Class Action Defense Blog

Federal Court for the District of Columbia Holds that Class Action Under District of Columbia Laws Predicated on Foreign Currency Exchange Rates Charged at Russian Hotel need not be Dismissed for Forum Non Conveniens and Survived Motion to Dismiss for Failure to State a Claim

Plaintiffs filed a putative class action against Marriott for unfair business practices under the Consumer Protection Procedures Act of the District of Columbia (CPPA) alleging that the company misrepresents the pricing practices at Marriott’s Moscow Hotel, specifically with respect to the exchange rates quoted by Marriott to its customers. Shaw v. Marriott Int’l, Inc., 474 F.Supp.2d 141, 142-43 (D.D.C. 2007). The action had been filed in the superior court, but the defense removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Id., at 143, 147 n.5. Plaintiff Shaw reserved a room at the Marriott-owned Renaissance Moscow Hotel at a rate of $425 per night. Id., at 143. The Marriott website stated that the exchange rate was 27.78 Russian rubles to the dollar, but when he checked out of the hotel, his bill reflected an exchange rate of 32 rubles to the dollar, id. Other class representatives had similar experiences. Id. Defense attorneys filed a motion to dismiss the class action for failure to state a claim or on the ground of forum non conveniens because the events central to the class action took place in Russia, id., at 144, which the district court denied, id., at 142.

The district court began with the forum non conveniens argument. The court readily concluded that the defense argument misstated the allegations of the class action complaint because the defense focused on acts in Russia and alleged violations of Russian law. Shaw, at 144-45. In point of fact, the court held, the class action focused on events that transpired at Marriott’s corporate headquarters in the District of Columbia and on violations of District of Columbia laws, id. The federal court also found that a balancing of the public and private interest factors supports keeping the case in the District of Columbia, id., at 145-46. Further, “There is no question that testimony from Marriott's witnesses related to these claims is more accessible in the District of Columbia, as are business records and other documents.” Id., at 146.

Continue reading "Class Action Defense Cases-Shaw v. Marriott: Federal Court Holds Class Action Under District Of Columbia Unfair Business Practice Laws Properly Brought In United States And Survives Motion To Dismiss" »

Posted In: Class Action Court Decisions

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 skip because 24 CFR § 3500.20 was removed and reserved; the next RESPA regulation, therefore, is found at 24 CFR § 3500.21, which sets forth the regulations concerning the transfer of mortgage servicing. Section 3500.21 provides in full:

§ 3500.21. Mortgage servicing transfers;/p>

(a) Definitions.As used in this section:

Master servicer means the owner of the right to perform servicing, which may actually perform the servicing itself or may do so through a subservicer.

Mortgage servicing loan means a federally related mortgage loan, as that term is defined in § 3500.2, subject to the exemptions in § 3500.5, when the mortgage loan is secured by a first lien. The definition does not include subordinate lien loans or open-end lines of credit (home equity plans) covered by the Truth in Lending Act and Regulation Z, including open-end lines of credit secured by a first lien.

Qualified written request means a written correspondence from the borrower to the servicer prepared in accordance with paragraph (e)(2) of this section.

Subservicer means a servicer who does not own the right to perform servicing, but who does so on behalf of the master servicer.

Transferee servicer means a servicer who obtains or who will obtain the right to perform servicing functions pursuant to an agreement or understanding.

Transferor servicer means a servicer, including a table funding mortgage broker or dealer on a first lien dealer loan, who transfers or will transfer the right to perform servicing functions pursuant to an agreement or understanding.

(b) Servicing Disclosure Statement and Applicant Acknowledgement; requirements.(1) At the time an application for a mortgage servicing loan is submitted, or within 3 business days after submission of the application, the lender, mortgage broker who anticipates using table funding, or dealer who anticipates a first lien dealer loan shall provide to each person who applies for such a loan a Servicing Disclosure Statement.This requirement shall not apply when the application for credit is turned down within three business days after receipt of the application. A format for the Servicing Disclosure Statement appears as Appendix MS-1 to this part. Except as provided in paragraph (b)(2) of this section, the specific language of the Servicing Disclosure Statement is not required to be used, but the Servicing Disclosure Statement must include the information set out in paragraph (b)(3) of this section, including the statement of the borrower's rights in connection with complaint resolution. The information set forth in Instructions to Preparer on the Servicing Disclosure Statement need not be included on the form given to applicants, and material in square brackets is optional or alternative language.

(2) The Applicant's Acknowledgement portion of the Servicing Disclosure Statement in the format stated is mandatory. Additional lines may be added to accommodate more than two applicants.

(3) The Servicing Disclosure Statement must contain the following information, except as provided in paragraph (b)(3)(ii) of this section:

(i) Whether the servicing of the loan may be assigned, sold or transferred to any other person at any time while the loan is outstanding.If the lender, table funding mortgage broker, or dealer in a first lien dealer loan does not engage in the servicing of any mortgage servicing loans, the disclosure may consist of a statement to the effect that there is a current intention to assign, sell, or transfer servicing of the loan.

(ii) The percentages (rounded to the nearest quartile (25%)) of mortgage servicing loans originated by the lender in each calendar year for which servicing has been assigned, sold, or transferred for such calendar year. Compliance with this paragraph (b)(3)(ii) is not required if the lender, table funding mortgage broker, or dealer on a first lien dealer loan chooses option B in the model format in paragraph (b)(4) of this section, including in square brackets the language "[and have not serviced mortgage loans in the last three years.]".The percentages shall be provided as follows:

(A) This information shall be set out for the most recent three calendar years completed, with percentages as of the end of each year.This information shall be updated in the disclosure no later than March 31 of the next calendar year. Each percentage should be obtained by using as the numerator the number of mortgage servicing loans originated during the calendar year for which servicing is transferred within the calendar year and, as the denominator, the total number of mortgage servicing loans originated in the calendar year. If the volume of transfers is less than 12.5 percent, the word "nominal" or the actual percentage amount of servicing transfers may be used.

(B) This statistical information does not have to include the assignment, sale, or transfer of mortgage loan servicing by the lender to an affiliate or subsidiary of the lender. However, lenders may voluntarily include transfers to an affiliate or subsidiary.The lender should indicate whether the percentages provided include assignments, sales, or transfers to affiliates or subsidiaries.

(C) In the alternative, if applicable, the following statement may be substituted for the statistical information required to be provided in accordance with paragraph (b)(3)(ii) of this section: "We have previously assigned, sold, or transferred the servicing of federally related mortgage loans."

(iii) The best available estimate of the percentage (0 to 25 percent, 26 to 50 percent, 51 to 75 percent, or 76 to 100 percent) of all loans to be made during the 12-month period beginning on the date of origination for which the servicing may be assigned, sold, or transferred. Each percentage should be obtained by using as the numerator the estimated number of mortgage servicing loans that will be originated for which servicing may be transferred within the 12-month period and, as the denominator, the estimated total number of mortgage servicing loans that will be originated in the 12-month period.

(A) If the lender, mortgage broker, or dealer anticipates that no loan servicing will be sold during the calendar year, the word "none" may be substituted for "0 to 25 percent." If it is anticipated that all loan servicing will be sold during the calendar year, the word "all" may be substituted for "76 to 100 percent."

(B) This statistical information does not have to include the estimated assignment, sale, or transfer of mortgage loan servicing to an affiliate or subsidiary of that person. However, this information may be provided voluntarily. The Servicing Disclosure Statements should indicate whether the percentages provided include assignments, sales or transfers to affiliates or subsidiaries.

(iv) The information set out in paragraphs (d) and (e) of this section.

(v) A written acknowledgement that the applicant (and any co-applicant) has/have read and understood the disclosure, and understand that the disclosure is a required part of the mortgage application. This acknowledgement shall be evidenced by the signature of the applicant and any co-applicant.

(4) The following is a model format, which includes several options, for complying with the requirements of paragraph (b)(3) of this section.The model format may be annotated with additional information that clarifies or enhances the model language.The lender or table funding mortgage broker (or dealer) should use the language that best describes the particular circumstances.

(i) Model Format: The following is the best estimate of what will happen to the servicing of your mortgage loan:

(A) Option A.We may assign, sell, or transfer the servicing of your loan while the loan is outstanding.[We are able to service your loan[.][,] and we [will] [will not] [haven't decided whether to] service your loan.]; or

(B) Option B.We do not service mortgage loans[.][,] [and have not serviced mortgage loans in the past three years.]We presently intend to assign, sell, or transfer the servicing of your mortgage loan. You will be informed about your servicer.

(C) As appropriate, the following paragraph may be used:

We assign, sell, or transfer the servicing of some of our loans while the loans are outstanding, depending on the type of loan and other factors.For the program for which you have applied, we expect to [assign, sell, or transfer all of the mortgage servicing] [retain all of the mortgage servicing] [assign, sell, or transfer ___% of the mortgage servicing].

(ii) [Reserved]

(c) Servicing Disclosure Statement and Applicant Acknowledgement; delivery.The lender, table funding mortgage broker, or dealer that anticipates a first lien dealer loan shall deliver Servicing Disclosure Statements to each applicant for mortgage servicing loans.Each applicant or co-applicant must sign an Acknowledgement of receipt of the Servicing Disclosure Statement before settlement.

(1) In the case of a face-to-face interview with one or more applicants, the Servicing Disclosure Statement shall be delivered at the time of application. An applicant present at the interview may sign the Acknowledgment on his or her own behalf at that time. An applicant present at the interview also may accept delivery of the Servicing Disclosure Statement on behalf of the other applicants.

(2) If there is no face-to-face interview, the Servicing Disclosure Statement shall be delivered by placing it in the mail, with prepaid first-class postage, within 3 business days from receipt of the application.If co-applicants indicate the same address on their application, one copy delivered to that address is sufficient.If different addresses are shown by co-applicants on the application, a copy must be delivered to each of the co-applicants.

(3) The signed Applicant Acknowledgment(s) shall be retained for a period of 5 years after the date of settlement as part of the loan file for every settled loan.There is no requirement for retention of Applicant Acknowledgment(s) if the loan is not settled.

(d) Notices of Transfer; loan servicing. (1) Requirement for notice. (i) Except as provided in this paragraph (d)(1)(i) or paragraph (d)(1)(ii) of this section, each transferor servicer and transferee servicer of any mortgage servicing loan shall deliver to the borrower a written Notice of Transfer, containing the information described in paragraph (d)(3) of this section, of any assignment, sale, or transfer of the servicing of the loan.The following transfers are not considered an assignment, sale, or transfer of mortgage loan servicing for purposes of this requirement if there is no change in the payee, address to which payment must be delivered, account number, or amount of payment due:

(A) Transfers between affiliates;

(B) Transfers resulting from mergers or acquisitions of servicers or subservicers; and

(C) Transfers between master servicers, where the subservicer remains the same.

(ii) The Federal Housing Administration (FHA) is not required under paragraph(d) of this section to submit to the borrower a Notice of Transfer in cases where a mortgage insured under the National Housing Act is assigned to FHA.

(2) Time of notice. (i) Except as provided in paragraph (d)(2)(ii) of this section:

(A) The transferor servicer shall deliver the Notice of Transfer to the borrower not less than 15 days before the effective date of the transfer of the servicing of the mortgage servicing loan;

(B) The transferee servicer shall deliver the Notice of Transfer to the borrower not more than 15 days after the effective date of the transfer; and

(C) The transferor and transferee servicers may combine their notices into one notice, which shall be delivered to the borrower not less than 15 days before the effective date of the transfer of the servicing of the mortgage servicing loan.

(ii) The Notice of Transfer shall be delivered to the borrower by the transferor servicer or the transferee servicer not more than 30 days after the effective date of the transfer of the servicing of the mortgage servicing loan in any case in which the transfer of servicing is preceded by:

(A) Termination of the contract for servicing the loan for cause;

(B) Commencement of proceedings for bankruptcy of the servicer; or

(C) Commencement of proceedings by the Federal Deposit Insurance Corporation(FDIC) or the Resolution Trust Corporation (RTC) for conservatorship or receivership of the servicer or an entity that owns or controls the servicer.

(iii) Notices of Transfer delivered at settlement by the transferor servicer and transferee servicer, whether as separate notices or as a combined notice, will satisfy the timing requirements of paragraph (d)(2) of this section.

(3) Notices of Transfer; contents. The Notices of Transfer required under paragraph (d) of this section shall include the following information:

(i) The effective date of the transfer of servicing;

(ii) The name, consumer inquiry addresses (including, at the option of the servicer, a separate address where qualified written requests must be sent), and a toll-free or collect-call telephone number for an employee or department of the transferee servicer;

(iii) A toll-free or collect-call telephone number for an employee or department of the transferor servicer that can be contacted by the borrower for answers to servicing transfer inquiries;

(iv) The date on which the transferor servicer will cease to accept payments relating to the loan and the date on which the transferee servicer will begin to accept such payments. These dates shall either be the same or consecutive days;

(v) Information concerning any effect the transfer may have on the terms or the continued availability of mortgage life or disability insurance, or any other type of optional insurance, and any action the borrower must take to maintain coverage;

(vi) A statement that the transfer of servicing does not affect any other term or condition of the mortgage documents, other than terms directly related to the servicing of the loan; and

(vii) A statement of the borrower's rights in connection with complaint resolution, including the information set forth in paragraph (e) of this section.Appendix MS-2 of this part illustrates a statement satisfactory to the Secretary.

(4) Notices of Transfer; sample notice. Sample language that may be used to comply with the requirements of paragraph (d) of this section is set out in Appendix MS-2 of this part.Minor modifications to the sample language may be made to meet the particular circumstances of the servicer, but the substance of the sample language shall not be omitted or substantially altered.

(5) Consumer protection during transfer of servicing. During the 60-day period beginning on the effective date of transfer of the servicing of any mortgage servicing loan, if the transferor servicer (rather than the transferee servicer that should properly receive payment on the loan) receives payment on or before the applicable due date (including any grace period allowed under the loan documents), a late fee may not be imposed on the borrower with respect to that payment and the payment may not be treated as late for any other purposes.

(e) Duty of loan servicer to respond to borrower inquiries.

(1) Notice of receipt of inquiry. Within 20 business days of a servicer of a mortgage servicing loan receiving a qualified written request from the borrower for information relating to the servicing of the loan, the servicer shall provide to the borrower a written response acknowledging receipt of the qualified written response.This requirement shall not apply if the action requested by the borrower is taken within that period and the borrower is notified of that action in accordance with the paragraph (f)(3) of this section.By notice either included in the Notice of Transfer or separately delivered by first-class mail, postage prepaid, a servicer may establish a separate and exclusive office and address for the receipt and handling of qualified written requests.

(2) Qualified written request; defined. (i) For purposes of paragraph (e) of this section, a qualified written request means a written correspondence (other than notice on a payment coupon or other payment medium supplied by the servicer) that includes, or otherwise enables the servicer to identify, the name and account of the borrower, and includes a statement of the reasons that the borrower believes the account is in error, if applicable, or that provides sufficient detail to the servicer regarding information relating to the servicing of the loan sought by the borrower.

(ii) A written request does not constitute a qualified written request if it is delivered to a servicer more than 1 year after either the date of transfer of servicing or the date that the mortgage servicing loan amount was paid in full, whichever date is applicable.

(3) Action with respect to the inquiry. Not later than 60 business days after receiving a qualified written request from the borrower, and, if applicable, before taking any action with respect to the inquiry, the servicer shall:

(i) Make appropriate corrections in the account of the borrower, including the crediting of any late charges or penalties, and transmit to the borrower a written notification of the correction. This written notification shall include the name and telephone number of a representative of the servicer who can provide assistance to the borrower; or

(ii) After conducting an investigation, provide the borrower with a written explanation or clarification that includes:

(A) To the extent applicable, a statement of the servicer's reasons for concluding the account is correct and the name and telephone number of an employee, office, or department of the servicer that can provide assistance to the borrower; or

(B) Information requested by the borrower, or an explanation of why the information requested is unavailable or cannot be obtained by the servicer, and the name and telephone number of an employee, office, or department of the servicer that can provide assistance to the borrower.

(4) Protection of credit rating. (i) During the 60-business day period beginning on the date of the servicer receiving from a borrower a qualified written request relating to a dispute on the borrower's payments, a servicer may not provide adverse information regarding any payment that is the subject of the qualified written request to any consumer reporting agency (as that term is defined in section 603 of the Fair Credit Reporting Act, 15 U.S.C. 1681a).

(ii) In accordance with section 17 of RESPA (12 U.S.C. 2615), the protection of credit rating provision of paragraph (e)(4)(i) of this section does not impede a lender or servicer from pursuing any of its remedies, including initiating foreclosure, allowed by the underlying mortgage loan instruments.

(f) Damages and costs. (1) Whoever fails to comply with any provision of this section shall be liable to the borrower for each failure in the following amounts:

(i) Individuals.In the case of any action by an individual, an amount equal to the sum of any actual damages sustained by the individual as the result of the failure and, when there is a pattern or practice of noncompliance with the requirements of this section, any additional damages in an amount not to exceed $1,000.

(ii) Class Actions. In the case of a class action, an amount equal to the sum of any actual damages to each borrower in the class that result from the failure and, when there is a pattern or practice of noncompliance with the requirements of this section, any additional damages in an amount not greater than $1,000 for each class member.However, the total amount of any additional damages in a class action may not exceed the lesser of $500,000 or 1 percent of the net worth of the servicer.

(iii) Costs.In addition, in the case of any successful action under paragraph (f) of this section, the costs of the action and any reasonable attorneys' fees incurred in connection with the action.

(2) Nonliability.A transferor or transferee servicer shall not be liable for any failure to comply with the requirements of this section, if within 60 days after discovering an error (whether pursuant to a final written examination report or the servicer's own procedures) and before commencement of an action under this section and the receipt of written notice of the error from the borrower, the servicer notifies the person concerned of the error and makes whatever adjustments are necessary in the appropriate account to ensure that the person will not be required to pay an amount in excess of any amount that the person otherwise would have paid.

(g) Timely payments by servicer. If the terms of any mortgage servicing loan require the borrower to make payments to the servicer of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the mortgaged property, the servicer shall make payments from the escrow account in a timely manner for the taxes, insurance premiums, and other charges as the payments become due, as governed by the requirements in § 3500.17(k).

(h) Preemption of State laws. A lender who makes a mortgage servicing loan or a servicer shall be considered to have complied with the provisions of any State law or regulation requiring notice to a borrower at the time of application for a loan or transfer of servicing of a loan if the lender or servicer complies with the requirements of this section.Any State law requiring notice to the borrower at the time of application or at the time of transfer of servicing of the loan is preempted, and there shall be no additional borrower disclosure requirements. Provisions of State law, such as those requiring additional notices to insurance companies or taxing authorities, are not preempted by section 6 of RESPA or this section, and this additional information may be added to a notice prepared under this section, if the procedure is allowable under State law.

Posted In: Statutes & Rules

To aid California class action defense attorneys in anticipating claims against which they may have to defend, we provide weekly an unofficial summary of legal categories for class actions filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. This report covers the time period of April 20 – April 26, 2007. We include only those categories that contain 10% or more of the class action filings during the relevant timeframe. Approximately 51 class action lawsuits were filed in these California state and federal courts during that time period, of which 21 involved employment law class action claims, which represents approximately 41% of the class actions filed during this time period. The only other categories to break the 10% threshold consisted of alleged unfair business practice class actions, which include false advertising claims, with 10 new class action filings (20%), and class actions alleging violations of the federal Americans with Disabilities Act (ADA), with 8 new filings (16%).

Posted In: Class Actions In The News

Federal Court Refuses to “Participate in Scheme” by Class Action Plaintiff Law Firm to Formulate Theory for Class Action Lawsuit and then Solicit “Stand-In Plaintiffs” to Serve as Class Representatives

Plaintiff filed a class action against Oreck Direct alleging unfair business practices in the advertisement and sale of its air purifiers. Bodner v. Oreck Direct, LLC, ___ F.Supp.2d ___, (N.D. Cal. April 25, 2007) [Slip Opn., at 1]. Plaintiff’s lawyer moved the court to certify the lawsuit as a class action and for appointment of lead plaintiff and lead counsel; defense attorneys opposed the motion. Id. The district court denied the motion, criticizing plaintiff’s law firm for formulating a class action lawsuit and then going in search of a class action plaintiff regardless of “the lack of a fitting plaintiff or the lack of ethical scruples.” Id., at 4.

Plaintiff alleges that he suffers from allergies and purchased an Oreck air purifier in reliance on defendant’s infomercial claiming that the product “would remove allergens, bacteria, dirt and dust from the air”; the thrust of his class action complaint is that the air purifier did nothing to alleviate his allergies. Bodner, at 1-2. The district court noted, however, that plaintiff did not even know what he was allergic to, had never been diagnosed or treated for allergies, frequently left open the window to his apartment, and was “exposed to allergens in other locations throughout the day,” id., at 2. Moreover, plaintiff’s air purifier was never tested to determine whether it performed as represented, id. The federal court also detailed that the class action had been formulated by plaintiff’s law firm before the firm “found” plaintiff, summarizing at page 2:

Continue reading "Class Action Defense Cases-Bodner v. Oreck: California Federal Court Refuses To Certify Class Action And Criticizes Ethics Of Plaintiff’s Counsel Westrup, Klick" »

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

Commission Exemption to Overtime Pay Under Federal Fair Labor Standards Act (FLSA) need only be Established by Preponderance of the Evidence Seventh Circuit Holds

Plaintiffs filed a labor law class action against their employer for violations of the federal Fair Labor Standards Act (FLSA) alleging that they were wrongly denied overtime pay. Defense attorneys moved for summary judgment on the ground that members of the putative class action were exempt from overtime pay under FLSA; the district court agreed and entered judgment in favor of the employer and against the class action plaintiffs. Yi v. Sterling Collision Centers, Inc., 480 F.3d 505, 506 (7th Cir. 2007). The Seventh Circuit affirmed.

This case involves “whether a system of compensation common in the auto repair industry is a commission system within the meaning of the [FLSA].” Yi, at 506. While the FLSA requires overtime pay for hours worked in excess of 40 hours per week, see 29 U.S.C. § 207(a)(1), the Circuit Court noted that “there is an exemption for workers in retail stores or other service establishments (including the automobile repair service that is the defendant in this case) who (1) are paid a wage that exceeds one and a half times the minimum wage and (2) receive more than half their compensation in the form of “commissions on goods or services,” Yi, at 506 (citing § 207(i)).

Preliminarily, the Circuit Court flatly rejected the argument that the defense must establish the exemption by “clear and affirmative evidence.” Yi, at 506. While it recognized that some sister circuits have used this or similar language, id., at 506-07, the Seventh Circuit’s analysis of the statute and the case law led it to a different conclusion: the burden of proof is no greater than in other federal civil cases – preponderance of the evidence. Id., at 507. In the Court’s opinion, the narrow interpretation of exemptions referenced in decisional law is properly viewed as “a tie breaker,” id., at 508.

Continue reading "FLSA Class Action Defense Cases-Yi v. Sterling Collision: Seventh Circuit Affirms Summary Judgment In Favor Of Defense In FLSA (Fair Labor Standards Act) Class Action Case Based On Commission Exemption To Overtime Pay" »

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

Intervention in Class Action Rests in the Sound Discretion of the Trial Court and Lower Court did not Abuse that Discretion in Denying Leave to Intervene to Object to Class Action Settlement Illinois Court Holds

After more than 20 class action and individual lawsuits were filed against Ingersoll-Rand and Kryptonite based on the ease with which the Kryptonite U-Lock bicycle locks could be picked, defendants reached a settlement with plaintiffs in two of the nationwide class action lawsuits. Rosen v. Ingersoll-Rand Co., ___ N.E.2d ___ (Ill.App. March 30, 2007) [Slip Opn., at 1-3]. The class action settlement allowed purchasers of the U-Lock to exchange it for a more secure lock, or alternatively to receive vouchers redeemable for other Kryptonite products. Id., at 3. The proposed settlement addressed other terms as well, such as redress of class members whose bicycles were stolen because the U-Lock was picked, id. The trial court preliminarily approved the class action settlement, and held that it had jurisdiction over all class members residing in the United States and Canada, id. Certain named plaintiffs in other class action lawsuits objected to the proposed settlement on the ground that it did not adequately protect their interests and sought leave to intervene in the Illinois class action, id., at 4-5. The trial court denied intervention and approved the settlement, id., at 5-6. The appellate court affirmed.

With respect to the intervention motion, the appellate court held that, even though “courts should be indulgent [in class action cases] where objections concern notice of settlement,” Rosen, at 10, appellant had not satisfied the statutory test for intervention in a class action. In Illinois, a person seeking to intervene in a class action “may do so with leave of court and such leave shall be liberally granted except when the court finds that such intervention will disrupt the conduct of the action or otherwise prejudice the rights of the parties or the class.” Id. (citing Ill. Code Civ. Proc., §2-804(a)). The motion is left to the “sound judicial discretion” of the court and “will not be reversed absent an abuse of that discretion.” Id., at 11 (citation omitted). Appellant admitted that he was not entitled to intervene as of right, id., and the court held that the lower court did not abuse its discretion in denying permissive leave to amend, id., at 11-12.

NOTE: As a preliminary matter, the appellate court held that proposed intervenors had standing to appeal – or as the appellate court considered the issue, that appellants “should be considered a ‘party’ for the purposes of appealing the approval of the settlement.” Rosen, at 8-9

Posted In: Class Action Court Decisions

The American Conference Institute is sponsoring a two-day seminar entitled, "Defending Consumer Protection Class Actions." The conference will be held at the Fairmont Hotel in San Francisco on May 21 and 22, 2007. The conference promises to be well worthwhile. Additional information on this class action seminar may be found here.

More information about the American Conference Institute may be found at its website: www.americanconference.com.

Posted In: Class Actions In The News

As Matter of First Impression, if Class Action Complaint Alleges Less than $5 Million in Damages then Defense Bears Burden of Proving “Legal Certainty” that Jurisdictional Amount Required by CAFA (Class Action Fairness Act of 2005) is Satisfied Ninth Circuit Holds

Plaintiff filed a class action against her former employer in Oregon state court alleging violations of state labor laws and stating that the damages sought would not exceed $5 million. Lowdermilk v. U. S. Bank Nat'l Ass'n, 479 F.3d 994, 995 (9th Cir. 2007). Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA); plaintiff filed a motion to remand the class action to state court, arguing that the amount in controversy did not exceed $5 million based on the allegations in the class action complaint. The district court held that unless plaintiff’s $5 million limitation on the amount in controversy was made in bad faith, then it was bound by the limitation stated therein; accordingly, it remanded the class action on the ground that the defense had not demonstrated that the damages limitation had been made in bad faith so the amount in controversy did not meet the $5 million threshold required by CAFA, id., at 996. The Ninth Circuit granted the employer’s request for leave to appeal. Id. As a matter of first impression, the Ninth Circuit held that when a class action complaint specifically alleges less than $5 million in damages, then CAFA requires that “the party seeking removal must prove with ‘legal certainty’ that the amount in controversy is satisfied, notwithstanding the prayer for relief in the complaint.” Id.

The Ninth Circuit concisely summarized the issue as follows: “In this case we are called upon to resolve a question of first impression: Under the Class Action Fairness Act of 2005 . . ., when the plaintiff has pled damages less than the jurisdictional amount, what must the defendant prove in order to remove the case to federal court?” Lowdermilk, at 995-96. The Circuit Court began its analysis by noting that the defense bears the burden of establishing removal jurisdiction, id., at 997 (citing Abrego Abrego v. Dow Chemical Co., 443 F.3d 676, 685 (9th Cir. 2006) (per curiam)), and that it was not disputed that CAFA's minimal diversity and numerosity requirements had been met, id.

The class action complaint sought damages “in total, less than five million dollars” plus attorney fees. Lowdermilk, at 997-98. The defense submitted evidence that the damages will exceed $5 million, and argued additionally that attorney fees should be included in determining the amount in controversy. Id., at 998. The Ninth Circuit began its analysis by rejecting defense claims that plaintiff failed to specify an amount in controversy; rather, it held that this case presented the precise situation reserved in Abrego Abrego – “What proof must the defendant adduce to contradict the plaintiff's claim that her damages are less than the jurisdictional amount?” Id. It answered this question of first impression by requiring “that where the plaintiff has pled an amount in controversy less than $5,000,000, the party seeking removal must prove with legal certainty that CAFA's jurisdictional amount is met.” Id., at 1000.

Continue reading "CAFA Class Action Defense Cases-Lowdermilk v. U.S. Bank: Ninth Circuit Holds Class Action Fairness Act (CAFA) Requires Defense Prove Certainty of Jurisdictional Amount For Removal When Class Action Claims Less Than $5 Million" »

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

Class Action Alleging Failure to Disclose Profit in Currency Exchange Transactions Fails Illinois Court Holds

Plaintiffs filed a class action in Illinois state court against various American Express Travel Related Services Company alleging violations of the state’s Consumer Fraud and Deceptive Business Practices Act in connection with foreign currency conversions services; specifically, the class action challenged Amex’s failure to disclose the exchange rate at which it would convert currency purchased from its customers. Sanchez v. American Express Travel Related Servs. Co., Inc., ___ N.E.2d ___ (Ill.App. March 29, 2007) [Slip Opn., at 1-3]. A defense motion to dismiss the class action was denied, id., at 3-4. Defense attorneys then moved for summary judgment arguing that each travel office sets the per transaction fee it charges, that the per transaction fee is not intended to be a representation that Amex will not receive any additional profit out of the transaction, and that Amex could not disclose the “float” because it buys and sells currency in bulk and does not know at the time it exchanges currency for a customer the rate that it will receive for that currency. Id., at 5-8. The deposition testimony elicited during discovery in the class action revealed further that the mark-up on the sale of currency to customers varies from travel office to travel office, and that the exchange rate for the purchase of currency is set by each travel office based on the local market and competition. Id., at 10-13. Further, Amex admitted that it hoped to profit by more than $3 per transaction, id., at 13-14. The trial court granted the defense summary judgment motion because plaintiff had no evidence that Amex represented the $3 transaction fee to be its net profit, id., at 14-15, and because plaintiff failed to prove that he suffered any damage, id., at 17. The appellate court affirmed.

The class action complaint alleged that, in addition to the posted $3 service fee for each currency exchange, Amex profited from the “float” between the rate it paid for the foreign currency and the rate at which it sold the currency. Sanchez, at 2-3. The appellate opinion quotes from the class action complaint at page 3 as follows: “In addition to profiting by charging each of its customers a ‘fee’ for the [foreign currency exchange service], American Express also profits by skimming the difference between the exchange rate it receives and the exchange rate it uses to convert a customer’s currency. The difference between the two exchange rates is a hidden, undisclosed charge it assesses to each of its customers that use the Service (hereafter ‘the Money Skimming Scheme’).”

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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 concerning the validity of contracts and liens under RESPA are set forth in § 3500.18, while the regulations providing for the enforcement of RESPA are contained in § 3500.19. Those regulations provide in full:

§ 3500.18. Validity of contracts and liens

Section 17 of RESPA (12 U.S.C. § 2615) governs the validity of contracts and liens under RESPA.

§ 3500.19. Enforcement

(a) Enforcement Policy. It is the policy of the Secretary regarding RESPA enforcement matters to cooperate with Federal, State or local agencies having supervisory powers over lenders