Class Action Defense Blog

As Matter of First Impression, Second Circuit Holds that American Pipe Tolling Applies to Putative Class Members of Class Action who File Individual Lawsuits Prior to Decision on Class Action Certification

Prior to the filing of putative class action lawsuits and within one year after plaintiffs discovered “the untrue statement or the omission,” see 15 U.S.C. § 77m, certain pension funds filed individual lawsuits against underwriters of WorldCom bonds under Section 11 of the federal Securities Act of 1933 alleging that they had purchased bonds based on registration statements that contained false and misleading information. In re WorldCom Sec. Litig., ___ F.3d ___, 2007 WL 2127874, *1 (2d Cir. July 26, 2007). Numerous putative class action lawsuits also were filed against WorldCom and its bond underwriters, including Caboto-Gruppo Intensa and Caboto Holdings Sim, and these alleged inter alia violations of Section 11, id. After the expiration of the one-year limitations period, the pension funds amended the individual complaints to add Caboto as party-defendants, id. Caboto defense attorneys moved to dismiss the individual actions as time-barred; plaintiffs countered that the class actions tolled the running of the statute of limitations. Id. The district court granted the defense motion, ruling that the class action complaints did not toll the limitations period because plaintiffs had filed suit before a decision on class certification in the class action lawsuits. Id. The Second Circuit reversed.

Briefly, WorldCom falsified financial records to paint an inaccurate picture of the company’s profitability, but in 2002 “the scheme collapsed.” In re WorldCom, at *2. A class action complaint was filed against WorldCom in April 2002, and numerous other class actions soon followed. More than 120 individual lawsuits also were filed against the company, all of which were removed to federal court based on WorldCom’s petition for bankruptcy protection. Id. By May 2003, the individual actions had been consolidated with the class action complaints, id. In October 2003, the district court certified a class action against WorldCom alleging securities violations; that class action complaint included Section 11 claims against Caboto and other bond underwriters. Id., at *3. In analyzing Caboto’s motion to dismiss the class action and individual claims, the district court found that the statute of limitations began to run no later than June 25, 2002, but that Caboto and certain other bond underwriters were not named as defendants until September 24, 2003 - three months after the expiration of the one year limitations period. Id., at *4.

Continue reading "WorldCom Class Action Defense Case: Second Circuit Holds Class Action Complaint Tolls Statute Of Limitations Of Putative Class Members Who File Individual Suits Prior To Certification Of Class Action" »

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

District Court Properly Denied Class Certification Motion on Grounds of Unmanageability because Literally Thousands of Individual Evidentiary Hearings would be Required Seventh Circuit Holds

Plaintiff filed a putative class action in Illinois federal court against State Farm alleging that it failed to pay insureds $10 as required by its insurance policies when car repairs render the insured’s vehicle unusable for at least one day but the insured does not rent a car during the repair period. Pastor v. State Farm Mut. Auto. Ins. Co., 487 F.3d 1042, 1043 (7th Cir. 2007). Defense attorneys argued against certification of a class action, and the district court agreed; plaintiff thereafter accepted an offer of judgment, and appealed the denial of class certification. Id. The Seventh Circuit affirmed, holding that class action treatment was not appropriate because common issues did not predominate over individual issues.

Plaintiff’s car windshield was damaged in an accident 11 years ago. Pastor, at 1044. Her auto insurer, State Farm, paid for the repairs, which were completed in about one hour, but it did not pay her an additional $10 pursuant to a provision in her policy that required State Farm to “pay you $10 per day if you do not rent a car while your car is not usable.” Id. The policy states that the “per day” entitlement period begins at the time of the accident or “if your car can run, when you leave it at the shop for agreed repairs,” and ends when the repairs are complete. Id. Plaintiff did not rent a car for the one-hour repair period and did not ask State Farm for the extra $10, but the class action complaint alleges that the insurer was contractually obligated “to notify her that she was entitled to the money,” id. The Circuit Court was harsh in its characterization of plaintiff’s claim, stating “there is nothing in the policy to suggest that upon receipt of a claim seeking reimbursement of one cost (the cost of repairing the windshield) the insurer must determine and inform the insured of any additional entitlement that the policy might confer on her, just in case its customers don't bother to read their insurance policies when they file claims under them.” Id. Despite this problem, just before the expiration of the 10-year statute of limitations period, plaintiff filed a putative class action in Illinois federal court seeking to represent all State Farm insureds who “received payments for claims for damage to their vehicles, did not rent a car, yet did not receive any payment pursuant to the $10 a day clause.” Id.

Continue reading "Class Action Defense Cases-Pastor v. State Farm: Seventh Circuit Affirms Refusal To Certify Class Action Holding Individual Fact Issues Predominate Over Common Questions Rendering Class Action Treatment Unmanageable" »

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

As a resources for class action defense lawyers who defend against securities class action lawsuits, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress described prohibited foreign trade practices by issuers under the PSLRA in 15 U.S.C. § 78dd-1, which provides as follows:

§ 78dd–1. Prohibited foreign trade practices by issuers

(a) Prohibition

It shall be unlawful for any issuer which has a class of securities registered pursuant to section 78l of this title or which is required to file reports under section 78o (d) of this title, or for any officer, director, employee, or agent of such issuer or any stockholder thereof acting on behalf of such issuer, to make use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to—

(1) any foreign official for purposes of—

(A)

(i) influencing any act or decision of such foreign official in his official capacity,

(ii) inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official, or

(iii) securing any improper advantage; or

Continue reading "15 U.S.C. § 78dd-1—Prohibited Foreign Trade Practices By Issuers Under The Federal Private Securities Litigation Reform Act (PSLRA) Governing Individual And Class Action Securities Lawsuits" »

Posted In: Statutes & Rules

As a resource to California class action 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 report covers the time period from July 20 – July 26, 2007, during which time 41 new class action cases were initiated in these California state and federal courts. New labor law class action filings again topped the list with 18 new cases, or 44% of the total number of new class action lawsuits filed during the week. Unfair competition law (UCL) class action cases, which include false advertising cases, came in second with 7 new class action lawsuits (17%), followed by 4 new class action alleging securities laws violations (10%).

Posted In: Class Actions In The News

Judicial Panel Grants Defense Request, Opposed by Plaintiffs, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Agrees with Defense Request to Transfer Class Actions to Western District of Michigan

Five federal securities class action lawsuits (two in Oklahoma and one in California, Michigan and Texas) were filed against Macatawa Bank and others arising out of the role played by Macatawa bank’s predecessor-in-interest, Grand Bank, in an alleged fraud perpetrated by Trade Partners, Inc. In re Trade Partners, Inc., Investors Litig., 493 F.Supp.2d 1381, 1381 (Jud.Pan.Mult.Lit. 2007). Defense attorneys for common defendants Macatawa Bank Corp. and Macatawa Bank 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 Western District of Michigan. All plaintiffs opposed pretrial coordination, but argued alternatively for the Western District of Oklahoma as the transferee court. Id. The Judicial Panel granted the motion to centralize the class actions because they involve common questions of fact and will benefit from centralization, id. In rejecting plaintiffs’ argument that “individual questions of fact and law predominate, as evidenced by a ruling in the Western District of Michigan action denying class certification,” the Panel explained that denial of class certification “does not negate the reality that centralization under Section 1407 is necessary in order to eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel and the judiciary.” Id.

In selecting an appropriate transferee court, the Judicial Panel noted that either Michigan or Oklahoma would be appropriate venues, but opted Michigan because the action there has been pending longest (so the district court judge was familiar with the issues involved) and because defendants’ headquarters are located there, as were the headquarters of Trade Partners, “and thus relevant documents and witnesses will likely be found there.” In re Trade Partners, at 1381-82.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Misrepresentations by Defendant and Defense Counsel in Connection with Discovery and Court Proceedings Surrounding Proposed Settlement of Class Action Supported Trial Court Ruling that Defense Waived Right to Compel Arbitration California Court Holds

Plaintiffs filed a class action California state court against American Express Travel Related Services (Amex) alleging violations of the state’s unfair competition law arising out of the manner in which it charged for flight and baggage insurance. Aviation Data v. American Express Travel Related Services Co., Inc., ___ Cal.App.4th __, 62 Cal.Rptr.3d 396, Slip Opn., at 2 (Cal.App. 2007). A proposed settlement fell apart due to misrepresentations made by defense counsel, and Amex moved to compel arbitration. The Court of Appeal defined the issue as, “May a party lose its contractual right to compel arbitration if, when negotiating and seeking approval of a class action settlement, it misrepresents the benefits of the proposed settlement to the court, opposing counsel and others?” Id., at 1. The court summarized the trial court order and its holding at page 1 as follows: “Here the trial court refused to approve a class action settlement when it concluded that counsel for [Amex] misled plaintiffs in the course of negotiations by offering to make significant modifications to its travel insurance program that, unbeknownst to the plaintiffs, it had already made for reasons unrelated to the lawsuit. We hold the court did not err in ruling that due to its misleading conduct, Amex lost its right to compel arbitration.”

The class action complaint alleged that Amex offered cardholders flight and baggage insurance programs at a cost of $4-$14 per flight automatically charged to their American Express card. The class action alleged that cardholders believed Amex would charge them for this insurance only if they actually flew, and would receive refunds if flights were canceled or the airline tickets were not used. Instead, “Amex engaged in a scheme to cheat and defraud its cardholders by assessing premiums for trips it knew were never taken; intentionally designed its billing practices, procedures and computer programs to bill customers for services they did not receive or use and to double-bill for the same service; and intentionally failed to issue refunds or credits on cancelled flights or unused tickets.” Aviation, at 2.

Continue reading "Amex Class Action Defense Cases-Aviation Data v. American Express: California Court Holds Defense Misrepresentations Warrant Rejection Of Class Action Settlement And Waiver Of Right To Arbitrate" »

Posted In: Arbitration, Class Action Court Decisions

The American Conference Institute is sponsoring a two-day seminar on positioning the class action case for early success. The conference will be held in Phoenix on September 26 and 27, 2007. The details of the conference, its location and its topics 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, Court Holds Class Action Failed to State a Claim Against Insurer because California Law Permits Insurers to Demand Reimbursement of Insurance Benefits Following Insured’s Recovery of Damages from Tortfeasor

Plaintiff filed a class action in California state court against Allstate Insurance alleging that its demand for reimbursement of benefits paid under the insurance policy violated various state and common laws. Allstate Ins. Co. v. Superior Court, 151 Cal.App.4th 1512, 1518 (Cal.App. 2007). Defense attorneys demurred, arguing that Allstate’s reimbursement demand, made pursuant to the terms of the insurance policy, was allowed by California law and so the class action complaint failed to state a claim, id., at 1519-20. The trial court overruled the demurrer, permitting the class action to proceed, id. The California Court of Appeal granted Allstate’s petition for writ of mandate and reversed.

Following an accident, plaintiff tendered a claim to Allstate under the first-party, no-fault medical payments insurance coverage section (“med-pay”) of his automobile policy, and Allstate paid him $4203.36. Allstate, at 1518. Plaintiff then sued the responsible party, recovering $11,000 but incurring $5926.84 in attorney fees and costs, id. Allstate did not participate in the litigation, but demanded reimbursement of the policy benefits paid pursuant to the “subrogation rights” provision which provides, “When we pay, your rights of recovery from anyone else become ours up to the amount we have paid. You must protect these rights and help us enforce them.” Id. Plaintiff reimbursed Allstate $1,696.13; “Allstate agreed to the reduction based on the common-fund rule that an insurer is required to deduct from its reimbursement a pro rata portion of the insured's attorney fees and costs incurred to recover covered losses against a third party tortfeasor when the insurer had knowledge of, but did not participate in, the litigation.” Id., at 1519 (citing Lee v. State Farm Mut. Auto. Ins. Co., 57 Cal.App.3d 458, 465-66 (Cal.App. 1976)).

Continue reading "Allstate Class Action Defense Case-Allstate v. Superior Court: California Circuit Holds That "Made Whole" Rule Does Not Require Insured Recover Attorney Fees Before Insurer Can Demand Reimbursement Of Policy Benefits Previously Paid" »

Posted In: Class Action Court Decisions

Class Action Complaint Adequately Alleged Section 10(a) Control Person Liability as to All Individual Defendants and Adequately Alleged Section 10(b) Violation Against Company and Three of its Officers, but Failed to Establish Necessary Inference of Scienter as to Two Other Officers Warranting Dismissal of Claim Against Them Only Delaware Federal Court Holds

Nine (9) securities class action lawsuits were filed against MBNA and consolidated in the United States District Court for the District of Delaware. The consolidated class action complaint sought to represent purchasers of MBNA securities and alleged that the company of five of its officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. Baker v. MBNA Corp., ___ F.Supp.2d ___, 2007 WL 2009673, *1 (D. Del. July 6, 2007). Defense attorneys moved to dismiss the class action; the federal court dismissed one count as against two of the individual defendants, but otherwise denied the defense motion.

The class action complaint named MBNA and MBNA officers Bruce L. Hammonds, Kenneth A. Vecchione, Richard K. Struthers, Charles C. Krulak, and John R. Cochran, III, and alleged that defendants reported false information concerning its growth in order to artificially inflate the stock price for their personal financial gain. Baker, at *1. The details of the allegedly false statements are discussed in the court’s opinion, see id., at *1-*2. The class action contained two counts only: one for violations of Section 10(b) and Rule 10b-5 against all defendants, and one for violations of Section 20(a) against the individual defendants. Id., at *3. All defendants moved for dismissal of the class action complaint under Rule 12(b)(6) and Rule 9(b), id. In addition to noting its safe harbor provision, the district court summarized the impact of the Private Securities Litigation Reform Act of 1995 (PSLRA) on securities cases at page *4 as follows:

Continue reading "PSLRA Class Action Defense Cases-Baker v. MBNA: Delaware Federal Court Grants Defense Motion To Dismiss One Count In Class Action Complaint Against Two Individuals Only But Otherwise Denies Motion" »

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

Required “Strong Inference” of Scienter Under Private Securities Litigation Reform Act (PSLRA) “Must be More than Merely Plausible or Reasonable - it Must be Cogent and at Least as Compelling as any Opposing Inference of Nonfraudulent Intent” Supreme Court Holds

Plaintiffs filed a class action against Tellabs and its CEO alleging violations of federal securities laws; defense attorneys moved to dismiss the class action complaint on the grounds that the Private Securities Litigation Reform Act (PSLRA) required plaintiffs to plead facts sufficient to support a “strong inference” of scienter, and that the putative class action failed to do so. The district court granted the defense motion, but the Seventh Circuit reversed and reinstated the class action. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. __, 127 S.Ct. 2499 (2007). The Supreme Court granted certiorari and reversed.

The Supreme Court recognized the positive aspects of private actions to enforce federal antifraud securities laws, but noted “if not adequately contained, [they] can be employed abusively to impose substantial costs on companies and individuals whose conduct conforms to the law.” Tellabs, at 2504. One control enacted by Congress consists of the exact pleading requirements in the Private Securities Litigation Reform Act (PSLRA), which “requires plaintiffs to state with particularity both the facts constituting the alleged violation, and the facts evidencing scienter, i.e., the defendant's intention ‘to deceive, manipulate, or defraud.’” Id. (citations omitted). Specifically, the PSLRA requires that the complaint “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind,” 15 U.S.C. § 78u-4(b)(2). Congress, however, did not define the term “strong inference” and circuit courts have disagreed on its meaning. Tellabs, at 2504.

Continue reading "PSLRA Class Action Defense Cases-Tellabs v. Makor: Supreme Court Holds In Securities Class Action That "Strong Inference" Of Scienter Under PSLRA Requires "More Than Merely Plausible Or Reasonable" Inference" »

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

In order to assist class action defense attorneys in defending against securities class action lawsuits, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress addressed foreign securities exchanges under the PSLRA in 15 U.S.C. § 78dd, which states:

§ 78dd. Foreign securities exchanges

(a) It shall be unlawful for any broker or dealer, directly or indirectly, to make use of the mails or of any means or instrumentality of interstate commerce for the purpose of effecting on an exchange not within or subject to the jurisdiction of the United States, any transaction in any security the issuer of which is a resident of, or is organized under the laws of, or has its principal place of business in, a place within or subject to the jurisdiction of the United States, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors or to prevent the evasion of this chapter.

(b) The provisions of this chapter or of any rule or regulation thereunder shall not apply to any person insofar as he transacts a business in securities without the jurisdiction of the United States, unless he transacts such business in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate to prevent the evasion of this chapter.

Posted In: Statutes & Rules

To aid class action defense attorneys anticipate the claims against which they will have to defend in California, 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 report covers the time period from July 13 – July 19, 2007, during which time 36 new class action cases were initiated in these California state and federal courts. New labor law class action filings dropped to thirteen (13) new cases, or 36% of the total number of new class action lawsuits filed during the week. Unfair competition law (UCL) class action cases, which include false advertising cases, came in second with 6 new class action lawsuits (17%), followed closely by 5 new ADA/public accommodation class action claims (14%) and 4 new class action alleging securities laws violations (11%).

Posted In: Class Actions In The News

Judicial Panel Grants Request, Unopposed by Defense, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 in the District of Massachusetts

Six class action lawsuits (four in Massachusetts, and one in Alabama and Puerto Rico) were filed against TJX and others seeking damages arising out of the electronic theft of confidential customer data from TJX’s computer system. In re In re The TJX Cos., Inc., Customer Data Security Breach Litig., 493 F.Supp.2d 1382, 1382 (Jud.Pan.Mult.Lit. 2007). Plaintiff's lawyer in one of the Massachusetts class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class action lawsuits pursuant to 28 U.S.C. § 1407; defense attorneys did not oppose centralization and all responding plaintiffs concurred that centralization in the District of Massachusetts was appropriate. Id., at 1382-83. The Judicial Panel granted the motion to centralize the class actions and agreed that the District of Massachusetts was the proper transferee court because "(i) the consensus of the parties favors or does not oppose centralization there, (ii) many actions are already pending there, and (iii) TJX is headquartered in Massachusetts and documents and witnesses will likely be found there." Id., at 1383.

Posted In: Multidistrict Litigation, Class Action Court Decisions

District Court Concludes that Validation Notice in Debt Collection Letter was Presumptively Valid because it Tracked Section 1692g of the Fair Debt Collection Practices Act (FDCPA), but Concluded that Least Sophisticated Consumer could have been Confused by “Subject To” Language in Letter and so Denies Defense Motion to Dismiss Class Action Complaint

Plaintiffs filed a putative class action against debt collection law firm alleging that a debt collection letter sent in August 2005 violated the federal Fair Debt Collection Practices Act (FDCPA). Meselsohn v. Lerman, 485 F.Supp.2d 215, 216 (E.D.N.Y. 2007). Defense attorneys moved to dismiss the class action complaint for failure to state a claim on the ground that the letter was presumptively valid. Surprisingly, plaintiff admitted that the letter “properly informs the consumer of his rights to dispute the debt, request verification of the debt and request creditor information within thirty (30) days of the initial communication from the debt collector.” Id., at 217. The class action complaint was premised on the theory that the letter violated the FDCPA because the 30-day validation period required by Section 1692g is “improperly overshadowed by the demand for payment of the debt within the same thirty days.” Id. According to plaintiff, it was unclear that he had the right “to either pay the debt or request validation,” id. (italics added). Defense attorneys argued that dismissal of the class action was warranted because the letter “tracks the statutory language of the FDCPA and is presumptively valid,” and argued further that the demand for payment “is specifically made ‘subject to’ the thirty day notice provisions” and so the validation notice is not “overshadowed” by the payment demand. Id. Plaintiff countered that the letters should have included “transitional language explaining to the consumer that the demand for payment does not override the consumer's right to seek validation of the debt” and that it is deficient because it is not clear that the consumer may either pay the debt or dispute it. Id. The district court agreed with plaintiff.

Continue reading "FDCPA Class Action Defense Cases-Meselsohn v. Lerman: New York Federal Court Denies Defense Motion To Dismiss Class Action Under Fair Debt Collection Practices Act (FDCPA) Holding Collection Letter Complied With Statute But Required Transitional Language" »

Posted In: FDCPA Class Actions, Class Action Court Decisions

Plaintiff in FLSA Class Action Must Make “Some Factual Showing” that Similarly-Situated Requirement is met in order to Obtain Conditional Certification of Class Action Treatment Delaware Federal Court Holds

Plaintiff filed a labor law class action against TruGreen - a lawn and landscaping company that hires non-immigrants for seasonal work under the federal H-2B visa program - alleging violations of the federal Fair Labor Standards Act (FLSA) and various state law claims. Villanueve-Bazaldua v. TruGreen Ltd. Partners, 479 F.Supp.2d 411, 413 (D. Del. 2007). Plaintiff moved to conditionally certify a class action; defense attorneys objected to class certification on the ground that plaintiff was not “similarly situated” to the putative class members and that, in any event, the company was not legally required to reimburse the expenses underlying the class action claims. The district court agreed with the defense and refused to certify an FLSA class action.

The class action complaint alleged that he was “recruited” in Mexico and that TruGreen promised to pay him $11.34 per regular hour and $17.01 per overtime hour to work for the company, and that in reliance on these promises, plaintiff incurred the expense of obtaining an H-2B visa and of traveling to and from the U.S. TruGreen, at 413. “These expenses included the cost of obtaining a Mexican passport, a $100 visa application fee, a $100 visa issuance fee, a $6 border crossing fee, a $155 administrative fee paid to TruGreen's agent for processing the visa paperwork, and transportation expenses from the point of recruitment to the place of work in the United States.” Id. According to the class action allegations, these expenses constituted “de facto deductions from the first and last weeks of their wages, causing them to earn less than the wages required by the FLSA.” Id., at 413-14. Plaintiff argued that class action treatment was appropriate because Arriaga v. Florida Pacific Farms, 305 F.3d 1228 (11th Cir. 2002), holds that “visa and transportation costs incurred by foreign visa workers are de facto wage deductions from the workers' first and last weeks' wages for purposes of the FLSA” and because “all of TruGreen's H-2B workers present the same claim that the FLSA requires reimbursement of those costs up to the mandated FLSA wage level,” id., at 414. Defense attorneys opposed conditional certification of a class action arguing that (1) it is not required to bear the visa and transportation costs of its H-2B employees, (2) plaintiff is not “similarly situated” to the putative class members because TruGreen provided him with transportation back to Mexico, and (3) “certain H-2B workers did receive compensation for various incidentals arising from their temporary employment.” Id.

Continue reading "Class Action Defense Cases-Villanueve-Bazaldua v. TruGreen: Delaware Federal Court Denies Conditional Class Action Certification Of FLSA Class Action Holding Plaintiff Not "Similarly Situated" to Putative Class" »

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

Plaintiffs in Class Action/FLSA Collective Action Alleging Labor Law Violations Adequately Supported Motion for Conditional Certification under FLSA of Putative Class Including Non-New York Employees, but Limits Class to Telemarketers Rather than All Hourly Employees

Two plaintiffs filed a class action and FLSA (Fair Labor Standards Act) collective action lawsuit against telemarketing service provider Sutherland Global - which operated 9 call centers in New York, one in California and one in Virginia - alleging various state and federal labor law violations, after which 38 former telemarketing agents sought court approval to “opt in” to the class action/FLSA lawsuit as named plaintiffs. Sherrill v. Sutherland Global Servs., Inc., 487 F.Supp.2d 344, 346-47 (W.D.N.Y. 2007). Plaintiffs moved the court to conditionally certify an FLSA collective action and to provide notice to putative class members of their right to opt in, id., at 346. Defense attorneys did not oppose the motion, but requested the right to approve the notice, asked the federal court to limit the scope of the proposed class, and asked the federal court to set an “opt-in” deadline, id., at 351. The defense also requested that plaintiffs’ lawyer remove “inaccurate statements” from counsel’s website, but plaintiffs “voluntarily agreed to make the necessary corrections” rendering the issue moot, id. at 351 n.4. The district court granted plaintiff’s motion in part, agreeing with defense attorneys that notice should be sent only to current and former telemarketing agents rather than all Sutherland hourly employees, and

The class action/FLSA complaint alleged three labor law violations. First, that Sutherland’s timekeeping system automatically deducted 60 minutes for lunch from each employee’s daily pay, regardless of whether the employee took a lunch break or worked during part of their lunch break. Sherrill, at 347. The complaint further alleged that the workload and the pressure to meet performance goals required that telemarketing agents frequently work during lunch periods, and as part of their motion, plaintiffs submitted declarations supporting these allegations, id. Second, the class action alleged that Sutherland required its telemarketers to work “off the clock” by arriving 15-30 minutes before their scheduled shift but encouraging them not to “log on” until at or near their scheduled start time. Id. Finally, plaintiffs alleged - and in their motion introduced evidence supporting - that Sutherland improperly excluded commissions and bonuses in calculating its employees’ appropriate overtime rates, using instead the “regular rate of pay” for each employee “result[ing] in application of a lower overtime rate than would apply were commissions and bonuses properly included in the rate of pay,” id., at 348.

Continue reading "FLSA Class Action Defense Case-Sherrill v. Sutherland Global: New York Federal Court Holds Conditional Certification Of FLSA (Fair Labor Standards Act) Collective Action Warranted But Limits Scope Of Proposed Class" »

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

Defense Attempt to Compel Arbitration of Class Action Claims Based on Arbitration Clause in Employment Agreement Between Plaintiffs and Co-Defendant Warranted Only “Passing Attention” and was Rejected by Massachusetts Federal Court

Skycaps filed a class action lawsuit against American Airlines and against their direct employer, G2 Secure Staff, LLC, which employs skycaps for airlines, alleging that American Airlines violated the Massachusetts Tips Law by imposing a $2 per bag service charge for passenger luggage checked at curbside. DiFiore v. American Airlines, Inc., 483 F.Supp.2d 121, 123 (D. Mass. 2007). Defense attorneys for American Airlines moved to dismiss the class action complaint on the grounds that the Airline Deregulation Act of 1978 preempted the class action claims, and G2 moved to dismiss the class action on the grounds that the skycaps were required to arbitrate their claims against G2 pursuant to the terms of their employment agreement with G2. Id., at 123-24. Plaintiffs stipulated to arbitrate their claims against G2; and American argued that “at least some of the skycaps must arbitrate their claims” against American as well as G2, id., at 127. The district court denied American’s motion to dismiss, and rejected also defense arguments in favor of arbitration.

We do not here address the federal court’s discussion of the Airline Deregulation Act, or its conclusion that the class action claims were not expressly or implied preempted by the Act. See DiFiore, at 124-27. We discuss DiFiore only because of the increasing attention given to arbitration clauses in the context of class action litigation. As noted above, American sought to “piggyback” on the arbitration agreement contained in plaintiff’s employment contracts with G2. Id., at 127. The district court’s response was terse and to the point: “This Court need not give more than passing attention to this argument. The arbitration agreement, by its own terms, is limited in scope to claims arising between G2 and G2 employees…. For this reason alone, this Court rejects American's effort to compel arbitration.” Id.

Posted In: Arbitration, Class Action Court Decisions

As a resource for class action defense lawyers who defend against securities class action litigation, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress set forth statutory provisions addressing the validity of contracts under the PSLRA in 15 U.S.C. § 78cc, which provides:

§ 78cc. Validity of contracts

(a) Waiver provisions

Any condition, stipulation, or provision binding any person to waive compliance with any provision of this chapter or of any rule or regulation thereunder, or of any rule of an exchange required thereby shall be void.

(b) Contract provisions in violation of chapter

Every contract made in violation of any provision of this chapter or of any rule or regulation thereunder, and every contract (including any contract for listing a security on an exchange) heretofore or hereafter made, the performance of which involves the violation of, or the continuance of any relationship or practice in violation of, any provision of this chapter or any rule or regulation thereunder, shall be void

Continue reading "15 U.S.C. § 78cc—Validity Of Contracts Statutes Under The Federal Private Securities Litigation Reform Act (PSLRA) For Individual And Class Action Securities Lawsuits" »

Posted In: Statutes & Rules

Enforcement of Class Action Waiver in Cingular’s Mandatory Arbitration Clause Reversed by Washington Supreme Court and Class Action Reinstated because Class Action Waiver was Unconscionable under the Circumstances

A Seattle newspaper reports that the Washington Supreme Court has held that Cingular Wireless cannot enforce a class action waiver as part of an apparently mandatory arbitration clause. As prior articles reveal, class action waivers are frequently part of company-drafted mandatory arbitration provisions. According to the newspaper, Justice Tom Chambers, writing for the Court, held that the class action waiver was “unconscionable” because “it effectively denies large numbers of consumers the protection of Washington’s Consumer Protection Act.” The decision springs from a trial court order that granted a defense motion to dismiss a class action complaint and to compel arbitration based on the class action waiver in a mandatory arbitration clause. In reversing, the Supreme Court opined that a class action “is often the only meaningful type of redress for small but widespread injuries” and concluded that customers were unlikely otherwise to pursue Cingular for the small amount at issue, either in small claims court or in arbitration. Accordingly, the Supreme Court invalidated the class action waiver and reversed the trial court order dismissing the class action complaint.

Posted In: Class Actions In The News

In an effort to assist California class action defense attorneys anticipate the claims against which they will 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 report covers the time period from July 6 – July 12, 2007. During this past week, 45 new class action lawsuits were filed in these California state and federal courts, of which twenty (20) involved labor law class action claims, representing 44% of the total number of new class action lawsuits filed during the week. Unfair competition law (UCL) class action cases, which include false advertising cases, came in second with 9 new class action lawsuits (20%). The only other category of new class action cases to break the 10% threshold alleged securities laws violations, with 6 new class action filings (13%).

Posted In: Class Actions In The News

Judicial Panel Grants Defense Request, Opposed by Plaintiffs, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 but Rejects Defense Request to Transfer Class Actions to Southern District of New York or to District of Connecticut

More than fifty (50) products liability class action lawsuits were filed, the vast majority in the District of Minnesota, against various defendants alleging adverse side effects from use of the drug Mirapex, and challenging the timeliness and adequacy of defendants' warnings concerning those side effects. In re Mirapex Products Liab. Litig., 493 F.Supp.2d 1376, 2007 WL 1853953, *1 (Jud.Pan.Mult.Lit. 2007). Defense attorneys for the common defendants 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 New York or in the District of Connecticut. The plaintiffs’ lawyers who responded to the motion opposed pretrial coordination, but argued alternatively that the District of Minnesota was the appropriate transferee court, id. The Judicial Panel granted the motion to centralize the class actions and selected the District of Minnesota because "i) this district has the most advanced of the 58 actions; ii) the judge there has had an opportunity to become familiar with the litigation; and iii) Minneapolis is easily accessible." Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

"Concept of Interest of Common Reliance" Applies to Class Action Alleging Violations of CLRA (Consumers Legal Remedies Act) and UCL (Unfair Competition Law) and Supports Certification of Class Action California Appellate Court Holds

Plaintiff filed a putative class action in California state court against Monier alleging violations of the state’s Consumers Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) arising out of its “failure to disclose that the color composition of its roof tiles would erode away, leaving bare concrete, well before the end of the tiles’ represented 50-year life.” McAdams v. Monier, Inc., 151 Cal.App.4th 667, 60 Cal.Rptr.3d 111, 112-13 (Cal.App. 2007), reh’g den. and opn. mod. (June 25, 2007). The class action complaint alleged that Monier warranted its roof tiles for 50 years, and represented that it had a permanent color glaze and required no care. McAdams, at 113. The class action claims were based on the allegation that, contrary to the above, Monier knew that the tiles lose their color “well in advance of their warranted 50-year useful life,” id. Plaintiff sought to prosecute a class action on behalf of a “CLRA” class, consisting of all people who own homes with Monier tile roofs or who paid to replace or repair such tiles, and an “ownership” class, consisting of people who own buildings other than homes with Monier tile roofs or who paid to replace or repair such tiles. Id., at 113-14. In denying plaintiff’s class certification motion, the trial court explained that each class member would be required to prove actual reliance, raising individual fact issues as to the particular representations relied on and the damage suffered, and that plaintiff claims were not “typical” of class because he purchased his tiles through a third party distributor rather than through Monier directly. Id., at 114. Plaintiff appealed, and the appellate court reversed.

The Court of Appeal first addressed class action certification under the CLRA, which is governed by Civil Code section 1781. The appellate court readily concluded that the class action complaint sufficiently alleged a violation of the CLRA, McAdams, at 115, the issue was whether the trial court correctly determined that individual issues predominated. The appellate court found, “The class action is based on a single, specific, alleged material misrepresentation: Monier knew but failed to disclose that its color roof tiles would erode to bare concrete long before the life span of the tiles was up.” Id. With respect to the trial court’s conclusion that class members must individually prove reliance and consequent damage, thus defeating commonality as required by section 1781(b)(2), the appellate court recognized the CLRA requires a plaintiff show both that the defendant’s statements were deceptive and that the representations caused them damage, id., at 116 (citation omitted), but held that under the facts of this case reliance by members of the putative class could be “inferred” based on the allegation that “Monier made a single, material misrepresentation to class members that consisted of a failure to disclose a particular fact regarding its roof tiles” when Monier allegedly knew “that the color composition of its roof tiles would erode to bare concrete well before the end of the tiles' represented 50-year life.” Id., at 117. The appellate court found that, if these allegations were true, the failure to make the requisite disclosure “would have been material to any reasonable person who purchased tiles in light of the 50- year/lifetime representation, or the permanent color representation, or the maintenance-free representation” so as to “permit an inference of common reliance among the class on the material misrepresentation comprising the alleged failure to disclose.” Id. The Court of Appeal further held that this conclusion meant plaintiff did not have to purchase his tiles directly from Monier in order to prosecute a CLRA class action claim against it on behalf of the class. See id., at 118-19.

Continue reading "Class Action Defense Cases-McAdams v. Monier: California Circuit Holds Class Action May Be Certified Based On "Inference" Of Reliance By Class Members So Trial Court Erred In Denying Motion To Certify Class Action" »

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

As Matter Of First Impression, 10-Day Deadline for Seeking Interlocutory Review of Court Order Refusing to Certify Class Action is Jurisdictional and District Court Cannot “Extend” Deadline by Vacating and Reentering its Order Eleventh Circuit Holds

Plaintiffs filed a putative class action against their employer, BellSouth, alleging a “pattern and practice of racial discrimination in promotions and compensation.” Defense attorneys opposed plaintiff’s motion to certify the lawsuit as a class action, and on September 19, 2006, the district court entered its order denying class certification. Jenkins v. BellSouth Corp., ___ F.3d ___, 2007 WL 1881294, *1 (11th Cir. July 2, 2007). On October 3, plaintiffs sought reconsideration of the order denying class action treatment, but on November 7 the court denied that request. Id. On November 24 plaintiffs asked the Eleventh Circuit for permission under FRCP Rule 23(f) to proceed with an interlocutory appeal of the class action certification order, but the Circuit Court dismissed the petition as untimely. Id. In response, plaintiffs asked the district court to “vacate and reenter” the order denying reconsideration, pleading that its petition in the Circuit Court was due November 22 (the day before Thanksgiving), that it attempted on November 21 to file its petition by overnight delivery, and that the package was delivered November 24 (the day after Thanksgiving). Id. The district court granted plaintiffs’ motion on March 5, 2007; specifically, the court “vacated its order of November 7, 2006, and reentered an identical order,” id. Plaintiffs filed their second Rule 23(f) petition on March 14, 2007, id.

The Eleventh Circuit stated that the issue presented had not been addressed previously in the circuit, explaining at page *1: “This petition presents an issue of first impression: whether a district court has the authority to circumvent the ten-day deadline for obtaining interlocutory review of an order denying class certification by vacating and reentering that order, after the aggrieved parties filed and this Court dismissed an untimely petition for an interlocutory appeal.” The Circuit Court held that “the district court lacked the authority to circumvent the ten-day deadline provided in Rule 23(f) by vacating and reentering its earlier order” and, accordingly, that plaintiffs’ petition was untimely, id. Accordingly, the Court dismissed the petition for lack of jurisdiction.

Continue reading "Employment Class Action Defense Cases-Jenkins v. BellSouth: Eleventh Circuit Holds District Court Cannot Avoid 10-Day Deadline For Seeking Interlocutory Review of Class Action Certification Order By Vacating And Reentering Order" »

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

Distributors of Dietary Supplements were not Adequate Class Representatives in Class Action Against Manufacturer Because Goal of Class is Disgorgement of Profits but Putative Class Representatives’ Self-Interest would be to Retain Profits Realized from Drug Sales

Plaintiffs filed a putative class action against Neways and others alleging inter alia unfair competition arising out of the sale of a dietary supplement without a prescription. Seastrom v. Neways, Inc., 149 Cal.App.4th 1496, 1499 (Cal.App. 2007). Defendant manufactured and distributed an oral spray called BioGevity as an anti-aging dietary supplement. Id. BioGevity contained HGH, which cannot be sold without a prescription, but defendant did not require a prescription to purchase the product, id. The class action complaint alleged that Neways and its independent distributors engaged in a pyramid sales scheme in which distributors could purchase BioGevity for $59-$66 per bottle, with a suggested retail price of $84.35-$94.40, and “keep the difference between the wholesale and retail prices on products they sold directly, and to commissions on the sale of products by distributors under them in the pyramid scheme.” Id. The putative class action alleged that some distributors had upwards of 8,800 “downline” distributors in the “pyramid” and made millions of dollars off the pyramid scheme, id. The court denied the motion of two distributors, acting as putative class representatives, to certify the lawsuit as a class action, and the Court of Appeal affirmed.

Following an investigation by the U.S. Attorney's Office into Neways' sale of BioGevity without prescriptions, “In September 2003 Neways pleaded guilty to knowingly selling approximately 100,000 bottles of a product that contained HGH in violation of [federal law] and to criminal forfeiture under sections 333(e)(3) and 853(a)(1).” Seastrom, at 1499-1500. The company also paid $1.75 million as part of a stipulated fine and forfeiture of profits from the sale of BioGevity; in return, the federal government agreed not to prosecute Neways distributors. Id., at 1500. In June 2003, just before Neways resolved the U.S. Attorney’s investigation, an unfair competition lawsuit was filed against Neways by a Marc Lewis. Id. However, because Lewis had never purchased BioGevity, he lacked standing to prosecute the class action after California voters enacted Proposition 64, id.

Continue reading "Class Action Defense Cases-Seastrom v. Neways: California Appellate Court Affirms Order Refusing To Certify Class Action Because Putative Class Representatives Were Potential Defendants In The Same Action" »

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

Plaintiff Failed to Establish Membership in Class Defined by Class Action Complaint and Failed to Allege Adequately Entitlement to Reduced Insurance Rate Underlying Damage Claims thus Warranting Court Order Granting Defense Motion to Dismiss Class Action Claims, but Plaintiff Given Leave to Amend

Plaintiff filed a putative class action against defendant Fidelity National Title Insurance Company of New York on behalf of purchasers of title insurance who, in connection with refinance transactions, qualified for discounted refinance rates but did not receive them. Lentini v. Fidelity Nat’l Title Ins. Co. of New York, 479 F.Supp.2d 292, 295 (D. Conn. 2007). The class action complaint alleged violations of Connecticut’s Unfair Trade Practices Act (CUTPA) (Count I), fraudulent misrepresentation (Count II), negligent misrepresentation (Count III) and unjust enrichment (Count IV), id., at 296. Defense attorneys moved to dismiss Counts I-III of the class action complaint, id., at 295-96; the district court granted the motion as to certain claims for relief but granted plaintiff leave to amend, id., at 303.

According to the class action complaint, Fidelity’s title insurance rate schedule, approved by the Connecticut Insurance Department, provided for both “regular” and “reduced” rates in connection with refinance transactions; specifically, if a homeowner refinances within 10 years “and the premises to be insured are identical and there has been no change in the fee ownership,” then discounted premiums may apply. Lentini, at 296. Plaintiff alleges that he refinanced his mortgage and qualified for a discounted title policy rate but that Fidelity “(a) concealed from the Plaintiff that he qualified for and was entitled to receive the discounted refinance rate and (b) supplied false, misleading, inaccurate and incomplete information about the applicable rate for title insurance by charging the Plaintiff Six Hundred Fifty Dollars ($650.00) for title insurance.” Id. The class action allegations were that all class members qualified for discounted rates and that Fidelity should have known that the class members were eligible to receive reduced rates, but instead Fidelity charged class members the regular rate for their title policies. Id., at 297. Plaintiff alleged that the premiums Fidelity charged class members exceeded the statutorily mandated rates, id.

Continue reading "Fidelity Class Action Defense Case-Lentini v. Fidelity: Connecticut Federal Court Grants Defense Motion To Dismiss Class Action Complaint Claims For Fraud And Unfair Business Practices But Grants Leave To File Amended Class Action Complaint" »

Posted In: Class Action Court Decisions

To aid class action defense attorneys in defending against securities class action lawsuits, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress explained the effect of the PSLRA on existing law in 15 U.S.C. § 78bb, which provides:

§ 78bb. Effect on existing law

(a) Addition of rights and remedies; recovery of actual damages; State securities commissions

Except as provided in subsection (f) of this section, the rights and remedies provided by this chapter shall be in addition to any and all other rights and remedies that may exist at law or in equity; but no person permitted to maintain a suit for damages under the provisions of this chapter shall recover, through satisfaction of judgment in one or more actions, a total amount in excess of his actual damages on account of the act complained of. Except as otherwise specifically provided in this chapter, nothing in this chapter shall affect the jurisdiction of the securities commission (or any agency or officer performing like functions) of any State over any security or any person insofar as it does not conflict with the provisions of this chapter or the rules and regulations thereunder. No State law which prohibits or regulates the making or promoting of wagering or gaming contracts, or the operation of “bucket shops” or other similar or related activities, shall invalidate any put, call, straddle, option, privilege, or other security subject to this chapter, or apply to any activity which is incidental or related to the offer, purchase, sale, exercise, settlement, or closeout of any such security. No provision of State law regarding the offer, sale, or distribution of securities shall apply to any transaction in a security futures product, except that this sentence shall not be construed as limiting any State antifraud law of general applicability.

Continue reading "15 U.S.C. § 78bb—Effect Of The Federal Private Securities Litigation Reform Act (PSLRA) Governing Individual And Class Action Lawsuits For Securities Fraud On Existing Law" »

Posted In: Statutes & Rules

To assist California class action defense attorneys anticipate the claims against which they will 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 report covers the time period from June 29 – July 5, 2007, during which time 37 new class action lawsuits were filed in these courts. We repeatedly note that employment-based class action lawsuits usually lead the list of new class action filings by a wide margin, but last week new labor law class actions outstripped all other categories of new class action filings by its widest margin since we began reporting these statistics. This week suggests that the "phenomenon" may prove to be a trend, because out of these 37 new class action lawsuits, 22 (60%) involve employment-related claims. Unfair competition law (UCL) class action cases, which include false advertising cases, came in a distant second with 5 new class action lawsuits (14%), followed closely by 4 new securities class action cases (11%).

Posted In: Class Actions In The News

Judicial Panel Grants Plaintiffs’ Requests, Opposed by Defense and Other Plaintiff Lawyers, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Sends Class Actions to District of Rhode Island

Thirteen (13) class action lawsuits were filed in 13 different courts located in 11 different states against various defendants, including C.R. Bard and its wholly-owned subsidiary Davol (common defendants in all class actions) and Surgical Sense and WCO Medical Products (defendants in only one class action), asserting products liability claims allegedly caused by defects in various models of hernia patches manufactured and sold by Bard, Davol or Surgical Sense. In re Kugel Mesh Hernia Patch Products Liab. Litig., ___ F.Supp.2d ___, 2007 WL 1853819, *1 (Jud.Pan.Mult.Lit. June 22, 2007). Plaintiffs’ lawyers in the Alabama and Rhode Island actions moved the Judicial Panel for Multidistrict Litigation (MDL) an order centralizing the class actions for pretrial purposes pursuant to 28 U.S.C. § 1407, each requesting transfer to the district court in which their action already was pending, id. The Tennessee plaintiffs opposed pretrial coordination entirely, while the Arkansas plaintiffs supported centralization only as to those class actions that contained certain claims but otherwise opposed centralization, id. All defense attorneys opposed centralization, alternatively arguing for transfer to Arkansas or Missouri, id. Other plaintiffs in various districts supported transfer to various districts and under various circumstances, providing the Judicial Panel with no consensus from which to work, id. The Judicial Panel granted the motion to centralize the class actions over the objection of defense and certain plaintiff lawyers, finding that “all actions involve common questions of fact” in that they “share factual questions concerning such matters as the design, manufacture, safety, testing, marketing and performance” of hernia patches manufacture and sold by Bard, Davol and Surgical Sense, id.

The Judicial Panel summarized defense arguments in opposition to centralization of the class action lawsuits as follows: “common facts do not predominate among the actions, as the actions involve different models of hernia patches and allege various types of defects; the number of pending actions does not warrant centralization; alternatives to centralization are available; and the pending actions differ substantially in the causes of action pleaded, and thus the evidence required. Additionally, the parties to the Western District of Arkansas action argue that the hernia patch at issue in that action was manufactured and distributed by a different, unrelated company. Plaintiffs to the Arkansas actions argue that two types of actions should not be included in MDL-1842 proceedings: (1) those actions that do not allege that the recoil ring is defective; and (2) those actions that arise from a procedure, or the installation of a hernia patch, that may create a higher risk of infection in the patient.” In re Kugel Mesh, at *2. The Panel rejected these arguments, explaining that “Section 1407 does not require a complete identity or even a majority of common factual or legal issues as a prerequisite to transfer.” Id. The Panel further explained at *2,

Continue reading "Class Action Defense Cases-In re Kugel Mesh: Judicial Panel On Multidistrict Litigation (MDL) Rejects Defense Opposition To Centralization Of Class Action Lawsuits And Selects District of Rhode Island As Transferee Court" »

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Claims were Time-Barred because Duplicate Property Tax Payments are still Properly Deemed “Tax Payments,” Class Action Plaintiff’s Argument to the Contrary Notwithstanding, so Trial Court did not Err in Granting Defense Motion to Dismiss Class Action Complaint

Plaintiffs filed a putative class action in Illinois state court seeking the return of overpaid property taxes; specifically, the class action complaint alleged that plaintiffs “had made duplicate real estate tax installment payments” and that the State of Illinois “refused to refund a duplicate real estate tax payment when the refund was requested more than five years after the duplicate payment was made.” Alvarez v. Pappas, ___ N.E.2d __, Slip Opn., at 2 (Ill.App. June 4, 2007). The thrust of the lawsuit was that the State “had no authority to collect, deposit, or disburse to tax districts any duplicate payments of real estate taxes,”, id., at 2-3; defense attorneys countered that the statute of limitations had run on plaintiffs’ claims thus necessitating that the class action be dismissed, id., at 1. The trial court agreed and dismissed the class action complaint as time-barred; the Illinois appellate court affirmed.

By way of background, the appellate court explained that the Cook County treasurer collects property taxes by sending out estimated tax bills by January 31, and final tax bills by June 30. Alvarez, at 1-2. The class action complaint alleged that the Alvarez plaintiffs received a property tax bill for their first installment of their 1989 taxes, and that their bank paid this installment out of an escrow account but that Alvarez also paid the property tax bill directly. Id., at 3. Alvarez allegedly made additional duplicate payments as well, id. Beginning with his second property tax installment for 1998, plaintiff Douglas also allegedly made duplicate tax payments, id., at 4. The Dratt plaintiffs also allege that they made duplicate property tax payments beginning with the second installment for 1998, id. Finally, the class action alleges that duplicate property tax payments were made on property owned by plaintiff Nazon beginning in 1994 or 1995. Id.

Continue reading "Class Action Defense Cases-Alvarez v. Pappas: Illinois Appellate Court Holds Class Action Properly Dismissed Because Claims To Recover Duplicate Property Tax Payments Are Subject To Five Year Statute Of Limitations" »

Posted In: Class Action Court Decisions

Florida Federal Court Reaffirms Prior Ruling that Lawsuits by Quasi-Governmental Agency on Behalf of Military Personnel Against Financial Institutions for Pension Fund Losses Constituted “Covered Class Actions” Within the Meaning of SLUSA (Securities Litigation Uniform Standards Act)

Plaintiff, a quasi-governmental agency that manages pension funds for armed forces personnel, filed a putative class action in Florida state court against Lehman Brothers alleging violations of various Florida state laws. Instituto de Prevision Militar v. Lehman Bros., Inc., 485 F.Supp.2d 1340, 1342 n.1 (S.D. Fla. 2007). The district court sua sponte held that the federal Securities Litigation Uniform Standards Act (SLUSA) preempted plaintiff’s claims and dismissed the class action complaint with leave to amend. Plaintiff sought reconsideration on the ground, inter alia, that the lawsuit was not a “covered class action” within the meaning of SLUSA; the district court denied reconsideration.

“Plaintiff Instituto de Prevision Militar … is a quasi-governmental agency of the Republic of Guatemala that, inter alia, manages the pension funds for members of the Guatemalan Armed Forces.” Instituto, at 1342. In July 2001, plaintiff was solicited by Pension Fund of America (PFA) to deposit pension funds with Lehman Brothers in a retirement trust account; believing PFA was the agent of Lehman (it was not), plaintiff invested more than $28 million in PFA through Lehman, id. Plaintiff alleges that PFA was “carrying out an embezzlement and money laundering scheme,” and this formed the basis of a lawsuit it filed against PFA in November 2002. Id. Through that action, plaintiff obtained an order compelling Lehman to liquidate its account, but the funds thus obtained were insufficient to cover its investment so plaintiff filed suit against Lehman, id., at 1342-43. Plaintiff also filed a putative class action against Merrill Lynch, and the district court consolidated the three cases for discovery purposes. Id., at 1343.

Continue reading "SLUSA Class Action Defense Cases-Instituto v. Lehman Brothers: Pension Manager Lawsuits Constituted “Covered Class Action” Under Securities Litigation Uniform Standards Act Florida Federal Court Holds" »

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

Second Circuit Opinion in In re IPO Class Action Enunciating new Standards for Certification of Class Actions Warranted Reconsideration of Order Certifying Class Action but not Decertification of Class Action because new Standards were met New York Federal Court Holds

Female employees filed a labor law class action against Willis Group and its affiliates alleging gender discrimination. Hnot v. Willis Group Holdings Ltd., 241 F.R.D. 204, 206 (S.D.N.Y. 2007). The district court granted plaintiffs’ motion to certify the litigation as a class action, see Hnot v. Willis Group Holdings Ltd., 228 F.R.D. 476 (S.D.N.Y. 2005); defense attorneys sought reconsideration of the class certification order and decertification of the class, arguing that under the Second Circuit opinion in In re Initial Pub. Offering Sec. Litig., 471 F.3d 24 (2d Cir.2006) (In re IPO) -- a summary of which may be found here -- which issued after the class action had been certified, plaintiffs failed to establish commonality under Rule 23(a), and that class action treatment was “inappropriate under Rule 23(b)(2),” 241 F.R.D. at 206. Specifically, the defense argued that a plaintiff is now required to do more than simply make “some showing” that the elements of Rule 23 have been met, id., at 207. The district court denied the defense motion, concluding that the requirements of Rule 23 had been met and that the lawsuit should properly proceed as a class action.

Plaintiffs filed their putative class action in 2001 “on behalf of a class of high-level female employees…alleging illegal employment discrimination on the basis of sex.” Hnot, at 206. In response to plaintiffs’ motion to certify a class action, defense attorneys argued that Rule 23(a)’s commonality requirement had not been satisfied. Id. Plaintiffs’ responded that “a common policy of vesting regional and local officers with unfettered discretion in making promotion and compensation decisions, result[ed] in discrimination against women in high level positions.” Id. (citation omitted). Each side submitted expert reports, which the district court considered as they pertained to the issue of commonality, id., and ultimately concluded that “plaintiffs' evidence was ‘certainly adequate to establish that whether or not Willis's promotion and compensation policies subject class members to discrimination is an issue common to all class members,’” id., at 207 (citing 228 F.R.D. at 483).

Continue reading "Class Action Defense Cases-Hnot v. Willis Group: New York Federal Court Denies Defense Motion To Reconsider Order Certifying Class Action Because New Second Circuit Authority Governing Class Action Certification Had Been Satisfied" »

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

District Court Properly Concluded that Class Action Claims of Debenture Holder Against Issuer for Breach of Contract, Fraud and Unjust Enrichment were Barred by Applicable Limitations Periods Eighth Circuit Holds

Plaintiff filed a putative class action against Union Pacific Railroad Company, as successor to the issuer of a debenture, alleging breach of contract, fraud and unjust enrichment for alleging failing to make proper interest payments due plaintiff. Great Plains Trust Co. v. Union Pac. R.R. Co., 492 F.3d 986, 989-90 (8th Cir. 2007). Defense attorneys moved to dismiss the class action complaint on the ground that each of the class action claims was time-barred; the district court agreed with the defense and dismissed the class action. Id., at 990. The Eighth Circuit affirmed, holding that Kansas law applied and that the two-year (fraud), three-year (unjust enrichment) and five-year (breach of contract) limitations periods had expired prior to the filing of the class action complaint.

Because the opinion turns exclusively on its analysis of statutes of limitation under Kansas law, we do not here summarize the opinion in any greater detail. The text of the Eighth Circuit opinion may be found here.

Posted In: Class Action Court Decisions

Class Action Alleging Market Timing Acts in Violation of State and Federal Laws were Time-Barred because Public Complaints, SEC Actions and Guilty Plea Arising out of Market Timing Claims Placed Class Representatives on Inquiry Notice of Basis for Class Action Claims Maryland Federal Court Holds

Investors filed a class action against numerous defendants, ultimately coordinated by the Judicial Panel on Multidistrict Litigation, alleging marketing timing acts in violation of the Securities Act, the Exchange Act, the Investment Company Act and various state laws. In re Mutual Funds Inv. Litig., 478 F.Supp.2d 833, 834 (D. Md. 2007). The class action complaint was attacked by motions to dismiss, which the district court granted as to the Securities Act and the ICA § 48(a) claims, denied as to the Exchange Act claims, and denied without prejudice as to the ICA § 36(b) claim, id.; plaintiffs voluntarily dismissed their state law claims, id. n.1. Plaintiffs filed a second amended class action complaint that added new defendants and claims, and defense attorneys filed another series of motions to dismiss, id., at 834. After reaffirming its prior rulings to the extent applicable, id.; the district court addressed numerous issues, but we address here only that portion of the court’s holding concerning the statute of limitations defense.

Plaintiffs conceded that any claims based on allegedly fraudulent conduct that occurred prior to July 1999 were time-barred. In re Mutual Funds, at 835. The district court recognized that Fourth Circuit decisional law holds that “Inquiry notice is triggered by evidence of the possibility of fraud, not by complete exposure of the alleged scam.” Id., at 836 (quoting Brumbaugh v. Princeton Partners, 985 F.2d 157, 162 (4th Cir. 1993)). And the court immediately rejected a defense effort to push inquiry notice back to 1999, explaining: “The attempt to place notice inquiry as far back as 1999 because of the shareholder letter and prospectus supplements warning of the risks of market timing is not persuasive, when those same documents indicated that additional steps would be taken to prevent timing and the funds are alleged instead to have concealed from investors specific agreements to permit that very practice.” Id., at 836 n.6.

Continue reading "Class Action Defense Cases- In re Mutual Funds: Maryland Federal Court Grants Defense Motion To Dismiss Class Action Claims As Time-Barred Holding That Publicity Placed Class Action Plaintiffs On Inquiry Notice Of Claims" »

Posted In: Class Action Court Decisions

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). Congress set forth special provisions relating to statutes of limitation for private causes of action for individual and class actions under the Private Securities Litigation Reform Act in 15 U.S.C. § 78aa-1, which states:

§ 78aa–1. Special provision relating to statute of limitations on private causes of action

(a) Effect on pending causes of action

The limitation period for any private civil action implied under section 78j (b) of this title that was commenced on or before June 19, 1991, shall be the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991.

(b) Effect on dismissed causes of action

Any private civil action implied under section 78j (b) of this title that was commenced on or before June 19, 1991—

(1) which was dismissed as time barred subsequent to June 19, 1991, and

(2) which would have been timely filed under the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991,

shall be reinstated on motion by the plaintiff not later than 60 days after December 19, 1991.

Posted In: Statutes & Rules