Posted On: May 31, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Issues-Ledbetter v. Goodyear: Divided Supreme Court Holds Statute Of Limitations For Title VII Pay Discrimination Claims Begins To Run When Discriminatory Act Occurs

Discriminatory Employment Practice Acts that occur Prior to EEOC Charging Period are Time-Barred even if the Discriminatory Acts had “Continuing Effects” During the EEOC Charging Period Supreme Court Holds

In a case that will have substantial impact of Title VII class action lawsuits, a divided Supreme Court held that the limitations period on a Title VII pay discrimination claim begins to run when the discriminatory act occurs. Ledbetter v. Goodyear Tire & Rubber Co., Inc., __ U.S. __, 2007 WL 1528298, *2 (May 29, 2007). Plaintiff had worked for Goodyear for almost 20 years, from 1979 to 1998, and received or was denied raises based on performance evaluations by her supervisors, id., at *3. Plaintiff filed a questionnaire with the Equal Employment Opportunity Commission (EEOC) in March 1998 alleging sex discrimination, and in July filed a formal charge with the EEOC. Id. In November 1998, after taking early retirement, plaintiff filed suit against Goodyear asserting several claims, including a Title VII pay discrimination allegation. Id. The Supreme Court summarized the district court proceedings at page *3 as follows:

The District Court granted summary judgment in favor of Goodyear on several of Ledbetter’s claims, including her Equal Pay Act claim, but allowed others, including her Title VII pay discrimination claim, to proceed to trial. In support of this latter claim, Ledbetter introduced evidence that during the course of her employment several supervisors had given her poor evaluations because of her sex, that as a result of these evaluations her pay was not increased as much as it would have been if she had been evaluated fairly, and that these past pay decisions continued to affect the amount of her pay throughout her employment. Toward the end of her time with Goodyear, she was being paid significantly less than any of her male colleagues. Goodyear maintained that the evaluations had been nondiscriminatory, but the jury found for Ledbetter and awarded her backpay and damages.

Continue reading "Class Action Defense Issues-Ledbetter v. Goodyear: Divided Supreme Court Holds Statute Of Limitations For Title VII Pay Discrimination Claims Begins To Run When Discriminatory Act Occurs" »

Posted On: May 31, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Neary v. Metropolitan Property: Connecticut Federal Court Grants Defense Motion In FLSA Class Action To Dismiss Class Action Claims Based On State Wage And Hour Laws

Federal Court Refuses to Exercise Supplemental Jurisdiction over State Law Wage and Hour Class Action Claims Because of Substantial Variance in State Laws and Conflict with FLSA (Fair Labor Standards Act) Opt-In Provision

Employees filed a putative class action in Connecticut federal court against Metropolitan Property alleging that the employer failed to pay overtime in violation of the federal Fair Labor Standards Act (FLSA) and Connecticut state labor laws. Neary v. Metropolitan Prop. & Cas. Ins. Co., 472 F.Supp.2d 247, 248 (D. Conn. 2007). The class action complaint included causes of action for a class action claim under FRCP Rule 23(b)(3) “for violation of state wage and hour laws ‘in each state in which each [p]laintiff worked’ (Count 4),” as well as “a class action claim under [FRCP Rule 23(b)(1)] for violation of state wage and hour laws ‘of the various states in which [p]laintiffs worked’ (Count 5).” Id. Defense attorneys moved to dismiss these class action claims on the grounds that the state law opt-out claims presented an irreconcilable conflict with the FLSA’s opt-in requirement. Id., at 249. The district court agreed.

Plaintiff’s class action complaint alleged that defendant insures vehicles nationwide and engaged in the practice of classifying field adjusters, field appraisers and outside adjusters as exempt from overtime in violation of the FLSA “and the wage and hour laws of the various states in which [p]laintiffs performed work for [d]efendant.” Neary, at 249. Plaintiff purported to bring the class action on behalf of a nationwide class alleging that certification was appropriate under Rule 23(b)(3). Id., at 249-50. The defense moved to dismiss Counts 4 and 5 of the class action complaint “pursuant to the Rules Enabling Act, 28 U.S.C. § 2072(b), on the basis that the class action procedures in Rule 23 irreconcilably conflict with Section 216(b) of the FLSA which expressly limits the scope of representative lawsuits seeking overtime pay to individuals who affirmative opt-in to the action.” Id., at 250. The district court granted the defense motion, but not for the reasons advanced.

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Posted On: May 30, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Mooney v. Allianz Life: Minnesota Court Certifies Class Action Holding Class Action Premised On State Consumer Fraud Laws And Common Law Unjust Enrichment Could Be Applied To Non-Resident Class Members

Federal Court Rejects Defense Constitutional Objection to Certification of Class Action and Holds Rule 23(b)(3) Predominance Test Satisfied in Class Action Premised on Minnesota Consumer Fraud Laws and Common Law for Unjust Enrichment because Minnesota’s Contacts with Non-Resident Class Members were Significant Enough to Permit Application of Minnesota Law to all Class Action Claims

Plaintiffs filed a class action against Allianz Life Insurance alleging consumer fraud claims arising out of the marketing of certain annuity products to senior citizens. Mooney v. Allianz Life Ins. Co., __ F.Supp.2d __ (D. Minn. May 10, 2007) [Slip Opn., at 2]. Plaintiffs moved for certification of a class action; defense attorneys objected in part on the grounds that predominance did not exist under Rule 23(b)(3) because of choice-of-law and conflicts-of-law issues. Id. The district court denied class action treatment, concluding that “because Plaintiffs had not performed the conflicts-of-law and choice-of-law analyses required by the Eighth Circuit’s opinion in In re St. Jude Medical, Inc., 425 F.3d 1116, 1120-21 (8th Cir. 2005), the Court was unable to determine whether class-wide questions of law predominate, or whether class-wide treatment is superior to other means of resolving this controversy.” Id. The court otherwise found that all of the class action requirements of Rule 23(a) had been met, id. Plaintiffs and defense filed supplemental briefing on the predominance issue, and the federal court certified a class action as requested.

Rule 23(b)(3) requires that “questions of law or fact common to the members of the class predominate over any questions affecting only individual members.” Plaintiffs argued that this test was met because Minnesota’s consumer fraud statutes and common law regarding unjust enrichment constitutionally may be applied to the claims of each class member; defense attorneys countered that “the law of each class member’s home state must be applied and therefore individualized questions of law predominate.” Mooney, at 3. According to the defense, applying Minnesota law to the claims of out-of-state residents is unconstitutional; alternatively, the defense argued that Minnesota’s choice of law rules required that the claims of each class member be examined under the laws of the states in which the class members lived. Id. The district court rejected the defense arguments and granted class certification.

Continue reading "Class Action Defense Cases-Mooney v. Allianz Life: Minnesota Court Certifies Class Action Holding Class Action Premised On State Consumer Fraud Laws And Common Law Unjust Enrichment Could Be Applied To Non-Resident Class Members" »

Posted On: May 29, 2007 by Michael J. Hassen Email This Post

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Federal Court Order Certifying Securities Class Action Against Vivendi Revised And Officially Published

In a prior article, we reported that the United States District Court for the Southern District of New York had granted plaintiffs’ motion to certify a securities class action against French company Vivendi and two of its individual officers – that article may be found here. The court’s Revised Memorandum Opinion and Order may be found at In re Vivendi Universal, S.A. Sec. Litig., 242 F.R.D. 76 (S.D.N.Y. 2007). A copy of the district court’s revised opinion and order granting class action treatment is provided.

Download PDF file of In re Vivendi Universal

Posted On: May 29, 2007 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Interinsurance v. Superior Court: Defense Entitled To Judgment In Class Action Because Interest Charged On Installment Payments For Auto Policy Was Not A "Premium" Under California Law

As Matter of First Impression, California Appellate Court Holds that Department of Insurance Interpretation of Statute was not Entitled to Deference and that Trial Court Erred in Holding that Interest Charged by Insurer for Installment Payments Was a “Premium” Required to be Disclosed Under California law

Plaintiff filed a putative class action against her insurer, Interinsurance Exchange of the Automobile Club (IEAC) alleging violations of California law in that the insurer failed to advise her of the fees associated with paying her insurance premium in installments rather than in one lump sum. Interinsurance Exch. of the Auto. Club v. Superior Court, ___ Cal.App.4th ___, 56 Cal.Rptr.3d 421, 423 (Cal.App. March 26, 2007). Defense and plaintiff attorneys moved for summary judgment; the trial court granted plaintiff’s motion and denied the defense motion, id. Defense attorneys filed a petition for writ of mandate with the Court of Appeal and the appellate court reversed, holding that a “premium” within the meaning of the applicable California law “does not include charges imposed for making payments of the annual premium in installments” and, accordingly, IEAC did not violate California law and was entitled to summary judgment against plaintiff’s class action complaint. Id. Defense attorneys filed a petition for writ relief with the Court of Appeal; the appellate court accepted the case in part because it presented an issue of first impression, and ultimately reversed the trial court.

In 2002, plaintiff obtained car insurance from IEAC with an annual premium of $1049, and in 2002 and 2003 she paid the premium in one lump sum. IEAC, at 423. Her renewal statement for 2004 reflected an annual premium of $986 (after a $63 discount), and provided plaintiff the option of paying the premium in one lump sum or in 9 installments “subject to additional charges for interest at a rate of 17.99 percent per year and requiring payment of only the first installment of $53.60,” id. Plaintiff understood the notice and “understood an election to pay the annual premium in installments would subject her to interest charges”; nonetheless, she “elected to pay the annual premium in installments rather than in one lump sum.” Id. The following year plaintiff received another renewal notice, this one reflecting an annual premium of $846, and again providing her with “the option of paying the $846 annual net premium in either one lump sum or nine monthly installments, subject to additional charges for interest at a rate of 18 percent per year and requiring payment initially of only the first installment of $34.48.” Id., at 424. Plaintiff again selected the installment option, id.

Continue reading "Class Action Defense Cases-Interinsurance v. Superior Court: Defense Entitled To Judgment In Class Action Because Interest Charged On Installment Payments For Auto Policy Was Not A "Premium" Under California Law" »

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

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Class Action Defense Cases-In re Intel: Delaware Federal Court Holds Sherman Act Class Action Claims Premised On Foreign Conduct Barred By Foreign Trade Antitrust Improvements Act (FTAIA)

Defense Motion to Dismiss Class Action Allegations Based on Foreign Conduct Granted because no Evidence of "Direct, Substantial and Foreseeable Effect on U.S. Commerce" as Required by Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) Delaware District Court Holds

After Advanced Micro Devices (AMD) filed suit Intel alleging Sherman Act antitrust claims and violations of California’s unfair competition laws, several class action lawsuits were filed and ultimately consolidated with the AMD lawsuit. In re Intel Corp. Microprocessor Antitrust Litig., 476 F.Supp.2d 452, 453 (D. Del. 2007). The first amended class action complaint alleged that Intel “engaged in anticompetitive conduct in the United States which has resulted in Intel obtaining an unlawful world-wide monopoly over the x86 microprocessor market” thereby increasing the cost of the x86 to consumers. Id., at 453-54. In addition to Sherman Act claims, the class action complaint included claims under the laws of 20 states for antitrust/restraint of trade, and 23 states for unfair competition/consumer protection, and prayed for injunctive relief, monetary damages (including punitive and treble damages), disgorgement of profits, and establishment of a constructive trust. Id., at 454. Defense attorneys moved to dismiss plaintiffs’ “foreign conduct claims” under Rule 12(b)(1) for lack of subject matter jurisdiction, id.; the district court granted the defense motion.

By way of background, AMD’s complaint against Intel included foreign conduct allegations that on Intel’s motion the district court dismissed for lack of jurisdiction. In re Intel, at 455. The class action complaint similarly included allegations of foreign conduct: the class plaintiffs “allege that the weakening of AMD in the market resulted in Intel charging higher prices overseas to third parties for microprocessors who then installed these higher priced Intel chips into computers that were eventually sold in the United States Market, which in turn led to higher retail prices for those computers in the United States.” Id. Intel argued that the foreign conduct theory in the class action complaint is even more attenuated than the claim the Court struck from AMD's Complaint and, accordingly, the foreign conduct claims should be dismissed for lack of jurisdiction under the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA). Id. Specifically, FTAIA requires evidence of a “direct, substantial and foreseeable effect on U.S. commerce” and Intel argued that the class action complaint failed to include any such evidence. Id.

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

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15 U.S.C. § 78w—Rules, Regulations, Orders And Annual Reports Under The Private Securities Litigation Reform Act (PSLRA)

To assist class action defense attorneys who defend against securities class action litigation, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). For purposes of private securities class actions, Congress set forth rules, regulations and orders, and provisions governing annual reports, in 15 U.S.C. § 78w, which provides:

§ 78w. Rules, regulations, and orders; annual reports

(a) Power to make rules and regulations; considerations; public disclosure

(1) The Commission, the Board of Governors of the Federal Reserve System, and the other agencies enumerated in section 78c (a)(34) of this title shall each have power to make such rules and regulations as may be necessary or appropriate to implement the provisions of this chapter for which they are responsible or for the execution of the functions vested in them by this chapter, and may for such purposes classify persons, securities, transactions, statements, applications, reports, and other matters within their respective jurisdictions, and prescribe greater, lesser, or different requirements for different classes thereof. No provision of this chapter imposing any liability shall apply to any act done or omitted in good faith in conformity with a rule, regulation, or order of the Commission, the Board of Governors of the Federal Reserve System, other agency enumerated in section 78c (a)(34) of this title, or any self-regulatory organization, notwithstanding that such rule, regulation, or order may thereafter be amended or rescinded or determined by judicial or other authority to be invalid for any reason.

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

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Labor Law Class Action Filings Continue Streak As Top Category Of New Class Action Filings In California State And Federal Courts

As a resource to California defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits 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 past week, only 36 new class action cases were filed in these courts. True to the norm, more labor law class action lawsuits were filed than any other category in the weekly class action filings. This report covers the time period from May 18 – May 24, 2007, during which time 17 new employment-related class action cases (47%) were filed in the California state and federal courts listed above. Four securities fraud class action lawsuits were filed, accounting for 11% of the new class actions. No other category met the 10% threshold.

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

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Class Action Defense Cases-In re Midland National Life: Judicial Panel On Multidistrict Litigation (MDL) Grants Motion To Centralize Class Action Lawsuits But Selects Central District of California 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 Moving Plaintiff's Request to Transfer Class Actions to Southern District of Iowa

Class action lawsuits were filed in Iowa and California federal courts against Midland National Life Insurance Company alleging deceptive marketing and sale of annuities to seniors. In re Midland Nat’l Life Ins. Co. Annuity Sales Prac. Litig., 484 F.Supp.2d 1355, 1356 (Jud.Pan.Mult.Lit. May, 2 2007). Plaintiff’s lawyer in the Iowa class action 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 Southern District of Iowa; defense attorneys agreed that pretrial coordination of the class actions was appropriate and agreed with the proposed transferee court. Id. The California plaintiffs did not oppose centralization of the class action lawsuits but argued that the cases should be transferred to the Central District of California. Id. The Judicial Panel granted the motion to centralize the class actions, and concluded that while either of the federal court would be an appropriate transferee court, the class action litigation should be centralized in the Central District of California “because the California action appears to be slightly broader and somewhat more procedurally advanced than the Iowa action.” Id.

Download PDF file of In re Midland National Life Transfer Order

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

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Class Action Defense Cases-Bell Atlantic v. Twombly: Supreme Circuit Holds Allegations Of Parallel Conduct Unfavorable To Competition Insufficient To Survive Motion To Dismiss Absent Facts Evidencing Agreement Rather Than Identical Independent Action

Sherman Act § 1 Class Action Complaint Must Allege Agreement not Merely Parallel Conduct Supreme Court Holds

Plaintiffs filed a putative class action against various “Baby Bells” defendants alleging violations of the § 1 of the Sherman Act, which prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations.” Bell Atlantic Corp. v. Twombly, __ U.S. __, 127 S.Ct. 1955, 2007 WL 1461066, *4 (May 21, 2007). Defense attorneys moved to dismiss the class action on the grounds that defendants were acting in their economic self-interest and that evidence of “parallel behavior” among them is insufficient to establish a conspiracy in violation of the Sherman Act, id., at *5. The district court agreed and granted the defense motion to dismiss, but the Second Circuit reversed. The Supreme Court “granted certiorari to address the proper standard for pleading an antitrust conspiracy through allegations of parallel conduct.” Id., at *6. The Supreme Court explained at page *4, “The question in this putative class action is whether a § 1 complaint can survive a motion to dismiss when it alleges that major telecommunications providers engaged in certain parallel conduct unfavorable to competition, absent some factual context suggesting agreement, as distinct from identical, independent action. We hold that such a complaint should be dismissed.”

Following the divestiture of AT&T’s local telephone service in 1984, regional telephone monopolies known as “Baby Bells” or “Incumbent Local Exchange Carriers” (ILECs) arose to provide local phone service but they were excluded from providing long-distance service. Twombly, at *4. In 1996, Congress enacted the Telecommunications Act of 1996 that permitted competition for local telephone service and authorized ILECs to enter the long-distance market, id. Plaintiffs’ class action complaint named BellSouth Corp., Qwest Communications, SBC Communications and Verizon, and alleged that these ILECs control at least 90% of the local telephone service market in the 48 contiguous states. Id., at *4 n.1. In essence, plaintiffs allege that defendants must have conspired in violation of § 1 of the Sherman Act, and that this conspiracy may be “inferred from the ILECs’ common failure ‘meaningfully [to] pursu[e]’ ‘attractive business opportunit[ies]’ in contiguous markets where they possessed ‘substantial competitive advantages.’” Id., at *5. The gravamen of the class action complaint was as follows:

Continue reading "Class Action Defense Cases-Bell Atlantic v. Twombly: Supreme Circuit Holds Allegations Of Parallel Conduct Unfavorable To Competition Insufficient To Survive Motion To Dismiss Absent Facts Evidencing Agreement Rather Than Identical Independent Action" »

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

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Class Action Defense Cases-Barasich v. Columbia Gulf: Louisiana Federal Court Grants Defense Motion To Dismiss Class Action Alleging Defendants Damaged Marshlands Thus Contributing To Hurricane Damage

Political Question Doctrine does not Preclude Court from Considering Class Action Alleging that Oil Industry Activities Dredging Marshlands Increased Hurricane Damage but Class Action Claims Fail to State Claims Under Louisiana Law Federal Court Holds

Two class actions - subsequently consolidated by the district court because they “raise[d] identical issues of law and fact,” leading to the filing of an joint amended class action complaint - were filed against various oil and gas companies following Hurricane Katrina and Hurricane Rita seeking to hold defendants “accountable for their activities that the plaintiffs allege contributed significantly to the storms' destructive impact in south Louisiana”; the class action alleged that defendants’ activities damaged marshlands “thereby weakening a protective barrier against hurricanes and exposing Louisianans to the prospect of greater harm from these storms.” Barasich v. Columbia Gulf Transmission Co., 467 F.Supp.2d 676, 678 (E.D. La. 2006). Defense attorneys moved to dismiss the class action complaint under Rule 12(b)(6) on the grounds that the claims involved political questions and therefore were nonjusticiable, and for failure to state a claim, id., at 680. The federal court rejected defense arguments that the class action claims were not justiciable, but granted the motion to dismiss the complaint for failure to state a claim.

The theory underlying the class action is (1) Louisiana’s coastal marshlands protect the state from hurricane damage, (2) defendants’ oil producing and transmission activities included dredging canals through these marshlands, destroying millions of acres of marshlands thereby “depriving inland communities . . . of their natural protection from hurricane winds and accompanying storm surge.” Barasich, at 679. The second amended class action complaint alleges “class members suffered personal injury and/or death, property damage, and the loss of the wetlands' value as storm protection” and prayed for “all damages reasonable in the premises, including restoration.” Id., at 679-80. Defense attorneys moved to dismiss the class action complaint on two grounds: “1) the subject matter of plaintiffs' action is nonjusticiable because it concerns a political question, and 2) plaintiffs do not state a claim upon which relief may be granted because they cannot prove the requisite elements for recovery as a matter of law under any available theory.” Id., at 680.

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

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Class Action Defense Cases-Lee v. Southern California: Class Action Plaintiff In Putative CLRA/UCL Class Action Not Bound By Arbitration Agreements Signed By Class Members California Court Holds

California Appellate Court Holds that Class Action Plaintiff cannot be Compelled to Arbitrate Claims Simply Because Class Members Signed Arbitration Agreements, as that Fact is not Relevant Until Motion to Certify Class Action, and in any Event Injunctive Relief Claims were not Subject to Arbitration

Plaintiff filed a putative class action against Southern California University for Professional Studies (SCUPS) alleging violations of California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) for failing to refund prepaid tuitions to its students. Lee v. Southern Cal. Univ. for Prof. Studies, 148 Cal.App.4th 782, 784 (Cal.App. 2007). Defense attorneys moved to compel arbitration, arguing that even though the class action representative was not directly subject to arbitration, 408 of the 519 putative class members had signed enrollment agreements with arbitration clauses and plaintiff, as their representative, was therefore bound to arbitrate her claims. Id., at 785. The trial court disagreed, denying the defense motion to compel arbitration of the putative class action. SCUPS appealed, and the appellate court affirmed.

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

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Class Action Defense Cases-Oscar v. Allegiance: Fifth Circuit Holds That Loss Causation Must Be Established To Certify Securities Fraud Class Action And Criticizes Efficient Market Theory

To Invoke Presumption of Reliance in Securities Fraud Class Action Based on Fraud on the Market Doctrine, Plaintiff must Establish Loss Causation at Time of Motion to Certify Class Action Fifth Circuit Holds

Plaintiffs filed a securities fraud class action against telecommunications provider Allegiance Telecom and others alleging violations of section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 based on an inaccurate statement concerning the number of line installations during the first three quarters of 2001 and a drop in stock price following a restated line count announced during the fourth quarter of that year. Oscar Private Equity Inv. v. Allegiance Telecom, Inc., 487 F.3d 261, 2007 WL 1430225, *1 (5th Cir. May 16, 2007). Plaintiffs’ lawyer moved to certify the litigation as a class action, advancing a “fraud on the market” theory to establish reliance by class members; defense attorneys objected to class action treatment, arguing that the restatement was not the cause of a drop in the stock price, id. The district court relied on the “fraud on the market” theory, rejected defense arguments, and certified a class action as requested. Id. The Fifth Circuit granted the defense leave to file an interlocutory appeal and reversed. The Circuit Court summarized its holding as follows: “We vacate the certification order and remand, persuaded that the class certified fails for wont of any showing that the market reacted to the corrective disclosure. Given the lethal force of certifying a class of purchasers of securities enabled by the fraud-on-the-market doctrine, we now in fairness insist that such a certification be supported by a showing of loss causation that targets the corrective disclosure appearing among other negative disclosures made at the same time.” Id. (italics added).

The details of the events that precipitated the filing of the class action complaint are set forth in the Note, below. The Fifth Circuit explained: “This dispute turns on whether the certification order properly relied upon the fraud-on-the-market theory. This theory permits a trial court to presume that each class member has satisfied the reliance element of their 10b-5 claim. Without this presumption, questions of individual reliance would predominate, and the proposed class would fail. Oscar, at *2 (footnotes omitted) (italics added). Under the fraud on the market theory, “Reliance is presumed if the plaintiffs can show that ‘(1) the defendant made public material misrepresentations, (2) the defendant's shares were traded in an efficient market, and (3) the plaintiffs traded shares between the time the misrepresentations were made and the time the truth was revealed.’” Id. (citation omitted). In the Fifth Circuit, it is insufficient for a plaintiff to show that defendant made a material misstatement; rather, “proof that the misstatement actually moved the market” is required, id., at *3. The Circuit Court explained at page *3:

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

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15 U.S.C. § 78v—Commission Hearings Under The Private Securities Litigation Reform Act (PSLRA)

To aid class action defense lawyers who defend securities class action lawsuits, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress provided for commission hearings as part of the PSLRA in 15 U.S.C. § 78v, which provides as follows:

§ 78v. Hearings by Commission

Hearings may be public and may be held before the Commission, any member or members thereof, or any officer or officers of the Commission designated by it, and appropriate records thereof shall be kept.

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

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New Class Action Filings Drop But Labor Law Class Action Lawsuits Continue To Top Weekly Class Action Filings In California State And Federal Courts

In order to assist California 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 action lawsuits 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 past week, only 30 new class action cases were filed in these courts. Predictably, more employment-related class action lawsuits were filed than any other category in the weekly class action filings. This report covers the time period from May 11 – May 17, 2007, during which time 11 new class action cases (37%) were filed in the California state and federal courts listed above. Seven securities fraud class action lawsuits were filed, accounting for 23% of the new class actions. The only other categories to break the 10% threshold were unfair business practices class action cases, which include false advertising claims, and fraud class action cases, each of which had 3 new cases filed (10%).

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

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Class Action Defense Cases—In re TFT-LCD: Judicial Panel On Multidistrict Litigation (MDL) Grants Motion To Centralize Class Action Litigation And Selects Northern District of California As Transferee Court

Judicial Panel Grants Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 in the Northern District of California, Rejecting Request of Separately Moving and Non-Moving Plaintiffs to Transfer Class Actions to Alternative Districts

Twenty federal antitrust class action lawsuits were filed in four different states against various defendants alleging a “conspiracy to fix the price of thin film transistor-liquid crystal display (TFT-LCD) panels, which are used in computer monitors, flat panel television sets, and other electronic devices”; the majority of these class actions – 13 of the 20 – were filed in the Northern District of California, and three of the class actions were filed in the District of New Jersey. In re TFT-LCD (Flat Panel) Antitrust Litig., 483 F.Supp.2d 1353, 1353 (Jud.Pan.Mult.Lit. 2007). Plaintiffs’ lawyers in 8 of the Northern District of California class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) pursuant to 28 U.S.C. § 1407 requesting centralization of the class action litigation in that district; however, plaintiff’s lawyer in one of the New Jersey cases moved the Panel for centralization in that district. Id. None of the parties opposed pretrial coordination of the class action lawsuits, but they did not agree on the appropriate transferee court. As the Panel summarized, “The majority support selection of the Northern District of California as transferee forum, while others urge the Panel to choose the District of New Jersey, the Southern District of New York, or the Western District of Washington.” The Judicial Panel granted the motion to centralize the class actions and concluded that the Northern District of California is the appropriate transferee court because "over 50 of the actions of which the Panel has been notified have been brought in that district, and it appears to be somewhat more conveniently located for the significant number of Asia-based defendants." Id., at 1354.

Download PDF file of In re TFT-LCD (Flat Panel) Antitrust Litigation Transfer Order

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

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Class Action Defense Cases-Davis v. O’Melveny & Myers: Ninth Circuit Reverses Order Dismissing Labor Law Class Action And Compelling Arbitration Holding Arbitration Clause Unconscionable

District Court Erred in Dismissing Employment Class Action and Compelling Arbitration Because “Take it or Leave it” Option was Procedurally Unconscionable Despite 3-Months’ Notice of Arbitration Clause and Limitations Period for Asserting Claims Against Employer was Substantively Unconscionable Ninth Circuit Holds

In February 2004, plaintiff, a paralegal at O’Melveny & Myers until July 2003, filed a class action against her former employer alleging violations of the federal Fair Labor Standards Act (FLSA) and California state laws for failing to pay overtime and failing to provide meal and rest periods. Davis v. O’Melveny & Myers, ___ F.3d ___ (9th Cir. May 14, 2007) [Slip Opn., at 5605-07]. The district court granted the defense motion to dismiss the class action and compel arbitration based on a Dispute Resolution Program that had been distributed to employees via interoffice mail and via the office intranet site. Id., at 5606. The class action alleged, in part, that the DRP was unconscionable and enforceable, id., at 5607. On appeal, the Ninth Circuit stated that whether the class action claims fell within the scope of the DRP was not in dispute; the issue, rather, was whether the arbitration provision was enforceable. Id., at 5608.

Preliminarily, the Ninth Circuit held that “the question of whether O’Melveny’s arbitration agreement is unconscionable is for a court to decide” rather than an arbitrator. Davis, at 5610 (citations omitted). It then addressed whether the arbitration clause was procedurally and substantively unconscionable, as required under California law, id., at 5611 (citations omitted). The Court of Appeals had little difficulty finding the provision procedurally unconscionable, holding that it was prepared by a “sophisticated employer - a national and international law firm, no less” and that, even though the arbitration clause was not hidden and employees were not taken by surprise, “in a very real sense the DRP was ‘take it or leave it.’” Id., at 5611-12. The only way for an employee to “opt out” of the arbitration provision was to leave the company, and California and Ninth Circuit decisional law disapproves of such provisions in employment agreements. Id., at 5612-13 (citations omitted).

Continue reading "Class Action Defense Cases-Davis v. O’Melveny & Myers: Ninth Circuit Reverses Order Dismissing Labor Law Class Action And Compelling Arbitration Holding Arbitration Clause Unconscionable" »

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

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Class Action Defense Cases-Lindstrom v. City of Des Moines: Court Rejects Defense Effort To Remove Class Action To Federal Court Holding Class Action Claims Not Preempted By Federal Cable Act

Iowa Federal Court Remands to State Court Class Action Lawsuits Challenging Cable Television Franchise Fees Holding that Class Action Claims were not Preempted by Federal Cable Communications Policy Act and that Class Action Complaints did not “Arise Under” Federal Law

Seven putative class action lawsuits were filed in state court against various Iowa cities challenging as illegal a cable television franchise fee tax, and defense attorneys removed the class action to federal court arguing that the claims for damages in the class action complaints are preempted by the Federal Cable Communications Policy Act, 47 U.S.C. § 521 et seq. (Federal Cable Act). Lindstrom v. City of Des Moines, Iowa, 470 F.Supp.2d 1002, 1004-05 (S.D. Iowa 2007). Plaintiffs moved to remand the class action to state court, arguing that their class action lawsuits did not contain any federal claims. Id., at 1005. The district court summarized the class action complaints as follows: “Plaintiffs have stated only a single claim that arises under state law, i.e., whether the Cities can collect the cable franchise fees, in amounts exceeding the reasonable costs of regulating the activity, without express authorization by the Iowa Legislature.” Id. The district court granted the motion and remanded the class action to state court.

The district court recognized that the defense bore the burden of establishing subject matter jurisdiction, Lindstrom, at 1006. While the class action did not state federal claims, defense attorneys argued that the claims were preempted by the Federal Cable Act, id. The federal court stated that “nothing on the face of [the class action complaints] raises a federal question,” id., so the issue was whether the Federal Cable Act completely preempts the state law cause of action in the class actions, id., at 1007. After a detailed analysis, see id., at 1007-10, the court held that the class action claims were not preempted by the Federal Cable Act because the cities were charging less than the maximum tax allowed by federal law and that this would further, not undermine, the intent of the Act, id., at 1010. The court rejected also a defense argument that the class action is preempted because it conflicts with the Act’s definition of “franchise fees,” id., at 1010-11, and that removal was proper because the class action claims “arise under” federal law, id., at 1011-12.

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

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Class Action Defense Cases-Bellikoff v. Eaton Vance: Second Circuit Affirms Judgment For Defense In Investment Company Act Class Action Holding That No Private Rights Of Action Exist For Claimed Violations Of The Act

Class Action Complaint Properly Dismissed Because no Private Rights of Action Exist for Alleged Violations of Sections 34(b), 36(a) and 48(a) of the Federal Investment Company Act of 1940 (ICA), and Section 36(b) Claim Failed as a Matter of Law Second Circuit Court Holds

Plaintiffs filed a putative class action against various Eaton Vance entities under sections 34(b), 36(a) and 48(a) of the federal Investment Company Act of 1940 (ICA) arising out of the marketing, managing, and distributing shares of various Eaton Vance mutual funds. Bellikoff v. Eaton Vance Corp., 481 F.3d 110, 113-14 (2d Cir. 2007). The thrust of the class action complaint was that defendants paid kickbacks to brokers who promoted the sale of Eaton Vance mutual funds, that the increase in fund assets meant higher advisory fees paid to certain defendants “while providing no benefits to the funds or the fund investors,” and that the advisory fees paid were too high. Id., at 114. Defense attorney’s moved to dismiss the class action, arguing that no private rights of action exist under ICA for the claims alleged, id. The district court agreed with the defense and dismissed the class action; the Second Circuit affirmed.

The class action complaint alleged that defendants entered into arrangements with Morgan Stanley, Salomon Smith Barney, Wachovia and others that included “(1) cash payments to brokers in return for the brokers' agreement to promote sales of fund shares; (2) directing fund portfolio brokerage to brokers in return for agreements by the brokers to promote the funds (a practice known as “directed brokerage”); and (3) excessive commission arrangements with brokers.” Bellikoff, at 114. At bottom, “as more investors were drawn to the funds through these arguably nefarious business practices, the fees paid to various defendants mushroomed,” id. The Second Circuit noted that SEC had investigated and sanctioned Morgan Stanley “for accepting impermissible payments from the defendants here in exchange for aggressively pushing Eaton Vance funds over other comparable investment options” while “fail[ing] to disclose adequately certain material facts to its customers ... [namely that] it collected from a select group of mutual fund complexes amounts in excess of standard sales loads and Rule 12b-1 trail payments.” Id., at 114-15. The SEC fine resulted in the predictable Pavlovian response. In the words of the Circuit Court, “Smelling blood in the water, five investors then filed complaints . . . against Eaton Vance and many of its affiliated entities, alleging, inter alia, violations of the ICA, the Investment Advisers Act, and breaches of fiduciary duties.” Id., at 115.

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

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Class Action Defense Cases-Cole v. General Motors: Fifth Circuit Agrees With Defense That Lower Court Erred In Certifying Nationwide Class Action Because Of Numerous Differences In Several Jurisdictions

District Court Abused its Discretion in Certifying Nationwide Class Action Because Numerous and Substantial Differences in Applicable Substantive laws Precluding Finding that Rule 23(b)(3) Predominance Test was Met Fifth Circuit Holds

Plaintiffs filed a putative class action against General Motors in Louisiana federal court, alleging that the sensors on 1998 and 1999 Cadillac DeVilles were defective. Cole v. General Motors Corp., 484 F.3d 717, 2007 WL 1054697, *1 (5th Cir. 2007). Plaintiffs’ moved to certify the lawsuit as a nationwide class action; defense attorneys opposed the motion, arguing in part that substantial differences in substantive laws among the 51 jurisdictions precluded a finding of predominance under FRCP Rule 23(b)(3). The district court rejected the defense arguments and certified a nationwide class action as requested. The defense filed an interlocutory appeal under Rule 23(f), arguing that the lower abused its discretion in certifying the class action, id., at *3. The Fifth Circuit agreed with the defense and reversed.

In September 2000, after receiving 300 reports of airbags deploying inadvertently, GM sent a voluntary recall notice to all 224,000 DeVille record owners/lessees stated that “a defect which relates to motor vehicle safety exists and may manifest itself in your 1998 or 1999 model year Cadillac DeVille” in that “the side impact air bags in your car [may] deploy unexpectedly, without a crash, as you start your car or during normal driving.” Cole, at *1. GM expected to have sufficient replacement parts by April 2001, but availability was delayed until May 2001, id. However, GM was able to replace 40,000 parts by November 2000, id. Plaintiffs Beverly Cole, Anita S. Perkins and Jewell P. Lowe received the voluntary recall notice: the Court of Appeals described them as follows: “Lowe is the mother of one of plaintiffs' counsel, Perkins is a paralegal for another of plaintiffs' counsel, and Cole is the paralegal's cousin.” Id. None of them had experienced a side airbag deploying inadvertently, but they filed a federal court class action against GM one month after receiving GM’s September 2000 letter, id. In November 2000, GM offered to replace the sensors in plaintiffs’ cars, but the offer was rejected “because GM did not extend the offer to all DeVille owners and GM would not answer questions about the source of the parts, the number available, and whether the SISMs had been properly tested.” Id. Plaintiffs dismissed this class action but filed a new class action in Louisiana state court in December 2000; defense attorneys removed the class action to federal court in January 2001 on the basis of diversity jurisdiction, id., at *1-*2.

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

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Class Action Defense Cases-Bishop v. Heartland Services: Kansas Federal Court Rejects Defense Opposition To Conditional Certification Of FLSA (Fair Labor Standards Act) Class Action

Plaintiffs in Class Action Alleging Failure to Pay Overtime in Violation of Federal Fair Labor Standards Act (FLSA) Demonstrated that they were “Similarly Situated” to Putative Class Members thus Supporting Court Order Granting Motion to Conditionally Certify Lawsuit as a Class Action and to Provide Notice to Class Members Kansas Federal Court Holds

Plaintiffs filed a class action complaint in Kansas federal court against their employer, Heartland Services, alleging failure to pay overtime in violation of the federal Fair Labor Standards Act (FLSA). Bishop v. Heartland Services, Inc., 242 F.R.D. 612, 613 (D. Kan. 2007). Plaintiffs filed a motion requesting the court to certify the lawsuit as a class action and to authorize notice to putative class members, id.; defense attorneys opposed the motion on the grounds that (1) the class involved only 21 people, and (2) “there has been no indication of interest by other potential class members,” id., at 614. The district court held that the employees were similarly situated with the putative class sufficient to warrant notice to the class of conditional certification of a class action.

Under the FLSA, class action treatment is governed by 29 U.S.C. § 216(b), which provides: “An action to recover the liability prescribed in either of the preceding sentences may be maintained...by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.” However, the statute fails to define the critical phrase, “similarly situated.” The district court noted that the Tenth Circuit has adopted the “ad hoc” method for determining whether the employee seeking class action treatment is “similarly situated” to members of the putative class, Bishop, at 613 (citing Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1105 (10th Cir. 2001)). The “ad hoc” method allows the district court to make a preliminary “notice stage” determination, which “‘require[s] nothing more than substantial allegations that the putative class members were together the victims of a single decision, policy, or plan.’” Id., at 614 (citation omitted). The district court explained that “[t]his standard is a lenient one,” id., and that while Thiessen suggests that “substantial allegations” are sufficient, plaintiffs in the current case “presented limited evidence in support of their claims.” Id. After the court “conditionally” certifies the lawsuit as a class action for purposes of notice, then the parties complete discovery and present evidence to support “a stricter ‘similarly situated’ standard.” Bishop, at 614 (citing Thiessen, 267 F.3d at 1102-03).

In analyzing plaintiffs’ motion for conditional certification of a class action, the district court held that plaintiffs’ allegations - viz., that all putative class members are employees with “same or similar job titles” who performed “same or similar job duties” at the same Kansas facility and were paid under a common Employee Compensation Agreement - adequately established that plaintiffs were similarly situated for purposes of notice stage conditional class action certification. Bishop, at 614. The court rejected defense arguments that the class was too small - allegedly consisting of only 21 people - because the defense failed to provide admissible evidence supporting its claim, id. The court rejected defense claims that “there has been no indication of interest by other potential class members” on the same ground, id. Accordingly, the court granted plaintiffs’ motion to conditionally certify the lawsuit as a class action and approved notice to putative class members, id., at 614-15.

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

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15 U.S.C. § 78u-5—Safe Harbor For Forward-Looking Statements Under The Private Securities Litigation Reform Act (PSLRA)

As a reference for class action defense attorneys who defend against securities class action litigation, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress provided a safe harbor for forward-looking statements for purposes of private securities class action lawsuits, in 15 U.S.C. § 78u-5, which states:

§ 78u–5. Application of safe harbor for forward-looking statements

(a) Applicability

This section shall apply only to a forward-looking statement made by—

(1) an issuer that, at the time that the statement is made, is subject to the reporting requirements of section 78m (a) of this title or section 78o (d) of this title;

(2) a person acting on behalf of such issuer;

(3) an outside reviewer retained by such issuer making a statement on behalf of such issuer; or

(4) an underwriter, with respect to information provided by such issuer or information derived from information provided by such issuer.

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

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Class Action Lawsuits Alleging Employment-Related Claims Again Lead Weekly Class Action Filings In California State And Federal Courts As No Other Class Action Category Meets 10% Threshold

To assist California 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 action lawsuits 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. Labor law class action cases generally top the list, with the “competition” often running a distant second. Yet again, employment-related class action cases topped the list of weekly class action filings. This report covers the time period from May 4 – May 10, 2007, during which time approximately 47 new class action cases were filed in the California state and federal courts listed above. Employment-related class actions accounted for 45% of these cases, with 21 new cases. No other class action category satisfied the 10% threshold for this list.

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

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Class Action Defense Cases—In re Orthopaedic Implant: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Southern District of Indiana As Transferee Court

Judicial Panel Grants Defense Request, Unopposed by Plaintiffs, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 of Class Action Lawsuits Alleging Antitrust Conspiracy

Four federal antitrust class action lawsuits, two in Tennessee and two in Indiana, were filed against various defendants alleging that they “engaged in a conspiracy to artificially increase, maintain, and/or stabilize prices of orthopaedic implants.” In re Orthopaedic Implant Device Antitrust Litig., 483 F.Supp.2d 1355 (Jud.Pan.Mult.Lit. 2007). Defense attorneys for several of the defendants – specifically, Zimmer Holdings, Zimmer, Inc., Stryker Corp., Biomet, DePuy Orthopaedics and/or DePuy, Inc., Johnson & Johnson, and Smith & Nephew plc and Smith & Nephew, Inc., id., at 1355 n.2 – 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 Southern District of Indiana; plaintiffs’ lawyers did not oppose the motion, and agreed as well to centralization in the Northern District of Indiana. Id. The Judicial Panel granted the motion to centralize the class actions and agreed that the Southern District of Indiana was an appropriate transferee court, noting that it is the district “where related grand jury proceedings are located and the first-filed action is pending, [and] enjoys the support of all parties.” Id.

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

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Class Action Defense Cases-Omstead v. Dell: California Federal Court Grants Defense Motion To Stay Class Action Litigation And Compel Arbitration Where Arbitration Clause Contains Class Action Waiver

In Putative Class Action Against Computer Manufacturer, California Federal Court Holds that Texas Choice of Law Provision in Computer Sales Agreement is Valid and Arbitration Clause Containing Class Action Waiver is Enforceable

Plaintiffs filed a class action against Dell alleging defects in its notebook computers. Omstead v. Dell, 473 F.Supp.2d 1018, 1021 (N.D. Cal. 2007). Defense attorneys moved to stay the class action and compel arbitration pursuant to the Federal Arbitration Act (FAA), id., at 1020. The arbitration clause contained a class action waiver, prohibiting customers from initiating or participating in class action litigation with Dell, id., at 1022. The district court granted the defense motion, holding that the class action waiver did not invalidate the arbitration clause.

Plaintiffs propose to litigate a class action on behalf of purchasers of Dell notebook computers alleging that they were “manufactured with three defects – inadequate cooling systems, a power supply that prematurely fails when used as intended, and motherboards that prematurely fail when used as intended.” Omstead, at 1021. The defense moved to stay the class action and compel arbitration based on the sales agreement provided to its computer purchasers; that agreement states that Texas law shall apply to any dispute arising out of the purchase of the computer and contains an arbitration clause governed by the FAA. Id. Further, all sales confirmations advised purchasers that the “Conditions and Terms of Sale” contain “a dispute resolution clause.” Id. Plaintiffs did not dispute receiving the sales agreement; rather, they argued that California law governed whether the arbitration clause therein was enforceable, not Texas law, and that under California law the class action waiver provision was unenforceable. Omstead, at 1022.

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

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TILA Class Action Defense Cases-Andrews v. Chevy Chase: Wisconsin Court Grants Defense Request For Stay Of Class Action Pending Appellate Review Of Order Certifying Federal Truth-In-Lending Act (TILA) Lawsuit As A Class Action

Uncertainty as to Whether Seventh Circuit will Hold that Class Action Under TILA (Truth-in-Lending Act) may seek Rescission Warrants Stay of Proceedings Pending Appeal Wisconsin Federal Court Holds

Plaintiff filed a class action against Chevy Chase Bank alleging various violations of the federal Truth-in-Lending Act (TILA). Ultimately, the district court extended by three years the borrowers’ rescission period based on its finding that the bank materially violated TILA, and certified the litigation as a class action “leaving the decision as to whether to actually seek rescission to each individual class member.” Andrews v. Chevy Chase Bank, FSB, 474 F.Supp.2d 1006, 1007 (E.D. Wis. 2007). Defense attorneys sought appellate review of the class action certification order under FRCP Rule 23(f), and the Circuit Court permitted the appeal, id. The defense thereafter sought a stay of the trial court proceedings pending appeal; the district court granted the request.

The district court applied the standard balancing test applicable to stay requests in the Seventh Circuit: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” Andrews, at 1007 (citation omitted). The bulk of the court’s order is devoted to an analysis of the First Circuit’s opinion in McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir. 2007), which held that class actions seeking rescission are inappropriate under TILA. Id., at 1007-10. Not surprisingly, the district court found it unlikely that the defense would prevail on appeal with respect to the class certification order, id., at 1110.

However, the federal court recognized that the Seventh Circuit may well accept the reasoning of its sister circuit in McKenna, and recognized further the likelihood that it “defined the class too broadly” in that the district court failed to “take into account that TILA prohibits certain borrowers from rescinding.” Andrews, at 1110. The court decided to grant the defense stay request because, even though it considered the irreparable injury/public interest factors to be “close,” in that both the plaintiffs and defense presented cogent arguments concerning prejudice, the court concluded that clarification as to whether a TILA class action can seek rescission tipped the scale in favor of the stay. Id.

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

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Class Action Defense Cases—In re Graphics Processing: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff's Motion To Centralize Class Action Litigation And Agrees Northern District of California Is Appropriate Transferee Court

Judicial Panel Grants Request, Supported by Defense, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 in the Northern District of California, Rejecting Request of Non-Moving Plaintiffs to Transfer Class Actions to Central District of California

Seven federal antitrust class action lawsuits were filed against various defendants alleging a “conspiracy to fix the price of graphics processing units, which are a type of specialized semiconductor”; all but one of these class actions were filed in the Northern District of California, with the remaining class action filed in the Central District of California. In re Graphics Processing Units Antitrust Litig., 483 F.Supp.2d 1356, 1356 (Jud.Pan.Mult.Lit. 2007). Plaintiffs’ lawyers in four of the Northern District actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) pursuant to 28 U.S.C. § 1407 requesting centralization of the class action litigation in the Northern District of California. Id. None of the parties opposed pretrial coordination of the class actions, but they did not agree on the appropriate transferee court. Defense attorneys for three of the defendants supported class action centralization and agreed with moving parties that the Northern District of California was the appropriate transferee court; however, plaintiffs in the three remaining class actions and plaintiffs in five tag-along class actions, while supporting centralization, argued for transfer to the Central District of California. Id. The Judicial Panel granted the motion to centralize the class actions and selected the Northern District of California because "[o]ver twenty of the actions of which the Panel has been notified have been brought in that district” and because “two of the defendants have their principal places of business there” so “relevant documents and witnesses are likely located in the San Francisco area." Id., at 1357.

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

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CAFA Class Action Defense Cases-Atteberry v. Esurance: Illinois Federal Court Remands Class Action To State Court Finding Defense Failed To Establish Requisite Amount In Controversy

Defense Claims of $75,000 Controversy for Diversity Jurisdiction and $5 Million Controversy for Removal Jurisdiction under Class Action Fairness Act of 2005 (CAFA) were Speculative Warranting Remand of Class Action to State Court

Plaintiff filed a putative class action against Esurance Insurance in Illinois state court alleging bad faith in the processing of insurance claims. Defense attorneys removed the class action to federal court arguing diversity jurisdiction and removal jurisdiction under the Class Action Fairness Act of 2005 (CAFA). Atteberry v. Esurance Ins. Services, Inc., 473 F.Supp.2d 876, 877 (N.D. Ill. 2007). Faced with the issue of whether the class action should be remanded to state court, the defense conceded that the class action was not subject to removal at the time it filed the notice of removal, but argued that plaintiff’s subsequent amendment of the class action complaint “operated to trigger potential removability.” Id. The district court disagreed and remanded the class action to state court.

The thrust of the defense argument was its interpretation of state law permitting a statutory award of up to $60,000 plus attorney fees for the bad faith handling of an insurance claim. Atteberry, at 877. The district court found the argument wanting in two respects. First, the federal court held that the defense failed to establish that the maximum statutory penalty would be awarded, characterizing the defense evidence as a “hypothetical valuation,” id. Second, the defense improperly assumed attorney fees in excess of $15,000 because “only fees already incurred at the time that federal jurisdiction is invoked, not anticipated fees, may be counted toward the requisite amount in controversy.” Id. (citing Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955, 958 (7th Cir. 1998)). In the words of the Seventh Circuit, “jurisdiction depends on the state of affairs when the case begins; what happens later is irrelevant.” Gardynski-Leschuck, 142 F.3d at 958.

Turning to the question of removal jurisdiction under CAFA, the district court held that the defense “has indulged [in] nothing beyond unsupported speculation as to the size of the potential class and hence as to the prospect . . . that the $5 million jurisdictional minimum under CAFA is at issue.” Id., at 878. Accordingly, the federal court remanded the lawsuit to the Illinois state court.

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

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15 U.S.C. § 78u–4--Congressional Provisions Applicable To Private Securities Litigation Pursuant To The Private Securities Litigation Reform Act (PSLRA)

As a resource for the class action defense lawyer who defends against securities class action litigation, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress set forth general provisions governing private securities class action litigation in 15 U.S.C. § 78u–4, which provides as follows:

§ 78u–4. Private securities litigation

(a) Private class actions

(1) In general

The provisions of this subsection shall apply in each private action arising under this chapter that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure.

(2) Certification filed with complaint

(A) In general

Each plaintiff seeking to serve as a representative party on behalf of a class shall provide a sworn certification, which shall be personally signed by such plaintiff and filed with the complaint, that—

(i) states that the plaintiff has reviewed the complaint and authorized its filing;

(ii) states that the plaintiff did not purchase the security that is the subject of the complaint at the direction of plaintiff’s counsel or in order to participate in any private action arising under this chapter;

(iii) states that the plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary;

(iv) sets forth all of the transactions of the plaintiff in the security that is the subject of the complaint during the class period specified in the complaint;

(v) identifies any other action under this chapter, filed during the 3-year period preceding the date on which the certification is signed by the plaintiff, in which the plaintiff has sought to serve as a representative party on behalf of a class; and

(vi) states that the plaintiff will not accept any payment for serving as a representative party on behalf of a class beyond the plaintiff’s pro rata share of any recovery, except as ordered or approved by the court in accordance with paragraph (4).

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

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Labor Class Action Lawsuits Again Lead Weekly New Class Action Filings In California State And Federal Courts

In order to assist 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 27 – May 3, 2007. We include only those categories that contain 10% or more of the class action filings during the relevant timeframe. Approximately 42 class action lawsuits were filed in these California state and federal courts during that time period, of which 20 involved employment law class action claims, which represents approximately 48% of the class actions filed during this time period. The only other category to break the 10% threshold consisted of alleged unfair business practice class actions, which include false advertising claims, with 7 new class action filings (17%).

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

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Class Action Defense Cases-Grays v. Carrier: Washington Federal Court Rejects Defense Arguments Against Certification Of Class Action Holding The Presumption Of Reliance Applied In This Fraud Class Action

Presumption of Reliance may be Applied in Fraud Class Action Lawsuit Where Defendant’s Omission is Primarily at Issue, and Existence of Individual Statute of Limitations Defenses does not Preclude Certification of Class Action Washington Federal Court Holds

Plaintiffs filed a putative class action against Carrier Corporation for misrepresentation, violation of Washington’s Consumer Protection Act (WCPA), unjust enrichment and breach of warranty alleging that the company “concealed a known defect in its high-efficiency condensing furnaces.” Grays Harbor Adventist Christian School v. Carrier Corp., ___F.Supp.2d ___ (W.D. Wash. May 1, 2007) [Slip Opn., at 2]. Plaintiffs moved to certify the lawsuit as a class action, id., at 1; defense attorneys opposed certification as a class action, primarily arguing that the commonality and superiority requirements of Rule 23(b)(3) had not been met, id., at 5. The district court certified the class action as requested, concluding that the requirements of FRCP Rule 23(a) and (b)(3) have been met.

The district court first addressed the requirements of Rule 23(a). Because the putative class consists of thousands of members, the court found that Rule 23(a)(1)’s numerosity requirement had been met. Grays, at 3. The federal court further found that the proposed class action “clearly” satisfied Rule 23(a)(2)’s commonality requirement, explaining at page 3:

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

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Class Action Defense Cases-Fireside Bank v. Superior Court: California Court Reaffirms Importance Of One-Way Intervention Rule In Class Action Alleging Fair Debt Collection And Unfair Competition Violations

Trial Court Order on Motion for Judgment on the Pleadings in Fair Debt Collection/Unfair Competition Law Class Action Violated One-Way Intervention Rule but Remedy is Vacating of Order Rather than Barring Class Action to Proceed California Supreme Court Holds

Sandra Gonzalez filed a class action cross-complaint against Fireside Bank alleging inter alia violations of California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) for failing to comply with the statutory notice requirements for collection of a deficiency judgment on vehicle sales contracts. Fireside Bank v. Superior Court, 56 Cal.Rptr.3d 861, 2007 WL 1112020, *1 (Cal. April 16, 2007). Gonzalez moved for judgment on the pleadings, and for an order certifying her lawsuit as a class action. The bank objected to any ruling on the merits of the class action until after the court first ruled on the motion to certify a class action, arguing that the one-way intervention rule required that procedure be followed. The trial court promised to rule on the class action certification first, but instead it simultaneously granted both motions. The Supreme Court held that this was error, and vacated the order granting the motion for judgment on the pleadings.

Gonzalez purchased a vehicle for her father, obtaining dealer financing but intending that her father use and pay for the vehicle. Fireside, at *1. The sales contract was assigned to Fireside Bank, and the loan went into default so the bank repossessed the vehicle, id. The bank sent Gonzalez a notice advising her of her redemption rights but overstating the amount due by $2700. Id. The bank then filed a lawsuit against Gonzalez seeking a deficiency judgment; Gonzalez filed a cross-complaint alleging that the bank failed to comply with the Rees-Levering Motor Vehicle Sales and Finance Act (Rees-Levering) in that the bank’s notice of intent was defective, thereby precluding the bank from seeking a deficiency judgment. Id., at *2. In part, the cross-complaint alleged violations of Rees-Levering and of California’s unfair competition law (UCL), id. The bank conceded that the notice contained a mistake, attributing it to a “computer error” and admitting that 3,000 other borrowers also received inaccurate notices. Id. Gonzalez moved for judgment on the pleadings on the bank’s complaint; the bank opposed the motion arguing, in part, that “before obtaining a ruling on the motion Gonzalez must seek or forswear certification of a class . . . and the trial court should take the motion off calendar or deny it without prejudice until class issues, if any, were resolved.” Id. The trial court postponed ruling on the motion, id.

Gonzalez amended her cross-complaint to assert the Rees-Levering Act and UCL claims on behalf of “all persons who had received postrepossession [sic] notices from Fireside Bank on accounts started in California in which the listed redemption amount failed to subtract the credit for unearned finance charges,” and then moved the court to certify the action as a class action. Fireside, at *2. The bank opposed the motion, id. The trial court set the hearing on the motion to certify a class action for the same date as the hearing on the motion for judgment on the pleadings; in so doing, the court indicated that it would likely certify a class action. Id., at *3. The bank also objected to any ruling on the motion for judgment on the pleadings until after the class certification issue was resolved, id. The Supreme Court noted at page *3 that “The trial court assured counsel that it was ‘not going to rule’ on the motion for judgment on the pleadings ‘until I decide the issue of certification.’” Id. But the trial court issued orders not only granting the motion to certify a class action, but also granting the motion for judgment on the pleadings based on its finding that the bank had "failed to comply with the notice requirements under the Rees-Levering Act” and therefore the bank could not recover a deficiency judgment. Id.

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

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Class Action Defense Cases-Barnes v. First American: Ohio Federal Court Denies Motion To Amend Class Action Complaint To Substitute New Class Representatives

Federal Court Holds that Putative Class Members are not “Current Parties” to Class Action, and that Rule 41 Applies to Class Action Plaintiffs Requiring Consent of Defendant for Dismissal

Plaintiffs filed a putative class action against their title insurer, First American, alleging that the prices charged by First American for title insurance issued in connection with refinance transactions violate state law. First American filed a counterclaim against plaintiffs and joined two parties as third-party defendants. Ten months after filing the class action, plaintiffs’ lawyer sought leave of court to file a second amended class action complaint for the purpose of substituting class representatives. Barnes v. First American Title Ins. Co., 473 F.Supp.2d 798, 799 (N.D. Ohio 2007). Defense attorneys opposed the motion on several grounds including (1) the existence of counterclaims unique to plaintiffs, precluding dismissal absent a stipulation with First American; (2) the absence of good cause in that plaintiffs knew the facts underlying the motion at the time they filed the class action; (3) the proposed amendment to the class action complaint “does not assert new claims but rather seeks a wholesale substitution of parties with different facts and discovery”; (4) the resulting prejudice to First American in that substantial discovery had been completed during the preceding 10 months; and (5) the joinder by First American, as third-party defendants, the agents who sold plaintiffs the title policies at issue. Id. The district court agreed with the first and third arguments, and denied the motion to substitute class representatives.

Believing that they could not adequately represent the proposed class, plaintiffs’ lawyer sought to substitute in as class representatives Dean and Aimee Hickman in place of Randolph and Stacie Barnes because the Barnes’ are involved in probate court litigation in which “Mr. Barnes' brother asserts the deed for the subject property that was subsequently refinanced by the Barnes was forged or obtained by fraud.” Barnes, at 799. Plaintiffs relied upon the general rule that leave to amend should be liberally granted and argued that “courts routinely grant leave to substitute parties in class action litigation.” Id. The district court recognized that the Sixth Circuit is “very liberal” in allowing complaints to be amended, id., at 800, but nonetheless denied the motion.

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

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Wal-Mart Class Action Defense Case-Savaglio v. Wal-Mart: Records Filed With Court In Labor Law Class Action Were Not Properly Sealed Thus Entitling News Agency To Access To Records Filed "Conditionally Under Seal" In Class Action California Court Holds

California Appellate Court Holds Wal-Mart Defense Attorneys Failed to Properly Move to Seal Records Filed with Court During Litigation of Labor Law Class Action, Reversing Trial Court Order Sealing Class Action Records

In February 2001, a class action was filed against Wal-Mart in California state court alleging violations of various labor laws; defense and plaintiff attorneys stipulatedd to a confidentiality and protective order governing documents filed with the court during the class action litigation, and the trial court entered a Protective Order in February 2002. Savaglio v. Wal-Mart Stores, Inc., ___ Cal.App.4th ___ (Cal.App. April 9, 2007) [Slip Opn., at 2]. The Protective Order provided that certain documents filed in the class action would be "conditionally sealed" pending a motion for an order permanently sealing the records, id. The class action was vigorously fought, and Wal-Mart filed petitions with the California Court of Appeal for writ relief following the trial court order certifying the lawsuit as a class action and following the trial court order denying Wal-Mart's motion for summary adjudication. Id., at 3. Defense attorneys did not seal any of the records filed with appellate court, id., at 1, 4, and did not file a motion in the trial court to permanently seal the records filed with the court, id., at 1, 5. A newspaper sought to review the documents filed in the class action, and Wal-Mart responded with a motion to permanently seal the records. Id., at 1. The trial court granted the defense motion in part, ordering that certain documents filed during the class action litigation be permanently sealed; the appellate court reversed.

The newspaper first sought the records filed in the class action litigation. Savalgio, at 3-4. The newspaper then sought access to the appellate records, and were advised by the clerk that the records of the Court of Appeal were not sealed, id., at 4. In response, Wal-Mart sent a letter to clerk representing that the records had been sealed by the trial court and thus should be deemed sealed on appeal; the appellate court agreed to conditionally seal the records pending a determination by the trial court of whether the records it were in fact sealed, id. at 5. The trial court denied the newspaper's motion to unseal the records, and wal-Mart filed a motion with the trial court to permanently seal the records. Id. Ultimately, the trial court ordered a "small portion" of the records permanently sealed, id. The newspaper moved for attorney fees under California Code of Civil Procedure section 1021.5, but the trial court denied the motion. Id., at 6. The newspaper appealed both rulings.

Continue reading "Wal-Mart Class Action Defense Case-Savaglio v. Wal-Mart: Records Filed With Court In Labor Law Class Action Were Not Properly Sealed Thus Entitling News Agency To Access To Records Filed "Conditionally Under Seal" In Class Action California Court Holds" »