Class Action Defense Blog

As a resource to California defense attorneys and to assist them 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 class action cases generally top the list, and this past week was no exception. This report covers the time period from March 23 – March 29, 2007, during which time approximately 51 class action lawsuits were filed in these California state and federal courts. Labor law class action filings accounted for almost 40% of these cases, with 20 new lawsuits (39%). Next came unfair competition law (UCL) claims, which include false advertising class action cases, with 8 new class actions (16%). A group of categories just barely broke the 10% threshold, including 6 new products liability class actions (12%), and 5 new antitrust and 5 new debt collection practices class actions (10%).

Posted In: Class Actions In The News

Judicial Panel Grants Request, Unopposed by Defense, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 but Selects Southern District of Texas as Appropriate Transferee Court for Class Actions

Several class action lawsuits were filed against MERSCORP and Mortgage Electronic Registration Systems, Inc. challenging mortgage loan registration fees and alleging that the fees violate the federal Real Estate Settlement Procedures Act (RESPA) Racketeering Influenced Corrupt Organizations Act (RICO). In re MERSCORP Inc., et al., Real Estate Settlement Procedures Act (RESPA) Litig., 473 F.Supp.2d 1379, 1379 (Jud.Pan.Mult.Lit. 2007). Lawyers for all plaintiffs in the separate class action lawsuits 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 Texas. Id. Defense attorneys agreed that pretrial coordination was appropriate, and agreed further that the Eastern District of Texas was the appropriate transferee court. Id. The Judicial Panel granted the motion to centralize the class actions, but noted that the Eastern District of Texas “declined the assignment due to its heavy caseload.” Id., at 1379-80. Accordingly, the Panel transferred the cases to the Southern District of Texas for pretrial proceedings. Id., at 1380.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Defense Victory will aid Merck in Defeating Motions to Certify other Lawsuits as Class Actions in the 265 Pending Class Action Lawsuits Involving Vioxx

Bruce Japsen of the Chicago Tribune reported yesterday that a jury in plaintiff-friendly Madison County has ruled in favor of Merck in a Vioxx case, handing Merck its first win in the Midwest and 10^th defense verdict overall. Japsen notes that Merck “has pledged to defend the Vioxx cases one by one, and has so far had only five defeats.” But the fight is far from over: Merck still faces 265 class action lawsuits in addition to 27,000 individual lawsuits. The risks are substantial: in one of its losses, the jury reportedly awarded the plaintiff more than $20 million.

The Madison County victory is important because it supports Merck’s argument that each case is different and so must be tried on a case by case basis. In the Madison County case, for example, the jury found that Vioxx was not the cause of the heart attack that killed a 5’2” tall, 280-pound 52-year-old woman, whose obesity, high blood pressure and diabetes, along with other health problems, likely contributed to her death. The deceased had used Vioxx for 20 months.

In prior articles, we have noted that Merck removed Vioxx from the market in 2004 because of increased risk of heart attacks and strokes.

Bruce Japsen’s article, entitled “10th win for Merck on Vioxx - Madison County jury gives drug giant 1st Midwest victory,” may be found in the Business Section of the March 28, 2007 edition of the Chicago Tribune.

Posted In: Class Actions In The News

In a lengthy decision issued on March 26, 2007, the United States District Court for the Southern District of New York granted plaintiffs’ motion to certify a class action in In re Vivendi Universal, S.A. Securities Litig., Case No. No. 02 Civ. 5571 (S.D.N.Y. March 26, 2007). The securities class action was filed against the French company Vivendi and two of its former officers, Jean-Marie Messier (former CEO) and Guillaume Hannezo (former CFO) on behalf of securities purchasers. According to the class action complaint, beginning in October 2000 defendants made materially false and misleading statements that caused Vivendi securities to trade at artificially inflated prices and these statements included representations made in connection with the December 2000 three-way merger of Vivendi, Seagram Company Limited and Canal Plus, S.A. The class action alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, as well as Sections 11, 12(a), and 15 of the Securities Act of 1933.

We do not here summarize the court’s lengthy decision. We highlight, however, the district court’s conclusions that while class action treatment was appropriate for Dutch, English and French shareholders, it was not the “superior method” of litigation for the Austrian or German shareholders and so excluded those claimants from the class.

Posted In: Class Action Court Decisions, PSLRA/SLUSA Class Actions

New Jersey Federal Court Holds as Matter of First Impression that Dismissal of One Claim for Relief under Federal Securities Litigation Uniform Standards Act (SLUSA) Requires Dismissal of Entire Complaint

Plaintiffs filed a putative securities class action against various Lord Abbett entities and numerous other defendants as “a federal class action complaint based upon the failure of defendant Lord Abbett ... to disclose excessive fees and commissions they siphoned from Lord Abbett mutual fund investors in order to improperly pay and induce brokers to steer investors into Lord Abbett mutual funds.” In re Lord Abbett Mut. Funds Fee Litig., 463 F.Supp.2d 505, 506-07 (D. N.J. 2006). The class action complaint contained 10 claims for relief under both state and federal law, all premised on the allegation that Lord Abbett “compensated brokers excessively as an incentive to steer new investors into Lord Abbett mutual funds,” id., at 507. Defense attorneys moved to dismiss the class action under Rule 12(b)(6); the district court granted the motion, ruling in part that the state law claims were preempted by the federal Securities Litigation Uniform Standards Act (SLUSA), but granted leave to amend with respect to two of the federal claims in the class action complaint. Id. Relying on Rowinski v. Salomon Smith Barney Inc., 398 F.3d 294 (3d Cir.2005), defense attorneys sought reconsideration on the ground that because the court dismissed Counts 7-10 under SLUSA, the court was required to dismiss the entire class action. Id., at 507-08. Ultimately, the district court vacated its order granting leave to amend and dismissed the class action complaint with prejudice.

The class action complaint advanced claims for relief under the Investment Company Act of 1940 (ICA) (Counts 1-4), the Investment Adviser Act of 1940 (IAA) (Count 5), the New Jersey Consumer Fraud Act (Count 6) which plaintiff later dismissed, and for unjust enrichment and alleged breaches of fiduciary duties and duties of good faith, loyalty, fair dealing, due care, and/or candor (Counts 7-10). In re Lord Abbett, at 507 and n.1. The district court dismissed Counts 1-5 for failure to state a claim, and dismissed Counts 7-10 as preempted by SLUSA. Id., at 507. However, the court also concluded that Counts 3 and 4 under ICA §§ 36(b) and 48(a) failed “because no direct cause of action exists under those statutes,” and granted plaintiffs leave to amend the class action complaint so as to replead them derivatively. Id. The defense moved the district court to dismiss the class action complaint with prejudice on the ground that preemption of one class action claim under SLUSA required dismissal of the entire class action complaint. Id., at 508.

Continue reading "SLUSA Class Action Defense Cases-In re Lord Abbett: Federal Court Grants Defense Motion To Dismiss Class Action Complaint With Prejudice Holding SLUSA Preemption Of One Claim Requires Dismissal Of Entire Class Action" »

Posted In: Class Action Court Decisions, PSLRA/SLUSA Class Actions

When District Court Finds Signatory to a Written Arbitration Agreement is Equitably Estopped from Avoiding Arbitration with a Nonsignatory, the Writing Requirement of Section 16 of the FAA (Federal Arbitration Act) is Satisfied Thereby Permitting Court of Appeals to Consider Interlocutory Appeal Second Circuit Holds

After more than twenty class action lawsuits were filed against VISA, MasterCard and their member banks alleging a conspiracy to fix fees for conversion of foreign currencies in violation of the Sherman Act, the Judicial Panel on Multidistrict Litigation consolidated the actions in the Southern District of New York for pretrial purposes (“the MDL Litigation”), see In re Currency Conversion Fee Antitrust Litig., 265 F.Supp.2d 385 (S.D.N.Y. 2003). Defense attorneys moved to compel arbitration; the district court granted the motion in part, holding (1) cardholders with cardholder agreements containing arbitration clauses were bound to arbitrate their disputes, and (2) the equitable estoppel doctrine also required those cardholders to arbitrate their disputes “against non-signatory banks”; the district court rejected a claim that the illegal conspiracy allegation rendered the arbitration clauses unenforceable, see In re Currency Conversion Fee Antitrust Litig., 361 F.Supp.2d 237 (S.D.N.Y. 2005). Thereafter, a class action was filed against American Express Company, American Express Travel Related Services Company and American Express Centurion Bank (collectively “Amex”) asserting the same claims as those raised in the MDL Litigation and alleging that Amex conspired with the defendants in the MDL Litigation “to ‘impose compulsory arbitration clauses on [their] cardholders and the cardholders of [their] co-conspirators’ in order ‘to suppress competition and deprive their cardholders of a meaningful choice concerning the arbitration of disputes.’” Ross v. American Express Co., 478 F.3d 96, 98 (2d Cir. 2007). Though not a signatory to an arbitration agreement, Amex defense attorneys moved to dismiss the class action and compel arbitration under the equitable estoppel doctrine, and to stay the class action: “[Amex] argued that the arbitration clauses contained in the cardholder agreements with the MDL Defendants bound [the class action plaintiffs] to arbitrate their dispute with [Amex].” Id. The district court agreed that the doctrine of equitable estoppel applied because the claims in the class action complaint against Amex were “inextricably intertwined” with the claims in the MDL Litigation, but it refused to compel arbitration or stay the class action against Amex pending the arbitration of the MDL Litigation; the court believed that the antitrust allegations necessitated a jury trial on the issue of enforceability of the arbitration clauses in the cardholder agreements. Id. American Express appealed, asserting appellate jurisdiction under section 16 of the Federal Arbitration Act (FAA). Plaintiffs moved to dismiss the appeal for lack of jurisdiction, and the Second Circuit denied the motion. Id., at 98-99.

Continue reading "Amex Class Action Defense Case-Ross v. American Express: Federal Arbitration Act (FAA) Permits Appellate Review Where District Court Finds Signatory To Written Arbitration Agreement Equitably Estopped From Avoiding Arbitration With Nonsignatory" »

Posted In: Class Action Court Decisions

Securities Class Action Complaint Properly Dismissed for Failure to Meet Pleading Requirements Under Private Securities Litigation Reform Act (PSRLA) and for Failure to Adequately Allege Loss Causation Fourth Circuit Holds

Plaintiffs filed a putative securities class action against Cree, Inc., a high-technology business in Durham, North Carolina, for violations of Section 10(b) of the Securities Exchange Act of 1924 and Rule 10b-5 alleging it made misleading statements about its business transactions and that these misstatements were discovered when a former officer sued the company. Teachers' Retirement Sys. of La. v. Hunter, 477 F.3d 162, 167 (4th Cir. February 20, 2007). Defense attorneys moved to dismiss the class action under Rule 12(b)(6) on the ground that the allegations in the class action complaint failed to satisfy the heightened pleadings requirements imposed by the Private Securities Litigation Reform Act of 1995 (PSLRA), id. The district court dismissed the class action, holding that “the complaint failed to allege facts sufficient to support the plaintiffs' claims that Cree's statements were misleading” and that “plaintiffs did not sufficiently allege that the statements were made with the requisite scienter or that plaintiffs' losses were caused by the misrepresentations and omissions of which they complained.” Id. (italics in original). The Fourth Circuit affirmed, “concluding that plaintiffs are complaining only about market risks, not particularized securities fraud.” Id., at 168.

In June 2003, Cree’s co-founder Eric Hunter filed suit against Cree and various officers and directors, including his brother and co-founder F. Neal Hunter, for violations of state and federal securities laws, defamation and intentional infliction of emotional distress; the complaint additionally sought “a preliminary injunction against Cree and Neal Hunter to prevent alleged personal harassment that appeared to have attended an ongoing family fight.” Hunter, at 168. Eric had served as Cree’s CEO from 1987 to 1994, and news of his lawsuit caused Cree's stock price to drop from $22.21 to $18.10 in a single day. Id. Eric’s lawsuit was resolved only two months later, but “the allegations in his complaint quickly spawned numerous class actions by purchasers of Cree stock who alleged securities fraud during a period beginning on August 12, 1999, when Cree filed an annual report on SEC Form 10-K, and ending on June 13, 2003, the day after Eric Hunter filed his suit, purportedly revealing the truth of Cree's fraud during the previous years.” Id. Eventually the cases were consolidated in the Middle District of North Carolina, and the court named Teachers' Retirement System of Louisiana as lead plaintiff. The first amended class action complaint alleged violations of § 10(b) and Rule 10b-5 (prohibiting false or misleading statements), § 20(a) (control person liability), § 18 (personal liability for making misleading statements), and Sarbanes-Oxley Act § 304 (reimbursement of accounting restatement costs due to misconduct). Id., at 168-69. The specific allegations of the complaint are set forth at page 169.

The Fourth Circuit summarized the district court order granting defendants’ Rule 12(b)(6) motion as follows: “The court concluded first that ‘plaintiffs adequately identif[ied] the statements [of Cree] they believe[d] to be false and the reasons why they believe[d] them to be false, but fail[ed] to state with particularity facts supporting a strong inference of fraud.’ Second, the district court concluded that plaintiffs did not adequately plead that the defendants acted with the requisite scienter because the complaint neither identified misleading statements or omissions nor alleged sufficient circumstantial evidence of scienter. Finally, the court found that ‘plaintiffs ... failed to demonstrate a direct relationship between their losses and the alleged misrepresentations and have failed, therefore, to establish the required element of loss causation.’ [¶] Having dismissed the first count alleging a claim under § 10(b) and Rule 10b-5, the court also dismissed plaintiffs' claims under §§ 20(a) and 20A . . . because these claims depended upon the liability alleged in the first count. Similarly, the court dismissed plaintiffs' claim pursuant to § 18 . . . because plaintiffs failed to plead facts showing that Cree made false statements. Finally, the court dismissed plaintiffs' claim under § 304 . . . because plaintiffs did not allege that Cree was required to issue any restatement of its financial reports.” Hunter, at 169-70.

Continue reading "Class Action Defense Cases-Teachers’ Retirement v. Hunter: Fourth Circuit Affirms Dismissal of Securities Class Action Based On Heightened Pleadings Requirements Under Federal Private Securities Litigation Reform Act (PSLRA)" »

Posted In: Class Action Court Decisions, PSLRA/SLUSA Class Actions

Whether Medical Monitoring of Persons who Ingested Vioxx is Available cannot be Determined on “Bare Pleadings” but Requires Development of Evidence, as does Impact on Viability of Class Action due to Absence of Physical Injuries Caused by Vioxx, New Jersey State Court Holds

Plaintiffs filed a putative products liability class action against Merck in New Jersey state court purporting to represent individuals “who had taken the drug Vioxx in any dose for at least six consecutive weeks at any time between May 20, 1999 and September 30, 2004” and alleging damages arising from the use of Vioxx. Sinclair v. Merck & Co., Inc., 913 A.2d 832, 833-34 (N.J.App.Div. 2007). Though plaintiffs did not claim to have suffered any physical injuries from using Vioxx, the class action complaint prayed for the formation of “a court-administered medical screening program, funded by Merck, ‘to provide for and/or reimburse medical and diagnostic tests for each member of the Class to detect [UMIs] and other latent or unrecognized injuries and, if such injuries are detected and diagnosed, to educate Plaintiffs about available treatment strategies.’” Id., at 834. Plaintiffs argued that “the cost of diagnostic testing represented an ascertainable economic loss for which they were entitled to compensation.” Id. Defense attorneys moved to dismiss the class action on the ground that a cause of action for medical monitoring cannot stand; the trial court agreed and granted the motion. Id. The Superior Court of New Jersey, Appellate Division, reversed, holding that the dismissal of the class action complaint “prematurely terminated plaintiffs' opportunity to establish the existence of a legally cognizable claim.” Id.

The sole issue on appeal concerned the viability of plaintiffs' medical monitoring claim. Sinclair, at 834. The trial court had relied upon two opinions: Mauro v. Owens-Corning Fiberglas Corp., 542 A.2d 16 (N.J.App.Div. 1988), aff'd sub. nom., Mauro v. Raymark Indus., Inc., 561 A.2d 257 (N.J. 1989) and Theer v. Philip Carey Co., 611 A.2d 148 (N.J.App.Div. 1992), rev'd, 628 A.2d 724 (N.J. 1993). It concluded that “pure” products liability cases were different from toxic tort claims, and opined that the New Jersey Supreme Court would not extend the availability of medical monitoring as a remedy to the Vioxx class action claims; accordingly, it dismissed the class action complaint in its entirety. Id.

Continue reading "Vioxx Class Action Defense Case-Sinclair v. Merck: New Jersey Appellate Court Reinstates Vioxx Class Action Against Merck For Development Of Evidence Regarding Availability Of Medical Monitoring As Relief" »

Posted In: Class Action Court Decisions

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 prohibiting kickbacks and unearned fees are set forth in § 3500.14, which provides:

§ 3500.14. Prohibition against kickbacks and unearned fees

(a) Section 8 violation. Any violation of this section is a violation of section 8 of RESPA (12 U.S.C. 2607) and is subject to enforcement as such under § 3500.19.

(b) No referral fees. No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person. Any referral of a settlement service is not a compensable service, except as set forth in § 3500.14(g)(1). A company may not pay any other company or the employees of any other company for the referral of settlement service business.

(c) No split of charges except for actual services performed. No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section. The source of the payment does not determine whether or not a service is compensable. Nor may the prohibitions of this Part be avoided by creating an arrangement wherein the purchaser of services splits the fee.

Continue reading "24 CFR § 3500.14— Prohibition Against Kickbacks And Unearned Fees Under Regulation X (Real Estate Settlement Procedures Act-RESPA)" »

Posted In: Statutes & Rules

To aid defense attorneys in anticipating the claims against which they may have to defend in California, 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 class action cases generally top the list, often by a wide margin, and during the past that was particularly true. This report covers the time period from March 16 – March 22, 2007, during which time approximately 59 class action lawsuits were filed in these California state and federal courts. Labor law class action filings accounted for nearly half, with 27 new lawsuits (46%). The only other categories of cases to break the 10% threshold involved unfair competition law (UCL) claims, which include false advertising class action cases, and securities law claims, each of which had 7 new class action filings (12%).

Posted In: Class Actions In The News

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 § 3500.13, which provides:

§ 3500.13. Relation to State laws

(a) State laws that are inconsistent with RESPA or this part are preempted to the extent of the inconsistency. However, RESPA and these regulations do not annul, alter, affect, or exempt any person subject to their provisions from complying with the laws of any State with respect to settlement practices, except to the extent of the inconsistency.

(b) Upon request by any person, the Secretary is authorized to determine if inconsistencies with State law exist; in doing so, the Secretary shall consult with appropriate Federal agencies.

(1) The Secretary may not determine that a State law or regulation is inconsistent with any provision of RESPA or this part, if the Secretary determines that such law or regulation gives greater protection to the consumer.

(2) In determining whether provisions of State law or regulations concerning affiliated business arrangements are inconsistent with RESPA or this part, the Secretary may not construe those provisions that impose more stringent limitations on affiliated business arrangements as inconsistent with RESPA so long as they give more protection to consumers and/or competition.

Continue reading "24 CFR § 3500.13—Questions Or Suggestions From Public And Copies Of Public Guidance Documents Under Regulation X (Real Estate Settlement Procedures Act-RESPA)" »

Posted In: Statutes & Rules