Posted On: October 31, 2006 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Aguiar v. Cintas: Trial Court Erred In Failing To Consider Use Of Subclasses In Labor Law Class Action California Court Holds

California Court Reverses Order Denying Class Certification in Employment Law Class Action Because Bases for Trial Court’s Decision Could be Resolved Through Use of Subclasses


Plaintiffs, individuals and the international workers’ union UNITE, filed a putative employment law class action against Cintas for alleged violations of the Los Angeles Living Wage Ordinance (LWO), which “prescrib[es] a minimum level of compensation be paid to employees of private firms who work on service contracts benefiting the City” - as well as sick leave, vacation, etc. - provided that the employees worked on a service contract for at last 20 hours during the month. The LWO does not apply to employees who did not work on a service contract, or who worked on a service contract for less than 20 hours, during the month. Aguiar v. Cintas Corp. No. 2, ___ Cal.App.4th ___, 2006 WL 2744773, *1-*2 (Cal.App. September 27, 2006). The LWO requires employers awarded service contracts to provide the City with “forms listing all subcontractors and employees working on the agreement and notify each current employee, and each new employee at the time of hire, of his or her rights under the LWO.” Id., at *2. Defense attorneys opposed certification of the lawsuit as a class action. The trial court agreed with the defense that class action treatment was inappropriate because the class was not ascertainable, the class lacked community of interest, and class action treatment was not the superior method to resolve the dispute. Id., at *1. The Court of Appeal reversed.

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Posted On: October 30, 2006 by Michael J. Hassen Email This Post

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Smith v. The Thomson Corporation-Class Action Defense Cases: Defense Wins Cross-Appeal In Fraud Class Action Based On Overcharges Because Plaintiff Failed To Prove Damages

Illinois Appellate Court Reverses Judgment in Favor of Class Action Plaintiff Because Evidence Demonstrated that Plaintiff Suffered no Damages and Because Trial Court’s Calculation of Damages was Flawed

A law firm filed a class action in Illinois state court against suppliers of legal products to law firms alleging Illinois and Minnesota statutory consumer fraud claims based on the allegation the defendants “add[ed], on a pro rata basis, a $6 per CD-ROM shipping-and-handling charge to the monthly billing statements sent to the plaintiff pursuant to a subscription agreement . . . without identifying the added charge and in contravention of the defendants’ previous practice of not charging customers for shipping and handling.” Smith, Allen, Mendenhall, Emons & Selby v. The Thomson Corp., ___ N.E.2d ___, 2006 WL 2947653 (Ill.App. October 26, 2006) [Slip Opn., at 2]. Following a bench trial, the court entered an $8.5 million judgment in favor of plaintiff, but denied prejudgment interest and attorney fees. Plaintiff appealed the limitation on its award; defense attorneys cross-appealed from the underlying judgment. Id., at 1. The Appellate Court reversed the underlying judgment, rendering plaintiff’s appeal moot.

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Posted On: October 29, 2006 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Insurance Industry Discriminatory Sales Practices: Judicial Panel On Multidistrict Litigation (MDL) Agrees With Defense And Denies Request To Centralize Actions

Plaintiffs Fail to Establish Grounds for Centralization of Lawsuits Under 28 U.S.C. § 1407

In conjunction with two class action lawsuits - one pending in the Eastern District of Louisiana and the other pending in the Western District of Texas - plaintiffs filed a motion with Judicial Panel on Multidistrict Litigation (MDL) pursuant to 28 U.S.C. § 1407 seeking centralization of the actions for pretrial purposes, and defense attorneys opposed the request. In re Insurance Industry Discriminatory Sales Practices Litig., 460 F.Supp.2d 1376, 1377 (Jud.Pan.Mult.Dist.Lit. 2006). The Judicial Panel denied the request because plaintiffs failed to demonstrate “that any common questions of fact and law are sufficiently complex, unresolved and/or numerous to justify Section 1407 transfer in this docket in which the Texas action has been pending for almost five years and is the subject of a pending class action settlement.” Id. The Panel explained that other alternatives exist to minimize the risk of duplicate discovery or inconsistent pretrial rulings. Id.

Posted On: October 29, 2006 by Michael J. Hassen Email This Post

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15 U.S.C. § 77h--Taking Effect Of Registration Statements And Amendments Thereto Under The Securities Act Of 1933

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. We have already noted that the information that must be contained in registration statements is described in 15 U.S.C. § 77g. In the following section, Congress set forth the effective date of registration statements and amendments to registration statements, and covered incomplete or inaccurate information in registration statements – including untrue statements or omissions – in 15 U.S.C. § 77h, which provides:

§ 77h. Taking effect of registration statements and amendments thereto

(a) Effective date of registration statement

Except as hereinafter provided, the effective date of a registration statement shall be the twentieth day after the filing thereof or such earlier date as the Commission may determine, having due regard to the adequacy of the information respecting the issuer theretofore available to the public, to the facility with which the nature of the securities to be registered, their relationship to the capital structure of the issuer and the rights of holders thereof can be understood, and to the public interest and the protection of investors. If any amendment to any such statement is filed prior to the effective date of such statement, the registration statement shall be deemed to have been filed when such amendment was filed; except that an amendment filed with the consent of the Commission, prior to the effective date of the registration statement, or filed pursuant to an order of the Commission, shall be treated as a part of the registration statement.

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

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Employment Law Class Action Cases Again Lead Weekly California Filings Facing Defense Attorneys

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 from October 20 - October 26, 2006. We include only those categories that boast 10% or more of the class action filings during the relevant timeframe. Approximately 33 class action lawsuits were filed in these California state and federal courts during that time period, of which 16 involved employment law claims (almost 50%). The category with the second highest number of class action filings involved California’s Unfair Competition Law (UCL) - which includes unfair business practices and false advertising claims - with 9 new filings (27%). The third category of class action cases with more than 10% of the new weekly filings concerned alleged violations of California's Consumers Legal Remedies Act (CLRA): class action defense attorneys will face 5 new cases involving that area of law, which represents approximately 15% of the class actions filed this time period.

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

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15 U.S.C. § 77g--Information Required In Registration Statements Under The Securities Act Of 1933

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. While the statutory provisions for the registration of securities is contained in 15 U.S.C. § 77f, Congress set forth the information that must be contained in a registration statement in 15 U.S.C. § 77g. That statute provides:

§ 77g. Information required in registration statement

(a) The registration statement, when relating to a security other than a security issued by a foreign government, or political subdivision thereof, shall contain the information, and be accompanied by the documents, specified in Schedule A of section 77aa of this title, and when relating to a security issued by a foreign government, or political subdivision thereof, shall contain the information, and be accompanied by the documents, specified in Schedule B of section 77aa of this title; except that the Commission may by rules or regulations provide that any such information or document need not be included in respect of any class of issuers or securities if it finds that the requirement of such information or document is inapplicable to such class and that disclosure fully adequate for the protection of investors is otherwise required to be included within the registration statement. If any accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, is named as having prepared or certified any part of the registration statement, or is named as having prepared or certified a report or valuation for use in connection with the registration statement, the written consent of such person shall be filed with the registration statement. If any such person is named as having prepared or certified a report or valuation (other than a public official document or statement) which is used in connection with the registration statement, but is not named as having prepared or certified such report or valuation for use in connection with the registration statement, the written consent of such person shall be filed with the registration statement unless the Commission dispenses with such filing as impracticable or as involving undue hardship on the person filing the registration statement. Any such registration statement shall contain such other information, and be accompanied by such other documents, as the Commission may by rules or regulations require as being necessary or appropriate in the public interest or for the protection of investors.

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Posted On: October 27, 2006 by Michael J. Hassen Email This Post

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Tmesys v. Eufaula-Class Action Defense Cases: Circuit Court Has Jurisdiction To Review District Court Order Remanding Class Action To State Court Based On Finding That CAFA (Class Action Fairness Act) Does Not Apply Eleventh Circuit Holds

As a Matter of First Impression, Eleventh Circuit Holds that Jurisdiction Exists to Review District Court Order Based on Finding that Class Action Fairness Act of 2005 (CAFA) does not Apply and Agrees with District Court Decision to Remand Class Action to State Court

Plaintiff filed a putative class action in Alabama state court against health insurer alleging breach of contract. Defense attorneys removed the action to federal court based on the Class Action Fairness Act of 2005 (CAFA). Plaintiffs moved to remand the class action to state court on the grounds that Class Action Fairness Act did not apply because the lawsuit had been filed prior to CAFA’s effective date. Tmesys, Inc. v. Eufaula Drugs, Inc., 462 F.3d 1317, 1318 (11th Cir. 2006). The district court agreed and remanded the matter to state court; defense attorneys appealed. The Eleventh Circuit held, as a matter of first impression, that the Court of Appeals “do[es] have jurisdiction to review a district court’s order to remand [a class action to state court] when that order is based on a determination that CAFA does not apply, at least to the extent of reexamining that jurisdictional issue.” Id., at 1319 (citations omitted).

The facts underlying the removal/remand issue are as follows. Plaintiff filed its class action on February 14, 2005 - four days before CAFA’s effective date of February 18, 2005 - but the summons was not issued until February 28, 2005. Defense attorneys removed the case under CAFA on the ground that the action was “commenced” on the date the summons issued, which was after CAFA’s effective date. Plaintiff argued, and the district court found, that plaintiff intended the complaint be served on the date it filed its complaint and thus, under Alabama law, the class action had been commenced prior to CAFA’s effective date. Tmesys, at 1318. The Circuit Court held (1) as noted above, the federal Courts of Appeals have jurisdiction to review on appeal the foundational jurisdictional issue of whether CAFA applies, and (2) that “the consensus among circuits is that state law determines when an action is commenced for purposes of CAFA.” Id., at 1319. The Eleventh Circuit summarized its holdings at page 1319 as follows:

Accordingly, because the district court’s application of Alabama law established that the action was commenced prior to the effective date of the act and it is clear that the district court properly applied Alabama law to the undisputed underlying facts, both the district court and our court are without jurisdiction under CAFA. Thus, we DENY the petition for permission to appeal.
Download PDF file of Tmesys v. Eufaula Drugs

Posted On: October 27, 2006 by Michael J. Hassen Email This Post

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Kim v. Citigroup-Class Action Defense Cases: Forfeiture Aspect Of Capital Accumulation Plan Did Not Violate State’s Wage Act Illinois Court Holds

Trial Court Erred in Finding that Employees Voluntary Participation in a Capital Accumulation Plan Violated Illinois Wage Act Because of Two-Year Forfeiture Period

Plaintiff filed a class action against Citigroup, Travelers Group, Primerica Financial Services, Salomon Smith Barney Holdings and Salomon Smith Barney alleging that a voluntary capital accumulation plan (CAP), whereby a portion of employee compensation and wages were paid in the form of restricted stock, violated Illinois labor laws because the CAP contained a two-year forfeiture period. Kim v. Citigroup, Inc., ___ N.E.2d ___, 2006 WL 2796362 (Ill.App. September 29, 2006). Plaintiff argued that the forfeiture of a portion of the stock upon termination of employment violated the Illinois Wage Payment and Collection Act (“the Act’), which requires that employees be paid all earned wages upon termination of employment. Defense attorneys argued that the CAP program is for the benefit of employees and does not violate state law. The trial court sided with plaintiff, but the appellate court reversed.

Plaintiff was a financial consultant for Salomon Smith Barney with responsibility for managing $30-$40 million in assets. He voluntarily agreed to participate in the CAP, which he believed to be “an innovative and attractive savings vehicle.” Slip Opn., at 2. Plaintiff elected to have 10% of his compensation paid in the form of restricted stock, which allowed him to receive Citigroup stock at a 25% discount subject to a two-year vesting period. Id., at 2-3. When plaintiff left to join UBS Paine Webber, Salomon Smith Barney kept the unvested shares of his CAP stock, which represented approximately $18,000 in earned wages. Id., at 3.

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

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FedEx Class Action Defense Case-Moody v. Federal Express: Illinois Appellate Court Affirms Judgment In Favor Of Defense Against Class Action Alleging Breach Of Contract Because Class Action Complaint Sought Remedy Outside Scope Of Contract

Defense Attorneys Successfully Defeat Class Action Alleging State Law Breach of Contract Claim Because Contract Set Forth Exclusive Remedies in Event of Breach and Class Action Complaint Sought a Different Remedy

Plaintiff filed a one-count nationwide class action in state court against FedEx alleging that it breached the terms of its shipping contract with customers because it charged higher rates for express delivery service but failed to deliver the packages on time. Moody v. Federal Express Corp., ___ N.E.2d ___, 2006 WL 3012854 (Ill.App. October 19, 2006) [Slip Opn., at 2]. Plaintiff paid $41.31 to send a package on January 22, 2002 by “FedEx Priority Overnight, Next Business Morning” expecting the package to be delivered by 8:00 a.m. the following morning; instead, the package was delivered two days later at 9:00 a.m. Id. Defense attorneys moved for summary judgment on the grounds that the relief sought in the class action violated the federal Airline Deregulation Act, 49 U.S.C. § 41713(b)(1), “because it sought a remedy outside the four corners of the contract.” Id. The trial court agreed that the claims were preempted and dismissed the class action; the Illinois Appellate Court affirmed on straight contract grounds without reaching the federal preemption issue.

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

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Hood v. Santa Barbara Bank-Class Action Defense Cases: Trial Court Improperly Granted Defense Motion To Dismiss Class Action Alleging CLRA, UCL And FDCPA Violations Because Class Action Claims Were Not Preempted By Federal Law California Court Holds

California Appellate Court Split Opinion Rejects Defense Federal Preemption Arguments and Reverses Order Dismissing Class Action

Plaintiffs filed a putative class action in California state court against a bank alleging conversion, and violations of California’s Consumers Legal Remedies Act (CLRA), Unfair Competition Law (UCL), Fair Debt Collection Practices Act (FDCPA) based on the bank’s “wrongful” release of tax refund monies to a third party creditor bank. Hood v. Santa Barbara Bank & Trust, 143 Cal.App.4th 526, 49 Cal.Rptr.3d 369, 373 (Cal.App. 2006). Defense attorneys cross-complained against several other banks, and the banks filed motions for judgment on the pleadings on the ground of federal preemption. Id., at 375. The trial court granted the motions, concluding that the “visitorial powers” regulation, the deposit-taking regulation and the non-real estate lending regulation adopted by the Office of the Comptroller of the Currency (OCC) expressly preempted plaintiffs’ class action claims. Id., at 375-76. By a 2-1 vote, the California Court of Appeal reversed.

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

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Jackson v. Midland Credit-Class Action Defense Cases: Illinois Federal Court Grants Defense Motion For Summary Judgment Holding Debt Collection Letter Did Not Violate Federal Fair Debt Collection Practices Act (FDCPA)

Federal Court Rejects Class Action Claim that Offer to Settle Debt for 50% of Current Balance Due Violates Fair Debt Collection Practices Act (FDCPA)

Plaintiffs filed a consolidated class action complaint against Midland Credit Management, a debt collector that purchases debts from third-party creditors, alleging violations of the federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692 et seq. Midland sent letters attempting to collect outstanding debts; the class action complaint alleged that the letters violated the FDCPA because they contain false and misleading information. Defense attorneys filed a motion for summary, and plaintiffs followed with a cross-motion for summary judgment. The federal district court agreed with defense attorneys that the collection letters did not violate the FDCPA and granted summary judgment in favor of Midland and against the class action plaintiffs. Jackson v. Midland Credit Management, Inc., 445 F.Supp.2d 1015, 1017 (N.D. Ill. 2006).

Preliminarily, the district court noted that the Seventh Circuit “evaluates FDCPA claims through the eyes of an ‘unsophisticated debtor’” – it does not employ the “least sophisticated debtor” test adopted by some sister circuits. Jackson, at 1018-19. The court explained at page 1018 that, under this test,

“The unsophisticated debtor is regarded as ‘uninformed, naive, or trusting,’ but nonetheless is considered to have a ‘rudimentary knowledge about the financial world and is capable of making basic logical deductions and inferences.’” (Citations omitted.)

Because the court’s analysis requires an understanding of the specific language used in Midland’s letters, we provide the quoted language, including the emphasis in the original letters, as set forth by the district court at page 1017:

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Posted On: October 25, 2006 by Michael J. Hassen Email This Post

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Tyson Class Action Defense Case-Trollinger v. Tyson: Tennessee Federal Court Grants Motion To Certify Class Action Alleging Violations Of Federal Racketeer Influence and Corrupt Organizations Act (RICO)

Federal Court Rejects Defense Arguments Against Class Certification of RICO Class Action Complaint Finding that Generalized Evidence Exists to Prove or Disprove the Class Claims and that Methodologies Exist to Calculate Damages

Plaintiffs filed a class action complaint in Tennessee federal court against poultry company Tyson Foods for violations of the federal Racketeer Influence and Corrupt Organizations Act (RICO) predicated on Tyson’s alleged harboring and hiring of illegal aliens in violation of federal law. Trollinger v. Tyson Foods, Inc., ___ F.Supp.2d ___, 2006 WL 2924938 (E.D. Tenn. October 10, 2006) [Slip Opn., at 2]. The complaint alleged that Tyson knowingly employed a substantial number of illegal immigrants and that in so doing “saved . . . large sums of money by driving down wages at the chicken processing plants below what wages would be if the [program] were not in existence.” Id., at 3. Following substantial litigation, including motions for summary judgment and judgment on the pleadings, plaintiffs filed a motion for class certification under Rule 23(a) and Rule 23(b)(3), id., at 6. The district court granted the motion.

While the district court discussed the requirements for a class action set forth in Rule 23(a), Tyson, at 6-14, the court noted, “It is not at all clear Tyson contests these prerequisites,” id., at 8. Moreover, defense attorneys did not challenge each of the four separate elements considered under Rule 23(b)(3); rather, “Defendants’ only challenges to Plaintiffs’ motion are in respect to Rule 23(b)’s requirements of manageability and predominance.” Id. Thus, while the federal court discussed each of the elements of Rule 23(b)(3), id., at 14-20, it observed that defense attorneys did not address whether class members will have a strong interest in controlling their claims, id., at 15, whether other litigation exists by or against class members, id., or the desirability of concentrating the litigation “in this forum,” id., at 15-16.

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Posted On: October 24, 2006 by Michael J. Hassen Email This Post

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Class Action Defense Issues--Fair and Accurate Credit Transactions Act (FACTA)

Class Action Defense Attorneys Urged to Advise Clients about FACTA Requirements

As we previously noted, the Fair and Accurate Credit Transactions Act (FACTA) is scheduled to take effect in December, 2006. Congress requires that credit card receipts provided to customers be modified so that the information contained on them no longer serves as a ready source for credit card fraud or identity theft. Under FACTA, the credit card number shown on the customer copy of the credit card receipt must be truncated and the expiration date must be omitted. Class action defense attorneys are encouraged to be proactive in warning their clients about the statute before the law becomes effective.

Posted On: October 24, 2006 by Michael J. Hassen Email This Post

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Baez v. Wagner & Hunt-Class Action Defense Cases: In Class Action Against Debt Collector Florida Federal Court Holds That Law Firm’s Collection Letter Violated Fair Debt Collection Practices Act (FDCPA)

In Case of First Impression Florida District Court Holds that Collection Letter Sent by Law Firm Violated Federal Fair Debt Collection Practices Act (FDCPA) Because it Told Debtor that Validity of Debt could be Disputed Only in Writing

Plaintiff opened an American Express Centurion credit card account. American Express retained a law firm to collect amounts owed on the account. The law firm sent a “Dunning letter” that stated, in pertinent part, that the debtor had to “notify this office in writing within thirty days after receiving this notice that you dispute the validity of the debt.” Baez v. Wagner & Hunt, P.A., 442 F.Supp.2d 1273, 1274 (S.D. Fla. 2006) (italics added by court). Plaintiff filed a class action against the law firm alleging that the collection letter violated Section 1692g of the federal Fair Debt Collection Practices Act (FDCPA) by requiring that the validity of the debt be disputed in writing, and defense attorneys moved to dismiss the complaint. Id., at 1274-75. The basis of the lawsuit is that Section 1692g(a)(3) requires that a debt collection letter notify the debtor that the debt will be assumed valid unless the debtor disputes the validity of the debt within 30 days. Sections 1692g(a)(4) and (a)(5), however, reference written notifications from the debtor disputing the debt. Defendant argued that its Dunning letter simply “provided [plaintiff] with additional guidance for disputing the debt and avoided confusion by reconciling the notification requirement in subsection (a)(3) with the writing requirement contained in subsections (a)(4) and (a)(5).” Baez, at 1275-76. The district court disagreed.

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Posted On: October 23, 2006 by Michael J. Hassen Email This Post

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Hartford Class Action Defense Cases-Hartford v. Beaver: Florida Law Requires Insurer Defend Against Claims Of Putative Class Members Even Before Class Action Is Certified Eleventh Circuit Holds

Circuit Court Reverses Judgment for Insurer and Holds that Florida Law Requires Insurers to Defend Against Class Action Lawsuits Before Certification Even if the Only Potentially Covered Claims Involve Members of the Putative Class

Two individuals filed a putative class action against defendants, operators of nursing home facilities, alleging breach of fiduciary duties owed nursing home residents “to provide necessary care, services, and supplies required for their health and well-being.” Hartford Acc. & Indemn. Co. v. Beaver, 446 F.3d 1289, 2006 WL 2933939, *1 (11th Cir. 2006). Plaintiff Estate of Ayres lived in a nursing home from 1986 until his death in 1995; plaintiff Garrison resided in the same nursing home from 1993 until 1997. Hartford defended the class action under a reservation of rights based on a general liability policy that covered the time period from 1987-1992. Id. Hartford then filed suit against defendants seeking a declaration that it owed no duty to defend, and sought summary judgment on its complaint. While the motion was pending, Ayres’ estate settled with defendants and withdrew as a party-plaintiff, leaving Garrison as the sole class representative in the class action. Id. The federal district court granted Hartford’s motion because Garrison’s claim was outside the policy period. While the claims of putative class members fell within the Hartford 1987-1992 insurance policy period, the court concluded that Hartford did not owe a duty to defend against those class action claims “until such time as that class is certified pursuant to Florida Rule of Civil Procedure 1.220.” Id., at *2. The district court explained, “a class must be certified before a claim may be maintained on its behalf” and that prior to certification “there is no class action claim to defend against.” Id. Defense attorneys appealed and the Eleventh Circuit reversed.

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Posted On: October 22, 2006 by Michael J. Hassen Email This Post

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15 U.S.C. § 77f--Registration Of Securities Under The Securities Act Of 1933

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. The statutory provisions for the registration of securities is set forth in 15 U.S.C. § 77f, which provides:

§ 77f. Registration of securities

(a) Method of registration

Any security may be registered with the Commission under the terms and conditions hereinafter provided, by filing a registration statement in triplicate, at least one of which shall be signed by each issuer, its principal executive officer or officers, its principal financial officer, its comptroller or principal accounting officer, and the majority of its board of directors or persons performing similar functions (or, if there is no board of directors or persons performing similar functions, by the majority of the persons or board having the power of management of the issuer), and in case the issuer is a foreign or Territorial person by its duly authorized representative in the United States; except that when such registration statement relates to a security issued by a foreign government, or political subdivision thereof, it need be signed only by the underwriter of such security. Signatures of all such persons when written on the said registration statements shall be presumed to have been so written by authority of the person whose signature is so affixed and the burden of proof, in the event such authority shall be denied, shall be upon the party denying the same. The affixing of any signature without the authority of the purported signer shall constitute a violation of this subchapter. A registration statement shall be deemed effective only as to the securities specified therein as proposed to be offered.

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Posted On: October 21, 2006 by Michael J. Hassen Email This Post

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15 U.S.C. § 77e--Prohibitions Relating To Interstate Commerce And The Mails Under The Securities Act Of 1933

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. In 15 U.S.C. § 77e, Congress set forth the prohibitions relating to interstate commerce and the mails in conjunction with securities:

§ 77e. Prohibitions relating to interstate commerce and the mails

(a) Sale or delivery after sale of unregistered securities

Unless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly--

(1) to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise; or

(2) to carry or cause to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale.

(b) Necessity of prospectus meeting requirements of section 77j of this title

It shall be unlawful for any person, directly or indirectly--

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Posted On: October 20, 2006 by Michael J. Hassen Email This Post

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Employment Law Class Action Cases Lead Weekly California Filings Facing Defense Attorneys But Unfair Competition/Unfair Business Practice (UCL) Class Action Filings Run A Close Second

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 from October 13 - October 19, 2006. We include only those categories that boast 10% or more of the class action filings during the relevant timeframe. Approximately 46 class action lawsuits were filed in these California state and federal courts during that time period, of which 18 involved employment law claims (almost 40%). Surprisingly, however, class action filings involving California’s Unfair Competition Law (UCL) - which includes unfair business practices and false advertising claims - came in a strong second, with 16 new filings (35%). Half of these UCL claims (8) involved the alleged SRAM price-fixing conspiracy against numerous defendants, including Samsung, Hynix, Micron Technology, IBM, Epson, Hitachi, Sharp, Sony, Fujitsu, Alliance Semiconductor, NEC, and many others.

During this time period, the only other significant group of class action filings involved various securities claims: class action defense attorneys will face 5 new cases involving that area of law, which represents approximately 11% of the class actions filed this time period.

Posted On: October 20, 2006 by Michael J. Hassen Email This Post

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Bell v. Acxiom-Class Action Defense Cases: Federal Court Grants Defense Motion To Dismiss Class Action Based On "Increased Risk" Of Identity Theft And Receiving Junk Mail Because Plaintiff Lacked Standing

Arkansas Federal Court Agrees with Defense that Plaintiff Failed to Establish Injury-in-Fact and Therefore Lacked Standing to Prosecute the Putative Class Action

Plaintiff filed a putative class action in federal court against Acxiom after a computer hacker compromised the files that the company maintained on its corporate clients, alleging that “Acxiom’s lax security jeopardized her privacy and left her at a risk of receiving junk mail and of becoming a victim of identity theft.” Bell v. Acxiom Corp., ___ F.Supp.2d ___, 2006 WL 2850042 (E.D. Ark. October 3, 2006). Defense attorneys moved to dismiss the class action complaint on the ground that plaintiff lacked standing to prosecute the action. The district court agreed and granted the motion to dismiss.

“Acxiom is a data bank that stores marketing information about its clients’ customers. Acxiom takes this information and ‘match[es] names with lifestyles and demographic information from other sources . . . [to] give . . . [its] client a clear picture of the people buying its products and services.’” Slip Opn., at 1. A computer hacker exploited a weakness in the company’s computer system, downloaded data and sold it to a marketing company who used the names and addresses for direct mail advertising. Plaintiff’s class action alleged that she and others were “at a higher risk of receiving junk mail and of being an identity theft victim” because “Acxiom failed to protect its clients’ data.” Id., at 2. Defense attorneys argued that plaintiff lacked standing because she had not established injury in fact; the court agreed.

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Posted On: October 19, 2006 by Michael J. Hassen Email This Post

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Alvarez v. May Department Stores-Class Action Defense Cases: California Court Holds That Demurrer To Class Action Allegations Is Proper And Defense Theory Of Collateral Estoppel Properly Applied In Sustaining Demurrer To Overtime Class Action Claims

California Trial Court Properly Applied Collateral Estoppel Principles in Ruling on Demurrer to Class Action Allegations Because Denial of Class Certification in Separate Lawsuit Binds Absent Putative Members of Class

Plaintiffs’ lawyer filed three class action complaints against May Department Stores in various California superior courts that alleged, in part, class action claims for failure to pay overtime to area sales managers: the 1997 Gorman case filed in Los Angeles; the 1999 Duran case filed in San Bernardino; and the 2003 Alvarez case filed in Los Angeles. Alvarez v. May Dept. Stores Co., ___ Cal.App.4th ___, 49 Cal.Rptr.3d 892, 2006 WL 2874907 (Cal.App. October 11, 2006) [Slip Opn., at 3-4.]. In the Alvarez lawsuit, defense attorneys demurred to the class action allegations on the ground of collateral estoppel; the trial court agreed that the doctrine applied and sustained the demurrer to the class action claims without leave to amend. Plaintiffs argued on appeal “that the doctrine of collateral estoppel is inapplicable to an order denying class certification in another lawsuit brought by other plaintiffs because absent putative class members are not bound prior to the certification of a class”; the appellate court rejected this argument and affirmed. Id., at 2.

The appellate court briefly summarized the history of the Gorman and Duran litigation, explaining that the trial court denied class action status in Gorman because “plaintiffs had failed to demonstrate a community of interest or an ascertainable class and that the proposed class representatives were unsuitable because they had unsatisfactory employment histories,” Alvarez, at 3, and that trial court order denying class action status in Duran was affirmed on appeal because the interests of the class members were dissimilar and “[c]ommon questions of fact could not predominate,” id., at 4. In Alvarez, defendant demurred “on the grounds that an order denying class certification of the same class was issued in Duran and thus [plaintiffs] were barred from relitigating the issue under the doctrine of collateral estoppel.” Id.

Preliminarily, the Court of Appeal quickly disposed of the claim that class certification issues may not be resolved by demurrer, holding that “[t]rial courts properly and routinely decide the issue of class certification on demurrer.” Alvarez, at 5-6 (italics added).

Continue reading "Alvarez v. May Department Stores-Class Action Defense Cases: California Court Holds That Demurrer To Class Action Allegations Is Proper And Defense Theory Of Collateral Estoppel Properly Applied In Sustaining Demurrer To Overtime Class Action Claims" »

Posted On: October 18, 2006 by Michael J. Hassen Email This Post

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Dunbar v. Albertson's-Class Action Defense Cases: Certification Of Employment Class Action Seeking Overtime Pay On Theory That Employer Misclassified Employees As Exempt Properly Denied California Court Holds

California Trial Court Properly Engaged in “Weighing Process” to Determine Commonality of Class Action Claims and Correctly Refused to Certify Class Action Because Individual Issues would Predominate

Plaintiff, a grocery manager at Albertson’s, filed a putative class action seeking overtime compensation on the theory that Albertson’s erroneously classified him as an exempt executive employee. Defense attorneys objected to certification of the class action on the grounds that individualized issues of liability and damages would predominate. Dunbar v. Albertson’s, Inc., 141 Cal.App.4th 1422, 1424-25 (Cal.App. 2006). The trial court agreed with the defense, and refused to certify the lawsuit as a class action. The appellate court affirmed.

Plaintiff’s motion for class certification consisted of more than 60 virtually identical declarations of grocery managers stating that the great majority of their work time was spent in the allegedly non-managerial tasks of walking the floor to verify that inventory was properly stocked, stocking shelves, organizing the stock room, unloading new merchandise, responding to customer questions, cashiering, putting price tags on items, checking inventory, and doing routine paperwork. Dunbar, at 1424-25. In opposition, defense attorneys submitted excerpts of deposition testimony from plaintiff’s declarants, and filed 79 declarations of grocery managers - many of whom had executed declarations for the plaintiff - that described “in varied terms their allegedly executive work at different stores.” Id., at 1425. “This evidence was accompanied by a chart outlining how the deposition testimony and counter-declarations differed from the declarations plaintiff submitted. Defendant also presented statistics on the varying amounts of time plaintiff's declarants spent working cash registers each week during the period from July 2004 through April 2005.” Id.

Continue reading "Dunbar v. Albertson's-Class Action Defense Cases: Certification Of Employment Class Action Seeking Overtime Pay On Theory That Employer Misclassified Employees As Exempt Properly Denied California Court Holds" »

Posted On: October 17, 2006 by Michael J. Hassen Email This Post

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Pennsylvania Jury Finds Wal-Mart Liable In Employee Overtime/Rest Breaks Class Action Case And Awards $78 Million In Damages Plus Attorney Fees

Defense Attorneys Plan to Appeal Jury Verdict that Wal-Mart Failed to Provide Employees with Rest Breaks and Overtime, and that Wal-Mart Acted in Bad Faith

The jury is in on a labor law class action on behalf of 187,000 Wal-Mart and Sam’s Club employees brought in Pennsylvania state court. The lawsuit alleged that employees were not provided rest breaks and were required to work “off the clock,” depriving them of overtime pay. The jury awarded $78.5 million in damages, and that figure may be dramatically increased because the jury also found that Wal-Mart acted in bad faith, opening the door to an additional $62 million in damages, according to plaintiffs’ lawyers. The jury agreed with defense attorneys that Wal-Mart had not forced employees to work through meal breaks. Several news sources have reported on the verdict, including Steven Greenhouse of the New York Times and James Covert of the Wall Street Journal.

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Posted On: October 17, 2006 by Michael J. Hassen Email This Post

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IBM Class Action Defense Case-Syverson v. IBM: General Release And Covenant Not To Sue Created Confusion In Employee Layoff Agreement Rendering Waiver Of ADEA Claims Unenforceable Ninth Circuit Holds

Ninth Circuit Reverses District Court Judgment Enforcing Employee Waiver of ADEA Claims Because Language was not “Written in a Manner Calculated to be Understood by an Average Individual Selected by IBM for Employment Termination” and so was not “Knowing and Voluntary”

A putative class action was filed against IBM based on the allegation that an employee layoff program violated the federal Older Workers Benefit Protection Act (OWBPA) and the federal Age Discrimination in Employment Act (ADEA). Syverson v. International Business Machines Corp., 461 F.3d 1147, 1149-50 (9th Cir. 2006). Defense attorneys moved to dismiss the class action complaint based on the executed wavier of ADEA claims and covenant not to sue signed by the plaintiffs as part of the layoff program. Id., at 1150. The district court granted the defense motion to dismiss the class action, but the Ninth Circuit reversed.

In 2001, as part of a workforce reduction plan, IBM offered employees that had been selected for termination severance pay and benefits if they executed a “Microelectronics Resource Action (MERA) General Release and Covenant Not To Sue.” Syverson, at 1149. Plaintiffs filed age discrimination charges with the Equal Employment Opportunity Commission; the EEOC dismissed the charges because it found that “the MERA Agreement satisfies the OWBPA’s minimum requirements for ‘knowing and voluntary’ waiver of ADEA rights and claims and is enforceable, thus depriving the employees of their right to pursue their age discrimination claims.” Id., at 1150. The EEOC issued plaintiffs notices of right to sue, and they commenced a putative class action challenging, in part, “the MERA Agreement’s use of both a release covering ADEA claims and a covenant not to sue excepting them, the pairing of which allegedly caused confusion over whether ADEA claims were excepted from the release.” Id.

Continue reading "IBM Class Action Defense Case-Syverson v. IBM: General Release And Covenant Not To Sue Created Confusion In Employee Layoff Agreement Rendering Waiver Of ADEA Claims Unenforceable Ninth Circuit Holds" »

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

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Camacho v. Automobile Club-Class Action Defense Cases: Defense Motion For Judgment On The Pleadings With Respect To Unfair Business Practice Claims In Class Action Complaint Properly Granted California Court Holds

California’s Unfair Competition Law (UCL) was not Violated by Efforts of Insurers and Collection Company to Collect Money from Uninsured Motorist who Caused Accident

An uninsured driver filed a putative class action against various defendants arising from their efforts to collect amounts that he owed for rear-ending an insured driver. The trial court sua sponte recast as a motion for judgment on the pleadings the demurrer filed by defense attorneys to the unfair business practice claims premised on California’s Business & Professions Code section 17200. The trial court then granted the judgment on the pleadings as to the UCL claims in the class action complaint, and the Court of Appeal affirmed. Camacho v. Automobile Club of Southern California, ___ Cal.App.4th ___, 48 Cal.Rptr.3d 770 (Cal.App. September 14, 2006).

Briefly, plaintiff rear-ended an insured driver whose carrier paid the claim and assigned its rights against plaintiff to a collection company. Plaintiff paid $500 of the roughly $9400 he owed, and then filed his class action lawsuit alleging violations of California’s unfair competition law (UCL), Business & Professions Code section 17200, arising out of the efforts of the collection company to recover money due the insurers. In part the class action challenged letters sent by the collection company, but the complaint also alleged unfair business practices unrelated to those letters. Camacho, at 771-73. The appellate court summarized the claims based on the letters at page 773 as follows:

Continue reading "Camacho v. Automobile Club-Class Action Defense Cases: Defense Motion For Judgment On The Pleadings With Respect To Unfair Business Practice Claims In Class Action Complaint Properly Granted California Court Holds" »

Posted On: October 15, 2006 by Michael J. Hassen Email This Post

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15 U.S.C. § 77d--Transactions Exempted Under The Securities Act Of 1933

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. While Congress set forth those securities that are exempt under the Act in 15 U.S.C. § 77c, section 77d addresses those transactions that are exempt and provides:

§ 77d. Exempted transactions

The provisions of section 77e of this title shall not apply to--

(1) transactions by any person other than an issuer, underwriter, or dealer.

(2) transactions by an issuer not involving any public offering.

(3) transactions by a dealer (including an underwriter no longer acting as an underwriter in respect of the security involved in such transaction), except--

(A) transactions taking place prior to the expiration of forty days after the first date upon which the security was bona fide offered to the public by the issuer or by or through an underwriter,

(B) transactions in a security as to which a registration statement has been filed taking place prior to the expiration of forty days after the effective date of such registration statement or prior to the expiration of forty days after the first date upon which the security was bona fide offered to the public by the issuer or by or through an underwriter after such effective date, whichever is later (excluding in the computation of such forty days any time during which a stop order issued under section 77h of this title is in effect as to the security), or such shorter period as the Commission may specify by rules and regulations or order, and

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Posted On: October 14, 2006 by Michael J. Hassen Email This Post

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Frustration Over Terms Of Class Action Settlements And Defense Practice Of Refusing To Admit Wrongdoing

Reporter Shines Light on Concerns Arising from Standard Defense Provision in Class Action Settlement Agreements that Defendant is not Admitting Liability

David Lazarus of the San Francisco Chronicle questions the standard defense provision in class action settlement agreements that the settlement does not constitute an admission of liability. He focuses on the recent settlement by Wells Fargo Bank in which he reports “it agreed to pay $12.8 million to settle a lawsuit claiming the bank unlawfully exempted as many as 4,500 workers from overtime pay by classifying them as analysts or consultants” but denied any wrongdoing. Mr. Lazarus identifies several other settlements that follow the same pattern. While understandable, any consumer frustration over this standard provision reflects in part unfamiliarity with the costs – financial and otherwise – associated with class action litigation, and fails to recognize that such provisions are standard clauses in virtually all settlement agreements, class action and non-class action.

Mr. Lazarus quoted this author’s observation that one reason defendants deny liability is so that the issue may be litigated in a future proceeding, if necessary. The concern is not that the settlement will “spark a flurry of lawsuits in other states,” but rather that the company will be precluded from obtaining a judicial determination on the merits in a future case. Very few companies blatantly violate the plain language of the law, and all attorneys recognize that the outcome of a trial can never be 100% guaranteed, no matter how strong the case. Rather, many of the legal issues presented in class action and other complex or high-liability cases fall into the “gray” areas of the law. For example, whether a grocery store manager is exempt from overtime often turns on the individual facts of the particular case, see, e.g., Dunbar v. Albertson’s, Inc., 141 Cal.App.4th 1422 (Cal.App. 2006) (refusing to certify class action on behalf of grocery store managers because of individual issues of liability and damages), whether employee commissions are subject to charge-backs or constitute wages turns on the specific facts of each case, see, e.g., Koehl v. Verio, Inc., ___ Cal.App.4th ___, 48 Cal.Rptr.3d 749 (Cal.App. 2006) (holding employer’s program did not violate California law, and awarding damages and attorney fees to employer).

If Albertson’s had settled the class action filed by Dunbar and if Verio had settled the class action filed by Koehl, those cases would have qualified for the list in Mr. Lazarus’s article. They represent concrete examples of why a company does not want to cut-off its right to litigate a future case involving the same issues.

The article by David Lazarus, entitled “They Pay But Deny Any Guilt,” may be found in the Business Section of the October 13, 2006 edition of the San Francisco Chronicle.

Posted On: October 14, 2006 by Michael J. Hassen Email This Post

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15 U.S.C. § 77c--Securities Exempt Under The Securities Act Of 1933

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. Congress set forth those securities that are exempt under the Act in 15 U.S.C. § 77c, which provides:

§ 77c. Classes of securities under this subchapter

(a) Exempted securities

Except as hereinafter expressly provided, the provisions of this subchapter shall not apply to any of the following classes of securities:

(1) Reserved.

(2) Any security issued or guaranteed by the United States or any territory thereof, or by the District of Columbia, or by any State of the United States, or by any political subdivision of a State or territory, or by any public instrumentality of one or more States or territories, or by any person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States; or any certificate of deposit for any of the foregoing; or any security issued or guaranteed by any bank; or any security issued by or representing an interest in or a direct obligation of a Federal Reserve bank; or any interest or participation in any common trust fund or similar fund that is excluded from the definition of the term "investment company" under section 80a-3(c)(3) of this title; or any security which is an industrial development bond (as defined in section 103(c)(2) of Title 26) the interest on which is excludable from gross income under section 103(a)(1) of Title 26 if, by reason of the application of paragraph (4) or (6) of section 103(c) of Title 26 (determined as if paragraphs (4)(A), (5), and (7) were not included in such section 103(c) ), paragraph (1) of such section 103(c) does not apply to such security; or any interest or participation in a single trust fund, or in a collective trust fund maintained by a bank, or any security arising out of a contract issued by an insurance company, which interest, participation, or security is issued in connection with (A) a stock bonus, pension, or profit-sharing plan which meets the requirements for qualification under section 401 of Title 26, (B) an annuity plan which meets the requirements for the deduction of the employer's contributions under section 404(a)(2) of Title 26, (C) a governmental plan as defined in section 414(d) of Title 26 which has been established by an employer for the exclusive benefit of its employees or their beneficiaries for the purpose of distributing to such employees or their beneficiaries the corpus and income of the funds accumulated under such plan, if under such plan it is impossible, prior to the satisfaction of all liabilities with respect to such employees and their beneficiaries, for any part of the corpus or income to be used for, or diverted to, purposes other than the exclusive benefit of such employees or their beneficiaries, or (D) a church plan, company, or account that is excluded from the definition of an investment company under section 3(c)(14) of the Investment Company Act of 1940 [15 U.S.C.A. § 80a-3(c)(14)], other than any plan described in subparagraph (A), (B), (C), or (D) of this paragraph (i) the contributions under which are held in a single trust fund or in a separate account maintained by an insurance company for a single employer and under which an amount in excess of the employer's contribution is allocated to the purchase of securities (other than interests or participations in the trust or separate account itself) issued by the employer or any company directly or indirectly controlling, controlled by, or under common control with the employer, (ii) which covers employees some or all of whom are employees within the meaning of section 401(c)(1) of Title 26, or (iii) which is a plan funded by an annuity contract described in section 403(b) of Title 26. The Commission, by rules and regulations or order, shall exempt from the provisions of section 77e of this title any interest or participation issued in connection with a stock bonus, pension, profit-sharing, or annuity plan which covers employees some or all of whom are employees within the meaning of section 401(c)(1) of Title 26, if and to the extent that the Commission determines this to be necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of this subchapter. For purposes of this paragraph, a security issued or guaranteed by a bank shall not include any interest or participation in any collective trust fund maintained by a bank; and the term "bank" means any national bank, or banking institution organized under the laws of any State, territory, or the District of Columbia, the business of which is substantially confined to banking and is supervised by the State or territorial banking commission or similar official; except that in the case of a common trust fund or similar fund, or a collective trust fund, the term "bank" has the same meaning as in the Investment Company Act of 1940 [15 U.S.C.A. § 80a-1 et seq.];

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Posted On: October 13, 2006 by Michael J. Hassen Email This Post

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California Defense Attorneys Find That Public Accommodation/ADA Cases Bounce Back Above Employment Law Class Action Cases In Weekly Filings

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 from October 6 - October 12, 2006. We include only those categories that contain 10% or more of the class action filings during the relevant timeframe. Approximately 44 class action lawsuits were filed in these California state and federal courts during that time period, of which 14 (almost 32%) involved public accommodation actions under the federal Americans with Disabilities Act (ADA). Employment law claims came in second with 11 new filings (25%). The only other category of cases to break the 10% threshold consisted of unfair competition/unfair business practice claims: class action defense attorneys will face 5 new cases involving that area of law, which represents approximately 11% of the class actions filed during this time period.

Posted On: October 13, 2006 by Michael J. Hassen Email This Post

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Cingular Class Action Defense Case-Stern v. Cingular Wireless: Arbitration Provision Waiving Class Action Remedy Unenforceable California Federal Court Holds

California Federal District Court Holds Arbitration Clause Requiring Arbitration at Customers’ Expense and Waiving Right to Class Action Device to be Unconscionable and Unenforceable

In November 2004, plaintiff signed a service agreement with AT&T Wireless, and received a booklet entitled “Important Information and Service Agreement” that contained in part an arbitration clause governed by the Federal Arbitration Act (FAA) and a class action waiver. Cingular Wireless thereafter acquired AT&T Wireless; its customers also signed service agreements that contained arbitration clauses, but Cingular’s agreement provided that the company would pay the cost of the arbitration unless the customer’s action is frivolous, and that the company would pay the customer’s attorney fees if the arbitrator awarded the amount the customer demanded or more. In December 2005, plaintiff filed a class action lawsuit in California federal court against AT&T and Cingular for violations of the Federal Communications Act, declaratory relief, breach of contract, violations of California’s unfair competition law (UCL), and violations of California’s Consumers Legal Remedies Act (CLRA), based on the allegation that defendants charged customers for services that the customers had not authorized, totaling approximately $9 per month. Stern v. Cingular Wireless Corp., 453 F.Supp.2d 1138, 1141-43 and 1149 (C.D. Cal. July 28, 2006). Defense attorneys moved to compel arbitration and stay the litigation; plaintiff’s lawyer argued that the arbitration clause was unconscionable and unenforceable. The district court denied the defense motion, concluding that the class action waiver was unconscionable.

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Posted On: October 12, 2006 by Michael J. Hassen Email This Post

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Exxon Mobil Class Action Defense Case-Steering Committee v. Exxon Mobil: District Court Properly Refused To Certify Class Action Based On Personal Injuries Arising From Chemical Fire Fifth Circuit Holds

Louisiana Federal Court did not Abuse its Discretion in Refusing to Certify Class Action Against Exxon Because Individual Issues Predominated over Common Issues and Superiority Requirement was not Met

In 1994, smoke from an oil fire at an Exxon Mobil chemical plant drifted into neighboring communities: “Hundreds of suits were filed against Exxon Mobil, alleging various causes of action including personal injury, personal discomfort and annoyance, emotional distress resulting from knowledge of exposure to hazardous substances, fear of future unauthorized exposures, and economic harm including damage to business and property, among others.” Steering Committee v. Exxon Mobil Corp., 461 F.3d 598, 600 (5th Cir. 2006). The lawsuits were consolidated in a Louisiana federal court, and plaintiffs proposed that the action proceed as a class action and moved for class certification. Defense attorneys opposed the motion, and filed summary judgment motions as to certain categories of claims against Exxon. Id. The district court first decided the summary judgment motions, granting summary judgment “on all claims for physical injuries and non-intentional emotional distress brought by individual plaintiffs who were located outside the geographic area that the air modeling experts agreed was affected by the [smoke] plume,” and “on all claims for intentional infliction of emotional distress.” Id., at 600-01. The court then denied the motion to proceed as a class action, concluding that plaintiffs failed to establish typicality or adequacy of representation under Rule 23(a), and predominance and superiority under Rule 23(b)(3). Id., at 601. The Fifth Circuit affirmed.

Continue reading "Exxon Mobil Class Action Defense Case-Steering Committee v. Exxon Mobil: District Court Properly Refused To Certify Class Action Based On Personal Injuries Arising From Chemical Fire Fifth Circuit Holds" »

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

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White v. DaimlerChrysler-Class Action Defense Cases: Defense Motion To Dismiss Consumer Fraud Class Action Granted Because Plaintiff Failed To Plead Fraud Or Damages With Requisite Specificity Illinois Court Holds

Illinois Court Affirms Dismissal of Consumer Fraud Class Action Because Fraud Allegations were Conclusory and Complaint Failed to Allege Actual Damages

A car buyer filed a putative class action in Illinois state court against DaimlerChrysler Corporation for alleged violations of the Consumer Fraud Act and the federal Magnuson-Moss Act, 15 U.S.C. §§ 2301 et seq., claiming that defendant concealed a “material defect” in its Jeeps; specifically, plaintiff claimed the exhaust manifold was “substandard and defective” because it was made of tubular steel rather than the more expensive (and allegedly “standard”) cast iron. White v. DaimlerChrysler Corp., ___ N.E.2d ___, 2006 WL 2739009 (Ill.App. September 26, 2006) [Slip Opn., at 1-2]. Defense attorneys moved to dismiss the class action complaint on several grounds; the trial court granted the defense motion, and plaintiff appealed only the dismissal of the Consumer Fraud Act claims. Id., at 1. The appellate court affirmed.

Continue reading "White v. DaimlerChrysler-Class Action Defense Cases: Defense Motion To Dismiss Consumer Fraud Class Action Granted Because Plaintiff Failed To Plead Fraud Or Damages With Requisite Specificity Illinois Court Holds" »

Posted On: October 10, 2006 by Michael J. Hassen Email This Post

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Cingular Class Action Defense Case-Kinkel v. Cingular: Illinois Rejects Defense Efforts To Enforce Arbitration Clause Barring Class Action Device And Refuses To Apply Arbitration Terms Effective After Class Action Plaintiff Terminated Service Contract

Court Holds that Arbitration Clause in Effect at Time Class Action Plaintiff Terminated her Service Agreement Governed in Motion to Compel Arbitration, and Class Action Waiver in Wireless Service Provider’s Arbitration Clause Held Unenforceable by Illinois Supreme Court

Plaintiff filed a class action in Illinois state court against her cellular telephone service provider, Cingular Wireless, for alleged violations of the state’s Consumer Fraud and Deceptive Business Practice Act on the ground that the early termination fee is an unlawful penalty. Defense attorneys moved to compel arbitration pursuant to an arbitration clause that provided that “‘no arbitrator has the authority’ to resolve class claims.” Kinkel v. Cingular Wireless LLC, ___ N.E.2d ___, 2006 WL 2828664 (Ill. October 5, 2006) [Slip Opn., at 1]. The trial court refused to compel arbitration. The appellate court held that the arbitration clause was enforceable, but that the prohibition against class action arbitrations was not; accordingly, it reversed the trial court’s ruling. Id. The Illinois Supreme Court rejected defense arguments that the class action bar was enforceable and affirmed the decision of the appellate court.

Plaintiff signed a two-year service contract with Cingular in July 2001, but terminated her service in April 2002. Cingular charged her a $150 early-termination fee, in accordance with the terms of the service agreement plaintiff signed when she became a customer. Slip Opn., at 2. Plaintiff filed a class action against Cingular, arguing that the early-termination fee was an illegal penalty and that the class action waiver in the arbitration clause “prevents her and others from ‘effectively vindicating their statutory and common law causes of action and facilitates rather than remedies Cingular’s fraudulent and unlawful conduct.’” Id. The trial court denied a defense motion to compel arbitration; the appellate court found the class-action waiver provision to be unenforceable but severable from the balance of the arbitration clause, and so reversed. Id.

Continue reading "Cingular Class Action Defense Case-Kinkel v. Cingular: Illinois Rejects Defense Efforts To Enforce Arbitration Clause Barring Class Action Device And Refuses To Apply Arbitration Terms Effective After Class Action Plaintiff Terminated Service Contract " »

Posted On: October 9, 2006 by Michael J. Hassen Email This Post

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Koehl v. Verio-Class Action Defense Cases: Class Representatives Hit With Damages And Half-Million Dollar Attorney Fee Award By California Court After Losing Labor Law Class Action Against Former Employer

California Court Holds that Compensation Scheme Permitting Chargebacks Against Monies Advanced Against Unearned Commissions did not Violate State Labor Laws Because Such Commissions were not Wages

Four former employees filed a class action in California state court against internet service provider Verio for violations of California’s labor laws on the grounds that Verio’s compensation scheme - which provided for a base salary, plus commissions that were subject to charge backs under certain conditions - violated California Labor Code § 221 because the commissions were wages. Koehl v. Verio, Inc., ___ Cal.App.4th ___, 48 Cal.Rptr.3d 749, 751 (Cal.App. 2006). “The complaint alleged three causes of action: (1) commission chargebacks in violation of Labor Code sections 221, 223, 225 and 400-410; (2) waiting penalties pursuant to section 203; and (3) unfair competition under Business and Professions Code section 17200 et seq.Id., at 759 (footnote omitted). Verio cross-complained against the class representatives for commissions recoverable as charge-backs under the compensation scheme, id. The trial court agreed that the commissions were not wages, awarded the employer compensatory damages (for overpayment of unearned commissions) and prejudgment interest totaling more than $250,000, and awarded the employer more than $548,000 in attorney fees. Id., at 759-60. The Court of Appeal affirmed.

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Posted On: October 8, 2006 by Michael J. Hassen Email This Post

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15 U.S.C. § 77b-1--Swap Agreements Under The Securities Act Of 1933

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. Congress defined "swap agreements" in 15 U.S.C. § 77b-1:

§ 77b-1. Swap agreements

(a) Non-security-based swap agreements

The definition of "security" in section 77b(a)(1) of this title does not include any non-security-based swap agreement (as defined in section 206C of the Gramm-Leach-Bliley Act).

(b) Security-based swap agreements

(1) The definition of "security" in section 77b(a)(1) of this title does not include any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act).

(2) The Commission is prohibited from registering, or requiring, recommending, or suggesting, the registration under this subchapter of any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act). If the Commission becomes aware that a registrant has filed a registration statement with respect to such a swap agreement, the Commission shall promptly so notify the registrant. Any such registration statement with respect to such a swap agreement shall be void and of no force or effect.

(3) The Commission is prohibited from--

(A) promulgating, interpreting, or enforcing rules; or

(B) issuing orders of general applicability;

under this subchapter in a manner that imposes or specifies reporting or recordkeeping requirements, procedures, or standards as prophylactic measures against fraud, manipulation, or insider trading with respect to any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act).

(4) References in this subchapter to the "purchase" or "sale" of a security-based swap agreement shall be deemed to mean the execution, termination (prior to its scheduled maturity date), assignment, exchange, or similar transfer or conveyance of, or extinguishing of rights or obligations under, a security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act), as the context may require.

Posted On: October 7, 2006 by Michael J. Hassen Email This Post

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15 U.S.C. § 77b--Definitions Applicable To Lawsuits Under The Securities Act Of 1933

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. Preliminarily, Congress set forth the applicable definitions in 15 U.S.C. § 77b:

§ 77b. Definitions; promotion of efficiency, competition, and capital formation

(a) Definitions

When used in this subchapter, unless the context otherwise requires--

(1) The term "security" means any note, stock, treasury stock, security future, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.

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Posted On: October 6, 2006 by Michael J. Hassen Email This Post

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Public Accommodation/ADA Class Action Lawsuits Again Seize Top Spot Of Weekly Class Action Filings In California State And Federal Courts

The evidence suggests that the recent wave of public accommodation/ADA class action lawsuits will continue for the foreseeable future. In order to assist class action defense attorneys in California to anticipate the claims against which they may have to defend, we provide weekly, unofficial summaries of the legal categories for new 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. At one time, employment law cases routinely headed the list, but an increasing number of class actions alleging public accommodation/Americans with Disabilities Act (ADA) claims have been filed.

This report covers the time period from October 2 – October 5, 2006. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. Approximately 55 class action lawsuits were filed in these California state and federal courts during that time period, of which 29 – almost 53% – involved public accommodation/ADA claims. Coming in at a distant second place, 8 new employment law class actions (15%) were filed during this time period.

Posted On: October 6, 2006 by Michael J. Hassen Email This Post

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U-Haul Class Action Defense Case-Aron v. U-Haul: Trial Court Erred In Granting Defense Motion For Judgment On The Pleadings In Class Action Alleging California CLRA And UCL Violations

California Court Holds that Class Action Complaint Adequately Alleged Violations of California’s Consumers Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) Based on Truck Rental Company’s Refueling Practices

Plaintiff filed a putative class action against U-Haul for violations of California’s Consumers Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) arising out of U-Haul’s refueling charges and practices. Aron v. U-Haul Co. of California, ___ Cal.App.4th ___, 2006 WL 2808074 (Cal.App. October 3, 2006) [Slip Opn., at 2]. Defense attorneys moved for judgment on the pleadings, and the trial court granted the motion. The Court of Appeal reversed. Id. The facts of the case are simple, and are concisely summarized by the appellate court at page 2 as follows:

U-Haul Company of California and U-Haul International, Inc. (“U-Haul”) rent trucks to customers. Rather than supplying those customers with fully fueled trucks, U-Haul rents its trucks partially fueled, presenting them to each succeeding customer with the fuel remaining when the previous customer returned the vehicle. The level of the fuel gauge is the exclusive means of measurement relied on. If on return, the fuel gauge is lower than at rental, U-Haul charges the customer a $20 fueling fee as well as $2 per gallon for fuel estimated to have been used, but not replaced, by the customer. U-Haul does not reimburse customers for additional fuel if a truck is returned with more fuel than initially provided.

The rental contract sets out these two options explicitly: “I confirm equipment is clean and agree to pay for all fuel used and return the truck with the same fuel gauge reading as indicated on this rental contract and will pay $20 fueling fee plus $2 per gallon for estimated fuel used. U-Haul does not reimburse for excess fuel purchased by the customer.”

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Posted On: October 5, 2006 by Michael J. Hassen Email This Post

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Farm Raised Salmon Class Action Defense Case: Class Action Preempted By Federal Food, Drug, And Cosmetic Act (FDCA) Because No State Law Private Right Of Action Exists Based On FDCA Violations California Court Holds

In Action Alleging California Consumers Legal Remedies Act (CLRA) and Unfair Business Practices (UCL) Claims Concerning Artificially Colored Farmed Salmon, California Court of Appeal Affirms Judgment Granting Defense Motion to Dismiss Class Action on Grounds of Federal Preemption

Plaintiffs filed separate class action lawsuits against various defendants for unfair competition, false advertising, negligent misrepresentation, and violations of California’s Consumers Legal Remedies Act (CLRA) based on the alleged sale of artificially colored farmed salmon without disclosing that the salmon had been artificially colored. Farm Raised Salmon Cases, ___ Cal.App.4th ___, 48 Cal.Rptr.3d 449, 451 (Cal.App. 2006). The class action was premised on the allegation that the flesh of farmed salmon is naturally “grayish,” so they were fed chemicals for the purpose of coloring the flesh so that it would resemble the color of wild salmon. The complaint alleged that consumers would be less inclined to purchase the salmon without the chemical coloring, and that consumers were not informed of the artificial coloring. Specifically, the class action alleged that “the FDCA and parallel state laws require food labeling to state that farmed salmon is artificially colored,” id. Defense attorneys moved to dismiss the lawsuit on the grounds that it was preempted by the federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. §§ 301 et seq. The trial court dismissed the class action and the appellate court affirmed, holding that “Congress made clear its intention to preclude private enforcement of the FDCA” and that “a state law private right of action based on an FDCA violation would frustrate the purposes of exclusive federal and state governmental prosecution of the act,” id.

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Posted On: October 4, 2006 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Del Campo v. Kennedy: California Federal Court Denies Defense Motion For Protective Order That Sought To Bar Third Party Precertification Discovery In FDCPA Class Action

California Federal Court Reaffirms that Scope of Precertification Discovery in Class Action Lawsuits is Within the Discretion of the Court

A putative class action alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) was filed against a county district attorney and a private company (ACCS) under contract to administer the county’s Bad Check Restitution Program. Del Campo v. Kennedy, 236 F.R.D. 454 (N.D. Cal. 2006). After plaintiff learned that the check she had given a store merchant (Fry’s Electronics) did not clear, she called the store and offered to make full payment: “The store declined her offer because the check had not been entered yet into the computer system.” Id., at 456. Plaintiff later received a letter from the district attorney concerning the crime of writing a bad check, and advising her that she owed not only the amount of the check ($95.02), but a returned item fee ($10), administrative fee ($35), and bad check restitution program fee ($125); plaintiff tendered only the amount of the delinquent check. Id. Upon receiving a demand threatening criminal action if she failed to pay the $170 in additional fees, plaintiff filed the FDCPA class action. Id. Eventually, the class action was consolidated with another lawsuit. Plaintiff then filed subpoenas on two stores (Safeway and Target), and defense attorneys filed a motion to quash the subpoenas or for a protective order.

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

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Class Action Defense Cases-Anchor Lighting v. SoCal Edison: California Public Utilities Commission Has Exclusive Jurisdiction Over State Utilities

California Courts Lack Jurisdiction Over Class Action By Commercial Electricity Customer Against Electricity Supplier

A commercial electricity customer, Anchor Lighting, filed a putative class action against electricity supplier Southern California Edison after it failed to qualify for a 10% rate reduction; the trial court agreed with defense attorneys that it lacked jurisdiction over the claims and dismissed the lawsuit. The California Court of Appeal affirmed, holding that the California Public Utilities Commission (CPUC) had “exclusive jurisdiction over the regulation and control of utilities and that jurisdiction, once assumed, cannot be hampered or second-guessed by a superior court action addressing the same issue.” Anchor Lighting v. Southern California Edison Co., ___ Cal.App.4thh ___, 47 Cal.Rptr.3d 7810, 784 (Cal.App. August 30, 2006).

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

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DirecTV Class Action Defense Case-Cohen v. DirecTV: Class Action Waiver In Arbitration Clause Unconscionable And Unenforceable California Court Holds

In Action Alleging California Consumers Legal Remedies Act (CLRA) and Unfair Business Practices (UCL) Claims, California Court of Appeal Affirms Trial Court Order Denying Defense Motion to Compel Arbitration of Under Arbitration Clause that Prohibited Class Action Litigation

Philip Cohen filed a putative class action in California state court against DirecTV under California’s Consumers Legal Remedies Act (CLRA) and unfair business practices (UCL) on the grounds that DirecTV broadcast to its HDTV customers a “below-standard signal, contrary to its advertisements.” Cohen v. DirecTV, Inc., 142 Cal.App.4th 1442, 1445 (Cal.App. 2006). Defense attorneys moved to compel arbitration; plaintiff’s lawyer argued that the arbitration clause was unconscionable because it prohibited class action litigation of claims, and that the arbitration clause was not binding on plaintiff because of the manner in which it had been added to DirecTV’s customer agreement. The trial court denied the defense motion on the grounds that the arbitration provision was “procedurally and substantively unconscionable, against public policy and unenforceable.” Id., at 1446. DirecTV appealed, and the Court of Appeal affirmed.

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Posted On: October 1, 2006 by Michael J. Hassen Email This Post

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15 U.S.C. § 1681x – Corporate and Technological Circumvention Prohibited: Statutory Provisions of the FCRA (Fair Credit Reporting Act) for Class Action Defense Attorneys

As a resource for the class action defense lawyer who defends against class actions brought under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., we provide the text of the FCRA. To make it perfectly clear that Congress intended to achieve its goals for the FCRA, it specifically enacted legislation prohibiting companies from avoiding the effects of the law, providing in Section 1681x:

§ 1681x. Corporate and technological circumvention prohibited

The Commission shall prescribe regulations, to become effective not later than 90 days after the date of enactment of this section, to prevent a consumer reporting agency from circumventing or evading treatment as a consumer reporting agency described in section 1681a(p) of this title for purposes of this title, including—

(1) by means of a corporate reorganization or restructuring, including a merger, acquisition, dissolution, divestiture, or asset sale of a consumer reporting agency; or

(2) by maintaining or merging public record and credit account information in a manner that is substantially equivalent to that described in paragraphs (1) and (2) of section 1681a(p) of this title, in the manner described in section 1681a(p) of this title.