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

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E*Trade Class Action Defense Case-Murray v. E*Trade: Illinois Federal Court Rejects Defense Objections To Motion For Certification Of Class Action Alleging Violations Of Federal Fair Credit Reporting Act (FCRA)

Rule 23 Requirements Met in Class Action Alleging FCRA (Fair Credit Reporting Act) Violations Against E*Trade Illinois Federal Court Holds


Plaintiff filed a class action against E*Trade alleging violations of the federal Fair Credit Reporting Act (FCRA) arising out of a solicitation mailer he received stating that he was pre-approved for a home equity loan and stating that "[i]nformation from a consumer credit report was used in connection with this offer." Murray v. E*Trade Fin, Corp., 240 F.R.D. 392, 2006 WL 3354039, *1 (N.D. Ill. November 20, 2006). Defense attorneys filed a motion for judgment on the pleadings as to the claim for relief in the class action complaint that E*Trade violated the FCRA's disclosure requirements; the district court granted the motion agreeing with the defense that no private right of action exists for such violations under 15 U.S.C. § 1681m(d). Id. The court denied defense efforts to obtain dismissal of the balance of the class action complaint. Plaintiff's lawyer then moved the court to certify the lawsuit as a class action; the court rejected defense arguments in opposition to the motion and granted class action certification, finding that the requirements of Rule 23(a) were met and that the class action satisfied also the requirements of Rule 23(b)(3).


The district court analyzed each of the Rule 23 requirements for certification of a class action, but " E*Trade refutes only the adequacy of Murray as class representative," Murray, at *2, so we do not here discuss the court's analysis supporting its finding that numerosity, commonality and typicality were met. See id., at *2-*4. With respect to the adequacy requirement of Rule 23(a)(4), a district court must examine the adequacy of both the proposed class representative and the proposed class counsel, and determine whether "the representative parties will fairly and adequately protect the interest of the class." Id., at *5. The court readily concluded that proposed class counsel would adequately represent the class based on the firm's class action experience, and noted that even E*Trade "praised" its experience. Id.

Continue reading "E*Trade Class Action Defense Case-Murray v. E*Trade: Illinois Federal Court Rejects Defense Objections To Motion For Certification Of Class Action Alleging Violations Of Federal Fair Credit Reporting Act (FCRA)" »

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

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Federal Court Trial Date Of Class Action Law Firm Milberg Weiss Set

As previously reported, class action plaintiff law firm Milberg Weiss Bershad & Schulman LLP and two of the firm's top partners, David Bershad and Steven Schulman were indicted in mid-May 2006 for paying millions of dollars in kickbacks to clients to serve as plaintiffs. Prosecutors allege that the class action firm paid people to serve as class representatives and recruited people to purchase stock in anticipation that share prices would fall, thereby positioning itself to play a lead role in any subsequent securities fraud class action lawsuits and, concomitantly, realize greater attorney fees. In today's New York Times, Cindy Chang provides additional details, reporting that "The law firm and the partners are accused of making $11.3 million in secret payments to entice people to serve as plaintiffs in more than 150 lawsuits. "


In July 2006, they entered pleas of not guilty in a California federal court. Ms. Chang reports that the trial date now has been set for January 2008, rejecting a request by prosecutors to set the trial for October 2007. While the late trial date permits defense attorneys additional time to prepare a defense for the class action firm, it also means another year of uncertainty for the firm. For example, Milberg Weiss' legal troubles have caused Illinois Cook County Circuit Judge Nancy Arnold to delay approval of a class action settlement involving Boeing until she completes a review of the testimony of the six plaintiffs in the case.


Cindy Chang's article, entitled "Trial of Class-Action Law Firm Is Set for 2008," may be found in Section C. of the November 28, 2006 edition of the New York Times.

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

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Huber v. Taylor Class Action Defense Case: Third Circuit Reverses Order Granting Defense Motion For Summary Judgment In Malpractice Class Action Against Prior Class Counsel Because District Court's Choice Of Law Determination Was Flawed

Class Action Plaintiffs’ Failure to Argue Choice of Law in District Court and in Opening Brief did not Waive Issue on Appeal, and District Court Erroneously Granted Defense Summary Judgment Motion and Erroneously Denied Class Certification in Breach of Fiduciary Duty Class Action Against Plaintiffs’ Prior Attorneys Based on its Incorrect Determination of Applicable Choice of Law


Based on a complicated fact pattern, plaintiffs filed a putative class action against some of their prior counsel in an asbestos mass action for breach of fiduciary duty, specifically, the breach of fiduciary duty of undivided loyalty and candor in the settlement of asbestos claims. Huber v. Taylor, ___ F.3d ___, 2006 WL 3071384, *4 (3rd Cir. October 31, 2006). In broad terms, the class action complaint alleged that prior counsel had negotiated settlements in which counsel received as attorney fees a smaller percentage of the payments made to putative class members than they received in fees from other clients in related actions, thus creating the incentive for counsel to negotiate higher settlements in cases in which they would receive a larger contingent fee. Id., at *3. Plaintiff's lawyers sought class certification, which the District Court denied. The parties thereafter filed cross motions for summary judgment; the court agreed with defense attorneys that plaintiffs had failed to demonstrate actual harm – specifically, that the settlements received by plaintiffs would have been more favorable but for the alleged breaches of fiduciary duties – and therefore granted judgment for the defense. Id., at *4. The Third Circuit Court of Appeals reversed because the district court erred in its choice of law determination.


The Circuit Court opinion defines the “Northerners” as plaintiffs in asbestos actions filed in Pennsylvania, Ohio and Indiana, Huber, at *1, and as “Southerners” those plaintiffs in asbestos actions filed in Mississippi and Texas, id., at *2. The class action complaint alleged that “Northerners received payouts that were between 2.5 and 18 times lower than those received by [Southerners],” id. In cases involving Northerners, class counsel had to share their attorney fee award with local counsel but they did not have to utilize local counsel in cases involving Southerners. The Court of Appeal summarized plaintiffs’ arguments at *2 and *3 as follows:

Continue reading "Huber v. Taylor Class Action Defense Case: Third Circuit Reverses Order Granting Defense Motion For Summary Judgment In Malpractice Class Action Against Prior Class Counsel Because District Court's Choice Of Law Determination Was Flawed" »

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

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Philip Morris Defense Team Solidifies Victory In Illinois Class Action Against Tobacco Giant

The New York Times reports on the decision of the United States Supreme Court to let stand the decision of the Illinois Supreme Court that reversed a $10 billion judgment against Philip Morris. The judgment against Philip Morris had been entered in a class action that alleged smokers "were misled about the health risks of 'light' cigarettes." The Illinois Supreme Court reversed the judgment, agreeing with defense attorneys that a statutory exemption for conduct authorized by a governmental regulatory agency applied because "the Federal Trade Commission had endorsed the 'light' and 'low tar' descriptions in settlements with other cigarette makers."


The article, entitled " Justices Let Stand a Decision to Void Big Award Against Philip Morris," may be found in Section C of the November 28, 2006 edition of the New York Times.

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

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Philip Morris Class Action Defense Case-Price v. Philip Morris: U.S. Supreme Court Denies Petition For Writ Of Certiorari

Illinois Supreme Court Decision Reversing Billion Dollar Class Action Award Against Tobacco Giant Now Final


The Philip Morris defense team secured victory in the Illinois class action involving the sale of "light" cigarettes today when the United States Supreme Court denied the petition for writ of certiorari filed plaintiffs' attorneys. Price v. Philip Morris Inc., ___ U.S. ___, 2006 WL 2843774 (November 27, 2006). The class action originated in 2000, when plaintiffs filed a class action lawsuit in Illinois state court alleging violations of the Consumer Fraud Act and the Deceptive Practices Act based on the packaging, marketing, promotion and sale of "light" cigarettes as having less tar and nicotine than "regular" cigarettes. Price v. Philip Morris Inc., 848 N.E.2d 1, 19-20 (Ill. 2005). Defense attorneys advanced 27 affirmative defenses to the class action complaint, including section 10b(1) of the Consumer Fraud Act, which provides a statutory exemption for conduct specifically authorized by a state or federal regulatory agency. Id., at 19. Ultimately, the trial court certified the lawsuit as a class action and entered judgment against Philip Morris in excess of $10 billion. The Illinois Supreme Court reversed the judgment, finding that the action was barred by section 10b(1). Id., at 53-55. This holding was based on the Illinois Supreme Court's conclusion that the Federal Trade Commission had "specifically authorized all United States tobacco companies to utilize the words 'low,' 'lower,' 'reduced' or like qualifying terms, such as 'light,' so long as the descriptive terms are accompanied by a clear and conspicuous disclosure of the 'tar' and nicotine content in milligrams of the smoke produced by the advertised cigarette." Id., at 50.


The Illinois Supreme Court's opinion was far from unanimous. Four separate opinions were filed: Justice Garman delivered the opinion of the court, Price, at 1 et seq.; Justice Karmeier filed a specially concurring opinion supporting reversal of the judgment for failure to prove actual damages rather than based on the statutory exemption of section 10b(1), id., at 55 et seq.; Justice Freeman filed a dissenting opinion, id., at 60 et seq.; and Justice Kilbride filed a dissenting opinion, id., at 84 et seq. A petition for rehearing was denied in May 2006, with Justices Freeman and Kilbride dissenting. By denying the petition for writ of certiorari, the United States Supreme Court brought finality to the judgment in favor of Philip Morris.

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

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Sears Class Action Defense Case-Santamarina v. Sears: Seventh Circuits Holds Class Action Not Removable By Defense Because Under California Law Amendments To Class Action Complaint Related Back To Original Filing

Error in Refusing to Remand Class Action is not Jurisdictional Error but Defense Improperly Removed Class Action under CAFA (Class Action Fairness Act of 2005) Because Amendments to Complaint Related Back Original Filing Which Predated CAFA's Effective Date


In January 2005, prior to the effect date of the Class Action Fairness Act of 2005 (CAFA), plaintiff filed a barebones class action in California state court against Sears alleging false representations that certain Craftsman tools are made in the U.S. when they are manufactured abroad. Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 571 (7th Cir. 2006). Defense attorneys demurred, and plaintiff's lawyer filed an amended complaint after CAFA became effective. The defense then removed the class action to federal court arguing that the amended complaint did not relate back and was therefore removable under CAFA. The California federal court denied plaintiff's motion for remand and plaintiff did not appeal that ruling. However, after the Judicial Panel on Multidistrict Litigation (MDL) transferred the case to Illinois, plaintiff asked the district court to reconsider the California court's ruling. The Illinois federal court held that the defense removal had been improper and remanded the class action to California state court. Id. Sears appealed, and the Seventh Circuit Court of Appeals affirmed.


Sears first argued that the Illinois federal court should not have reconsidered the ruling of the California federal court. Santamarina, at 571-72. The Seventh Circuit disagreed, explaining that a court has inherent power to reconsider prior rulings in the same lawsuit, even the rulings of a different judge, "if there is a compelling reason, such as a change in, or clarification of, law that makes clear that the earlier ruling was erroneous." Id., at 572. The Circuit Court reasoned at page 572, "Not to reconsider in such circumstances would condemn the parties to the unedifying prospect of continued litigation when they knew that a possibly critical ruling was in error and, unless it became moot in the course of the proceedings, would compel a reversal of the final judgment at the end of the case." The Court of Appeals was critical of plaintiff's delay in seeking reconsideration "almost 15 months since the case was removed to the federal court and 13 months since it was transferred to Chicago," but held that "some latitude" was warranted because the class action was removed and remand denied "only a few months after the promulgation of the Class Action Fairness Act." Id.

Continue reading "Sears Class Action Defense Case-Santamarina v. Sears: Seventh Circuits Holds Class Action Not Removable By Defense Because Under California Law Amendments To Class Action Complaint Related Back To Original Filing" »

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

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In re Vioxx Class Action Defense Cases: Louisiana Federal Court Hands Merck Defense Crucial Victory By Denying Motion To Certify Nationwide Class Action Involving Vioxx

Federal Court Agrees with Defense that Vioxx Class Action Claims Lack Typicality and Fail to Satisfy Predominance and Superiority Requirements of Rule 23(b)


The Vioxx litigation against Merck - consisting of thousands of individual and numerous class action lawsuits filed in state and federal courts - is well known. Merck withdrew Vioxx from the market in September 2004, following clinical reports that Vioxx led to an increased risk of heart attacks and strokes. By that time, however, an estimated 20 million people had used the prescription drug. The individual and class action lawsuits assert various tort and products liability claims against Merck. In February 2005, the Judicial Panel for Multidistrict Litigation transferred the cases to the federal court for the Eastern District of Louisiana, Judge Eldon Fallon, for pretrial proceedings. In re Vioxx Products Liab. Litig., ___ F.Supp.2d ___ (E.D. La. November 22, 2006) [Slip Opn., at 1-2]. Plaintiffs moved for certification of a nationwide class action against Merck; defense attorneys opposed the motion on two grounds: (1) that each claim must be litigated under the substantive law of each class members' respective state (rather than New Jersey law, as plaintiffs' claimed) thus defeating commonality of law, and (2) that each claim "involves separate and distinct factual issues." Id., at 6. On November 22, 2006, the district court agreed with Merck's defense team and refused to certify a nationwide Vioxx class action.


Merck secured FDA approval for the sale of the prescription drug Vioxx in May 1999 for relief of pain caused by osteoarthritis, rheumatoid arthritis, menstrual pain, and migraine headaches. In re Vioxx, at 1. Following centralization by the Judicial Panel, the Plaintiffs Steering Committee filed a Master Class Action Complaint alleging that Vioxx was defective, that Merck misrepresented its safety in that it knew or should have known that Vioxx was unsafe, and that Vioxx caused medical problems, injury and death. Id., at 4. In December 2005, plaintiffs moved to certify a nationwide class action under Rule 23(b)(3) consisting of all U.S. residents who used Vioxx and who claim personal injuries or assert wrongful death claims arising from such use, id. Merck opposed the motion on the grounds summarized above, see id., at 6.

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

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Class Action Defense Cases-IBM Defense Attorneys Seeks Court Approval Of $65 Million Settlement In Federal Fair Labor Standards Act (FLSA) Overtime Class Action

The Los Angeles Times reports that IBM has reached a tentative agreement to pay $65 million in settlement of a class action lawsuit filed in California federal court that alleged it had improperly denied overtime pay to 32,000 workers. According to the article, "The case involved workers classified as 'technical services professional and information technology specialists.' IBM considered them professionals exempt from overtime laws detailed in the Fair Labor Standards Act and state labor laws." Plaintiff's lawyer argued that the employees at issue "were by no means the decision makers or creative types typically ineligible for overtime." IBM maintains that it seeks settlement of the lawsuit because litigation will be "lengthy, burdensome and expensive."


The article, entitled "IBM settles overtime class action," may be found in the Business Section of the November 23, 2006 Los Angeles Times.

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

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15 U.S.C. § 77r-1--Preemption Of State Law 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 provided for preemption of state laws in 15 U.S.C. § 77r-1, which provides:

§ 77r-1. Preemption of State law

(a) Authority to purchase, hold, and invest in securities; securities considered as obligations of United States

(1) Any person, trust, corporation, partnership, association, business trust, or business entity created pursuant to or existing under the laws of the United States or any State shall be authorized to purchase, hold, and invest in securities that are--

(A) offered and sold pursuant to section 77d(5) of this title,

(B) mortgage related securities (as that term is defined in section 78c(a)(41) of this title),

(C) small business related securities (as defined in section 78c(a)(53) of this title), or

(D) securities issued or guaranteed by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association,

to the same extent that such person, trust, corporation, partnership, association, business trust, or business entity is authorized under any applicable law to purchase, hold or invest in obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof.

(2) Where State law limits the purchase, holding, or investment in obligations issued by the United States by such a person, trust, corporation, partnership, association, business trust, or business entity, such securities that are--

(A) offered and sold pursuant to section 77d(5) of this title,

(B) mortgage related securities (as that term is defined in section 78c(a)(41) of this title),

(C) small business related securities (as defined in section 78c(a)(53) of this title), or

(D) securities issued or guaranteed by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association,

shall be considered to be obligations issued by the United States for purposes of the limitation.

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

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15 U.S.C. § 77r--Exemption From State Regulation 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. In 15 U.S.C. § 77r, Congress provided for the exemption of securities offerings from State regulation as follows:

§ 77r. Exemption from State regulation of securities offerings

(a) Scope of exemption

Except as otherwise provided in this section, no law, rule, regulation, or order, or other administrative action of any State or any political subdivision thereof--

(1) requiring, or with respect to, registration or qualification of securities, or registration or qualification of securities transactions, shall directly or indirectly apply to a security that--

(A) is a covered security; or

(B) will be a covered security upon completion of the transaction;

(2) shall directly or indirectly prohibit, limit, or impose any conditions upon the use of--

(A) with respect to a covered security described in subsection (b) of this section, any offering document that is prepared by or on behalf of the issuer; or

(B) any proxy statement, report to shareholders, or other disclosure document relating to a covered security or the issuer thereof that is required to be and is filed with the Commission or any national securities organization registered under section 78o-3 of this title, except that this subparagraph does not apply to the laws, rules, regulations, or orders, or other administrative actions of the State of incorporation of the issuer; or

(3) shall directly or indirectly prohibit, limit, or impose conditions, based on the merits of such offering or issuer, upon the offer or sale of any security described in paragraph (1).

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

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15 U.S.C. § 77q--Fraudulent Interstate Transactions 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. § 77q, Congress addressed fraudulent interstate transactions as follows:

§ 77q. Fraudulent interstate transactions

(a) Use of interstate commerce for purpose of fraud or deceit

It shall be unlawful for any person in the offer or sale of any securities or any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act) by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly

(1) to employ any device, scheme, or artifice to defraud, or

(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or

(3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.

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

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15 U.S.C. § 77p--Additional Remedies And Limitation On Remedies 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 previously provided the statutory provisions of 15 U.S.C. § 77m - § 77o, which addressed limitations on actions under the Act and the liability of controlling persons under the Act, and provided that the statutes, rules and regulations concerning the Act may not be waived. As part of this comprehensive statutory scheme, Congress provided for additional remedies, and the limitations on those remedies, in 15 U.S.C. § 77p, which provides:

§ 77p. Additional remedies; limitation on remedies

(a) Remedies additional

Except as provided in subsection (b), the rights and remedies provided by this subchapter [15 U.S.C.A. § 77a et seq.] shall be in addition to any and all other rights and remedies that may exist at law or in equity.

(b) Class action limitations

No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging--

(1) an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security; or

(2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.

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

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Miller v. Bank of America Class Action Defense Case: Billion Dollar Class Action Judgment Reversed As California Court Agrees With Defense That Banks May Apply Funds From Government Benefit Deposits To Cover Overdraft Fees Connected With The Same Account

California Court Holds that Kruger v. Wells Fargo Bank does not Apply to Offsets of Government Benefits Against Overdraft and Other Fees Incurred in Connection with the Same Deposit Account


Plaintiff filed a class action in California state court against Bank of America alleging inter alia violations of the state's Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) arising out of the bank's use of Social Security disability benefits directly deposited into a Bank of America checking account to offset overdraft charges. Miller v. Bank of America, NT & SA, 144 Cal.App.4th 1301 (Cal.App. November 20, 2006) [Slip Opn., at 1-2]. Defense attorneys argued that banks may lawfully apply government benefit deposits against overdraft and other fees connected with the same account. The trial court, however, agreed with plaintiff's lawyer that Kruger v. Wells Fargo Bank, 11 Cal.3d 352 (Cal. 1974), which held that banks may not use public benefit funds deposited in one bank account to offset "an account holder's delinquent but separate credit card account," bars banks from using government benefits to offset any funds owed the bank. Id. The California Court of Appeal framed the issue as follows: "Does a bank act illegally if when balancing customer accounts, it credits for Social Security benefits and other public benefit payments directly deposited to its customers' checking accounts to cover debits for overdraft and overdraft fees?" Id. In reversing the trial court, the appellate court summarized its holding as follows: "In this case, the trial court applied Kruger to prohibit [the Bank] from collecting for overdrafts and fees by debiting directly deposited Social Security and other public benefit payments. This application of Kruger is an extension of its holding that is unwarranted in light of significant differences between the banker's setoff addressed in Kruger and the facts of this case." Id.


The case arose from a bank error in posting an $1800 credit to plaintiff's account. The bank discovered its error and reversed the credit, causing plaintiff's account to be substantially overdrawn. After a Social Security payment was deposited directly into plaintiff's checking account, "it was automatically balanced against the larger overdraft to reduce his negative balance." Miller, at *1-*2. When plaintiff complained the bank reversed the debit. Future direct deposits from Social Security that the bank credited against the overdraft balance were also reversed when plaintiff complained. Id., at *2. Plaintiff filed his class action lawsuit against the bank alleging numerous causes of action including intentional and negligent misrepresentation, intentional infliction of emotional distress, unlawful levy of Social Security benefits, and violations of California's CLRA, UCL and False Advertising Act (FAA). The trial court granted summary adjudication in favor of the defense on the intentional infliction of emotional distress and unlawful levy claims, but the remaining causes of action proceeded to trial. Id. It certified a class consisting of more than 1 million members defined as California residents with "a checking or savings deposit account with Bank of America into which payments of Social Security benefits or other public benefits are or have been directly deposited by the government or its agent." Id., at *3.

Continue reading "Miller v. Bank of America Class Action Defense Case: Billion Dollar Class Action Judgment Reversed As California Court Agrees With Defense That Banks May Apply Funds From Government Benefit Deposits To Cover Overdraft Fees Connected With The Same Account" »

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

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Class Action Defense Cases-In re InPhonic: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In The District of the District of Columbia

Judicial Panel Grants Unopposed Defense Request for Pretrial Coordination Pursuant to 28 U.S.C. § 1407 for Centralization of Class Action Lawsuits


Four putative class action lawsuits were filed against InPhonic in the District of Columbia, Illinois and New Jersey (followed by several tag-along suits) alleging violations of various state consumer protection statutes and common law claims, and - in some cases - violations of the Federal Racketeering Influenced and Corrupt Organizations Act (RICO). The class action claims were based on InPhonic's alleged failure to adequately disclose the rebate conditions associated with the purchase of wireless telephones and service plans, failure to honor rebates or delay in processing rebates. In re InPhonic, Inc., Wireless Phone Rebate Litig., 460 F.Supp.2d 1380 (Jud. Pan.Mult.Lit. 2006). The Judicial Panel agreed that centralization was warranted under 28 U.S.C. § 1407, and selected the District of Columbia as the appropriate transferee court, explaining:


This district is where many relevant documents and witnesses are likely to be found, inasmuch as InPhonic's headquarters and related offices are located in the Washington, D.C., metropolitan area. Further, since the District of Columbia is the situs of related court proceedings (an action brought by the Attorney General of the District of Columbia), centralization in the District of District of Columbia carries the added benefit of fostering coordinated discovery between the federal and local proceedings, should such a need arise.

Download PDF file of In re InPhonics Transfer Order

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

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Class Action Defense Cases-In re Int’l Air Transportation: Judicial Panel On Multidistrict Litigation (MDL) Grants Motion To Centralize Class Action Litigation In The Northern District of California

Judicial Panel Agrees with Plaintiffs and Defense that Putative Class Action Lawsuits Warrant Centralization Pursuant to 28 U.S.C. § 1407 and Selects Northern District of California as Transferee Court


At least 15 separate putative class action lawsuits were filed in at least 6 different federal courts in various states - followed by numerous tag-along actions - seeking to recover damages for alleged violations of antitrust laws arising out a purported conspiracy to fix prices on international passenger air travel to or from the United States. In re Int'l Air Transp. Surcharge Antitrust Litig., 460 F.Supp.2d 1377 (Jud.Pan.Mult.Lit. 2006). Defense and plaintiff lawyers agreed that pretrial coordination under 28 U.S.C. § 1407 was warranted, but they disagreed on the appropriate transferee court. The Judicial Panel agreed that pretrial coordination was warranted, and explained that the Northern District of California was the appropriate form because "i) the MDL-1973 actions in that district (which comprise the largest number of actions and potential tag-along actions pending in any single district in this docket) are already proceeding apace before an able judge experienced in the management of complex and multidistrict litigation; and ii) the district is well equipped with the resources that this complex antitrust docket is likely to require." Id.


NOTE: The Judicial Panel noted that four of its judges - Judges Hodges, Jensen, Motz and Hansen - could be putative class members in the case. Accordingly, "each of them has filed with the Clerk of the Panel a formal renunciation of any claim they he might have as a putative class member, thereby removing any basis for disqualification on that ground." In re Int’l Air Transp., at 1378 n.1. The Panel noted that, in any event, it invoked the "rule of necessity." Id. (citing In re Wireless Tel. Radio Frequency Emissions Products Liab. Litig., 170 F.Supp.2d 1356, 1357-58 (Jud.Pan.Mult.Lit. 2001)).

Download PDF file of In re International Air Transportation Transfer Order

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

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Carton v. Choice Point-Class Action Defense Cases: New Jersey Federal Court Denies Defense Motion To Dismiss Class Action For Lack Of Standing Because "Lost Opportunity To Sell Stock" Is Sufficient Injury In Fact

Federal Court Denies Defense Motion To Dismiss Class Action For Lack Of Standing But Otherwise Grants In Part And Denies In Part Defense Motion To Dismiss Class Action Complaint Arising Out Of Unclaimed Property Claims


Plaintiffs filed a putative class action against Choice Point and its subsidiary for violations of the New Jersey Consumer Fraud Act and Uniform Unclaimed Property Act, and for common law claims of tortuous interference, fraud, breach of duty, wrongful exercise of dominion over property and interference with possession of property. Carton v. Choice Point, 450 F.Supp.2d 489, 495 (D. N.J. 2006). Defense attorneys moved to dismiss the class action complaint for lack of standing. The defense also moved to dismiss the class action complaint for failure to state a claim. The federal court held that plaintiffs had standing to pursue the class action, and then granted in part and denied in part the motion to dismiss.


Choice Point is a company that charges a fee to locate and secure the return of unclaimed property. Mellon Investor Services asked Choice Point, with whom it had contract, to track down plaintiffs' father, James Carton Jr., because he held 1600 shares of stock worth $150,000. Carton had died in January 2000, and Choice Point sent a letter to his surviving sons informing them "that a 'stock account' with a 'current value in excess of $15,000' was 'still outstanding with our client.'" Carton, at 493. In response to subsequent inquiries, Choice Point stated only that the value of the asset exceed $15,000. Id., at 494. Choice Point sent plaintiffs a contract in which it "agreed to locate the unspecified 'asset' in exchange for a finder's fee of 35% of the asset's gross value"; plaintiffs signed the contract, but reduced the fee to one-third of the net recovery. Id. Choice Point notified Mellon that it had a signed contract to recover the Carton account and asked that a "stop" be placed on the account. Mellon complied. Choice Point also sent plaintiffs additional documentation, but plaintiffs refused to sign the Letter of Authorization and Irrevocable Stock Power required by Choice Point to complete the transaction. Instead, plaintiffs sought to recover the stock from Mellon directly, but Mellon refused to turn over the stock certificates because of the stop placed on the account. However, for reasons which are unclear, Mellon sent the stock certificates to Choice Point. Choice Point maintained possession of the stock for three years. Carton, at 494.

Continue reading "Carton v. Choice Point-Class Action Defense Cases: New Jersey Federal Court Denies Defense Motion To Dismiss Class Action For Lack Of Standing Because "Lost Opportunity To Sell Stock" Is Sufficient Injury In Fact" »

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

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Class Action Defense Cases-In re New York Bancorp: New York Federal Court Grants Defense Motion To Dismiss Securities Class Action And Rejects Plaintiffs' Meritorious Remand Motion As Untimely

Court Holds Allegations in Securities Class Action Fail to Meet Heightened Pleadings Requirements Mandated by FRCP Rule 9(b) and the PSLRA (Private Securities Litigation Reform Act of 1995), and Denies Plaintiffs Request To Rule on its Year-Old Remand Motion as Untimely


Plaintiff investors filed separate putative class actions against New York Community Bancorp (NYCB) and several of its officers alleging violations of federal securities laws by making materially false and misleading statements to investors. In re New York Community Bancorp, Inc., Securities Litig., 448 F.Supp.2d 466, 469 (E.D.N.Y. 2006). The federal court eventually consolidated 11 such class action lawsuits, and appointed lead plaintiff and lead counsel. Following the filing of a Consolidated and Amended Class Action Complaint, defense attorneys filed a motion to dismiss and certain plaintiffs filed a motion for reconsideration of the consolidation order. Id. The district court denied the motion for reconsideration and granted the defense motion to dismiss.


The amended class action complaint alleged violations of the Securities and Exchange Act of 1934 (“Exchange Act”) and the Securities Act of 1933 (“Securities Act”) on behalf of NYCB shareholders. In re New York Comm. Bancorp, at 469. NYCB went through a period of substantial earnings growth and acquired several financial institutions, building "a unique and profitable core lending business comprised of multi-family mortgage loans." Id., at 470. Over time, however, market conditions changed and NYCB expanded into a " risky, but common, leveraging strategy involving mortgage-backed securities known as the 'carry trade.'" Id. The complaint alleged that NYCB diverted increasingly large sums away from conservative investments and to carry trade investments, but continually held itself out as a risk-adverse, conservative community bank. Id., at 471. The court summarized the material allegations of the complaint as follows: "In particular, the Plaintiffs allege that the Defendants: (1) falsely represented that NYCB was uniquely able to thrive in an environment of rising interest rates and that its business prospects remained strong; (2) highlighted a false strategy of deleveraging following the acquisition of Roslyn; and (3) failed to adequately disclose the extent of the risks of the carry trade activity." Id.


The court first addressed the motion for reconsideration, which additionally sought to reinstate a motion that the plaintiffs had filed more than a year earlier to remand to state court one of the class action lawsuits. In re New York Comm. Bancorp, at 474. Plaintiffs had filed their class action in state court, and the defense removed the lawsuit to federal court. Plaintiffs filed a motion to remand arguing that the Securities Litigation Uniform Standards Act of 1998 (SLUSA) prohibits removal of cases based exclusively on the Securities Act. When the federal court consolidated the 11 securities class actions, it did not specifically address the remand motion but the practical effect of the court's ruling was to deny the motion. Id., at 475. In evaluating the plaintiffs' motion, the district court concluded that even though claim of improper removal appears to have merit, id., the fact remained that plaintiffs' motion was too late, id., at 475-76.

Continue reading "Class Action Defense Cases-In re New York Bancorp: New York Federal Court Grants Defense Motion To Dismiss Securities Class Action And Rejects Plaintiffs' Meritorious Remand Motion As Untimely" »

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

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Employment Class Action Filings Again Top List But Defense Attorneys Also Gear Up For New Public Accommodation/ADA Class Action Lawsuits Which Ran A Close Second In Weekly Class Action Filings In California

Class action defense attorneys in California will continue to confront more labor law class action cases than any other category, but public accommodation/ADA (Americans with Disabilities Act) cases made a strong showing this past week. In an effort to assist class action defense attorneys in anticipating 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. Employment law cases routinely lead the list and usually do so by a wide margin, but this past week class actions alleging public accommodation/Americans with Disabilities Act (ADA) claims ran a close second.


This report covers the time period from November 13 – November 16, 2006. We include only those categories that include 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 15 (34%) involved employment-related claims. New public accommodation/ADA class action lawsuits came in second with 11 new filings (25%). The third place category consists of 7 new unfair competition claims, which include unfair business practices and false advertising claims (16%).

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

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15 U.S.C. § 77m-77o--Limitation Of Actions, Contrary Stipulations And Liability Of Controlling Persons 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 three separate and brief sections, Congress set forth the statutory provisions concerning limitations on actions under the Securities Act of 1933, 15 U.S.C. § 77m, and the liability of controlling persons under the Act, 15 U.S.C. § 77o, and provided that the statutory provisions of the Act – as well as the rules and regulations of the Commission in furtherance of the Act – may not be waived, 15 U.S.C. § 77n. These three sections state in full:

§ 77m. Limitation of actions

No action shall be maintained to enforce any liability created under section 77k or 77l(a)(2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, or, if the action is to enforce a liability created under section 77l(a)(1) of this title, unless brought within one year after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under section 77k or 77l(a)(1) of this title more than three years after the security was bona fide offered to the public, or under section 77l(a)(2) of this title more than three years after the sale.

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

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15 U.S.C. § 77l--Civil Liabilities Arising In Connection With Prospectuses And Communications 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 provided for civil liability in connection with prospectuses and communications in 15 U.S.C. § 77l, which provides:

§ 77l. Civil liabilities arising in connection with prospectuses and communications

(a) In general

Any person who--

(1) offers or sells a security in violation of section 77e of this title, or

(2) offers or sells a security (whether or not exempted by the provisions of section 77c of this title, other than paragraphs (2) and (14) of subsection (a) of said section), by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission,

shall be liable, subject to subsection (b) of this section, to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security.

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

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Class Action Defense Cases-In re Vioxx Products: Federal Court Grants Defense Motion To Dismiss Class Action Claims On Behalf Of Residents Of Italy And France On Grounds Of Forum Non Conveniens

Louisiana Federal Court Holds Concurs with Defense that Class Action Claims Against Vioxx Manufacturer on Behalf of Foreign Citizens may be Adjudicated Outside the United States


After Merck removed Vioxx from the market in September 2004, thousands of lawsuits were filed in state and federal courts, ultimately leading to centralization by order of the Judicial Panel on Multidistrict Litigation to the Eastern District of Louisiana. These lawsuits included not only class action filings, but 11 lawsuits on behalf of residents of other countries, including Italy and France. In re Vioxx Prods. Liab. Litig., ___ F.Supp.2d ___, 2006 WL 2504353, *1-*2 (E.D.La. August 30, 2006). Defense attorneys moved to dismiss the foreign class actions on grounds of forum non conveniens. Id., at *2. The parties stipulated that the federal court should limit its analysis to Italian and French class actions, and the district court granted the defense motion and dismissed the class action complaints. Id.,


In support of the motion to dismiss, defense attorneys argued that Vioxx had been regulated extensively in Italy and France, and that regulators in both countries "required that certain warnings and packaging information be included." In re Vioxx, at *2. Also, local physicians had prescribed Vioxx to the Italian and French citizens allegedly injured, and the product had been purchased and used, and the putative class members treated for any resulting injuries, in those countries. Id. Plaintiffs countered that Merck "designed, tested, and manufactured" Vioxx in the United States, and orchestrated worldwide distribution from within the United States. Id., at *3.

Continue reading "Class Action Defense Cases-In re Vioxx Products: Federal Court Grants Defense Motion To Dismiss Class Action Claims On Behalf Of Residents Of Italy And France On Grounds Of Forum Non Conveniens" »

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

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Class Action Defense Issues-Merck Defense Of Individual Federal Vioxx Action Improves Likelihood That Class Action Status Will Be Denied

Latest Defense Verdict Weighs Heavily Against Class Action Treatment of Vioxx Claims


The verdict is in on Merck's eleventh Vioxx trial, and a Louisiana federal jury agreed with defense attorneys that a Utah bank manager who suffered a heart attack after using Vioxx for almost a year had not established Vioxx caused his injury. Defense attorneys argued that the manager had used the drug for less than one year and had stopped using the drug four days before he suffered his heart attack. Importantly, the federal trial was before U.S. District Court Judge Eldon Fallon, who will ultimately rule on a pending motion to certify a Vioxx class action against Merck. Merck's defense attorneys wisely have argued that each case should be tried individually, and have pressed to have cases tried in advance of any class action determination. The outcome of those cases weighs heavily against class action treatment. The most recent verdict comes in Merck's fourth federal action - Merck's defense team is now ahead three to one in federal court. Judge Fallon has presided over all four federal trials. Merck has tried seven state court actions, winning three, losing three and facing a retrial in the remaining action.


The next federal trial against Merck is scheduled for November 27, 2006; Judge Fallon will again serve as presiding judge. The range of factual differences and the differing focus of the expert testimony across the federal cases may well persuade Judge Fallon that the lawsuits are not suitable for class action treatment.

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

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Howell v. State Farm-Class Action Defense Cases: Maryland Federal Court Grants Defense Motion To Dismiss Class Action Claims For Breach of Fiduciary Duty And Breach of Implied Covenant Of Good Faith And Fair Dealing As Not Cognizable Under Federal Law

Federal Common Law Exclusively Governs Interpretation of Insurance Policies Issued Under National Flood Insurance Program (NFIP) and Federal Law does not Recognize Breach of Fiduciary Duty or Breach of Implied Covenant Claims Thus Supporting Defense Motion to Dismiss Those Claims for Relief in Class Action Complaint


Homeowners filed a putative class action in Maryland federal court against various insurance companies for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of fiduciary duty arising out of the issuance of flood insurance under the National Flood Insurance Program (NFIP), administered by the Federal Emergency Management Agency (FEMA). The class action complaint alleged that plaintiffs suffered damage following Hurricane Isabel in 2003, that they settled their policy claims for amounts below policy limits, and that defendants breached their contractual obligations under the insurance policies. Howell v. State Farm Ins. Cos., ___ F.Supp.2d ___, 2006 WL 2664379, *1 (D.Md. September 15, 2006). Defense attorneys moved to dismiss the second and third claims for relief under Rule 12(b)(6); the district court granted the motion holding that federal law does not recognize those claims.


Preliminarily, the federal court held that whether the class action complaint could assert claims for breach of the implied covenant or breach of fiduciary duty turned on federal law because "'federal common law alone governs the interpretation of insurance policies issued pursuant to the NFIP,'" Howell, at *2 and n.12 (citation omitted). However, neither the National Flood Insurance Act of 1968 nor FEMA regulations create such claims for relief, and "the Court has been unable to find any case law creating such a right under federal common law." Id. On the contrary, federal courts have consistently refused to recognize the existence of such claims. Id. Accordingly, the district court granted the motion to dismiss the second and third counts in the class action complaint. Id.

Download PDF file of Howell v. State Farm

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

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Ruiz v. Bally-Class Action Defense Cases: Massachusetts Federal Court Denies Defense Motion To Dismiss Class Action For Lack Of Jurisdiction But Grants Defense Motion To Dismiss Class Action For Failure To State A Claim

By Holding Itself Out as Operating in Massachusetts and by Drafting Membership Contract in Dispute Bally Subjected Itself to the Jurisdiction of the Massachusetts Federal Court, but Membership Contract was not Unlawful Thus Warranting Dismissal of Class Action Complaint


Plaintiff filed a putative class action in Massachusetts state court against Bally Total Fitness and Holiday Universal (a subsidiary of Bally) alleging common law and various consumer protection law violations arising out of a health club membership contract she signed that required payment of a $1565 membership fee plus dues of $8 per month. The membership fee could be financed at 14.75% interest for 36 months. If a customer canceled her membership within that 36-month period, she need no longer pay the monthly dues but she remained liable for the entire membership fee. The Contract also contained a provision limiting the liability of the health club “for the loss or theft of, or damage to, the personal property of members or guests.” Ruiz v. Bally Total Fitness Holding Corp., 447 F.Supp.2d 23, 25-26 (D. Mass. 2006). After defense attorneys removed the case to federal court on grounds of diversity jurisdiction, the defense moved to dismiss the class action for failure to state a claim, and argued also that the court lacked personal jurisdiction over Bally. Id., at 25. The district court held that it had personal jurisdiction over Bally, but granted the defense motion to dismiss the class action for failure to state a claim.


With respect to the personal jurisdiction claim, the federal court recognized that jurisdiction over a subsidiary does not establish jurisdiction over the parent company. The district court held at page 27, "In consideration of 1) the requirement that [plaintiff's] evidence of jurisdiction be accepted at face value, 2) the fact that Bally has held itself out as a company operating in Massachusetts and 3) the fact that the dispute in this case concerns a form membership contract that, in all likelihood, was developed by the parent corporation and not Holiday, the Court concludes that plaintiff has adequately demonstrated a basis for this Court's exercise of personal jurisdiction over Bally."

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

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More Fallout From Indictment Of Class Action Firm Milberg Weiss As Court Delays Approval Of Class Action Settlement Pending Review Of Class Action Plaintiffs' Testimony

Ameet Sachdev of the Chicago Tribune reports that Cook County Circuit Judge Nancy Arnold has delayed approval of a three-year-old stockholders class action against Boeing because of the federal court indictment handed down against lead plaintiffs' counsel Milberg Weiss Bershad & Schulman. After the settlement had been submitted for her approval, Judge Arnold required that the six named plaintiffs appear in court and testify as to how they became plaintiffs in the case, including when the became Boeing stockholders and the amount of stock that they owned. Sachdev explains that while there is nothing overtly improper about the plaintiffs' behavior, "the judge's suspicions were aroused this summer after one of the plaintiffs' law firms, Milberg Weiss Bershad & Schulman, was indicted on federal charges of paying kickbacks to people to serve as plaintiffs in class-action lawsuits, just weeks before a settlement was proposed in the Boeing case." While the firm and its indicted named partners, Bershad and Schulman, have denied any wrongdoing, one of its clients has pleaded guilty to receiving $2.4 million in kickbacks. Judge Arnold may reject the settlement if she concludes that such misconduct occurred in this case.


Sachdev reports that this is but one more blow to the once-powerful class action plaintiffs law firm. "The fallout from the indictment is being felt in courtrooms around the U.S. In Minnesota, a federal judge removed Milberg Weiss from a leadership role in cases accusing Medtronic Inc. of selling faulty heart devices. [¶] In New York, the state's comptroller fired the firm, which was representing New York's public employee pension fund as lead counsel in a case against pharmaceuticals giant Bayer AG. Ohio's public pension fund also axed Milberg Weiss."


Ameet Sachdev's article, entitled "Milberg case put on hold: Judge orders review of Boeing suit after law firm indicted," may be found in the Business Section of the November 13,. 2006 edition of the Chicago Tribune.

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

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Moniz v. Bayer-Class Action Defense Cases: Defense Removal Of Class Action To Federal Court Proper Under CAFA (Class Action Fairness Act of 2005) Because Of Post-CAFA Amendment To Class Action Complaint Massachusetts Federal Court Holds

Massachusetts Federal Court Agrees With Defense that Post-CAFA Amendment of Class Action Complaint Rendered Suit Removable But Rejects Defense Claim that CAFA Shifts Burden of Proof to Plaintiff to Prove Remand is Warranted


Plaintiff filed a putative class action in Massachusetts state court against Bayer, Crompton Corporation and Uniroyal Chemical on February 10, 2005, alleging a conspiracy to fix prices on certain rubber and urethane products. Plaintiff amended the complaint in May 2005, and defense attorneys consented to the filing of a second amended class action complaint on February 6, 2006. Defense attorneys then removed the action to federal court on February 10, 2006, under the Class Action Fairness Act of 2005 (CAFA). Moniz v. Bayer A.G., 447 F.Supp.2d 31, 32-33 (D.Mass. 2006). Plaintiff filed a motion to remand the action to state court.


CAFA became effective on February 18, 2005. As a preliminarily matter, the federal court rejected the defense claim that CAFA shifted the burden of proof to the plaintiff to demonstrate that remand is warranted. Moniz, at 33-34. As the district court explained at page 34, “the clear majority of courts that have addressed the issue have held that, even where CAFA applies, the burden of proof on a motion to remand remains with the removing party because the text of the statute says nothing about changing that long-standing rule.”

Continue reading "Moniz v. Bayer-Class Action Defense Cases: Defense Removal Of Class Action To Federal Court Proper Under CAFA (Class Action Fairness Act of 2005) Because Of Post-CAFA Amendment To Class Action Complaint Massachusetts Federal Court Holds" »

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

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FLSA Class Action Defense Cases-Choimbol v. Fairfield Resorts: Virginia Federal Court Conditionally Certifies Class Action Under Fair Labor Standards Act (FLSA) Holding Only "Minimal Evidence" Required To Support Class Action Treatment

FLSA Class Action Certification within Court's Discretion Even if Supported by only "Minimal Evidence" Virginia Federal Court Holds and Conditionally Certifies Class Action Subject to Defense Motion for Decertification Following Discovery

Plaintiffs filed a class action against their employers (see Note) alleging failure to pay overtime in violation of the federal Fair Labor Standards Act (FLSA). Choimbol v. Fairfield Resorts, Inc., 475 F.Supp.2d 557, 558 (E.D. Va. 2006). Plaintiffs moved the court to certify the lawsuit as a class action; defense attorneys objected on the grounds that plaintiffs were not “similarly situated” to the class and had introduced no evidence that defendant Fairfield Resorts was a “joint employer” of plaintiffs or members of the putative class. The district court rejected defense arguments and conditionally certified a class action, holding that it had authority to grant the motion for class action treatment based on “minimal evidence” subject to a subsequent motion by defense attorneys for decertification of the class action.

The facts underlying the class action complaint are rather complicated but the salient facts are these, found at pages 559 through 561 of the district court’s opinion: Fairfield Resorts operates timeshares including Kingsgate, Governor's Green and Patriot Place timeshare locations in Virginia. Fairfield contracted with Sandulyak and Nunnery to hire immigrants to provide laundry, housekeeping and grounds maintenance services at certain properties in Virginia. Sandulyak (doing business as Carolina Janitorial) provides regional immigrant labor, and is “commonly owned, staffed and operated” by national immigrant providers Ambassador Hospitality and Proline Management. Fairfield’s contract with Ambassador provided that the immigrant laborers would be employees and Carolina Janitorial and that Fairfield had no right to supervise, direct or control the laborers. In practice, however, Sandulyak failed to supervise the laborers, Carolina Janitorial did not have a manager at the properties, and Sandulyak only visited the properties once every 1-3 months. Rather, for more than a year responsibility for supervision and day-to-day control over the laborers fell to Nunnery, who had negotiated the agreement with Ambassador “in the name and on behalf of Fairfield.”

Continue reading "FLSA Class Action Defense Cases-Choimbol v. Fairfield Resorts: Virginia Federal Court Conditionally Certifies Class Action Under Fair Labor Standards Act (FLSA) Holding Only "Minimal Evidence" Required To Support Class Action Treatment" »

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

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Class Action Defense Cases—In re Dep’t of Veteran Affairs: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In The District of the District of Columbia

Judicial Panel Rejects Opposition to Defense Request for Pretrial Coordination Pursuant to 28 U.S.C. § 1407 and Grants Defense Motion for Centralization of Three Class Action Lawsuits


On May 3, 2006, a laptop computer and external hard drive was stolen from the home of an employee of the Department of Veterans Affairs, resulting in the loss of “the names, dates of birth, and social security numbers of approximately 26 million veterans and active duty military personnel.” In re Dep’t of Veterans Affairs (VA) Data Theft Litig., 461 F.Supp.2d 1367 (Jud. Pan.Mult.Lit. November 3, 2006). Three putative class action lawsuits followed, and defense attorneys moved the Judicial Panel on Multidistrict Litigation (MDL) pursuant to 28 U.S.C. § 1407 to centralize the lawsuits for pretrial purposes in the District of the District of Columbia. Id. Plaintiffs in already in the D.C. federal court supported the motion; plaintiffs in actions pending in New York and Kentucky opposed the motion, or alternatively requested transfer to Kentucky. The Panel agreed with defense attorneys that centralization was warranted and that the District of the District of Columbia was the appropriate transferee court. In so holding, the Panel rejected opposition arguments that centralization was not warranted due to the “minimal number of actions involved” and that “transfer under the ‘first to file’ rule” would be superior to centralization under Section 1407. Id.


NOTE: The Panel’s holding highlights that Section 1407 does not require a minimum number of pending lawsuits be on file in order to warrant transfer. The purpose of centralization under Section 1407 is “to eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel and the judiciary.” In re Dep’t of Veterans Affairs, at *1.

Download PDF file of Transfer Order in In re Department of Veterans Affairs (VA) Data Theft Litigation

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

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Class Action Defense Cases—In re Novartis: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Two Employment Law Class Action Lawsuits In The Southern District Of New York

Judicial Panel Grants Unopposed Defense Request for Pretrial Coordination of Two Class Action Complaints Pursuant to 28 U.S.C. § 1407


Plaintiffs filed two class action lawsuits in federal court against Novartis Pharmaceuticals Corp. (NPC), Novartis Corp., Novartis Finance Corp., and Novartis Services, Inc., alleging violations of state and federal labor laws concerning compensation for overtime; specifically, the complaints alleged that defendants had misclassified NPC sales representatives as exempt from overtime pay. In re Novartis Wage & Hour Litig., 460 F.Supp.2d 1382 (Jud.Pan.Mult.Lit. 2006). Pursuant to 28 U.S.C. § 1407, defense attorneys moved the Judicial Panel on Multidistrict Litigation (MDL) to centralize the lawsuits for pretrial purposes in the Southern District of New York, where one of the lawsuits was pending. Id. The motion was unopposed. The Panel agreed with defense attorneys that centralization was warranted even though only two class action lawsuits had been filed, and agreed further – in accord with the agreement of the parties – that the Southern District of New York was the appropriate transferee court. Id.


NOTE: This transfer order illustrates (1) that Section 1407 does not require a minimum number of lawsuits be on file in order to warrant transfer, and (2) that the Judicial Panel independently determines whether centralization is warranted and, if so, the appropriate transferee court. Despite the agreement of the parties, the Judicial Panel explained that it selected the Southern District of New York based on its independent evaluation:

Continue reading "Class Action Defense Cases—In re Novartis: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Two Employment Law Class Action Lawsuits In The Southern District Of New York" »

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

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Employment Law Class Action Lawsuits Again Dominate Claims Facing Class Action Defense Attorneys In California

Class action defense lawyers continue to face a greater number of labor law class action filings in California than any other category. As frequent visitors know, 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. This report covers the time period from November 3 - November 9, with employment law class action cases retaining their firm grip on the top spot on the class action filings list. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. Approximately 29 class action lawsuits were filed in these California state and federal courts during that time period, of which 10 (almost 35%) asserted labor law claims. Class action lawsuits alleging unfair competition, including unfair business practices and false advertising claims, again came in a second with 6 new class action filings (21%), with various Consumers Legal Remedies Act violations a close third with 5 new filings (17%). The only other group of class action claims that pass the 10% threshold involved 3 securities fraud filings (10%).

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

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Defense Expected To Pay $30 Million To Settle Class Action Arising Out Of Martha Stewart Sale Of ImClone Stock In 2001

Martha Stewart and Martha Stewart Living Omnimedia Defense Attorneys Report $30 Million to Settle Class Action


Several news reports cite reliable sources that the class action against Martha Stewart Living Omnimedia and Martha Stewart has been settled pending court approval. Several lawsuits were filed apparently claiming that Stewart’s misrepresentations concerning her sale of ImClone stock artificially inflated the stock price of Martha Stewart Living. The separate lawsuits eventually were consolidated. News reports place the total settlement at $30 million, of which Martha Stewart personally will pay about $5 million. Insurers are expected to pay about $10 million, with the company – Martha Stewart Living – picking up the tab for the remaining $15 million.


News reports on the anticipated settlement may be found in an article entitled “Stewart Expected To Pay $5 Million To Settle Suit,” in the Business Section of the November 9, 2006 Los Angeles Times, and in an article entitled “Stewart To Pay $5 Million In Settlement Of ImClone Suit,” in the Business Section of the November 9, 2006 Chicago Tribune.

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

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15 U.S.C. § 77k--Civil Liabilities On Account Of False Registration Statement 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 provided for civil liabilities arising out of false registration statements in 15 U.S.C. § 77k as follows:

§ 77k. Civil liabilities on account of false registration statement

(a) Persons possessing cause of action; persons liable

In case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security (unless it is proved that at the time of such acquisition he knew of such untruth or omission) may, either at law or in equity, in any court of competent jurisdiction, sue--

(1) every person who signed the registration statement;

(2) every person who was a director of (or person performing similar functions) or partner in the issuer at the time of the filing of the part of the registration statement with respect to which his liability is asserted;

(3) every person who, with his consent, is named in the registration statement as being or about to become a director, person performing similar functions, or partner;

(4) every accountant, engineer, or appraiser, or any person whose profession gives authority to a statement made by him, who has with his consent been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement in such registration statement, report, or valuation, which purports to have been prepared or certified by him;

(5) every underwriter with respect to such security.

If such person acquired the security after the issuer has made generally available to its security holders an earning statement covering a period of at least twelve months beginning after the effective date of the registration statement, then the right of recovery under this subsection shall be conditioned on proof that such person acquired the security relying upon such untrue statement in the registration statement or relying upon the registration statement and not knowing of such omission, but such reliance may be established without proof of the reading of the registration statement by such person.

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

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15 U.S.C. § 77j--Information Required In Prospectus 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 described the information that must be contained in a prospectus in 15 U.S.C. § 77j, which provides:

§ 77j. Information required in prospectus

(a) Information in registration statement; documents not required

Except to the extent otherwise permitted or required pursuant to this subsection or subsections (c), (d), or (e) of this section--

(1) a prospectus relating to a security other than a security issued by a foreign government or political subdivision thereof, shall contain the information contained in the registration statement, but it need not include the documents referred to in paragraphs (28) to (32), inclusive, of schedule A of section 77aa of this title;

(2) a prospectus relating to a security issued by a foreign government or political subdivision thereof shall contain the information contained in the registration statement, but it need not include the documents referred to in paragraphs (13) and (14) of schedule B of section 77aa of this title;

(3) notwithstanding the provisions of paragraphs (1) and (2) of this subsection when a prospectus is used more than nine months after the effective date of the registration statement, the information contained therein shall be as of a date not more than sixteen months prior to such use, so far as such information is known to the user of such prospectus or can be furnished by such user without unreasonable effort or expense;

(4) there may be omitted from any prospectus any of the information required under this subsection which the Commission may by rules or regulations designate as not being necessary or appropriate in the public interest or for the protection of investors.

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

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Class Action Defense Cases-In re Edward D. Jones: Judicial Panel On Multidistrict Litigation (MDL) Denies Defense And Plaintiff Motion To Coordinate Class Action Employment Law Lawsuits

Multidistrict Litigation Judicial Panel Concludes Centralization Under Section 1407 not Warranted

Three separate class action lawsuits against Edward D. Jones & Co. seeking overtime pay. The lawsuits were filed in the Central and Northern Districts of California, and the Western District of Pennsylvania. Two motions were filed with the Judicial Panel on Multidistrict Litigation (MDL) seeking to coordinate the litigation for pretrial purposes - one by the Pennsylvania plaintiff, and one by the common defendant, Edward Jones. In re Edward D. Jones & Co., L.P., Overtime Pay Litig., 442 F.Supp.2d 1370 (Jud.Pan.Mult. 2006). After oral argument, the Judicial Panel denied the motion, concluding that “centralization presently would neither serve the convenience of the parties and witnesses nor further the just and efficient conduct of this litigation.” Id., at 1371. The Panel explained that it did not believe “any common questions of act and law are sufficiently complex and/or numerous to justify Section 1407 transfer,” id.

Download PDF file of In re Edward D. Jones Denial of Transfer Order

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

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Klimas v. Comcast Cable-Class Action Defense Cases: District Court Properly Granted Defense Motion To Dismiss Class Action Under Cable Communications Policy Act Because Act Does Not Apply To Internet Services Sixth Circuit Holds

Sixth Circuit Holds that Putative Class Action Against Cable Company for Alleged Violations of Federal Cable Communications Policy Act Arising Out of Internet Service Provided to Plaintiff Properly Dismissed but not for Reasons Expressed by District Court


Plaintiff filed a putative class action against his internet provider, Comcast, alleging violations of the subscriber privacy protection provisions of the federal Cable Communications Policy Act of 1984 (CCPA), 47 U.S.C. §§ 521-561. Klimas v. Comcast Cable Communications, Inc., 465 F.3d 271, 273 (6th Cir. 2006). Defense attorneys moved to dismiss the class action on the ground that plaintiff "lacked standing to contest alleged violations of the privacy provisions in § 551(b) by [Comcast] in the operation of its broadband internet services." Id. The district court granted the motion on grounds rejected by the Sixth Circuit; however, the Circuit Court affirmed the judgment of dismissal based on the plain language of the statute, which "by its terms, applies only to a 'cable system'" or to acts "in the provision of cable service," id.


Plaintiff contracted for internet service with Comcast, which launched its internet service around January 1, 2002. Six weeks after its launch, Comcast announced that it had "stored temporarily" IP (internet protocol) addresses and URL (universal resource locators) information, but stated that "[t]his information has never been connected to individual subscribers and has been purged automatically to protect subscriber privacy" and that the practice was being terminated "immediately." Klimas, at 273-74. Plaintiff promptly filed a putative class action alleging that Comcast violated § 551(b) by "collecting personally identifiable information concerning subscribers" and violated § 551(a) by failing to give written notice of the nature of personally identifiable information Comcast collected with respect to its customers and the nature of it use of that information. Id., at 274.

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

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NovaStar Class Action Defense Case-Pierce v. NovaStar Mortgage: Washington Federal Court Certifies RESPA/TILA Class Action Over Defense Objection That YSP (Yield Spread Premium) Need Not Be Disclosed In Writing

Lawsuit Alleging Violations of Federal Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) Based on Failure to Provide Written Disclosure of YSPs (Yield Spread Premiums) Allowed to Proceed as Class Action


Plaintiffs filed a class action against NovaStar Mortgage alleging violations of Washington's Consumer Protection Act (CPA) based on the lender's failure to disclose in writing the payment of yield spread premiums (YSPs) in violation of the federal Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA), and Washington's Consumer Loan Act (CLA). Pierce v. NovaStar Mortgage, Inc., ___ F.Supp.2d ___ (W.D. Wash. October 31, 2006) [Slip Opn., at 1-2]. The district court denied plaintiffs' first motion to certify a class, agreeing with defense counsel that plaintiffs had not demonstrated numerosity or typicality under Rule 23(a) and had failed to establish the predominance and superiority elements of Rule 23(b). Id., at 2. Defense attorneys opposed class certification largely on the ground that YSPs were not required to be disclosed in writing; the federal court agreed, holding that "verbal disclosures and independent knowledge of the YSP were relevant" in evaluating whether NovaStar violated RESPA, TILA or CLA, id. However, in connection with a renewed motion to certify the lawsuit as a class action, the court rejected that defense argument and granted plaintiffs' motion.


In considering the renewed motion for class certification, the district court stated that class certification turned on "whether verbal disclosures are legally relevant" to the CPA claims. Slip Opn., at 3. Plaintiffs argued that verbal disclosures were irrelevant because the lender was required to disclose YSPs in writing under the CLA, and because violations of the CLA are per se violations of the CPA. Id., at 2. Defense attorneys argued that the CLA does not require written disclosure of YSPs. Id., at 4. While the federal court found that plaintiffs had not cited any provision of the CLA requiring lenders to disclose YSPs, it determined that this was irrelevant, explaining at page 5:

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

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Class Action Defense Cases-Carnegie v. Household Int’l: Illinois Federal Court Approves Class Action Settlement

Third Attempt to Obtain Court Approval of Class Action Settlement Succeeds and Court Rejects Claim of Collusion Between Class Counsel and Defense Attorneys

Plaintiffs filed a class action against H&R Block (as tax preparer) and against Beneficial National Bank (as lender) arising from loans made based on the anticipated tax refund the borrowers would receive claiming that defendants’ failure to disclose that Beneficial paid H&R Block a $7 license fee for every loan referred by H&R Block. Defense attorneys vigorously contested the class action, and after a decade of litigation a settlement was reached and approved by the district court. Zawikowski v. Beneficial Nat’l Bank, 2006 WL 1051879 (N.D. Ill. July 28, 2000, Case No. 98 C 2178). The Illinois federal court approved a settlement of that class action, but the Seventh Circuit reversed. See Reynolds v. Beneficial Nat’l Bank, 288 F.3d 277 (7th Cir. 2002). The Illinois federal district court rejected a second attempt at settlement because the proposed settlement was not fair and reasonable. The court also concluded that class counsel’s representation of the class was inadequate. See Reynolds v. Beneficial Nat’l Bank, 260 F.Supp.2d 680 (N.D. Ill. 2003). Under the guidance of new class counsel and a new class representative, the parties reached yet another proposed settlement, this one winning district court approval. Carnegie v. Household Int’l, Inc., 445 F.Supp.2d 1032 (N.D. Ill. 2006).

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

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Class Action Defense Cases-Quaak v. Dexia: Massachusetts Federal Court Denies Defense Motion To Dismiss Securities Class Action Against Banker Because Of Alleged Involvement In Scheme To Inflate Stock Price

Defense Motion to Dismiss Class Action Complaint Denied Because Plaintiff Adequately Alleged Securities Laws Violations by Company’s Chief Commercial Banker

Plaintiff filed a securities fraud class action against Dexia Bank Belgium as successor to Artesia Banking Corp., “the former chief commercial banker for Lernout & Hauspie Speech Products N.V.,” alleging “that L&H could not have committed its wide ranging fraud without the intimate involvement of Defendant . . . as architect of the fraudulent scheme” and that Defendant “made numerous fraudulent loans to L&H in an effort to bolster L&H’s stock price.” Quaak v. Dexia, S.A., 445 F.Supp.2d 130, 134 (D. Mass. 2006). The district court denied a defense motion to dismiss the class action complaint, but certified several questions to the First Circuit because “the legal issues involved, particularly the question of scheme liability under the securities laws, were . . . quite cutting edge,” and the First Circuit accepted the appeal. Id. Before the Circuit Court heard oral argument, plaintiff sought and received leave from the district court to amend the class action complaint; the Circuit Court therefore vacated the appeal, and defense attorneys filed a new motion to dismiss. Id.

The district court explained that the amended complaint added “significant factual allegations” based on newly discovered documents that purportedly evidenced Defendant made millions in profits from the sale of L&H stock and that it “exercised absolute control over the operations of a wholly-owned subsidiary” and caused the issuance of reports that promoted the purchase of L&H stock based on false financial data. Quaak, at 135. According to the complaint, the scheme inflated the value of the stock or artificially caused it to retain its inflated value, but the stock plummeted once the company’s true financial condition was learned. Id. Based on the new allegations, the complaint alleged Defendant was a “controlling person” and therefore liable within the meaning of Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), and liable under Section 10(b) for the issuance of false and misleading reports. Id.

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

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DHL Class Action Defense Case-Synfuel v. DHL: Illinois District Court Abused Its Discretion In Approving Class Action Settlement Seventh Circuit Holds

Seventh Circuit Reverses Order Approving Settlement of Class Action Finding District Court Failed to Critically Analyze Fairness of Settlement Because it Failed to Determine the Value of the Plaintiff’s Case or the Value of the Settlement to the Class

Plaintiff filed a class action against Airborne Express (now DHL) alleging that its practice of charging customers the cost of shipping a five-pound package as a “default rate” if the customer failed to write down the weight of the package violated federal common law. In practice, this meant that if a customer used an Airborne envelope intended for shipping eight ounces or less (called “Letter Express”) but the customer failed to note the actual weight of the package or write the number “1” in the weight section, then Airborne charged the customer “a default rate equivalent to the cost of sending a five pound shipment,” which was approximately $5 more than the regular rate for such envelopes. Synfuel Technologies, Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 648-49 (7th Cir. 2006). After the district court denied a defense motion to dismiss the class action complaint, the parties reached a settlement. The district court approved the settlement, but the Seventh Circuit reversed.

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

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15 U.S.C. § 77i--Court Review Of Orders 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 provided for judicial review of orders by the Commission in 15 U.S.C. § 77i, which provides:

§ 77i. Court review of orders

(a) Any person aggrieved by an order of the Commission may obtain a review of such order in the court of appeals of the United States, within any circuit wherein such person resides or has his principal place of business, or in the United States Court of Appeals for the District of Columbia, by filing in such Court, within sixty days after the entry of such order, a written petition praying that the order of the Commission be modified or be set aside in whole or in part. A copy of such petition shall be forthwith transmitted by the clerk of the court to the Commission, and thereupon the Commission shall file in the court the record upon which the order complained of was entered, as provided in section 2112 of Title 28. No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission. The finding of the Commission as to the facts, if supported by evidence, shall be conclusive. If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the hearing before the Commission, the court may order such additional evidence to be taken before the Commission and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commission may modify its findings as to the facts, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported by evidence, shall be conclusive, and its recommendation, if any, for the modification or setting aside of the original order. The jurisdiction of the court shall be exclusive and its judgment and decree, affirming, modifying, or setting aside, in whole or in part, any order of the Commission, shall be final, subject to review by the Supreme Court of the United States upon certiorari or certification as provided in section 1254 of Title 28.

(b) The commencement of proceedings under subsection (a) of this section shall not, unless specifically ordered by the court, operate as a stay of the Commission's order.

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

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Class Action Employment Law Claims Continue To Predominate Categories Confronting Defense Attorneys As Labor Law Class Actions Hold Top Spot In California Weekly Class Action Filings

To allow class action defense lawyers anticipate claims against which they may have to defend, 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. This report covers the time period from October 27 - November 2, 2006, and employment law cases yet again hold a firm grip on the top spot on the list. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. Approximately 37 class action lawsuits were filed in these California state and federal courts during that time period, of which 17 involved labor law claims (46%). Class action lawsuits alleging unfair competition, including unfair business practices and false advertising claims, came in a distant second with 9 new class action filings (24%). The only other group of class action claims that pass the 10% threshold are four (4) cases alleging fraud (11%).

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

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15 U.S.C. § 77h-1--Cease And Desist Proceedings 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 provided for cease-and-desist proceedings in 15 U.S.C. § 77h-1, which states:

§ 77h-1. Cease-and-desist proceedings

(a) Authority of Commission

If the Commission finds, after notice and opportunity for hearing, that any person is violating, has violated, or is about to violate any provision of this subchapter, or any rule or regulation thereunder, the Commission may publish its findings and enter an order requiring such person, and any other person that is, was, or would be a cause of the violation, due to an act or omission the person knew or should have known would contribute to such violation, to cease and desist from committing or causing such violation and any future violation of the same provision, rule, or regulation. Such order may, in addition to requiring a person to cease and desist from committing or causing a violation, require such person to comply, or to take steps to effect compliance, with such provision, rule or regulation, upon such terms and conditions and within such time as the Commission may specify in such order. Any such order may, as the Commission deems appropriate, require future compliance or steps to effect future compliance, either permanently or for such period of time as the Commission may specify, with such provision, rule, or regulation with respect to any security, any issuer, or any other person.

(b) Hearing

The notice instituting proceedings pursuant to subsection (a) of this section shall fix a hearing date not earlier than 30 days nor later than 60 days after service of the notice unless an earlier or a later date is set by the Commission with the consent of any respondent so served.

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

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Winig v. Cingular Wireless-Class Action Defense Cases: California Federal Court Denies Defense Motion To Compel Arbitration Under Agreement Barring Class Action Lawsuits Holding Arbitration Clause Unconscionable

California Court Holds that Arbitration Clause Barring Class Action Lawsuits in Contract Governed by Federal Arbitration Act (FAA) Unconscionable and that FAA does not Preempt State Law Against Class Action Waivers


Plaintiff filed a putative class action against his cellular telephone provider - for, inter alia, violations of the Federal Communications Act, and California’s unfair competition laws (UCL) and Consumers Legal Remedies Act (CLRA) - alleging that it charged his cell phone calls to himself (primarily to check his voicemail) against his “limited number of ‘anytime minutes’” instead of treating them as part of his “unlimited free ‘mobile to mobile’ calls,” contrary to promises made to him by Cingular representatives when he entered into the service contract. Winig v. Cingular Wireless LLC, ___ F.Supp.2d ___, 2006 WL 2766007, *1 (N.D. Cal. September 27, 2006). Defense attorneys moved to compel arbitration under a clause governed by the Federal Arbitration Act (FAA), id.; that arbitration clause required customers to bring claims only in an “individual capacity,” thereby precluding participation in class action lawsuits, id., at *3. The district court denied the motion.

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

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Class Action Defense Cases-Otto v. Pocono Health: Federal Court Grants Defense Motion To Dismiss State Law Overtime Class Action Claims As Incompatible With Federal Overtime Class Action Claims Because Of Conflict Between Opt-In/Opt-Out Requirements

Pennsylvania Federal Court Agrees With Defense that Fair Labor Standard Act (FLSA) Opt-In Requirement for Overtime Class Actions is “Inherently Incompatible” with Rule 23 Opt-Out Requirement for State Law Overtime Class Action Cases Mandating Dismissal of State Claims


Former employees filed a putative class action in Pennsylvania federal court against Pocono Health System and Pocono Medical Center alleging violations of the federal Fair Labor Standard Act (FLSA), and of Pennsylvania’s Minimum Wage Act and Wage Payment and Collection Law, because defendants paid overtime on an “8 and 80” plan, requiring overtime if employees work more than 8 hours in a day or more than 80 hours over a two-week period. Otto v. Pocono Health System, 457 F.Supp.2d 522, 522-23 (M.D. Pa. 2006). Defense attorneys moved to dismiss the state law class action claims on the grounds that FRCP Rule 23 requires that class members must affirmatively “opt-out” of state law class action cases filed in federal court, but FLSA § 216(b) requires that putative class members affirmatively “opt-in” to class action cases seeking overtime pay under the FLSA. Defense attorneys urged that the state law and federal law claims advanced in plaintiffs’ class action complaint were thus “inherently incompatible” and compelled dismissal of the state law claims. Id., at 523. The district court agreed.


The federal court began by noting that several New Jersey federal courts “have held that Section 216(b) opt-in collective actions are incompatible with Rule 23 opt-out class actions.” Otto, at 523. And while those sister court decisions are not binding, the district court found the reasoning therein to be persuasive. In granting the defense motion plaintiffs’ state law class action claims, the district court explained at page 524: “It is clear that Congress labored to create an opt-in scheme when it created Section 216(b) specifically to alleviate the fear that absent individuals would not have their rights litigated without their input or knowledge. To allow an Section 216(b) opt-in action to proceed accompanied by a Rule 23 opt-out state law class action claim would essentially nullify Congress's intent in crafting Section 216(b) and eviscerate the purpose of Section 216(b)'s opt-in requirement.”

Download PDF file of Otto v. Pocono Health System

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

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Class Action Defense Cases-Achtman v. Kirby: Defense Motion To Dismiss Malpractice Class Action Against Class Counsel Properly Granted Because Failure To Sue Arthur Andersen Was Not Negligent Second Circuit Holds

Second Circuit Holds Federal District Court that Approved Settlement of Class Action had Supplemental Jurisdiction Over Subsequent Class Action Against Class Counsel Alleging Malpractice and Properly Granted Defense Motion to Dismiss


Class members in a securities fraud class action against Bennett Funding Group (BFG) filed a putative class action against the attorneys who served as class counsel in the BFG action alleging negligence in failing to name Arthur Andersen as a defendant. Defense attorneys moved to dismiss the lawsuit. The district court granted the motion and plaintiffs appealed. The Second Circuit remanded the matter to allow the district to explain the basis of federal court jurisdiction, and then affirmed both the existence of jurisdiction and the judgment of dismissal. Achtman v. Kirby, McInerney & Squire, 464 F.3d 328, 330-31 (2d Cir. 2006). The 1996 class action against BFG alleged a Ponzi scheme that cheated investors out of $500 million. Two law firms were appointed as lead counsel, Kirby, McInerney & Squire, and Bernstein, Litowitz, Berger & Grossman. While counsel named several co-defendants, they did not name Arthur Andersen “which had audited BFG’s allegedly misleading 1989 and 1990 financial statements.” Id., at 331. The district court ultimately approved a $139 million settlement of that class action, which included a $14 million settlement with the accounting firm that succeeded Arthur Andersen as BFG’s auditor. Id. Some individual BFG investors “met some success” in suing Arthur Andersen, but when efforts were made in 1999 to bring a class action against the company, the federal court dismissed the complaint as time-barred. The malpractice class action against Kirby and Bernstein followed premised upon (1) the failure to name Arthur Andersen as a defendant, (2) the failure to name Arthur Andersen in the Notice of Pendency as a party who could be sued but had not been sued, and (3) the failure to advise class members of the statute of limitations for claims against Arthur Andersen. As noted above, the federal courts agreed with defense attorneys that the complaint failed to state a claim. Id., at 331-32.

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

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Class Action Defense Cases-In re Farmers Insurance Exchange: Employer Properly Classified Insurance Claims Adjusters As Exempt From Overtime Requirements Of Federal Fair Labor Standard Act (FLSA) Ninth Circuit Holds

Ninth Circuit Directs District Court to Enter Judgment in Favor of Defense in Overtime Class Action Because 29 C.F.R. § 541.203 Exempts Insurance Claims Adjusters from FLSA Overtime Requirements


Insurance claims adjusters filed several overtime class action lawsuits against Farmers Insurance Exchange alleging failure to pay overtime under the federal Fair Labor Standard Act (FLSA). Defense attorneys argued that claims adjusters are exempt from FLSA’s overtime provisions. The district court created a “$3,000 in claims paid per month rule” and, under this new rule, found that some of the adjusters were exempt from overtime while others were not. On appeal, plaintiff and defense attorneys agreed that this rule “is neither workable nor supported by the evidence.” The Ninth Circuit agreed, holding that FLSA expressly exempts claims adjusters and directing that judgment be entered in favor of the defense in the class action. In re Farmers Ins. Exch., 466 F.3d 853, 855-56 (9th Cir. 2006).


In its capacity as an inter-insurance exchange, Farmers “performs all the functions of a typical insurance company,” including adjusting claims. In re Farmers Ins. Exch., at 856. In fact, approximately half of its 10,000 employees are claims adjusters categorized into five different types, which the Ninth Circuit summarized at pages 856 and 857 as:

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