. Randolph: U.S. Supreme Court Upholds Order Compelling Arbitration Pursuant to Lender's Arbitration Provision under Federal Arbitration Act (FAA) Because Plaintiff Did Not Establish that Arbitral Forum would be Prohibitively Expensive: Truth in Lending Act (TILA) Class Action Claims Properly Dismissed

In Green Tree Financial Corp. v. Randolph, 531 U.S. 79 (2000), the United States Supreme Court addressed two issues: (1) whether a court order granting a defense motion to compel arbitration and dismissing (rather than staying) the plaintiff's claims is immediately appealable under the Federal Arbitration Act (FAA), 9 U.S.C. § 16(a)(3) as a "final decision with respect to an arbitration"; and (2) whether an arbitration provision that is silent on the question of allocation and amount of arbitration fees and costs is unenforceable for failure to "affirmatively protect a party from potentially steep arbitration costs." Id., at 82. The putative class action against Green Tree alleged violations of the federal Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 et seq., and arose from a loan to the putative class action representative for the purchase of a mobile home evidenced by a Manufactured Home Retail Installment Contract and Security Agreement that expressly provided for all disputes to be resolved by finding arbitration under the provisions of the FAA. Id., at 82-83 and n.1. Plaintiff asserted that Green Tree violated TILA by failing to disclose a specific insurance requirement as a finance charge; she later added a claim under the federal Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691 et seq. based on the requirement that she arbitrate her statutory claims for relief. The district court granted the class action defense team's motion to compel arbitration and dismissed plaintiff's claims with prejudice. The court also denied the plaintiff's request to certify the case as a class action. Id., at 83.

Continue reading "Federal Court Order Compelling Arbitration And Granting Class Action Defense Motion To Dismiss TILA Case Is Appealable Under FAA And Plaintiff Did Not Meet Burden Of Establishing Prohibitive Cost of Arbitration-Class Action Defense Cases " »

Posted In: Arbitration, Class Action Court Decisions, RESPA/TILA Class Actions

Indiana Court Requires Class Action Firm Milberg Weiss and Its Class Representatives to Produce Financial Records Dating Back to 1998

David Cay Johnston of the New York Times reports today that an Indiana court has granted a motion by American United Life Insurance Class to compel class action plaintiff firm Milberg Weiss Bershad & Schulman LLP and four of the firm's clients to produce financial records dating back to 1998. Federal prosecutors filed criminal charges in California against Milberg Weiss and two of its partners in mid-May 2006 alleging that the firm paid millions of dollars in kickbacks to clients to serve as plaintiffs; charges the firm and its partners deny. American United Life filed the motion in an effort to discover whether the firm paid four of its clients to serve as plaintiffs in an action against the company that alleged it had improperly sold "tax-deferred annuities wrapped in retirement accounts that were themselves tax-deferred." The results of the court's order could be far-reaching, especially if it is any indication of court rulings to come in the many other lawsuits that have been filed against Milberg Weiss.

Mr. Johnston's article, entitled "Judge's Wide Disclosure Order Could Tie Up Litigation Firm," may be found in Section C. of the July 21, 2006 edition of the New York Times.

Posted In: Class Actions In The News

In an article published on July 17, 2006, Correy Stephenson - a staff writer for Lawyers USA - reports on the increase in employment law class actions, particularly under the federal FLSA (Fair Labor Standards Act). Her article and findings are certainly consistent with the court filings seen in California state and federal courts. To aid California class action defense attorneys in anticipating claims against which they may have to defend, we recently began to provide weekly, unofficial summaries of the legal categories for class actions 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. Employment law cases have led the way in every report. This report covers the time period from July 14 - July 20, 2006. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. Approximately 34 class action lawsuits were filed in these California state and federal courts during that time period, of which 12 involved employment law claims (more than 35%), and eight (8) of those 12 (24% of the total number of class action filings) alleged inter alia failure to pay overtime. Unfair business practice lawsuits were next, with six (6) new filings (18%), followed by five (5) antitrust class actions (15%) and four (4) securities laws class actions (12%). It may be of interest to note that almost all of the antitrust lawsuits - four of the five - were "me too" lawsuits against British Airways.

Ms. Stephenson's article, entitled "Wage and hour suits on the rise: Employees seek payment for overtime and minimum wage," is the article of the week for Lawyers Weekly USA, and may be found online at www.lawyersweeklyusa.com/feature.cfm.

Posted In: Class Actions In The News

San Francisco Federal Court Denies Motion by Class Action Defense and Federal Government to Dismiss Lawsuit on Grounds of "State Secrets" Privilege and Immunity, But Certifies Order for Interlocutory Appeal

After the federal government's warrantless surveillance program was revealed in the press, and after AT&T and President Bush admitted the existence of the program, a putative class action was filed in San Francisco federal court against AT&T alleging that its participation in the program violated numerous constitutional and federal laws, as well as California's unfair competition law (UCL), California Bus. & Prof. Code, §§ 17200 et seq. AT&T moved to dismiss the class action complaint on grounds of standing, failure to plead that AT&T did not have a government certification, and immunity; the federal government intervened and moved for dismissal or summary judgment based on the state secrets privilege. Yesterday, the California district court denied the defense motions, but certified its order for immediate appeal. Hepting v. AT&T Corp., ___ F.Supp.2d ___ (N.D. Cal. July 20, 2006). The court's order is exceptionally detailed; we provide but a brief summary of it below. The entire opinion may be downloaded from the link at the end of this article.

The district court first addressed the federal government's "state secrets" defense. "'The state secrets privilege is a common law evidentiary rule that protects information from discovery when disclosure would be inimical to the national security.'" Slip Opn., at 5 (citation omitted). Importantly, an inquiry into the state secrets privilege does not turn on "a balancing of ultimate interests at stake in the litigation," Halkin v. Helms, 690 F.2d 977, 990 (D.C. Cir. 1982). Rather, the question is whether the harm that may result from the disclosure at issue requires that the information be withheld as a matter of "absolute right," id. The district court in Hepting applied the standard set forth in the Ninth Circuit's "definitive opinion on the state secrets privilege," Kasza v. Browner, 133 F.3d 1159 (9th Cir. 1998). Slip Opn., at 12. The federal government asserted that Kasza required dismissal because "(1) the very subject matter of this case is a state secret, (2) plaintiffs cannot make a prima facie case for their claims without classified evidence and (3) the privilege effectively deprives AT&T of information necessary to raise valid defenses." Slip Opn., at 15 . The court rejected each of these arguments.

Continue reading "Class Action Defense Cases--Hepting v. AT&T Corp.: California Federal Court Rejects Defense Motion to Dismiss Class Action Challenging Warrantless Surveillance Program" »

Posted In: Class Actions In The News, Class Action Court Decisions

Class Action Defense Attorneys Prevail on Demurrer Challenging Class Action Allegations - California Court Holds Plaintiffs' Lawyer Could not Establish "Community of Interest" (Commonality)

California homeowners filed a putative class action against their homeowners' insurance carriers, Farmers Insurance Exchange and Mid-Century Insurance Exchange (collectively "Farmers") and State Farm General Insurance, asserting claims for declaratory relief, breach of contract, bad faith, and unfair competition (UCL) based on the allegation that they "were wrongfully denied policy benefits for damage caused to their homes by the Northridge earthquake." Newell v. State Farm Gen. Ins. Co., 118 Cal.App.4th 1094, 1098 (Cal.App. 2004). The homeowners asserted the insurers had engaged in a "pervasive scheme . . . to limit liability on earthquake claims and [of] widespread use of bad faith practices," id., at 1103. The insurers demurred to the class action allegations on the grounds that, as a matter of law, the insureds could not establish commonality or that a class action was a superior means for resolution of the disputes. The trial court agreed with the insurers and sustained the demurrer without leave to amend; plaintiffs appealed. Id., at 1099.

The appellate court affirmed. As a preliminary matter, the Court held that the plaintiffs bore the burden of proving "'a well-defined community of interest among the class members.'" Newell, at 1100 (citation omitted). The Court found that the plaintiffs had failed to meet this burden. With respect to the breach of contract and breach of the implied covenant of good faith and fair dealing claims, the Court held:

Common questions of law and fact do not predominate . . . . Even if [the insurers] adopted improper claims practices to adjust Northridge earthquake claims, each putative class member still could recover for breach of contract and bad faith only by proving his or her individual claim was wrongfully denied, in whole or in part, and the insurer's action in doing so was unreasonable. . . . Thus, each putative class member's potential recovery would involve an individual assessment of his or her property, the damage sustained and the actual claims practices employed. . . . In such cases, class treatment is unwarranted.

Newell, at 1103 (citation omitted) (italics in original). The appellate court then explained that the declaratory relief and UCL claims "fare no better," id.

The Court also agreed that a class action would not be the "superior means" of resolving the disputes between the insurers and the members of the putative class, particularly in light of the fact that each class member will "have a strong interest in controlling their own case" and that "thousands of individuals have pursued their own claims." Newell, at 1104. It also bears noting that the appellate court believed the class had been defined so broadly - including "numerous types of alleged wrongdoing" - that it would not be manageable as a class action. Id.

NOTE: While the demurrer to the class action allegations did not result in a final judgment, under California law "denial of certification to an entire class is an appealable order." Linder v. Thrifty Oil Co., 23 Cal.4th 429, 435 (Cal. 2000).

Download PDF file of Newell v. State Farm

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

California Court Holds that Disney did not Require Employees to Drive to Work and to Take Shuttle from Parking Lot to Work, So Disney was not Required to Compensate Them for Travel Time Spent Riding Shuttle

A Disney employee filed a putative class action against the company seeking compensation under California state law for travel time based on the theory that certain employees were assigned to a parking lot located one mile from the Disneyland theme park, and Disney provided shuttles to transport them between the parking lot and the park. Overton v. Walt Disney Co., 136 Cal.App.4thh 263 (Cal.App. 2006). The class action defense attorneys argued that the California Supreme Court opinion in Morillion v. Royal Packing Co., 22 Cal.4th 575 (Cal. 2000) – which held that if an employer requires employees to travel in a company vehicle to work then it must compensate the employees for their travel time – did not apply. The defense moved for summary judgment on the grounds that the undisputed evidence established that Disney did not require employees to drive to work (and, in fact, encouraged and offered financial incentives to employees who used alternative means of transportation), and that Disney did not require employees to use the shuttle to travel from the parking lot to the theme park (some employees, for example, would walk or ride a bike). Overton, at 267-68. The trial court granted the defense motion for summary judgment and plaintiff’s lawyer appealed.

Continue reading "Overton v. Walt Disney Company: Disney’s Class Action Defense Prevails – Disney Not Required To Compensate Employees For Time Spent Riding Shuttle From Parking Lot To Theme Park California Court Holds" »

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

Judicial Panel on Multidistrict Litigation (MDL) Grants Defense Motion To Eliminate Duplicative Discovery, Prevent Inconsistent Rulings, and Conserve Resources of Parties and Court in Pretrial Proceedings of Class Action Cases

Three class action lawsuits were filed against H & R Block Mortgage Corp. alleging violations of the FCRA (Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq.) in that defendants purportedly “us[ed] consumer reports for purposes of mailing prescreened offers of credit for home loans to plaintiffs and potential class members.” In re H & R Block Mortgage Corp. Prescreening Litigation, ___ F.Supp.2d ___, ___, 2006 WL 1737530 (Jud.Pan.Mult.Lit., June 20, 2006). The class actions had been filed in the Central District of California, the Northern District of Indiana, and the Eastern District of Wisconsin, and the Judicial Panel found that there was overlap among the putative members of each class action because even though the Indiana and Wisconsin class actions were limited to residents of those particular states, the California class action defense confronted a putative nationwide class action. H & R Block’s class action defense team filed a motion under 28 U.S.C. § 1407 for coordination or consolidation of pretrial proceedings of the class actions. On June 20, 2006, the MDL Judicial Panel granted the defense motion – over the objection of the plaintiffs’ attorneys, who argued that “voluntary measures” had been put in place to obviate the need for coordination or consolidation – holding that the class actions would benefit from such treatment:

The three actions contain competing class allegations and involve facts of sufficient intricacy that could spawn challenging procedural questions and pose the risk of inconsistent and/or conflicting judgments. While we applaud every cooperative effort undertaken by parties to any litigation, transfer under Section 1407 has the salutary effect of placing all actions in this docket before a single judge who can formulate a pretrial program that: 1) allows discovery with respect to any non-common issues to proceed concurrently with discovery on common issues . . .; and 2) ensures that pretrial proceedings will be conducted in a streamlined manner leading to the just and expeditious resolution of all actions to the overall benefit of the parties and the judiciary.

In re H & R Block Mortgage Corp., at 2.

Download PDF file of In re H & R Block Mortgage Corp.

Posted In: FCRA Class Actions, Multidistrict Litigation, Class Action Court Decisions

Federal Court Cites Lack of Evidence Employee was Engaged in Interstate Commerce or in Production of Goods for Commerce to Establish Coverage Under Fair Labor Standards Act (FLSA) to Support Overtime Claim

Plaintiff Joseph Thorne appealed a district court order granting All Restoration Service’s defense motion for dismissal under Rule 50 as to Thorne’s overtime pay claims based on alleged violations of FLSA (Fair Labor Standards Act). Thorne v. All Restoration Serv., Inc., 448 F.3d 1264 (11th Cir. 2006). The district court had granted the defense motion on the grounds that “Thorne had not presented evidence at trial that he qualified for either enterprise coverage or individual coverage under the FLSA” because “‘[his] activities were local in nature and really did not affect interstate commerce in general,’” id., at 1265. On appeal Thorne challenged only the finding that he failed to establish individual coverage under FLSA. Individual coverage exists only if an employee “is engaged in commerce or in the production of goods for commerce,” 29 U.S.C. § 207(a)(1) (2005). The Circuit Court affirmed.

First, the Court rejected Thorne’s claim that regular use of his employer’s credit cards in the course and scope of employment means that he “engaged in interstate commerce.” First, the Circuit Court explained that the statute requires an activity that constitutes interstate commerce, not an activity that “merely affect[s]” interstate commerce. Thorne, at 1266 (citing McLeod v. Threlkeld, 319 U.S. 491, 497, 63 S.Ct. 1248 (1968)). All Thorne alleged was that he made purchases with the credit cards; he could not even establish whether the credit card bills came from out of state. Id., at 1266-67.

Continue reading "Class Action Defense and Employment Law Issues–Thorne v. All Restoration: FLSA (Fair Labor Standards Act) Overtime Claim Rejected By Eleventh Circuit" »

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

Class action plaintiff firm Milberg Weiss Bershad & Schulman LLP and two of the firm's top partners, David Bershad and Steven Schulman - indicted in mid-May 2006 for paying millions of dollars in kickbacks to clients to serve as plaintiffs - entered pleas of not guilty in a California federal court yesterday. As explained by Molly Selvin of the Los Angeles Times, "Prosecutors said the 'paid plaintiffs' were recruited to buy stocks in anticipation that they would fall in value, positioning themselves and Milberg Weiss to take the lead in securities-fraud cases and collect extra fees." Selvin also reports that, according to federal prosecutors, more indictments are likely to follow.

A New York Times article by Cindy Chang notes that two others tied to the alleged scheme - Seymour M. Lazar, "accused of serving as a paid plaintiff," and Paul T. Selzer, a lawyer "accused of helping launder the payments" to the paid plaintiffs - also entered not guilty pleas. Chang notes that Milberg Weiss continues to lose lawyers "and has been removed as lead counsel by a handful of large institutional investors in high-profile cases."

But Selvin reports that the news is not all bad for Milberg Weiss, as the class action plaintiffs' law firm continues to secure appointments to serve as lead counsel in class action lawsuits, suggesting the firm "might survive its current legal troubles." Molly Selvin's article, entitled "Milberg Enters Not Guilty Plea," may be found in the Business section of the July 18, 2006 edition of the Los Angeles Times. Cindy Chang's article, entitled "Law Firm and 4 Figures in Payments Case Enter Pleas," may be found in Section C. of the July 18, 2006 edition of the New York Times.

Posted In: Class Actions In The News

California Appellate Court Confirms that One Who, as a Nonrepresentative Class Member, Repeatedly Objects to Class Action Settlements may be Deemed a Vexatious Litigant, But Reverses Court Designation for Lack of Evidence

Based on a request that came not from the class action defense but from the class action plaintiffs’ attorneys, a California trial court declared a lawyer, Ernest M. Thayer, a vexatious litigant, see California Code Civ. Proc., §§ 391-391.7, “based on his history of filing objections to class action settlements . . . in which he was a member of the plaintiff class or represented a member of such a class.” In re Natural Gas Anti-Trust Cases I, II, II & IV, 137 Cal.App.4th 387, 390 (Cal.App. 2006). The Court of Appeal agreed that one who engages in conduct that falls within the scope of California’s vexatious litigant statutes is not insulated from being declared a vexatious litigant by virtue of his or her role in a class action as a nonrepresentative class member. Id.

The Court began its analysis with the definition of a vexatious litigant, and then addressed each subsection of the applicable statute in turn. Under California Code of Civil Procedure section 391(b), “a vexatious litigant is a person who does any of the following:

Continue reading "Class Action Defense Issues--In re Natural Gas: Objecting Class Members To Class Action Settlements Not Exempt From Being Declared Vexatious Litigants California Court Holds" »

Posted In: Class Action Court Decisions

"Vitamins Class Action" Defense Attorneys and Plaintiffs' Lawyer Present Proposed $30.5 Settlement to Court

On July 17, 2006, the parties involved in Amsterdam's first cartel class action appeared in court to seek approval of a $30.5 million settlement after a 7-year legal battle. The "vitamins class action' named Roche, BASF and Aventis and alleged unfair competition price fixing from 1989-1999 for vitamins A, B2, B5, C, E, and beta carotene. Reportedly the Australian Federal Court permitted the case to proceed as a class action in 2002. The victims of the price fixing scheme - which involved vitamins used for animal nutrition - allegedly lost market share or paid inflated prices.

The class action was precipitated by actions initiated by the European Commission alleging a worldwide antitrust conspiracy to fix prices that included not only Roche, BASF and Aventis, but Solvay Pharmaceuticals, Merck, Daiichi Pharmaceutical, Eisai, Takeda Chemical Industries, Lonza, Kongo Chemical, Sumitomo Chemical, Sumika Fine Chemicals and Tanabe Saiyaku as well. The EU began its investigation in May 1999, and concluded that 13 companies had participated in cartels aimed at eliminating competition in vitamin markets involving vitamin A, B1, B2, B5, B6, C, D3, E, Biotin (H), Folic Acid (M), beta carotene and carotinoids. On November 21, 2001, the EU ended its investigation into what its antitrust chief called the "most damaging series of cartels the commission has ever investigated" by fining eight (8) companies a combined total of more than 855 million euros. (It did not fine the last five companies listed because the statute of limitations had run.)

Note: The plaintiffs' lawyer reportedly believes that settlement of this class action - if approved - will impact an antitrust class action she has filed against Amcor alleging price fixing of cardboard boxes. Earlier this month, Amcor filed a cross-claim against rival Visy, seeking to bring it into the class action. News reports state that Visy intends to vigorously fight the charges.

Posted In: Class Actions In The News, Class Actions In The News

California Federal Court Grants Summary Judgment in Favor of Wolpoff & Abramson and Client MBNA, and Issues Order to Show Cause re Rule 11 Sanctions Against Plaintiff

The law firm of Wolpoff & Abramson LLP is no stranger to litigation: it routinely prosecutes debt collection actions on behalf of national retail and banking clients; and it has been named in many individual and class action lawsuits by people upset at the Wolpoff firm’s efforts to collect on delinquent accounts. According to a lawyer at Wolpoff & Abramson, the law firm aggressively defends lawsuits filed against it, and statistically it appears to do a very good job in presenting its defense. The most recent court ruling concerning the firm comes out of a California federal court, which granted the defense motions for summary judgment. Gorman v. Wolpoff & Abramson, ___ F.Supp.2d ___, 2006 WL 1728915 (N.D. Cal. June 23, 2006). The action was filed by a lawyer (John Gorman) against MNBA and its attorneys, the Wolpoff firm, asserting causes of action under the federal Fair Credit Reporting Act (FCRA), the federal Fair Debt Collection Practices Act (FDCPA), and libel. (The claims under California state law that existed in Gorman’s original complaint were dismissed without leave to amend in response to an earlier defense motion. See Gorman v. Wolpoff & Abramson, 370 F.Supp.2d 1005, 1010-11 (N.D. Cal. 2005).)

Gorman’s action was precipitated by a contested credit card charge of roughly $760 that MBNA initially removed but then reposted. The federal court found that Gorman stopped making payments to MBNA in May 2003, “but then deliberately charged thousands of dollars more on his MBNA credit card” and then in August 2003 demanded that MBNA write off “the entirety of his balance of over $5000.” Instead, MBNA retained Wolpoff to file a debt collection suit against Gorman.

Continue reading "Class Action Defense Issues--Gorman v. Wolpoff & Abramson: Law Firm Again Prevails In Action Alleging Violations of FCRA (Fair Credit Reporting Act) and FDCPA (Fair Debt Collection Practices Act)" »

Posted In: FCRA Class Actions, FDCPA Class Actions, Class Action Court Decisions

Separate articles summarize news reports and the criminal complaint involving the federal indictment of class action law firm Milberg Weiss, Bershad & Schulman and two of its partners for allegedly paying people $11 million in kickbacks to serve as class representatives in shareholder lawsuits. According to Friday’s edition of the San Jose Mercury news, “Prosecutors allege that the secret kickback arrangement often allowed the firm to be among the first to file lawsuits against major corporations on behalf of shareholders. The indictment alleges that the lawsuits generated $216 million in attorneys' fees.” The criminal indictment includes charges of money laundering, filing false tax returns, racketeering and conspiracy.

The San Jose Mercury News reported Friday that bail had been set for class action plaintiff lawyer David J. Bershad at $3.5 million, and for his partner Steven G. Schulman at $2 million. It was reportedly their first appearance in federal court; they are scheduled to return to court on Monday to enter pleas. The Associated Press report, entitled “Million Dollars Bail Set for Lawyers Indicted in Kickback Case,” may be found in the July 14, 2006 edition of the San Jose Mercury News.

Posted In: Class Actions In The News

Identities of Putative Class Members in Wage and Hour/Overtime Pay Class Action Who Contact Plaintiffs' Lawyer in Response to Precertification Letter Protected from Disclosure to Class Action Defense Attorneys by Right to Privacy

On May 15, 2006, a California appellate court addressed a discovery issue arising out of a putative class action filed against Tenet Healthcare on behalf of hourly employees alleging failure to provide meal and rest breaks and failure to pay overtime. Tien v. Superior Court, 139 Cal.App.4th 528 (Cal.App. 2006). During the precertification discovery proceedings, plaintiffs' lawyer asked for the identity and contact information of every class member in the putative class action. In response to obvious privacy concerns, the parties eventually agreed to a procedure whereby a neutral letter was sent to a randomly selected group of approximately 6% of the class members, advising them of the lawsuit and inviting them to contact plaintiffs' lawyer if they wanted more information. Id., at 532-334. The letter expressly stated, "You are not required to call anyone regarding this lawsuit unless you personally wish to do so. If you do elect to call, please be assured that doing so will not have any negative effect on your employment with any Tenet-related facility." Id., at 533 (bold in original). Tenet's class action defense attorneys later sought to discover the names of the people who contacted plaintiffs' lawyer in response to the letter; plaintiffs sought a protective order on several grounds, including the class members' right to privacy. The trial court ordered the information provided to defense attorneys concluding that the privacy rights "were outweighed by Tenet's right to the discovery." Id., at 534.

Eventually, the matter ended up before the California Court of Appeal on a petition for writ of mandate. The appellate court held that the information sought by Tenet was relevant, Tien, at 535-36, and that it was not protected from disclosure by the attorney work product doctrine, id., at 536, or the attorney-client privilege, id., at 536-38. The Court held, however, that disclosure of the identities of the class members who contacted plaintiffs' lawyer would violate their right to privacy. Id., at 539.

Continue reading "Tien v. Superior Court (Tenet Healthcare): Class Action Defense Prohibited From Discovering Names Of Putative Class Members in Employment Law Case Who Contacted Plaintiffs' Lawyer Due To Class Members' Privacy Rights California Court Holds" »

Posted In: Class Actions In The News, Class Action Court Decisions

On July 13, 2006, Merck’s defense team convinced a New Jersey jury that it was not responsible for the 68-year-old plaintiff’s heart attack – securing an important victory in advance of potential trials in the class action cases that have been filed in Vioxx cases. By our count, Merck has taken 6 Vioxx cases to trial (all against individuals): it has prevailed in three (3), it has lost two (2), and it “split” the sixth (the case involved two plaintiffs; Merck won as to one of the plaintiffs and lost as to the other). Merck’s class action defense has focused on the unique factual questions presented by each individual claim – a defense strengthened by the wide range of jury verdicts and jury findings.

NOTE: Vioxx has been off the market since September of 2004, following a study that found a statistical connection between long-term use of Vioxx and increased incidence of strokes and heart attacks.

Posted In: Class Actions In The News

The State of New York must mount a class action defense to a lawsuit seeking damages for illnesses caused by contaminated water at a water park run by New York’s Department of Parks, Recreation, and Historical Preservation. New York’s Seneca Lake Park's Sprayground was closed in August 2005 after tests revealed that its water tanks were contaminated with cryptosporidiosis, one of many types of recreational water illnesses. The tests were run after the Health Department received more than 100 complaints from people who fell ill after visiting the water park. A lawsuit filed in response to the incident received court approval this week to proceed as a class action.

NOTE: In broad terms, recreational water illnesses – caused by germs such as cryptosporidiosis, E. coli and giardia – are contracted through contact with contaminated water. The National Center for Disease Control and Prevention reports that incidents of such illnesses have been steadily on the rise, and estimates that roughly 19,000 people suffered from such illnesses between 1984 and 2002. While diarrhea is the most common recreational water illness symptom, the responsible germs can also cause ear and eye infections, skin infections and respiratory problems. While cryptosporidiosis is highly contagious, the National Center for Disease Control and Prevention reports that healthy people generally recover without the necessity of medical treatment. No deaths have been attributed to the Sprayground outbreak.

Posted In: Class Actions In The News

Restaurants’ Class Action Defense Fails to Prevent Class Certification in Meal and Rest Breaks Lawsuit

The Los Angeles Times reports today that a California court has certified a class action against the operator of restaurant chains Chili’s and Romano’s Macaroni Grill alleging failure to provide employee meal and rest periods required by California state law. According to the report, Judge Patricia Cowett of the San Diego Superior Court certified the class action on behalf of both current and former employees. The article maintains that, according to the plaintiffs’ lawyer, the class action that may cover as many as 63,000 class members.

The article, entitled “Brinker Faces Class Action over Meal Breaks,” may be found in the Business Section of the July 15, 2006 Los Angeles Times.

Posted In: Class Actions In The News

Fair Debt Collection Practices Act Requires Affirmative Action, Fair Credit Reporting Act Does Not Apply to Commercial Activity,

On July 10, 2006, a federal appellate court consolidated two appeals and (1) agreed with eBay's defense team that eBay was not subject to the federal FDCPA (Fair Debt Collection Practices Act) or the federal FCRA (Fair Credit Reporting Act), and (2) affirmed that eBay compliance with a subpoena for records did not violate the federal ECPA (Electronic Communications Privacy Act) or the federal SCA (Stored Communications Act): it therefore affirmed the dismissals entered in both underlying lawsuits. McCready v. eBay, Inc., ___ F.3d ___, 2006 WL 1881142 (7th Cir. 2006). For clarity, we address the two lawsuits separately. The first lawsuit arose from the fact that plaintiff utilized eBay's services to operate an online business through which he would buy and sell goods. Several eBay users became unhappy with their business dealings with plaintiff; they used eBay's "Feedback Forum" to explain their dissatisfaction, and several of them notified eBay of their complaints. eBay told plaintiff of the complaints and explained that his accounts would be suspended if the complaints were not resolved. Ultimately, eBay suspended plaintiff's accounts but offered to reinstate them if he reimbursed monies to the claimants. "Rather than make good on his sales, [plaintiff] embarked on retaliatory litigation," Slip Opn., at 2, and a summary of that litigation is described in the Note below. Relevant here, plaintiff filed a federal court complaint against eBay alleging violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692 et seq., the Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., the Electronic Fund Transfers Act (EFTA), 15 U.S.C. §§ 1693 et seq., Title 11 of the U.S. Bankruptcy Code, and nine (9) state law claims. Id., at 3. The district court granted the defense motion to dismiss the FDCPA and FCRA claims, and declined to exercise supplemental jurisdiction over the state law claims; the parties stipulated to dismissal with prejudice of the bankruptcy claim. Id., at 4.

With respect to the FDCPA claim, the Seventh Circuit observed that eBay simply suspended plaintiff's accounts until he resolved the outstanding fraud complaints and never threatened to take collection against him; the Court held that such conduct could not be deemed an attempt to "collect" a debt. McCready, at 8. With respect to the FCRA claim, plaintiff asserted that eBay's "Feedback Forum" constituted a "consumer report, id., at 9. The Court quickly dispatched this claim on several grounds:

Continue reading "Class Action Defense Cases–McCready v. eBay: eBay Not A Debt Collector Under Federal FDCPA Or Reporting Agency Under Federal FCRA, And eBay Lawfully Produced Documents Pursuant To Subpoena, Seventh Circuit Holds" »

Posted In: FCRA Class Actions, FDCPA Class Actions, Class Action Court Decisions

To aid California class action defense attorneys in anticipating claims against which they may have to defend, we provide weekly an unofficial summary of legal categories for class actions 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. This report covers the time period of July 7 - July 13, 2006. We include only those categories with 10% or more of the class action filings during the relevant timeframe. Approximately 24 class action lawsuits were filed in these California state and federal courts during that time period, of which 12 (50%) involved employment law claims. During this time period, the only other significant group of class action filings involved various claims of unfair business practices: class action defense attorneys will face 5 new cases involving that area of law, which represents approximately 21% of the class actions filed this past week.

Posted In: Class Actions In The News, Class Actions In The News

Class Action Defense Attorneys Agree With Plaintiffs’ Lawyer’s Assessment of Case

A lawsuit by Paul and Julie Leonard against Nationwide is the first lawsuit against a liability insurer for home damage caused by Hurricane Katrina to go to trial, according to today’s New York Times. The article by Joseph Treaster details the difference between insurance claims arising out of Katrina for wind damage (generally covered) and flood damage (generally excluded from coverage). Treaster also reports that many homeowners claim their insurance agent told them not to buy flood insurance because “it wasn’t necessary.” But while Hurricane Katrina affected tens of thousands of people, the plaintiffs’ lawyer, an experienced class action attorney, elected to bring the Leonards’ claim on their behalf only “because it could take years to receive court certification for a class action.” But plaintiffs’ lawyer is quoted as saying, “Time is of the essence. These people need the insurance money to rebuild.” Class action defense attorneys agree that the case would not have made it to trial this quickly if plaintiffs’ lawyer had pursued a class action. As one class action defense attorney opined, “The case most likely still would be winding its way through precertification discovery if it had been brought as a class action. Both the plaintiffs’ lawyer and the defense attorneys would be required in a class action to conduct broader discovery, looking into issues of numerosity, commonality, typicality and adequacy of the plaintiffs to serve as class representatives.”

By focusing on the issues surrounding the claims of the plaintiffs only, plaintiffs’ lawyer eliminated the risk of his case getting bogged down in precertification discovery, and the class certification hearing that would follow. Based on his experience with class actions, plaintiffs’ lawyer undoubtedly knew also that he avoided possible writ proceedings that would have further delayed the trial date. In short, plaintiffs’ counsel demonstrated that an experienced class action attorney knows when to avoid filing class actions.

Treaster’s article, entitled “Katrina Victims Say Agents Advised Against Flood Coverage,” may be found in Section C of the July 14, 2006 edition of the New York Times.

Posted In: Class Actions In The News

The "Order or Other Paper" Exception to the 30-Day Period to Remove a State Court Action to Federal Court is not Satisfied By New Appellate Law

We have discussed that class action defense often benefits from removal of the case to federal court, and that the Class Action Fairness Act of 2005 (CAFA) greatly expanded access to federal courts in class action cases, in separate articles. If CAFA does not apply, then removal of cases to federal court generally is governed by 28 U.S.C. § 1446, also discussed in prior articles related to class action defense. Broadly speaking, the defense must remove a case to federal court within 30 days of receipt of the complaint or "a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable," 28 U.S.C. § 1446(b) (italics added). This 30-day time period is "mandatory" but not "jurisdictional." Fristoe v. Reynolds Metals Co., 615 F.2d 1209, 1212 (9th Cir. 1980); Somlyo v. J. Lu-Rob Enterprises, Inc., 932 F.2d 1043, 1046 (2d Cir. 1991). On May 9, 2006, an Illinois federal district court considered whether a recent Seventh Circuit opinion constituted an "order or other paper" from which federal jurisdiction "may first be ascertained." G.M. Sign, Inc. v. Global Shop Solutions, Inc., 430 F.Supp.2d 826 (N.D. Ill. 2006).

Plaintiff filed suit a putative class action against Global Shop Solutions in Illinois state court for alleged violations of the federal Telephone Consumer Protection Act, 47 U.S.C. § 227 (TCPA), which the then-existing weight of authority held "vests exclusive jurisdiction in state courts for private actions under the TCPA," though the Seventh Circuit Court of Appeal had not yet addressed the issue. G.M. Sign, at 827-28 and n.1. In fact, a week Global Shop had been served, an Illinois federal district court remanded a similar TCPA action to state court "holding that the TCPA conferred exclusive [jurisdiction] on the state courts." Id., at 827 (citing Brill v. Countrywide Home Loans, Inc., 2005 WL 2230193 (N.D. Ill. 2005)). After the time for removal had passed, the Seventh Circuit reversed Brill and held that TCPA claims may be brought in federal court both under federal question jurisdiction and under diversity jurisdiction. Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 451 (7th Cir. 2005). Global Shop removed its class action lawsuit to federal court 32 days after the issuance of Brill.

Continue reading "Class Action Defense Issues–G.M. Sign v. Global Shop: New Case Law Does Not Constitute "Order Or Other Paper" Permitting Removal Of Class Action To Federal Court After 30-Day Period Has Lapsed Illinois Court Holds" »

Posted In: Removal & Remand, Class Action Court Decisions

California Appellate Court Holds that Federal Fair Labor Standards Act (FLSA) May Serve as Unlawful Act for California Unfair Competition Claim, and Triable Issues of Fact Exist As to Overtime Pay Claim and Unlawful Deductions for Cancelled Subscriptions Claim

Employees who worked as telemarketers selling newspaper subscriptions filed a class action in California state court "alleging claims under the California Labor Code for overtime pay, unlawful commission deductions, and waiting penalties, and for unfair competition pursuant to [California Business & Professions Code] section 17200." Harris v. Investor's Business Daily, 138 Cal.App.4th 28, 31 (Cal.App. 2006). The claims were based on a compensation system whereby employees "were compensated on the basis of a point system which rewarded them for selling longer subscriptions, winning daily contests, and meeting weekly sales goals" but they were "subject to a 'chargeback' - a deduction from points earned on a sale if the customer cancelled the subscription within 16 weeks." Id. To ensure that it complied with state and federal laws, the compensation system provided that employees would be paid no less than the prevailing minimum wage. Id. The complaint was later amended to a add a claim that alleged violations of the federal FLSA (Fair Labor Standards Act, 29 U.S.C. § 207(a)(1)) as the predicate for a new section 17200 violation. Id., at 32. The defense demurrer to the new 17200 cause of action was sustained without leave to amend, and the defense summary adjudication motion as to the balance of the class action claims was granted. Id.

The appellate court first addressed the FLSA-based 17200 claim. The defense had argued that FLSA preempted the claim "because traditional opt-out class actions are available under the California law, while, under FLSA, class members must opt in." Harris, at 32. Relying upon several unpublished federal court decisions, id., at 34-36, the appellate court concluded that FLSA did not preempt section 17200, and that the purpose behind the federal "opt-in" requirement - "to protect employers from facing 'financial ruin' and prevent employees from receiving 'windfall payments, including liquidated damages'" - is not implicated by a section 17200 claim "limited to restitution." Id., at 33-34.

Continue reading "Harris v. Investor's Business Daily: California Class Action By Telemarketing Employees Not Preempted By Federal FLSA (Fair Labor Standards Act) California Court Holds" »

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

In Case of First Impression for Federal Courts in Fifth Circuit, Court Joins Sister Circuits in Holding that Fair Labor Standards Act (FLSA) Does not Cover Prisoners Working at Prison

On July 7, 2006, the Fifth Circuit Court of Appeals considered the appeal of a prison inmate from a federal district court judgment dismissing his action as frivolous. Loving v. Johnson, ___ F.3d ___, 2006 WL 1868320 (5th Cir. 2006). The prisoner filed suit claiming that under the federal Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (FLSA), he was entitled to receive minimum wage for working in the prison laundry. The federal appeals court noted that "until today, we have not expressly stated whether there is any FLSA employment relationship between the prison and its inmates working in and for the prison." Slip Opn., at 2. The Circuit Court adopted the reasoning of a recent opinion out of the Seventh Circuit and quickly disposed of Loving's claim, holding that "a prisoner doing work in or for the prison is not an 'employee' under the FLSA," id., at 3:

People are not imprisoned for the purpose of enabling them to earn a living. The prison pays for their keep. If it puts them to work, it is to offset some of the cost of keeping them, or to keep them out of mischief, or to ease their transition to the world outside, or to equip them with skills and habits that will make them less likely to return to crime outside. None of these goals is compatible with federal regulation of their wages and hours. The reason the FLSA contains no express exception for prisoners is probably that the idea was too outlandish to occur to anyone when the legislation was under consideration by Congress.

Slip Opn., at 3 (quoting Bennett v. Frank, 395 F.3d 409, 409-10 (7th Cir. 2005) (additional citations omitted).

NOTE: As Loving notes, prisoners have not uniformly lost these types of cases. The Fifth Circuit has held, for example, that prisoners who work outside the prison for private firms are "employees" within the meaning of FLSA (at least if they are not sentenced to hard labor), Watson v. Graves, 909 F.2d 1549, 1556 (5th Cir. 1990), but that prisoners who work inside the prison for private firms are not be covered by FLSA, Alexander v. Sara, Inc., 721 F.2d 149, 150 (5th Cir. 1983). The Fifth Circuit has also held "that a jailer was not the FLSA employer of an inmate working in a work-release program for a private employer outside the jail," Loving, at 2 (citing Reimonenq v. Foti, 72 F.3d 472, 475-76 (5th Cir. 1996).

Download PDF file of Loving v. Johnson

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

Pfizer v. Superior Court: Proposition 64 Requires Class Action Representatives and Class Members Satisfy Injury in Fact and District Court Exercise of Discretion to Select Class Action Attorneys Best Able to Represent Absent Class Members is Generally Not Subject to Appellate Review: Class Action Defense Issues

California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code, §§ 17200 et seq., and false advertising statute, id., §§ 17500 et seq., were altered fundamentally by the passage of voter-initiate Proposition 64 in November 2004. In January 2005, a putative class action lawsuit was filed in California state court against Pfizer under California’s UCL and false advertising law (FAL) on the ground that it had “marketed Listerine in a misleading manner by indicating the use of Listerine can replace the use of dental floss in reducing plaque and gingivitis.” Pfizer, Inc. v. Superior Court, ___ Cal.App.4th ___ (Cal.App. July 11, 2006), Slip Opn., at 2. (Prior to Proposition 64, UCL claims were brought as “representative actions”; Proposition 64 amended the UCL and FAL so as to require plaintiffs in such actions to satisfy the requirements for class action lawsuits. See Bus. & Prof., Code, §§ 17203 [UCL], 17535 [FAL].) The trial court certified class action status, describing the class as “all persons who purchased Listerine, in California, from June 2004 through January 7, 2005.” Id. The defense filed a petition for writ of mandate, and the appellate court reversed.

In seeking class certification, plaintiff claimed inter alia that his claims were “typical” of the class; the defense disagreed. Pfizer argued that individual issues would predominate over common questions of fact (as detailed in the “Note” below). Slip Opn., at 7. Nonetheless, the trial court certified “a broad class, on an opt-opt basis,” though it noted that whether Proposition 64 amended the standing requirements for class members in UCL class actions is “an open issue.” Id., at 7-8. After carefully analyzing the issue, the California appellate court held that the standing requirements for UCL class actions had been amended by Proposition 64: “Proposition 64 now prohibits any person, other than the Attorney General or local public prosecutors from bringing a lawsuit under the UCL or the FAL unless the person has suffered injury and lost money or property as a result of such violations.” Slip Opn., at 11 (citation omitted).

Continue reading "California Court Agrees With Defense: Holds Both Class Action Plaintiff And Class Members Must Have Suffered Injury In Fact, And Both Must Have Standing Which Requires Detrimental Reliance On Allegedly False Advertising, In Order To Warrant Certification" »

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

Class Action District Court Judge's Hostility to Interior Department Makes Him Incapable of Rendering Fair and Impartial Rulings

Federal and state courts are understandably loathe to recuse judges for claims of bias, but on July 11, 2006, in a class action that has been pending for a decade, the United States Court of Appeals for the District of Columbia "reluctantly" granted a federal defense motion to do just that. Cobell v. Kempthorne, ___ F.3d ___, 2006 WL 1889150 (D.C. Cir. 2006). The class action originated in 1996, when five Indians sued the federal government for breach of fiduciary duties in its capacity as trustee of Indian lands by "destroy[ing] critical records, fail[ing] to account to trust beneficiaries, and either los[ing] trust assets or convert[ing] them to government use." Slip Opn., at 2. By the lawsuit, plaintiffs sought "'to force the government to abide by its duty to render an accurate accounting' of the assets held in Individual Indian Money (IIM) trust accounts." Slip Opn., at 2-3 (quoting Cobell v. Babbitt, 91 F.Supp.2d 1, 6-7 (D.D.C. 1999) ("Cobell V")). The case was certified as a class action in 1997, plaintiffs prevailed at trial, and in 1999 the district court ordered the federal government to "come into compliance with their duties." Slip Opn., at 3 (quoting Cobell v. Norton, 240 F.3d 1081,1094 (D.C. Cir. 2001) ("Cobell VI")). The lower court retained jurisdiction over the action and required status reports from the federal government quarterly summarizing its progress. Id. In 2001, the D.C. Circuit "generally affirm[ed] the judgment, but cautioned the district court "'to be mindful of the limits of its jurisdiction' and therefore to refrain from unduly interfering with Interior’s 'conduct in preparing an accounting.'" Slip Opn., at 3 (quoting Cobell VI, at 1110).

Continue reading "Class Action Defense Cases: D.C. Circuit Grants Federal Government's Defense Motion To Reassign Class Action" »

Posted In: Class Actions In The News, Class Action Court Decisions

David Lazarus of the San Francisco Chronicle reports today on the confusion millions of Verizon customers are experiencing in deciphering precisely what the new disclosures are in their wireless phone contract after receiving "a voluminous - and optional - 'customer agreement pursuant to lawsuit settlement.'" But they are not alone: according to Lazarus, a Verizon spokeswoman "admit[s] that finding the revised language can be tough." Verizon is quoted as saying, "If it's confusing, this is what we were ordered to do by the court." The situation is not helped by the fact that there is "no indication as to what's new in the contract or what the ramifications of accepting it might be." The situation is further complicated by the fact that Verizon implemented many of the "new" changes in November of 2003, in anticipation of the approval of a settlement agreement that contained those terms. According to Verizon, then, the "vast majority" of Verizon's 53 million customers are "already under contracts that contain these [new] disclosures." Mr. Lazarus's article, "Verizon Contract Still Murky," may be found in today's business section of the San Francisco Chronicle.

Posted In: Class Actions In The News

California Supreme Court Denies Petition for Review and Request to Depublish Appellate Court Opinion in Best Buy v. Superior Court

In a post dated April 11, 2006, we summarized a then-recent California appellate decision in a class action against Best Buy that permitted the plaintiff-lawyer to conduct discovery for the purpose of finding substitute plaintiffs to serve as class representatives. See Best Buy Stores, L.P. v. Superior Court, 137 Cal.App.4th 772 (Cal.App. 2006). Best Buy filed a petition for review with the California Supreme Court on April 21, 2006. On July 12, 2006, the California Supreme Court denied the petition for review and further denied Best Buy's request that the appellate opinion be depublished.

Posted In: Class Actions In The News, Class Actions In The News

While Congress enacted the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., in 1978 for the purpose of establishing certain that ethical guidelines for the collection of consumer debts, and to provide debtors with a means for challenging payoff demands and determining the validity and accuracy of asserted debts, it did not intend to foreclose States from enacting laws concerning debt collection practices. Several states, such as California, have enacted such laws, and defense attorneys must frequently defend against class actions filed under such State laws. Congress expressed its intent not to preempt State laws - “except to the extent that those laws are inconsistent” with the FDCPA - in § 1692n, set forth below. Congress also provided that the Federal Trade Commission debt collection practices from State laws or regulations under the provisions of § 1692o, also set forth below.

§ 1692n. Relation to State laws

This subchapter does not annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by this subchapter.

§ 1692o. Exemption for State regulation

The Commission shall by regulation exempt from the requirements of this subchapter any class of debt collection practices within any State if the Commission determines that under the law of that State that class of debt collection practices is subject to requirements substantially similar to those imposed by this subchapter, and that there is adequate provision for enforcement.

Posted In: FDCPA Class Actions, Statutes & Rules

Congress enacted the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., in 1978 for the purpose of establishing certain that ethical guidelines for the collection of consumer debts, and to provide debtors with a means for challenging payoff demands and determining the validity and accuracy of asserted debts. Congress also authorized the Federal Trade Commission to commence administrative actions against debt collectors for violations of the FDCPA, and charged the Commission with an obligation to report to Congress annually on FDCPA matters. The specific statutory language concerning these reports is as follows:

§ 1692m. Reports to Congress by the Commission; views of other Federal agencies

(a) Not later than one year after the effective date of this subchapter and at one-year intervals thereafter, the Commission shall make reports to the Congress concerning the administration of its functions under this subchapter, including such recommendations as the Commission deems necessary or appropriate. In addition, each report of the Commission shall include its assessment of the extent to which compliance with this subchapter is being achieved and a summary of the enforcement actions taken by the Commission under section 1692l of this title.

(b) In the exercise of its functions under this subchapter, the Commission may obtain upon request the views of any other Federal agency which exercises enforcement functions under section 1692l of this title.

Posted In: FDCPA Class Actions, Statutes & Rules

Illinois Appellate Court Holds Defense Motion to Dismiss Class Action Should Have Been Granted Because Plaintiffs Lack Standing To Allege Wrongful Dishonor Of Check and Because Federal National Bank Act Preempts Illinois State Law Regarding Fees Charged to Negotiate Checks for Non-Customers

On July 5, 2006, an Illinois appellate court issued a surprising opinion in favor of the defense in a class action case. Illinois follows the rule that courts with interlocutory appeal/certified question procedures usually follow: “Th[e] court’s examination of an interlocutory appeal is usually limited to the questions certified by the trial court and, as with all questions of law, is a de novo review.” Kronemeyer v. U.S. Bank Nat’l Ass’n, ___ Ill.App.3d __ (Ill.App. 2006) (citation omitted) [Slip Opn., at 2]. Rarely do courts deviate from this general rule but the Kronemeyer appellate court did just that, sidestepping one of the questions certified for appeal, addressing a question that had not been certified for appeal, and reversing the trial court’s order denying the defense motion to dismiss the class action.

Plaintiffs filed a putative nationwide class action alleging that U.S. Bank “regularly charges a fee of $10 to persons who do not have accounts at U.S. Bank and who present for payment checks drawn by its depositors,” and pleading state law causes of action. The defense filed a motion to dismiss the class action on the grounds, inter alia, that plaintiffs lacked standing to prosecute the “wrongful dishonor” claim, and that the claims were preempted by federal National Bank Act, 12 U.S.C. § 93a (2000), and the regulations and regulation interpretations issued by the Office of the Comptroller of the Currency (OCC). Slip Opn., at 2. The trial court denied the motion to dismiss, id., but certified for interlocutory appeal two questions: “(1) whether the plaintiffs’ claims are preempted under the National Bank Act . . . and the regulations and regulatory interpretations issued thereunder by the [OCC] and (2) whether the circuit court has jurisdiction to review whether the OCC correctly interpreted its own regulation or whether that review lies within the exclusive jurisdiction of the federal courts pursuant to the Administrative Procedures Act,” id., at 1 (citations omitted).

Continue reading "Kronemeyer v. U.S. Bank: Class Action Alleging Bank Wrongfully Charged Fee To Negotiate Checks Preempted By Federal National Bank Act Illinois Court Holds" »

Posted In: Class Actions In The News, Class Action Court Decisions

California Appellate Court Agrees With Defense And Dismisses Lawsuit Against Lender Based on Federal Preemption: Class Action Defense Issues

WFS Financial and its subsidiary are federal savings associations that operate under the federal HOLA (Home Owners' Loan Act), 12 U.S.C. §§ 1461 et seq. A car dealer assigned WFS a motor vehicle loan and the borrower defaulted: "WFS repossessed the vehicle, gave notice of its intent to dispose of the vehicle by private sale, sold the vehicle, and filed suit against [the borrower]for the deficiency between the sale price and remaining balance due, including various costs and fees." WFS Financial, Inc. v. Superior Court, 140 Cal.App.4th 637, 44 Cal.Rptr.3d 561 (Cal.App. 2006). The borrower cross-complained, alleging that WFS failed to comply with California's Rees-Levering Automobile Sales Finance Act, California Civil Code, §§ 2981 et seq., and included an unfair business practice claim under California Unfair Competition Law (UCL), California Business & Professions Code, §§ 17200 et seq., based on the alleged violations of Rees-Levering. Id., at 563-64. In defense, WFS demurred, arguing that HOLA preempted Rees-Levering. The trial court disagree and overruled the demurrer, and WFS sought a petition for writ of mandate from the California Court of Appeal.. Id., at 564.

Before agreeing with the defense, the appellate court set forth a detailed summary of HOLA, the Federal Home Loan Bank Board (FHLBB) that originally regulated federal savings and loan associations, and FHLBB's replacement by the Office of Thrift Supervision (OTS). Id., at 565-68. The Court highlighted evidence from numerous sources that Congress intended HOLA to preempt state laws and regulations, concluding:

Continue reading "WFS Financial v. Superior Court: Federal Home Owners' Loan Act (HOLA) Preempts California Automobile Sales Finance Act California Court Holds" »

Posted In: Class Actions In The News, Class Action Court Decisions