Posted On: February 28, 2007 by Michael J. Hassen Email This Post

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DaimlerChrysler Class Action Defense Case- Chin v. DaimlerChrysler: New Jersey Federal Court Holds California Law Applies And Class Action Materially Influenced Automobile Recall Decision Justifying Award Of Attorney Fees

Class Action Against Car Manufacturer was a Catalyst Behind Recall Program thus Entitling Plaintiffs to Attorney Fee Award as "Prevailing Party" under California law New Jersey Federal Court Holds

In March 1994, following consumer complaints, the National Highway Traffic Safety Administration (NHTSA) opened an investigation into whether the Bendix 10 ABS had a safety-related defect warranting a recall. In October 1995 plaintiffs filed a putative class action against DaimlerChrysler for, inter alia, violations of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301, alleging that Chrysler vehicles equipped with Bendix 10 ABS were defective. And in April 1996, Chrysler voluntarily recalled vehicles equipped with Bendix 10 ABS, thereby ending the NHTSA's investigation. Chin v. DaimlerChrysler Corp., 461 F.Supp.2d 279, 281 (D. N.J. 2006). But in March 1996, plaintiffs had amended their class action complaint to allege that Chrysler vehicles equipped with Bendix 9 ABS also were defective, as the product was "largely interchangeable [with the Bendix 10] and suffer[ed] from virtually identical defects." Id. The NHTSA informed Chrysler in September 1996 that it would begin investigating customer complaints involving the Bendix 9 ABS, and soon thereafter the company voluntarily recalled vehicles equipped with Bendix 9 thereby ending the NHTSA investigation. Id.

Defense attorneys moved to dismiss the amended class action complaint, but the district court denied the motion in March 1997 and the following month Chrysler publicly announced its recall of vehicles with Bendix 9 ABS. Chin, at 281. However, defense attorneys successfully defeated plaintiffs' effort to certify the lawsuit as a class action: in September 1998, the district court denied plaintiffs motion for class certification on the ground that plaintiffs had failed to demonstrate that common questions of law would predominate over individual issues, as required by Rule 23(b)(3), because the court would be required to apply the laws of 52 jurisdictions if a nationwide class were certified. Id., at 281-82. As the district court observed, "[f]or nearly all intents and purposes, Plaintiffs' class-action came to an end" with the denial of the motion to certify a class action. Id., at 281.

Continue reading "DaimlerChrysler Class Action Defense Case- Chin v. DaimlerChrysler: New Jersey Federal Court Holds California Law Applies And Class Action Materially Influenced Automobile Recall Decision Justifying Award Of Attorney Fees" »

Posted On: February 27, 2007 by Michael J. Hassen Email This Post

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CAFA Class Action Defense Cases-Mattera v. Clear Channel: New York Federal Court Grants Defense Motion To Dismiss Labor Law Class Action For Failure To Join Indispensable Party

Entity that Employed Significant Number of Putative Class Members was an Indispensable Party under Rule 19 of the Federal Rules of Civil Procedure and could not be Joined in Class Action Without Destroying Federal Court Diversity Jurisdiction thus Necessitating Dismissal of Class Action Complaint New York Court Holds

Plaintiff filed a putative class action against Clear Channel Communications and Clear Channel Broadcasting for violations of New York's labor laws, alleging that defendants "made and continue to make unauthorized deductions from the wages of sales representatives for the New York radio stations that Defendants own and operate." Mattera v. Clear Channel Communications, Inc., 239 F.R.D. 70, 71-72 (S.D.N.Y. 2006). Plaintiff invoked federal court jurisdiction solely on the basis of diversity, id., at 72. Defense attorneys moved to dismiss the class action complaint for failure to join an indispensable party, id.; the thrust of the defense motion was that the class action failed to name Capstar Radio Operating Company (the owner of the two radio stations where plaintiff worked) as a defendant, and that joinder of Capstar would eliminate diversity jurisdiction thereby compelling dismissal of the action, id., at 73. The district court agreed with the defense and dismissed the class action.

Plaintiff was a sales representative, selling advertising spots or on-air time for two of the 1200+ radio stations defendants own and operate. Mattera, at 72. Sales representatives were received biweekly draws against commissions earned on each sale. The commissions were to be "paid one month after the contract for a sale is executed and the advertising spot purchased is aired,." But if the customer failed to pay for the service within 120 days then there would be a "charge back," with the entire amount of the commission deducted from the employee's next paycheck. According to the allegations in the class action complaint, the customer, "typically an advertising agency or corporation with a longstanding relationship with Defendants," would pay the bill more than 120 days after service, but in such instances defendants would not reverse the charge back. Id.

Continue reading "CAFA Class Action Defense Cases-Mattera v. Clear Channel: New York Federal Court Grants Defense Motion To Dismiss Labor Law Class Action For Failure To Join Indispensable Party" »

Posted On: February 26, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Ramirez v. Smart Corp.: Illinois State Court Affirms In Part And Reverses In Part Summary Judgment In Favor Of Defense In Class Action Against Hospital Record Retrieval/Copy Service

Voluntary Payment Doctrine did not Apply where Plaintiff Could only get Copies of Hospital Records through Service Company and Plaintiff is an Adequate Class Representative if her Agent Requests and Pays for Hospital Records Illinois Court Holds

Plaintiff filed a putative class action against Smart Corporation, a company which contracted with hospitals to place its own employees on site to retrieve and copy hospital medical records for patients, alleging that it overcharged hospital patients for such services in violation of common law, Illinois' Inspection of Hospital Records Act and Consumer Fraud and Deceptive Business Practices Act, and claiming also unjust enrichment. Ramirez v. Smart Corp., ___ Ill.App.3d ___ (Ill.App. February 16, 2007). Plaintiff's lawyer sought class certification, and defense attorneys moved for summary judgment. Slip Opn., at 1-2. The trial court granted the defense motion and denied class certification.

Plaintiff had suffered an injury and received treatment at a hospital. As part of her workers compensation claim, plaintiff's lawyer sought her hospital records. Smart retrieved and copied the records - consisting of 6 pages - and sent a bill for $34.78 itemized as follows: a basic fee of $15 and a $1 per page copy fee bringing the total photocopy charge to $21, a retrieval/search fee of $10, and shipping/handling fee of $3.78. Ramirez, at 2. Plaintiff's law firm paid the bill before plaintiff reviewed it. Id., at 3. The trial court denied class certification and granted the defense motion for summary judgment. The court refused to certify a class action because it found plaintiff to be an inadequate class representative in that her lawyer had reviewed and paid the bill, not the plaintiff. Id., at 4. The court granted summary judgment in favor of the defense holding that plaintiff's claims were barred by the voluntary payment doctrine, and additionally finding that the charges were not deceptive or unfair within the meaning of the Consumer Fraud Act and that plaintiff could not seek damages under the Hospital Records Act because that statute allows a patient to compel production of hospital records. Id.

Continue reading "Class Action Defense Cases-Ramirez v. Smart Corp.: Illinois State Court Affirms In Part And Reverses In Part Summary Judgment In Favor Of Defense In Class Action Against Hospital Record Retrieval/Copy Service" »

Posted On: February 25, 2007 by Michael J. Hassen Email This Post

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Labor Law Class Action Lawsuits Regain Top Spot In Weekly Class Action Filings In California State And Federal Courts With Public Accommodation/ADA And Antirust Class Action Lawsuits Close Behind

California defense attorneys will be confronted once again by a greater number of employment law class action cases than any other category, though public accommodation/ADA (Americans with Disabilities Act) and antitrust class action lawsuits came close to keeping law labor class actions out of the top spot for a second consecutive week. In an effort to assist the class action defense lawyer in anticipating the claims against which she or he 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. We include only those categories that include 10% or more of the class action filings during the relevant timeframe.

This report covers the time period from February 16 – February 22, 2007. Approximately 49 class action lawsuits were filed in these California state and federal courts during that time period. Employment law class action filings typically lead the list of new weekly lawsuits, often by a wide margin. This past week labor law class action cases regained the top spot with 12 new filings (24%). Public accommodation/ADA claims came in second with 9 new lawsuits (18%), with new antitrust class action lawsuits right behind at 8 new cases (16%). The only other category to break the 10% threshold involved federal securities laws class action claims, with 6 new actions (12%).

Posted On: February 25, 2007 by Michael J. Hassen Email This Post

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24 CFR § 3500.6—Special Information Booklet At Time Of Loan Application Under Regulation X (Real Estate Settlement Procedures Act-RESPA)

As a resource for class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of Regulation X. Congress gave authority to the Secretary of the Department of Housing and Urban Development (HUD) to promulgate regulations for RESPA, and the regulations are set forth in 24 CFR § 3500.1 et seq. The regulations provide for the preparation of a special information booklet to be given to borrowers at time of a loan application in § 3500.6, which provides:


§ 3500.6. Special information booklet at time of loan application


(a) Lender to provide special information booklet. Subject to the exceptions set forth in this paragraph, the lender shall provide a copy of the special information booklet to a person from whom the lender receives, or for whom the lender prepares, a written application for a federally related mortgage loan. When two or more persons apply together for a loan, the lender is in compliance if the lender provides a copy of the booklet to one of the persons applying.


(1) The lender shall provide the special information booklet by delivering it or placing it in the mail to the applicant not later than three business days (as that term is defined in § 3500.2) after the application is received or prepared. However, if the lender denies the borrower's application for credit before the end of the three-business-day period, then the lender need not provide the booklet to the borrower. If a borrower uses a mortgage broker, the mortgage broker shall distribute the special information booklet and the lender need not do so. The intent of this provision is that the applicant receive the special information booklet at the earliest possible date.

Continue reading "24 CFR § 3500.6—Special Information Booklet At Time Of Loan Application Under Regulation X (Real Estate Settlement Procedures Act-RESPA)" »

Posted On: February 24, 2007 by Michael J. Hassen Email This Post

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24 CFR § 3500.5—Coverage Of Real Estate Settlement Procedures Act (RESPA) Under Regulation X

As a resource for class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of Regulation X. Congress gave authority to the Secretary of the Department of Housing and Urban Development (HUD) to promulgate regulations for RESPA, and the regulations are set forth in 24 CFR § 3500.1 et seq. The regulations provide for coverage of RESPA in § 3500.5, which provides:


§ 3500.5. Coverage of RESPA


(a) Applicability. RESPA and this part apply to all federally related mortgage loans, except for the exemptions provided in paragraph (b) of this section.


(b) Exemptions. (1) A loan on property of 25 acres or more.


(2) Business purpose loans. An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by Regulation Z, 12 CFR 226.3(a)(1). Persons may rely on Regulation Z in determining whether the exemption applies.


(3) Temporary financing. Temporary financing, such as a construction loan. The exemption for temporary financing does not apply to a loan made to finance construction of 1- to 4-family residential property if the loan is used as, or may be converted to, permanent financing by the same lender or is used to finance transfer of title to the first user. If a lender issues a commitment for permanent financing, with or without conditions, the loan is covered by this part. Any construction loan for new or rehabilitated 1- to 4-family residential property, other than a loan to a bona fide builder (a person who regularly constructs 1- to 4-family residential structures for sale or lease), is subject to this part if its term is for two years or more. A "bridge loan" or "swing loan" in which a lender takes a security interest in otherwise covered 1- to 4-family residential property is not covered by RESPA and this part.

Continue reading "24 CFR § 3500.5—Coverage Of Real Estate Settlement Procedures Act (RESPA) Under Regulation X " »

Posted On: February 23, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases—In re Morgan Stanley Overtime Pay: Over Defense Objection Judicial Panel On Multidistrict Litigation (MDL) Grants Motion To Centralize Class Action Litigation But Selects Southern District of California As Transferee Court

Judicial Panel Grants Unopposed Request for Pretrial Coordination Pursuant to 28 U.S.C. § 1407 but Agrees with Defense Attorneys and Non-Moving Plaintiffs that Class Actions Should be Centralized in Southern District of California


Six class action lawsuits were filed against Morgan Stanley in Connecticut, Illinois, New Jersey, New York and Texas federal courts alleging violations of the federal Fair Labor Standards Act (FLSA) by misclassifying certain employees as exempt from overtime pay and/or by assessing improper deductions against employee compensation. In re Morgan Stanley & Co., Inc., Overtime Pay Litig. (No. II), 471 F.Supp.2d 1353, 1353-54 (Jud.Pan.Mult.Lit. 2006). Pursuant to 28 U.S.C. § 1407, the Illinois and Texas plaintiffs moved the Judicial Panel on Multidistrict Litigation (MDL) to centralize the lawsuits for pretrial purposes in the Northern District of Illinois; defense attorneys and the remaining plaintiffs supported centralization but argued for transfer to the Southern District of California. Id. The agreed that the Southern District of California was an appropriate transferee court, in part because “[a]n earlier action against the Morgan defendants raising similar claims has just recently settled in that district.” Id., at 1354. “More significantly,” in the Panel’s view, “the Morgan defendants and the [Connecticut, new Jersey and New York plaintiffs] . . . state that they have reached a ‘global settlement’ under which a consolidated complaint would be filed in the California district, the matter would be related to the now-settled Southern District of California action, and Judge Roger T. Benitez, who presides over the Southern California action, would administer a settlement resolving the claims against the defendants on a nationwide basis.” Id. Thus transferring the actions to that district would not only place the litigation before a court “already familiar with the issues” but “may further enhance the prospects for a just and speedy resolution” of the various lawsuits. Id.


NOTE: This case provides another illustration of the fact that the Judicial Panel is not restricted in its selection of transferee forums. The Panel is free to select a forum where none of the actions is pending if it determines that forum to be the best choice.

Download PDF file of In re Morgan Stanley & Co., Inc., Overtime Pay (No. II) Transfer Order

Posted On: February 22, 2007 by Michael J. Hassen Email This Post

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Pierce v. NovaStar-Class Action Defense Cases: Washington Federal Court Certifies Truth-In-Lending/Real Estate Settlement Procedures Act Class Action Against NovaStar Mortgage Based On Failure To Disclose Yield Spread Premiums (YSPs)

Whether Lender Violated TILA, RESPA or State's Consumer Loan Act Irrelevant to Determination of Class Certification Motion because Plaintiffs Adequately Alleged such Violations Washington Federal Court Holds

Plaintiffs filed a class action against their lender NovaStar Mortgage for violations of Washington's Consumer Protection Act (CPA) alleging that it failed to disclose it paid mortgage brokers a yield spread premium (YSP) in connection with their loans; the class action complaint was premised on NovaStar's purported failure to provide written disclosures required by the federal Real Estate Settlement Procedures Act (RESPA), the federal Truth in Lending Act (TILA), Washington's Consumer Loan Act (CLA), and the plaintiffs' deeds. Pierce v. NovaStar Mortgage, Inc., 238 F.R.D. 624, 625 (W.D. Wash. 2006). In response to plaintiffs' first motion to certify the lawsuit as a class action, the district court agreed with defense attorneys that plaintiffs had failed to demonstrate numerosity or typicality as required by Rule 23(a) and also failed to establish the predominance and superiority elements required by Rule 23(b); it therefore denied the motion, but did so without prejudice. Id. On plaintiffs' renewed motion for class certification, the court rejected defense objections and granted the motion.

By way of background, to establish a violation of the CPA one must prove "(1) an unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) that impacts the public interest; (4) and causes injury to the plaintiff in his or her business or property; and (5) such injury is causally linked to the unfair or deceptive act." Pierce, at 626 (citation omitted). A plaintiff may satisfy the first two elements by proving that the act in question is a per se unfair trade practice: "A per se unfair trade practice exists when, by statute, the Legislature declares an unfair or *627 deceptive act in trade or commerce and the statute has been violated." Id., at 626-27 (citations omitted). Under Washington law, "[a] violation of the CLA . . . is explicitly deemed a violation of the first and second elements of the CPA," id., at 627 (citation omitted). In denying the first motion for class certification, the district court believed that "verbal disclosures and independent knowledge of the YSP were relevant to determining whether NovaStar violated the CPA." Id., at 626. Plaintiffs' lawyers disagreed, arguing in the renewed motion that "verbal disclosures are irrelevant to class certification because they seek to establish a per se violation of the Consumer Protection Act by proving that NovaStar violation the Consumer Loan Act." Id.

Continue reading "Pierce v. NovaStar-Class Action Defense Cases: Washington Federal Court Certifies Truth-In-Lending/Real Estate Settlement Procedures Act Class Action Against NovaStar Mortgage Based On Failure To Disclose Yield Spread Premiums (YSPs)" »

Posted On: February 21, 2007 by Michael J. Hassen Email This Post

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MBIA Class Action Defense Case-In re MBIA Inc. Securities Litigation: New York Federal Court Grants Defense Motion To Dismiss Securities Fraud Class Action Finding Class Action Claims Time-Barred By Inquiry Notice

Plaintiffs in Securities Fraud Class were on Inquiry Notice of Claims Against Company thus Rendering Class Action Complaint Barred by Statute of Limitations New York Court Holds

Several securities fraud class action lawsuits were filed in federal courts against MBIA and various individual defendants alleging that certain financial statements contained materially misleading statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. The actions were consolidated in the Southern District of New York, and defense attorneys moved to dismiss on the grounds that claims were time barred and that the allegations in the class action complaints failed to satisfy the heightened pleading requirements for securities fraud cases. In re MBIA Inc. Securities Litig., ___ F.Supp.2d ___, 2007 WL 473708 (S.D.N.Y. February 13, 2007) [Slip Opn., at 1-2]. The district court concluded that the class action claims were barred by the applicable statute of limitations and dismissed the complaint.

The class action complaint alleges that in 1998 MBIA - which is in the "primary business [of] selling financial guarantee insurance to public finance and structured finance clients" - entered into retroactive reinsurance agreements to protect itself against an anticipated $170 million loss in order to avoid a downgrade of its AAA rating. MBIA, at 3-4. According to the complaint, MBIA entered into a series of side agreements with the reinsurance companies that were not publicly disclosed for the purpose of inducing the reinsurers to cover the $170 million loss; under these side agreements, "MBIA promised to transfer insurance policies on the highest rated bonds in its portfolio, along with the associated premiums, to the Reinsurers over a period of six years." Id., at 4-5. The complaint also alleged that MBIA improperly booked these premiums as income rather than as loans. MBIA's disclosures of these transactions painted a positive picture for the company, see id., at 5-6; however, in the months following MBIA's disclosures, several published reports explained the trade-offs realized through the deals, some viewing the strategy as "the bond insurance equivalent to Houdini" and others viewing it as "innovative," id., at 6-7. And in 2002, a 66-page research report by Gotham Partners on MBIA detailed credit concerns involving the company's guarantee portfolio, which MBIA immediately criticized in a press release that "contained no factual discussion of the transactions related by the [research] report." Id., at 8-10.

Continue reading "MBIA Class Action Defense Case-In re MBIA Inc. Securities Litigation: New York Federal Court Grants Defense Motion To Dismiss Securities Fraud Class Action Finding Class Action Claims Time-Barred By Inquiry Notice" »

Posted On: February 20, 2007 by Michael J. Hassen Email This Post

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Jenkens & Gilchrist Class Action Defense Case-Olson v. Jenkens & Gilchrist: Illinois Federal Court Grants Defense Motion To Compel Arbitration Of Claims Against Law Firm/Lawyers Involved In Tax Shelter Ultimately Held Illegal By IRS

In Multifaceted Action Against Several Defendants, Illinois Court Grants Ernst & Young's Defense Motion to Dismiss, Grants Timmis Law Firm/Lawyers Defense Motion to Compel Arbitration, and Grants Deutsche Bank Defense Motion for Stay

Plaintiffs filed a putative class action in Illinois state court against various lawyers, accountants, and bankers with whom they had consulted in connection with minimizing tax liability arising from the sale of their respective companies because the IRS subsequently determined that the tax saving strategy recommended to plaintiffs was "illegal" and they "ended up losing hundreds of thousands of dollars in the transactions." Olson v. Jenkens & Gilchrist, 461 F.Supp.2d 710, 714 (N.D. Ill. 2006). Defense attorneys removed the action to federal court. Certain defendants then moved to dismiss the class action complaint, and other defendants moved to compel arbitration under a clause governed by the Federal Arbitration Act (FAA), and still other defendants moved for a stay of proceedings, id. The district court granted the defense motions.

The tax strategy recommended to plaintiffs involved digital option contracts, sometimes called Currency Options Bring Reward Alternatives (COBRA). Olson, at 714-15. We do not summarize here the convoluted and complicated fact pattern underlying the class action complaint. Suffice it to say that plaintiffs were persuaded by some of the law firm defendants to use digital options as a tax shelter in connection with the sale of their companies, the IRS subsequently determined such tax shelters to be illegal, and that plaintiffs suffered substantial damages as a result. The law firm defendants also allegedly advised plaintiffs not to participate in an IRS amnesty program and, even after the IRS determination, defendants failed to "retract, modify, or qualify their advice that the tax strategy was legal." Id., at 716.

Ernst & Young moved to dismiss the 10 claims against it, which included claims for fraud, violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (Illinois Consumer Fraud Act), conspiracy, declaratory relief, and breach of the duty of good faith and fair dealing. The district court granted the motion finding that the class action complaint alleged only that Ernst & Young was involved "in the initial creation of the COBRA tax strategy in 1999": plaintiffs "[did] not allege that [Ernst & Young] provided any professional services to Plaintiffs; received any fees from Plaintiffs directly or as a result of any transaction Plaintiffs engaged in; communicated with Plaintiffs in any way; or had any relationship with Plaintiffs whatsoever. While the Complaint does allege that [Ernst & Young] had a relationship with Jenkens and Deutsche Bank, Plaintiffs do not allege that relationship led to any damages to Plaintiffs." Olson, at 718. Accordingly, the district court dismissed the class action claims against Ernst & Young, but did so without prejudice. Id.

Continue reading "Jenkens & Gilchrist Class Action Defense Case-Olson v. Jenkens & Gilchrist: Illinois Federal Court Grants Defense Motion To Compel Arbitration Of Claims Against Law Firm/Lawyers Involved In Tax Shelter Ultimately Held Illegal By IRS" »

Posted On: February 19, 2007 by Michael J. Hassen Email This Post

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TILA Class Action Defense Cases-LaLiberte v. Pacific Mercantile Bank: As Matter Of First Impression California Court Holds That Rescission Under Federal Truth-In-Lending Act (TILA) Not Suitable For Class Action Treatment

California Court Surprisingly Holds that Under Certain Circumstances Plaintiffs need not be Members of Class to Serve as Class Representatives and that, as Matter of First Impression, Rescission Under TILA (Truth-in-Lending Act) is a Personal Remedy Unsuitable for Class Action Treatment

Plaintiffs filed a putative class-action lawsuit against their lender alleging inter alia violations of the federal Truth In Lending Act (TILA) arising from the lender’s failure to disclose certain closing fees charged in connection with refinance loans. LaLiberte v. Pacific Merc. Bank, 147 Cal.App.4th 1. 53 Cal.Rptr.3d 745, 746 (Cal.App. 2007). Defense attorneys demurred to the class-action complaint on the ground that the class allegations failed to establish commonality; the trial court agreed but granted plaintiffs leave to amend. After extensive motion practice, plaintiffs filed a third amended class-action complaint seeking to represent a single class of borrowers who obtained loans after November 20, 2002. Id., at 746-47. Defense attorneys again demurred, this time on the ground that because the putative class representatives secured their loans in April 2002, they were not members of the class they sought to represent. Id., at 747. The trial court agreed, and sustained the demurred to the class action allegations without leave to amend. Id. as a matter of first impression, the California appellate court affirmed the trial court's order, holding that rescission under TILA was not suitable for class action treatment.

Under California law, “An order sustaining demurs to class action allegations ‘is appealable to the extent that it prevents further proceedings as a class action.’” LaLiberte, at 747 (citation omitted). In this case, two standards of review apply on appeal. The first involves the independent judgment exercised by an appellate court in reviewing an order sustaining a demurrer; the second involves whether the trial court abused its discretion in denying leave to amend. Id., at 747-48 (citations omitted). The trial court had relied upon Payne v. United California Bank, 23 Cal.App.3d 850 (Cal.App. 1972), in support of its conclusion that plaintiffs lacked standing to sue on behalf of the proposed class because they were never members of that class. See id., at 748. The Court of Appeal disagreed, holding that La Sala v. American Sav. & Loan Ass’n, 5 Cal.3d 864 (Cal. 1971), was more on point. Id.

Continue reading "TILA Class Action Defense Cases-LaLiberte v. Pacific Mercantile Bank: As Matter Of First Impression California Court Holds That Rescission Under Federal Truth-In-Lending Act (TILA) Not Suitable For Class Action Treatment" »

Posted On: February 18, 2007 by Michael J. Hassen Email This Post

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24 CFR § 3500.4—Reliance Upon Rule, Regulation Or Interpretation By HUD Under Regulation X (Real Estate Settlement Procedures Act-RESPA)

For class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of Regulation X. Congress gave authority to the Secretary of the Department of Housing and Urban Development (HUD) to promulgate regulations for RESPA, and the regulations are set forth in 24 CFR § 3500.1 et seq. The regulations provide for rules, regulations and interpretations by HUD in § 3500.4, which provides:


§ 3500.4. Reliance upon rule, regulation or interpretation by HUD


(a) Rule, regulation or interpretation.--(1) For purposes of sections 19(a) and (b) of RESPA (12 U.S.C. 2617(a) and (b)) only the following constitute a rule, regulation or interpretation of the Secretary:


(i) All provisions, including appendices, of this part. Any other document referred to in this part is not incorporated in this part unless it is specifically set out in this part;


(ii) Any other document that is published in the FEDERAL REGISTER by the Secretary and states that it is an "interpretation," "interpretive rule," "commentary," or a "statement of policy" for purposes of section 19(a) of RESPA. Such documents will be prepared by HUD staff and counsel. Such documents may be revoked or amended by a subsequent document published in the FEDERAL REGISTER by the Secretary.

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Posted On: February 17, 2007 by Michael J. Hassen Email This Post

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Public Accommodation/ADA Class Action Lawsuits And Federal Fair And Accurate Credit Reporting Act (FACTA) Class Action Cases Share Top Spot In Weekly Class Action Filings In California State And Federal Courts As Labor Law Class Actions Drop Dramatically

Defense attorneys in California are facing another wave of public accommodation/ADA (Americans with Disabilities Act) class action cases, together with a surprising number of class action lawsuits alleging violations of the federal Fair and Accurate Credit Reporting Act (FACTA). The surge in class action cases falling within these two categories this past week coincide with a dramatic drop in employment law class action claims.

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. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. Employment law cases routinely lead the list and usually do so by a wide margin, but this past week they fell below the 10% threshold. Instead, class actions alleging public accommodation/ADA claims and FACTA claims easily claimed the top spot.

This report covers the time period from February 9 – February 15, 2007. Approximately 77 class action lawsuits were filed in these California state and federal courts during that time period, of which 21 (27%) involved public accommodation/ADA class action lawsuits, and an equal number involved Fair And Accurate Credit Transactions Act cases. Antitrust class action filings came in a distant third with 9 new cases (12%). The only other category of cases to break the 10% threshold involved securities fraud class actions, with 8 new filings (10%).

Posted On: February 17, 2007 by Michael J. Hassen Email This Post

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24 CFR § 3500.3—Questions Or Suggestions From Public And Copies Of Public Guidance Documents Under Regulation X (Real Estate Settlement Procedures Act-RESPA)

As a resource for class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of Regulation X. Congress gave authority to the Secretary of the Department of Housing and Urban Development (HUD) to promulgate regulations for RESPA, and the regulations are set forth in 24 CFR § 3500.1 et seq. The regulations concerning questions or suggestions from public and copies of public guidance documents are set forth in § 3500.3, which provides:


§ 3500.3. Questions or suggestions from public and copies of public guidance documents


Any questions or suggestions from the public regarding RESPA, or requests for copies of HUD Public Guidance Documents, should be directed to the Director, Office of Consumer and Regulatory Affairs, Department of Housing and Urban Development, 451 7th Street SW., Washington, DC 20410-8000, rather than to HUD field offices. Legal questions may be directed to the Assistant General Counsel, GSE/RESPA Division, at this address.

Posted On: February 16, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-In re JP Morgan Chase: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff's Motion To Centralize Class Action Litigation But Selects Northern District of Illinois As Transferee Court

Judicial Panel Grants Request, Unopposed by Defense, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 but Rejects Plaintiff's Request to Transfer Class Actions to District of Delaware


Three federal securities class action lawsuits (two in Delaware and one in Illinois) were filed against JP Morgan Chase alleging fraudulent misrepresentations relating to its merger in 2004 with Bank One Corp. In re JP Morgan Chase & Co. Securities Litig., 452 F.Supp.2d 1350, 1351 (Jud.Pan.Mult.Lit. 2006). Plaintiff's lawyer in the two Delaware actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the District of Delaware. Defense attorneys agreed that pretrial coordination was appropriate, but argued that the Southern District of New York was the appropriate transferee court. The Illinois plaintiff opposed the motion, but alternatively argued that the class action should be transferred to the Northern District of Illinois. Id. The Judicial Panel granted the motion to centralize the class actions and selected the Northern District of Illinois because "[t]he action pending there, which is the earliest filed of the three actions, is more procedurally advanced than the two Delaware actions." Id.

Download PDF file of In re JP Morgan Chase Transfer Order

Posted On: February 16, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-In re Stand 'N Seal: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In The Northern District of Georgia

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

Numerous class action lawsuits were filed against several defendants alleging "that plaintiffs suffered injuries resulting from their use of Tile Perfect Stand 'n Seal "Spray-On" Grout Sealer." In re Stand 'N Seal Products Liab. Litig., 469 F.Supp.2d 1351, 1351 (Jud. Pan.Mult.Lit. January 5, 2007). Pursuant to § 1407, defense attorneys moved the Judicial Panel on Multidistrict Litigation (MDL) to centralize the lawsuits for pretrial purposes in the Northern District of Georgia. Id. Plaintiffs in some courts supported centralization but recommended different transferees courts; other plaintiffs opposed centralization at all. The Panel agreed with defense attorneys that centralization was warranted. The Panel also concluded that even though "no single forum stands out as a transferee district choice," the Northern District of Georgia was the appropriate transferee court. Id.

Download PDF file of In re Stand 'N Seal Transfer Order

Posted On: February 15, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Goplen v. 51job: New York Federal Court Grants Defense Motion To Dismiss Securities Fraud Class Action For Failing To Plead With Particularity Required by PSLRA and Rule 9(b)

Defense Attorneys Established that Class Action Complaint Failed to Adequately Plead Securities Fraud with Particularity as Required by Rule 9(b) and the Private Securities Litigation Reform Act of 1995 (PSLRA) but New York Federal Court Gives Plaintiffs Leave to Amend their Complaint

Seven putative securities fraud class actions were filed against 51Job and several of its officers and directors alleging “false and misleading statements with respect to the company's revenues and expected growth, in violation of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 . . ., and Rule 10b-5,” Goplen v. 51job, Inc., 453 F.Supp.2d 759, 763 (S.D.N.Y. 2006) (citations omitted). Defense attorneys filed a motion to dismiss the class action complaint on the ground that it failed to satisfy the heightened pleading requirements set forth in Rule 9(b) of the Federal Rule of Civil Procedure and in the Private Securities Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. § 78u-4, for securities fraud. Id. The district court agreed with the defense and dismissed the class action complaint, but granted plaintiffs leave to file an amended complaint if they could allege facts sufficient to satisfy the PSLRA.

We do not here summarize the particular factual allegations in this case; the facts are quite detailed and an attorney interested in understanding the applicability of the PSLRA’s heightened pleading requirements for securities fraud class actions is well advised to read the opinion in its entirety. We provide only a broad summary of the legal arguments in the opinion. The district court concisely summarized at pages 765 and 766 the legal standard it was to apply as follows:

Continue reading "Class Action Defense Cases-Goplen v. 51job: New York Federal Court Grants Defense Motion To Dismiss Securities Fraud Class Action For Failing To Plead With Particularity Required by PSLRA and Rule 9(b)" »

Posted On: February 14, 2007 by Michael J. Hassen Email This Post

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Buller Trucking Class Action Defense Case: Illinois Federal Court Remands Class Action To State Court Holding Lawsuit Not Removable Under Class Action Fairness Act Of 2005 (CAFA)

State Law Governed the Effective Date of the Filing of an Amended Complaint for Purposes of CAFA (Class Action Fairness Act of 2005) Illinois Federal Court Holds

In January 2004, plaintiff filed a lawsuit in Illinois state court against its cargo loss insurer for breach of contract, delay in paying insurance claim and fraud. On February 7, 2005, plaintiff requested leave of court to file an amended complaint to allege class action allegations and to represent three nationwide classes against the insurer; the motion was granted on February 18 - the same date that CAFA(Class Action Fairness Act of 2005) became effective. Buller Trucking Co. v. Owner Operator Independent Driver Risk Retention Group, Inc., 461 F.Supp.2d 768, 770-71 (S.D. Ill. 2006). On March 7, 2005, defense attorneys removed the class action to federal court. The district court remanded the class action to state court and defense attorneys petitioned the Seventh Circuit for leave to appeal. Id., at 771. The Circuit Court vacated the district court's remand order and instructed the lower court to consider whether the filing of the amended complaint after CAFA became effective rendered the class action removable under CAFA. Id. The district court concluded that the effective date of the amended complaint pre-dated CAFA thus compelling remand to state court.

After summarizing CAFA and observing that CAFA does not apply retroactively to cases filed before its effective date, Buller Trucking, at 772, the district court explained that whether an amended complaint "recommences" a class action under state law for purposes of CAFA generally turns on "whether the amendment 'relates back' to the filing date of the original complaint: if it does, then the case is not removable, but if it does not, the case is subject to removal under CAFA." Id. (quoting Knudsen v. Liberty Mut. Ins. Co., 411 F.3d 805, 807 (7th Cir. 2005)). In the Seventh Circuit, "a new claim for relief (a new 'cause of action' in state practice), the addition of a new defendant, or any other step sufficiently distinct that courts would treat it as independent for limitations purposes, could well commence a new piece of litigation for federal purposes even if it bears an old docket number for state purposes." Id. (quoting Knudsen, 411 F.3d at 807).

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Posted On: February 13, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-In re Spectrum: Georgia Federal Court Grants Defense Motion To Dismiss Securities Fraud Class Action Finding Allegations Fail To Meet Requirements Under Private Securities Litigation Reform Act (PSLRA)

Allegations in Securities Fraud Class Action Complaint Failed to Satisfy Heightened Pleadings Requirements Imposed by PSLRA (Private Securities Litigation Reform Act) But Plaintiffs Are Entitled To Leave To Amend Georgia Court Holds

In September 2005,, plaintiffs filed a putative securities fraud class action under the Securities Exchange Act of 1934 against Spectrum Brands (formerly known as Rayovac) and individual defendants - including its Chief Executive Officer and Chief Financial Officer/Executive Vice President - on behalf of purchasers of persons who purchased Spectrum Brands's common stock between November 11, 2004, and November 13, 2005 alleging that defendants' conduct "artificially affected the value of Spectrum Brands's stock" through the practice of "channel-stuffing." In re Spectrum Brands, Inc. Sec. Litig., 461 F.Supp.2d 1297, 1300-01 (N.D. Ga. 2006). Plaintiffs amended the complaint in February 2006, and defense attorneys moved to dismiss, id., at 1300. The district court granted the motion, finding that the class action complaint failed to plead securities fraud with sufficient particularity as required by the federal Private Securities Litigation Reform Act (PSLRA).

Channel-stuffing refers to the act of persuading customers to purchase more inventory than they presently require - a practice the Eleventh Circuit recognizes "is not fraudulent per se." Garfield v. NDC Health Corp., 466 F.3d 1255, 1261 (11th Cir. 2006). The practice, however, causes a company to realize as revenue monies that would otherwise be received later, assuming that the customer did not decide to switch suppliers. In re Spectrum Brands, at 1301. The class action complaint alleged Spectrum "engaged in aggressive channel-stuffing during the fourth quarter of 2004 and the first quarter of 2005, which allowed Spectrum Brands's performance in the battery market to appear better than it should have and caused an artificial spike in the company's stock price." Id. As the district court summarized at page 1301, the class action hinged on the theory that "[company] statements of strong battery sales growth and positive earnings guidances were misleading because Defendants concealed that battery sales reported during the Class Period were generated at the expense of sales in future quarters." The complaint asserts senior management engaged in channel-stuffing for the purpose of artificially inflating the company's stock price. Id., at 1301-02.

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Posted On: February 12, 2007 by Michael J. Hassen Email This Post

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Coca Cola Class Action Defense Case-Oshana v. Coca Cola: Federal Court Jurisdiction Exists And District Court Properly Granted Defense Motion To Dismiss Class Action Under Cable Communications Policy Act Because Act Does Not Apply To Internet Services

Seventh Circuit Holds that Certification of Class Action Properly Denied Because Putative Class Included Members who Suffered no Damage and Because Plaintiff's Claims were not Typical of the Class

Plaintiff filed a putative class action against Coca Cola in Illinois state court for violating the state's Consumer Fraud and Deceptive Practices Act and for unjust enrichment on the theory that "Coke tricked consumers into believing that fountain Diet Coke and bottled Diet Coke have the same ingredients" when in fact the company used different sweeteners in the drinks. Oshana v. Coca-Cola Co., 472 F.3d 506, 509 (7th Cir. 2006). According to plaintiff, Coke used only aspartame in the bottled drinks, but combined aspartame with saccharin in its fountain drinks. Id. Defense attorneys removed the class action to federal court and defeated plaintiff's motion for class certification. The defense then tendered a judgment of $650 to plaintiff, which plaintiff accepted with the provisos that she be permitted to challenge on appeal whether the action had been proper removed and whether her motion to certify a class action had been properly denied. Id. The Seventh Circuit affirmed both rulings of the district court.

Plaintiff purported to bring this action on behalf of ".All individuals who purchased for consumption and not resale fountain Diet Coke in . . . Illinois from March 12, 1999, through the date of entry of an order certifying the class." Oshana, at 510. Her class action complaint hinged on the allegation that "Coke began advertising in 1984 that Diet Coke would be sweetened with 100% NutraSweet® brand aspartame, leading consumers to believe that all forms of Diet Coke would follow that formula, even though fountain Diet Coke continued to use saccharin." Id., at 509. While plaintiff disclaimed any right to individual damages in excess of $75,000, she steadfastly refused defense requests that she "admit she would not individually seek an award of attorneys' fees over $75,000; punitive damages over $75,000; a combined award of compensatory and punitive damages and attorneys' fees over $75,000; or a combined award of disgorgement, attorneys' fees, and punitive damages over $75,000." Id. Accordingly, Coca Cola removed the putative class action to federal court asserting a good faith belief that the amount in controversy exceeded $75,000; the district court denied plaintiff's motion to remand the action to state court concluding that plaintiff's damages could exceed $75,000, particularly in light of her refusal to "admit otherwise." Id., at 509-10.

Continue reading "Coca Cola Class Action Defense Case-Oshana v. Coca Cola: Federal Court Jurisdiction Exists And District Court Properly Granted Defense Motion To Dismiss Class Action Under Cable Communications Policy Act Because Act Does Not Apply To Internet Services" »

Posted On: February 11, 2007 by Michael J. Hassen Email This Post

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Employment Class Action Filings Again Top List But Federal Fair And Accurate Credit Reporting Act (FACTA) Class Action Cases Again Run Second In Weekly Class Action Filings In California State And Federal Courts

As is generally the case, class action defense attorneys in California will confront more labor law class action cases than any other category, but the number of class action lawsuits alleging violations of the federal Fair and Accurate Credit Reporting Act (FACTA) continue to surge. 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 class action cases routinely lead the list by a wide margin, but recently a wave of class actions alleging violations of FACTA have been filed. This report covers the time period from February 2 – February 8, 2007. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. Approximately 50 class action lawsuits were filed in these California state and federal courts during that time period, of which 18 (36%) involved employment-related claims. New FACTA class action lawsuits came in second with 12 new filings (24%). The third place category consists of 9 new antitrust claims (18%).

Posted On: February 11, 2007 by Michael J. Hassen Email This Post

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24 CFR § 3500.2—Definitions Used In The Regulations Promulgated By The Secretary Of The Department Of Housing And Urban Development (HUD) For The Real Estate Settlement Procedures Act (RESPA)

As a resource for class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of Regulation X. Congress gave authority to the Secretary of the Department of Housing and Urban Development (HUD) to promulgate regulations for RESPA, and the regulations are set forth in 24 CFR § 3500.1 et seq. The definitions used in Regulation X are set forth in § 3500.2, which provides:

§ 3500.2. Definitions

(a) Statutory terms. All terms defined in RESPA (12 U.S.C. 2602) are used in accordance with their statutory meaning unless otherwise defined in paragraph (b) of this section or elsewhere in this part.

(b) Other terms. As used in this part:

Application means the submission of a borrower's financial information in anticipation of a credit decision, whether written or computer-generated, relating to a federally related mortgage loan. If the submission does not state or identify a specific property, the submission is an application for a prequalification and not an application for a federally related mortgage loan under this part. The subsequent addition of an identified property to the submission converts the submission to an application for a federally related mortgage loan.

Business day means a day on which the offices of the business entity are open to the public for carrying on substantially all of the entity's business functions.

Dealer means, in the case of property improvement loans, a seller, contractor, or supplier of goods or services. In the case of manufactured home loans, "dealer" means one who engages in the business of manufactured home retail sales.

Continue reading "24 CFR § 3500.2—Definitions Used In The Regulations Promulgated By The Secretary Of The Department Of Housing And Urban Development (HUD) For The Real Estate Settlement Procedures Act (RESPA)" »

Posted On: February 10, 2007 by Michael J. Hassen Email This Post

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12 U.S.C. § 2617— Authority Granted To Secretary Of The Department Of Housing And Urban Development (HUD) Under The Real Estate Settlement Procedures Act (RESPA)

As a resource for class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of the statute. Congress described the authority granted to the Secretary of the Department of Housing and Urban Development (HUD) under RESPA in 12 U.S.C. § 2617, which provides:

§ 2617. Authority of Secretary

(a) Issuance of regulations; exemptions

The Secretary is authorized to prescribe such rules and regulations, to make such interpretations, and to grant such reasonable exemptions for classes of transactions, as may be necessary to achieve the purposes of this chapter.

(b) Liability for acts done in good faith in conformity with rule, regulation, or interpretation

No provision of this chapter or the laws of any State imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule, regulation, or interpretation thereof by the Secretary or the Attorney General, notwithstanding that after such act or omission has occurred, such rule, regulation, or interpretation is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.

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Posted On: February 9, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-In re Pharmacy Benefit Managers: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff's Motion To Centralize Antitrust Class Action Litigation In The Eastern District of Pennsylvania

Judicial Panel Holds Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 Warranted and Concurs with View of Some Plaintiff and Defense Attorneys that Eastern District of Pennsylvania is Appropriate Transferee Court

Six federal antitrust securities class action lawsuits were filed in Alabama, California, Illinois and Pennsylvania against several defendants "aris[ing] out of allegations that certain conduct by the pharmacy benefit manager (PBM) defendants-including the negotiation of rates for the sale of prescription drugs by retail pharmacies-violated the federal antitrust laws." In re Pharmacy Benefit Managers Antitrust Litig., 452 F.Supp.2d 1352, 1352-53 (Jud.Pan.Mult.Lit. 2006). Plaintiffs in one of the Pennsylvania actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of Pennsylvania. Id., at 1353. Defense attorneys for parties named in three of the class actions, as well as the California plaintiffs, supported the motion, id. Other plaintiffs supported centralization but argued in favor of the Northern District of Alabama as the appropriate forum, while other defendants opposed centralization and argued in the alternative for transfer to the Northern District of Illinois. Id.

The Judicial Panel acknowledged that "unique questions of fact relating to each PBM" may "spawn some unique discovery" based on the specific contracts between each plan sponsor/PBM, but found centralization warranted because "all plaintiffs allege that these contracts create a price-fixing conspiracy" and "all actions can be expected to focus on similar PBM practices and procedures." Id. As the Judicial Panel explained at pages 1353 and 1354,

Transfer to a single district under Section 1407 has the salutary effect of placing all actions before one court which can formulate a pretrial program that: 1) allows pretrial proceedings with respect to any non-common issues to proceed concurrently with pretrial proceedings on common issues . . .; and 2) ensures that pretrial proceedings will be conducted in a manner leading to the just and expeditious resolution of all actions to the overall benefit of the parties. The MDL-1782 transferee court can employ any number of pretrial techniques-such as establishing separate discovery and/or motion tracks-to efficiently manage this litigation. In any event, we leave the extent and manner of coordination or consolidation of these actions to the discretion of the transferee court. . . .

With respect to the appropriate transferee court, the Judicial Panel found that, "Given the geographic dispersal of constituent actions, any of the suggested transferee districts would be an appropriate transferee forum." Id., at 1354. The Judicial Panel selected the Eastern District of Pennsylvania because two class actions already were pending in that court and the district court has the experience necessary to properly oversee the litigation. Id.

Download PDF file of In re Pharmacy Benefit Managers Antitrust Litigation Transfer Order

Posted On: February 9, 2007 by Michael J. Hassen Email This Post

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

Judicial Panel Agrees with Defense that Pretrial Coordination Pursuant to 28 U.S.C. § 1407 is Warranted for Two State Labor Law Class Action Lawsuits


Two class action lawsuits were filed against Terminix in the Central and Northern Districts of California alleging violations of state labor laws for failure to pay overtime to pest control technicians and for misclassifying the class members as exempt employees.. In re Terminix Employment Practices Litig., 466 F.Supp.2d 1354, 1354-55 (Jud. Pan.Mult.Lit. December 19, 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 Northern District of California; plaintiffs did not respond to the motion. Id. The Judicial Panel agreed with defense attorneys that centralization was warranted and that the Central District of California was the appropriate transferee court. In rejecting the Central District of California, the Panel observed that the action had been pending in that federal court "for only a few months and is not far progressed"; the action in the Northern District, by contrast, "stands out as an appropriate transferee forum" and "mediation is underway" in that action. Id.

Download PDF file of In re Terminix Transfer Order

Posted On: February 8, 2007 by Michael J. Hassen Email This Post

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CAFA Mass Action Defense Case-Lowery v. Honeywell: Alabama Federal Court Rejects Defense Arguments And Remands Mass Action To State Court Due To Defense Failure To Establish $75,000 Amount In Controversy

Class Action Fairness Act of 2005 (CAFA) did not Shift Burden of Proof of Amount in Controversy Requirements to Plaintiffs in Mass Actions or Class Actions Alabama Court Holds

In 2003, nine property owners filed suit in Alabama state court against eleven defendants asserting various common law based on defendants' discharge of pollutants and demanding as damages in excess of $1 million each. Lowery v. Honeywell Int'l, Inc., 460 F.Supp.2d 1288, 1290-91 (N.D. Ala. 2006). In an amended complaint filed in October 2005, 533 named plaintiffs sought damages against 12 named defendants seeking damages "in an amount of compensatory and punitive damages to be determined by a jury," id., at 1291. The complaint was amended against in March 2006 and June 2006; none of the complaints sought class action status, none of the theories of liability changed, and the indefinite prayer remained the same in the first through third amended complaints. Id. The Third Amended Complaint added as a party-defendant Alabama Power and Filler Products Company, and in July 2006 Alabama Power removed the action to federal court based in part on the Class Action Fairness Act of 2005 (CAFA) on the theory that "the action constitutes a 'mass action', which, under 28 U.S.C. § 1332(d)(11)(B)(i), is removable." Id. Plaintiffs moved to remand the case to state court on the grounds that CAFA did not apply and that defendants had not demonstrated the requisite amount in controversy. In an opinion that contains some surprising legal conclusions but in the author's view reached the correct result, the federal court remanded the action to state court.

The district court noted that the complaint was filed long before CAFA's February 18, 2005 effective date, but the amendment that precipitated removal post-dated CAFA. Lowery, at 1292. The court explained at page1292, "This procedural fact creates two potentially dispositive removability questions: (1) did the filing of the third amended complaint 'commence' a new suit for purposes of CAFA; and (2) if so, did the new suit, by retroactive effect, 'commence' as to all defendants, or only as to [those defendants added by the third amended complaint]." CAFA looks to state law for determining when an action is "commenced," which under Alabama law was the date the original complaint was filed. Id. However, federal law holds that "as to the new defendant, removability is determined as of the date of receipt of service of the amended complaint, not as of the date on which the original suit was filed in state court." Id. (citations and italics omitted). The question, then, is whether Alabama Power properly removed the action. Id., at 1292-93.

Continue reading "CAFA Mass Action Defense Case-Lowery v. Honeywell: Alabama Federal Court Rejects Defense Arguments And Remands Mass Action To State Court Due To Defense Failure To Establish $75,000 Amount In Controversy" »

Posted On: February 7, 2007 by Michael J. Hassen Email This Post

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Dukes v. Wal-Mart Class Action Defense Case: Ninth Circuit Upholds Certification Of Nationwide Sex Discrimination Class Action Creating Largest Class Ever Agreeing With District Court That Class Action Was Nonetheless Manageable

District Court did not Abuse its "Broad Discretion" in Certifying Nationwide Sex Discrimination Class Action Against Wal-Mart Creating "the Largest Certified Class in History" Ninth Circuit Holds

In June 2001, plaintiffs filed a putative class action against Wal-Mart in the San Francisco federal court alleging sex discrimination in the payment of wages and in promotions. In April 2003, plaintiffs moved to certify a nationwide class action on behalf of 1.5 million former and present female employees “employed in a range of Wal-Mart positions - from part-time, entry-level, hourly employees to salaried managers.” Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. February 06, 2007) [Slip Opn., at 1340]. Defense attorneys argued that the requirements of Rule 23 had not been satisfied, stressing in particular several problems inherent in litigating a class of record size. More than a year later, in an 84-page decision handed down in June 2004, the district court rejected all but one of the defense arguments and, save for that one point, certified the class action as requested by plaintiffs. Both sides appealed, but the Ninth Circuit affirmed the district court order in all respects.

Plaintiffs’ motion sought certification of a nationwide class action on behalf of “All women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart’s challenged pay and management track promotions policies and practices.” Dukes, at 1340. Wal-Mart stressed the “‘historic’ nature of Plaintiffs’ motion, inasmuch as it concerns a class of approximately 1.5 million women who work or worked in one or more of Wal-Mart’s 3,400 stores in 41 regions at any time since 1998.” Id. The district court recognized Wal-Mart’s concerns but concluded that “while the class size was large, the issues were not unusual.” Id. The Ninth Circuit summarized the district court’s order at page 1341 as follows:

On June 21, 2004, the district court issued an eighty-four-page order granting in part and denying in part Plaintiffs’ motion for class certification. [Citation.] With respect to Plaintiffs’ claims for equal pay, the district court granted Plaintiffs’ motion as to issues of alleged discrimination and all forms of requested relief. With respect to Plaintiffs’ promotion claim, the court’s finding was mixed. The court certified the proposed class as it related to issues of alleged discrimination (including liability for punitive damages) as well as injunctive and declaratory relief. However, the court denied Plaintiffs’ request for certification with respect to backpay because data relating to challenged promotions were not available for all class members.

On appeal, Wal-Mart focused its attack on three points: (1) that the commonality and typicality requirements of Rule 23(a) had not been satisfied, (2) that the class action complaint primarily sought monetary relief thus barring certification under Rule 23(b)(2), and (3) that the district court order prejudiced its ability to respond to individual claims. Dukes, at 1341. Plaintiffs, in turn, argued that the district court erred in limiting backpay relief. Id. The Ninth Circuit held that the district court did not abuse its discretion in certifying the nationwide class.

Continue reading "Dukes v. Wal-Mart Class Action Defense Case: Ninth Circuit Upholds Certification Of Nationwide Sex Discrimination Class Action Creating Largest Class Ever Agreeing With District Court That Class Action Was Nonetheless Manageable" »

Posted On: February 6, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Colomar v. Mercy Hospital: Florida Federal Court Denies Defense Motion To Dismiss Unfair Trade Practice Class Action Based On Allegations That Hospital Charges Uninsured Patients More Than Insured Patients For The Same Services

Class Action Complaint Adequately Alleges Breach of Contract and Violation Florida’s Deceptive and Unfair Trade Practices Act where Hospital Charges Uninsured Patients Significantly More for Services than it Charges Insured Patients Florida Federal Court Holds


Plaintiffs filed a putative securities class action against Mercy Hospital for breach of contract, unjust enrichment, breach of duty of good faith and fair dealing, and violation of Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA), alleging that the hospital routinely overcharged uninsured patients for care. Colomar v. Mercy Hospital, Inc., 461 F.Supp.2d 1265, 1267 (S.D. Fla. 2007). Defense attorneys moved to dismiss the class action under Rule 12(b)(6); the district court granted the motion as to the unjust enrichment and breach of good faith and fair dealing claims, and granted the motion as to the FDUTPA claim for relief to the extent that it alleged deceptiveness by the hospital. Id. The district court requested additional briefing as to the breach of contract claim and as to the FDUTPA claim to the extent it alleged unfairness in the hospital’s billing practices, both of which were premised on allegations of “unreasonable pricing” of hospital services for uninsured patients. Id. The district court held that “[having] reviewed the [complaint] in a light most favorable to Plaintiff and drawn all reasonable inferences therefrom in Plaintiff’s favor, . . . the allegations of unreasonable pricing in the [complaint] meet Plaintiff’s burden of pleading claims for breach of contract and violation of FDUTPA.” Id.


The thrust of plaintiff’s complaint is that the bill she received as an uninsured patient for Mercy Hospital’s services “was inflated and unfair when compared to the rates charged to, and accepted from, patients with insurance or patients covered by Medicaid or Medicare.” Colomar, at 1268. Plaintiff originally argued that “differential pricing alone was sufficient to constitute a breach of contract because Florida law requires the amount of an open pricing contract to be reasonable”; the district court agreed that the amount must be reasonable but held that “Florida law requires more than mere allegations of differential pricing to establish unreasonableness.” Id. (citation omitted). In response, plaintiff amended her complaint to include the following details: “(1) Plaintiff was charged nearly $12,863 for medical services, while the actual costs of the services were only $2,098; (2) CHE hospitals (of which Mercy belongs) generally charge uninsured patients rates at 370% of Medicare reimbursement rates; (3) Mercy in particular charges uninsured patients rates at 450% of Medicare reimbursement rates; (4) CHE hospitals rank among the top 13% of all hospitals nationwide in charges (including both for-profit and non-profit hospitals); (5) CHE's cost-to-charge ratio is 394%, meaning that on average CHE hospitals charge almost four times their costs to uninsured patients; (6) CHE hospitals rank in the top 10% of hospitals nationwide in terms of cost-to-charge ratio.” Id.

Continue reading "Class Action Defense Cases-Colomar v. Mercy Hospital: Florida Federal Court Denies Defense Motion To Dismiss Unfair Trade Practice Class Action Based On Allegations That Hospital Charges Uninsured Patients More Than Insured Patients For The Same Services" »

Posted On: February 5, 2007 by Michael J. Hassen Email This Post

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San Francisco's Paid Sick Leave Ordinance To Take Effect On February 5, 2007

On February 5, 2007, San Francisco's sweeping Paid Sick Leave Ordinance ("PSL") will take effect. The PSL Ordinance (Chapter 12W) was approved by 60% of San Francisco voters in the November election. San Francisco employers who do not comply with the PSL Ordinance will face stiff penalties and possible civil lawsuits with attorneys' fees recoverable.

All employers in San Francisco will be required to provide paid sick leave to all full-time, part-time and even temporary employees who work in San Francisco. Under the PSL Ordinance, employees accrue one hour of paid sick leave for every 30 hours worked (about 9 days per year for a full-time, non-exempt employee). Those employed as of February 5, 2007 will begin accruing paid sick leave as of that date. Those employed after February 5, 2007 will begin accruing paid sick leave 90 days into their employment. Employers may cap maximum accruals at 40 hours if they employ fewer than 10 employees and at 72 hours if they employ 10 or more employees. Unlike vacation benefits, paid sick leave does not need to be paid out when employees leave their employers.

Beginning February 5, 2007, employers must post the City's official notice of the PSL Ordinance in a conspicuous location in English, Spanish, Chinese and any other languages spoken by at least 5% of an employer's workforce in San Francisco. Under the PSL Ordinance, paid sick leave may be used to care for family members ("kin care"), which is more broadly defined than California's Labor Code and includes relatives such as siblings and grandparents. In addition, employees who do not have a spouse or registered domestic partner may once a year designate a person for whom the employee may use paid sick leave. Further, unlike current California law, an employee may use the entire amount of their sick leave for kin care.

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Posted On: February 5, 2007 by Michael J. Hassen Email This Post

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Deloitte & Touche Class Action Defense Case-Lattanzio v. Deloitte: Second Circuit Affirms Dismissal of Securities Class Action Against Outside Accountant

Second Circuit Holds that District Court Properly Granted Defense Motion to Dismiss Securities Class Action Against Outside Accountant Because (1) Claims fell Outside Class Period, (2) Accountant is under no Duty to Correct Financial Statement for which it Provided no Public Opinion, and (3) Plaintiffs’ Failed to Adequately Allege Loss Causation


Plaintiffs filed a putative securities class action against Deloitte & Touche in its capacity as outside accountant for Warnaco Group for violations of Section 10(b) of the Securities Exchange Act of 1924 and Rule 10b-5 alleging that Deloitte misstated Warnaco’s financial condition and breached its duty to correct previous misstatements once it learned that they were inaccurate. Lattanzio v. Deloitte & Touche LLP, 476 F.3d 147, 2007 WL 259877, *1 (2d Cir. January 31, 2007). Defense attorneys moved to dismiss the class action under Rule 12(b)(6). The district court granted the motion finding that “[i] Deloitte was not liable for Warnaco’s quarterly statements, which it did not audit; [ii] Deloitte had no duty during the class period to correct statements or misstatements made by Deloitte prior to the class period; and [iii] Plaintiffs inadequately alleged loss causation in connection with the statements that Deloitte made during the class period.” Id. On appeal, the Second Circuit affirmed the “thorough and well-reasoned opinion” of the district court. Id.


Deloitte began serving as Warnaco’s outside accountant in November 1999. Plaintiffs filed this class action after Warnaco declared bankruptcy in June 11, 2001 seeking to represent those who purchased Warnaco’s common stock from August 15, 2000 through June 8, 2001 (defined as “the Class Period”). Lattanzio, at *1. The class action complaint alleged that Warnaco’s 1999 Form 10-K (filed in March 2000) overstated total shareholder equity by $30 million, and that in February 2000 Deloitte learned of $26 million of this sum but did not correct Warnaco’s financial statements until March 2001. Id. Deloitte allegedly learned of the additional $4 million mistake “sometime in fall 2000” but did not correct the financial statements until August 2001 (by which time Warnaco was in bankruptcy). Id., at *2. The complaint also complained that the three quarterly statements Warnaco filed during the Class Period contained material misstatements; Deloitte did not audit these statements but “reviewed” them as required by federal law and, allegedly, learned of the errors but failed to correct them. Id. Finally, the complaint alleged that Warnaco’s 2000 Form 10-K contained material misstatements Id., at *3. However, Deloitte’s audit opinion expressed a “going concern” that the company “was not in compliance with certain covenants of its long-term debt agreements” and that the company “was a working capital deficiency as of December 30, 2000” which “raise substantial doubt about its ability to continue as a going concern.” Id. As noted above, the district court granted the defense Rule 12(b)(6) motion and dismissed the class action complaint.

Continue reading "Deloitte & Touche Class Action Defense Case-Lattanzio v. Deloitte: Second Circuit Affirms Dismissal of Securities Class Action Against Outside Accountant" »

Posted On: February 4, 2007 by Michael J. Hassen Email This Post

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12 U.S.C. § 2616—Impact Of The Real Estate Settlement Procedures Act (RESPA) On State Laws And Affect Of Inconsistent Federal And State Laws

For class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we make the text of RESPA available here. Congress clarified the affect of RESPA on state laws and provided for determining whether state laws were inconsistent with federal laws in 12 U.S.C. § 2616, which provides as follows:


§ 2616. State laws unaffected; inconsistent Federal and State provisions


This chapter does not annul, alter, or affect, or exempt any person subject to the provisions of this chapter from complying with, the laws of any State with respect to settlement practices, except to the extent that those laws are inconsistent with any provision of this chapter, and then only to the extent of the inconsistency. The Secretary is authorized to determine whether such inconsistencies exist. The Secretary may not determine that any State law is inconsistent with any provision of this chapter if the Secretary determines that such law gives greater protection to the consumer. In making these determinations the Secretary shall consult with the appropriate Federal agencies.

Posted On: February 3, 2007 by Michael J. Hassen Email This Post

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12 U.S.C. § 2615—Validity Of Contracts And Liens Under The Real Estate Settlement Procedures Act (RESPA)

As a resource for the class action defense lawyer who defends against RESPA (Real Estate Settlement Procedures Act) class actions, we make the text of the statute available here. Congress clarified that RESPA does not affect the validity or enforceability of contracts for the sale of real property or of federally-related mortgage loans in 12 U.S.C. § 2615, which states:


§ 2615. Contracts and liens; validity


Nothing in this chapter shall affect the validity or enforceability of any sale or contract for the sale of real property or any loan, loan agreement, mortgage, or lien made or arising in connection with a federally related mortgage loan.

Posted On: February 2, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-In re Banc of America: Judicial Panel On Multidistrict Litigation (MDL) Rejects Defense Opposition To Centralization Of Class Action Litigation And Selects Central District Of California As Transferee Court

Over Defense Objection Judicial Panel Grants Request for Pretrial Coordination Pursuant to 28 U.S.C. § 1407 and Transfers Class Action Lawsuits to Central District of California Despite Settlement of Action Pending in that District


Three class action lawsuits were filed naming Banc of America Investment Services, Quick & Reilly, Fleet National Bank and/or Fleet Investment Services for alleged violations of the federal Fair Labor Standards Act (FLSA) and/or state labor laws alleging the failure to pay overtime to individuals who worked as securities brokers or broker trainees. In re Banc of America Investment Services, Inc., Overtime Pay Litig., 466 F.Supp.2d 1353, 1353-54 (Jud. Pan.Mult.Lit. December 19, 2006). The plaintiffs in the Northern District of California and the Eastern District of New York class action moved the Judicial Panel on Multidistrict Litigation (MDL) pursuant to 28 U.S.C. § 1407 to centralize the lawsuits for pretrial purposes in the Southern District of New York. Id. Defense attorneys opposed centralization or, alternatively, requested transfer to the Central District of California; plaintiffs in the Central District of California also opposed centralization but, like the defense, requested transfer to the Central District of California if the motion is granted. Id. The Judicial Panel rejected opposition arguments that centralization was unwarranted because one of the actions (interestingly, the one pending in the Central District of California) was settled or nearly settled, and selected the Central District of California as the appropriate transferee court. Id.


The Panel explained that "Regardless of whether [other] actions have settled, there remains two federal actions and a potential tag-along action pending in three federal districts." In re Banc of America, at 1354. The "salutary" goals of pretrial coordination are still served, even if only two federal actions remain. The Panel also selected the Central District of California, even though the class action there pending may settle, because it "is where the first-filed action (in which plaintiffs claim to have reached a nationwide settlement) is pending" and because all defendants and the plaintiffs in that district support transfer to that location. Id.

Download PDF file of In re Banc of America Transfer Order

Posted On: February 2, 2007 by Michael J. Hassen Email This Post

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Labor Law Class Action Lawsuits Again Hold Top Spot In Weekly Class Action Filings In California State And Federal Courts With Public Accommodation/ADA Class Action Claims A Distant Second

Yet again California class action defense attorneys will face more new employment class action claims than any other category. 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. This past week was no exception. This report covers the time period from January 25 – January 31, 2007. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. Approximately 39 class action lawsuits were filed in these California state and federal courts during that time period, of which 18 (46%) involved labor law claims. The only other category of cases to meet the 10% threshold was public accommodation/ADA class action lawsuits with 5 new cases (13%).

Posted On: February 2, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-In re LLRice: Judicial Panel On Multidistrict Litigation (MDL) Grants Unopposed Motion To Centralize Class Action Litigation And Agrees With Defense That Eastern District Of Missouri Is Appropriate Transferee Court

Judicial Panel Grants Unopposed Request for Pretrial Coordination Pursuant to 28 U.S.C. § 1407 and Agrees with Defense that Eastern District of Missouri is Appropriate Transferee Court


Several class actions were filed against Bayer CropScience and others on behalf of rice farmers asserting various causes or action arising out of "the contamination of commercial rice stocks with LLRice 601, a variety of genetically modified rice." In re LLRice 601Contamination Litig., 466 F.Supp.2d 1351, 1351-52 (Jud. Pan.Mult.Lit. December 19, 2006). The class action complaints were "brought on behalf of nationwide, multistate [and] statewide classes of rice farmers." Id. Pursuant to 28 U.S.C. § 1407, the plaintiffs in one of the class actions moved the Judicial Panel on Multidistrict Litigation (MDL) to centralize the lawsuits for pretrial purposes in the Eastern District of Arkansas; while no one objected to centralization, the parties could not agree on the appropriate transferee court and defense attorneys for "the common defendant" supported transfer to the Eastern District of Missouri. Id. The Judicial Panel agreed with that centralization was warranted and concurred with the defense recommendation that the actions be transferred to the Eastern District of Missouri. Id., at 1352. The Panel explained that the Eastern District of Missouri "enjoys the support of the common defendant and several plaintiffs." Id.

Download PDF file of In re LLRice 601

Posted On: February 1, 2007 by Michael J. Hassen Email This Post

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First American Title Class Action Defense Case-California Court Bars Plaintiff's Attorney From Conducting "Fishing Expedition" Discovery To Find Prospective Client

California Court Holds that if Class Representative Plaintiff is not and Never was Member of Class then Trial Court Abuses it Discretion if it Permits Precertification Discovery for the Purpose of Identifying Class Member Willing to Serve as Plaintiff


Plaintiff filed a putative class action against his title insurer (First American Title Insurance) and his lender (Wilmington Finance) alleging that "title insurers in the State of California are paying money for referral business from lenders," that "[the] payments to lenders are rewards for channeling business to them," and that "[t]hese kickbacks may be disguised as payments for bogus reinsurance which is purchased from captive insurers operated by the firms sending business to the title insurers." First American Title Ins. Co. v. Superior Court, 146 Cal.App.4th 1564 (Cal.App. 2007) [Slip Opn., at 4]. Plaintiff brought the class action on behalf of those persons who "paid in whole or in part for a title insurance policy [from First American] which provided coverage for property located in the State of California . . . [f]or whom part of the premium paid for the title insurance policy was received by Wilmington Finance," id., at 5. As it turned out, plaintiff was not a member of the class he proposed to represent, and no such scheme existed involving Wilmington Finance; accordingly, he propounded discovery on First American for the purpose of identifying someone willing to serve as class representative so the class action could proceed. Id., at 8. Defense attorneys objected on the ground that "[plaintiff] was never a member of the class alleged in his complaint, and therefore lacked standing to obtain discovery to locate a proper class representative." Id., at 11. The trial court ultimately rejected the arguments of defense attorneys and granted plaintiff's motion. The Court of Appeal granted First American's petition for writ of mandate and directed the trial court to disallow the precertification discovery requested. Id., at 13.


Plaintiff purchased a home in February 2004. He claims the seller's agent and the escrow company insisted that First American issue title insurance on the property, and he suspected that the escrow company or First American paid a kickback to the seller's agent. Slip Opn., at 2. In November 2004, Colorado's Division of Insurance "uncovered a reinsurance kickback scheme" under which "certain homebuilders, lenders and realtors formed their own reinsurance companies, known as 'captive insurers'" and then referred business to title companies that agreed to "reinsure" the policies through the captive insurer. Id., at 3. In essence, "the reinsurance agreement was simply a way for the title insurer to transfer funds to the captive insurer as a payment for the referral of customers." Id. California's Department of Insurance initiated its own investigation in January 2005, one month before Colorado reached a settlement with First American. Id. A few days after the announcement that Colorado and First American had reached a settlement, plaintiff filed suit. Id.

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