Class Action Defense Blog

Divided California Supreme Court Holds Class Action Arbitration Clause would "Undermine the Vindication of the Employees’ Unwaivable Statutory Rights and would Pose a Serious Obstacle to the Enforcement of the State’s Overtime Laws"

Yesterday, in a 4-3 decision with far-reaching impacts on class action arbitration waivers in California, the Supreme Court essentially held that class action waivers are unenforceable under California law. While the majority opinion claims that it is not condemning all such waivers, the dissent cogently observes that -- for all intents and purposes -- it is the practical effect of the decision. Even more surprising, the Supreme Court held that an arbitration clause in an employment contract was procedurally unconscionable even though the employee had been given a 30-day right to opt out of the arbitration provision without any adverse impact if the employee opposed arbitration. This aspect of the opinion is crucial, because under California law a contract is not unconscionable unless it is both procedurally and substantively unconscionable. Accordingly, if (as the trial court and appellate court held) the 30-day right to opt out of the arbitration aspect of the dispute resolution program meant that the arbitration clause was not procedurally unconscionable, then the arbitration provision would be insulated from attack. The Supreme Court found "an element of procedural unconscionability notwithstanding the opt-out provision," and so it remanded the putative class action to the trial court for a determination of whether the arbitration clause was also substantively unconscionable.

We plan to post an article covering the Supreme Court opinion on Tuesday, September 4, following the Labor Day weekend, but a copy of the opinion may be downloaded here.

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 and Concurs with Request to Transfer Class Actions to District of South Carolina

Antitrust class action lawsuits were filed in Illinois and South Carolina against various moving companies for violation of the Sherman Act arising from the allegation that defendants entered into an agreement concerning the method for calculating fuel surcharges. In re Household Goods Movers Antitrust Litig., 502 F.Supp.2d 1356, 2007 WL 2386409, *1 (Jud.Pan.Mult.Lit. 2007). Plaintiff's lawyer in the South Carolina 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 that district; defense attorneys agreed that pretrial coordination was appropriate, as did plaintiffs in the Illinois class action. Id. Even though only two class actions had been filed, the Judicial Panel granted the motion to centralize the class actions concluding that centralization “will eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.” Id. The Panel also concurred that the District of South Carolina was an appropriate transferee court “because the first-filed and more advanced action is pending there, and all responding parties favor centralization in the District of South Carolina.” Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Motion for Reconsideration of Denial of Class Action did not Toll Statutory Time Period for Appealing Court Order Appellate Court Holds

Plaintiffs filed a putative class action in Illinois state court against The Mortgage Exchange alleging violations of the federal Telephone Consumer Protection Act of 1991 (TCPA), which makes it unlawful to send unsolicited advertisements via facsimile, and the state’s Consumer Fraud and Deceptive Business Practices Act, which prohibits “unfair or deceptive acts or practices.” CE Design, Ltd. v. The Mortgage Exch., Inc., ___ N.E.2d __, Slip Opn., at 1-2 (Ill.App. July 23, 2007). On October 13, 2006, the trial court denied plaintiffs’ motion to certify the litigation as a class action holding (1) “issues such as the specific receipt of and consent to receive a facsimile transmission by each class member were not common issues,” id., at 2-3, and (2) class action treatment was not appropriate “because when Congress enacted the TCPA, it envisioned individual, small claims litigation, not private class actions with potential recoveries in the millions of dollars,” id., at 3. Plaintiffs filed a motion for reconsideration on November 13, 2006, which the trial court denied on February 22, 2007. Id. On March 26, 2007, plaintiffs filed a petition for leave to appeal the denial of their class certification motion, but the appellate court dismissed the petition for lack of jurisdiction.

Illinois law requires that petitions for leave to appeal the denial of a motion to certify a class action must be made within 30 days of the trial court order. CE Design, at 5. Plaintiffs argued that the time period was tolled during the pendency of the motion for reconsideration, id., at 5-6, but the appellate court rejected this argument, see id., at 6-8. Plaintiffs argued in the alternative that their motion for reconsideration was actually a new motion seeking certification of a class action, id., at 8, but the appellate court rejected that argument as well, see id., at 8-9. Accordingly, it dismissed the appeal for lack of jurisdiction, id., at 9.

Posted In: Class Action Court Decisions

Noted Securities Class Action Lawyer Resigns From Law Firm Reportedly In Exchange For Government Agreement not to Indict Law Firm

Jenny Anderson of The New York Times reports that noted class action plaintiff lawyer William S. Lerach is leaving his law firm in order to focus on the criminal allegations connected with the federal indictment of Milberg Weiss Bershad & Schulman, where he once worked. We have previously reported on the criminal indictment of Milberg Weiss and two of its named partners, David Bershad and Steven Schulman, alleging illegal payments of more than $11 million to individuals who served as class representatives in class actions filed by Milberg Weiss. Bershad pleaded guilty to conspiracy last July, and has agreed to return almost $8 million and to cooperate with prosecutors.

While Lerach has not been indicted, he reportedly is leaving the practice of law “to focus his attention on fighting the allegations against him.” Rumors have been spreading for months that Lerach would be indicted charges that he, too, made such illegal payments. Ms. Anderson’s article quotes Lerach as stating that “These allegations have proven to be personally time-consuming, and I have decided to focus single-mindedly on putting the matter behind me once and for all.”

Ms. Anderson’s article, entitled “Lawyer Quits Firm to Focus on Inquiry,” may be found in Section C of the August 29, 2007 edition of the New York Times.

Posted In: Class Actions In The News

District Court Properly Concluded that Securities Fraud Allegations in Class Action Complaint did not Satisfy Heightened Pleading Requirements of the Private Securities Litigation Reform Act (PSLRA) and that Amendment of Class Action Complaint would have been Futile Fifth Circuit Holds

Plaintiff, a pension fund, filed a putative class action against Integrated Electrical and certain officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act, 15 U.S.C. §§ 78j(b) & 78t(a), and Rule 10b-5 based on “a number of false or misleading statements by IES regarding the company's financial condition caused an artificial inflation in the market price of IES's securities during the class period.” Central Laborers' Pension Fund v. Integrated Electrical Services Inc., 497 F.3d 546, 2007 WL 2367776, *1 (5th Cir. 2007). Defense attorneys moved to dismiss the class action on the ground that it failed to plead scienter with the requisite specificity under the Private Securities Litigation Reform Act (PSLRA), id. The district court agreed that the complaint failed to meet the PSRLA’s heightened pleading standards and dismissed the class action; in so ruling, the court implicitly denied plaintiff’s request for leave to file an amended class action complaint. Id. The Fifth Circuit affirmed, holding that the PSLRA compelled dismissal of the class action complaint and that the district did not abuse its discretion in concluding that further amendment of the class action complaint would have been futile.

Integrated Electrical is a publicly-traded company that provides electrical contracting services throughout the country. Central Laborers', at *1. Beginning in April 2003, the company “expressed confidence” in its financial status, but in August 2004 it “publicly disclosed that it could not release its quarterly earnings numbers on time due to an ongoing evaluation of certain projects.” Id. Ultimately, the company restated its financial statements for fiscal years 2002 through the first half of 2004, id. In the Fifth Circuit, “‘[t]o state a claim under § 10(b) and Rule 10b-5, a plaintiff must allege, in connection with the purchase or sale of securities[:] (1) a misstatement or an omission (2) of material fact (3) made with scienter (4) on which plaintiff relied (5) that proximately [injured him].’” Id., at *2 (quoting Fin. Acquisition Partners LP v. Blackwell, 440 F.3d 278, 286 (5th Cir. 2006)). The PSLRA requires that securities fraud must be pleaded with particularity, and alleged violations of Section 10(b) and Rule 10b-5 require proof that the defendant acted either with intent or with “severe recklessness.” Id., at *2. And appellate review of a district court order refusing leave to amend is governed by an abuse of discretion standard, id., at *3.

Continue reading "PSLRA Class Action Defense Cases-Central Laborers’ v. Integrated Electrical: Fifth Circuit Holds Class Action Complaint Failed To Adequately Plead Scienter Under PSLRA And Leave To Amend Class Action Complaint Properly Denied" »

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

Law Seminars International is sponsoring a two-day seminar entitled, "Innovative Strategies for Litigating Class Action Suits." The conference will be held at the Millennium Biltmore Hotel in Los Angeles on November 12 and 13, 2007. The details of the conference, its location and its topics may be found here.

Posted In: Class Actions In The News

Whether FACTA Class Action Violates Due Process Because Statutory Damages are Grossly Disproportionate to Actual Harm Suffered must be Challenged by Defense at Motion to Certify Class Action Rather than by Defense Motion to Dismiss California Federal Court Holds

Plaintiff filed a class action in California federal court against Adidas alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA) for failing to remove credit card expiration dates from receipts given customers following credit card purchases. Arcilla v. Adidas Promotional Retail Operations, Inc., 488 F.Supp.2d 965, 967-68 (C.D. Cal. 2007). Defense attorneys moved to dismiss the class action complaint or to strike the prayer for punitive damages, id., at 968. The district court rejected the defense challenges to the class action complaint.

FACTA is part of the Fair Credit Reporting Act (FCRA), and provides in part, “[N]o person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” 15 U.S.C. § 1681c(g). The statute became effective December 4, 2006, and since that time literally hundreds of putative class action complaints have been filed alleging violations of FACTA; indeed, the district court noted that the putative class action before it was “one of as many as 70” FACTA class action lawsuits filed in the Ninth Circuit alone. Arcilla, at 967. The class action allegations in the instant class action complaint “resemble those in the others”: the putative class action alleges that plaintiff purchased merchandise from defendant and received a credit card receipt that disclosed the expiration date of his credit card, id. The class action alleged that defendant provided similar receipts to other customers, and alleged further that some of those receipt included “more than the last five digits of the card numbers,” id., at 968. The class action complaint prayed for statutory damages, punitive damages, and attorney fees, and alleges that defendant’s conduct resulted in an “increased risk of identify theft.” Id.

The district court summarized the defense arguments at page 968 as follows: “(1) it could not have willfully violated the FACTA because the statute is vague and ambiguous; (2) the Complaint seeks statutory damages that would be constitutionally excessive and thus violate due process because no actual harm has been suffered; (3) the statutory damages would violate ‘principles of tort law’ because Plaintiff and the potential class members have suffered no actual harm; (4) the request for punitive damages is improper because any such damages would be excessive absent an allegation of actual harm.” The district court disagreed, concluding that the allegations of the class action complaint were sufficient to survive the defense motions, and that certain challenges to the class action had to be brought in response to a motion to certify the litigation as a class action.

Continue reading "FACTA Class Action Defense Cases-Arcilla v. Adidas: California Federal Court Rejects Defense Challenge To Constitutionality Of FACTA And Permits Class Action To Proceed Past Pleading Stage" »

Posted In: FCRA Class Actions, Class Action Court Decisions

Because California’s Unfair Competition Law (UCL) Requires Compliance With State’s Class Action Statutes, UCL Representative Claims Must be Brought as Class Action Lawsuits California Court Holds, but PAGA (Private Attorney General Act) Representative Actions under Labor Code need not Satisfy Class Action Pleading Requirements

Plaintiff filed suit in California state court against his employer, Angelo Dairy, and others alleging, inter alia, that he was not paid overtime and did not receive meal and rest breaks required by law; the action purported to be a representative action under California’s Unfair Competition Law (UCL) and under the Private Attorney General Act (PAGA) contained in the state’s labor code. Arias v. Superior Court, ___ Cal.App.4th ___, 63 Cal.Rptr.3d 272, 273 (Cal.App. 2007). Defense attorneys moved to strike the representative claims on the ground that the complaint did not meet the requirements for pleading a class action, id. The trial court agreed and dismissed the complaint. The California Court of Appeal affirmed, holding that “the UCL requires that a representative claim be brought as a class action because the UCL requires compliance with the class action provisions” of state law, id.

The appellate court noted that while California’s UCL previously permitted a private party to file representative or class action lawsuits even if he or she had not suffered any injury, the passage of Proposition 64 in 2004 materially amended the UCL so that it “now requires that a plaintiff have suffered damages,” and additionally requires compliance with California’s class action statute, Code of Civil Procedure section 382, for representative actions. Arias, at 274. Section 382 “is the primary statutory authority for class actions in California,” id., at 275 (citations omitted). Thus, while plaintiff’s lawyer correctly noted that Proposition 64, on its face, “contains no requirement that a representative suit be brought as a class action,” the Court of Appeal held that Proposition 64 does “require[] that the claim comply with section 382, which is commonly understood to authorize class actions.” Id. Based on the appellate court’s statutory construction analysis, the amendments to the UCL occasioned by the passage of Proposition 64 necessarily require compliance with the requirements for pleading a class action under section 382 in order to pursue a representative action, id., at 275-78. It therefore affirmed the trial court order striking the UCL representative claims, holding that plaintiff “must amend his complaint to allege them either individually on his own behalf, or as a class action.” Id., at 278.

The Court of Appeal reached a different conclusion as to the PAGA claim, however, holding that “the Labor Code statute authorizing a private enforcement action is an exception to the class action requirement.” Arias, at 278. The appellate court explained at page 279 that “[b]oth the language of the PAGA and the express intent of the Legislature indicate that an aggrieved employee may bring an action on behalf of other employees without complying with the requirements of a class action.” Thus, representative actions under PAGA may be pursued without complying with the pleadings requirements applicable to class action complaints, id., at .279. The Court of Appeal therefore issued a writ of mandate directing the trial court to vacate its order dismissing the PAGA claims for failure to plead the requirements of a class action, id., at 280.

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

As a resource to 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 set forth the penalties under the PSLRA for false and misleading statements and for the failure to file information, documents or reports in 15 U.S.C. § 78ff, which states:

§ 78ff. Penalties

(a) Willful violations; false and misleading statements

Any person who willfully violates any provision of this chapter (other than section 78dd–1 of this title), or any rule or regulation thereunder the violation of which is made unlawful or the observance of which is required under the terms of this chapter, or any person who willfully and knowingly makes, or causes to be made, any statement in any application, report, or document required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title, or by any self-regulatory organization in connection with an application for membership or participation therein or to become associated with a member thereof which statement was false or misleading with respect to any material fact, shall upon conviction be fined not more than $5,000,000, or imprisoned not more than 20 years, or both, except that when such person is a person other than a natural person, a fine not exceeding $25,000,000 may be imposed; but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation.

Continue reading "15 U.S.C. § 78ff—Penalties Under The Federal Private Securities Litigation Reform Act (PSLRA) Governing Individual And Class Action Securities Lawsuits For False And Misleading Statements And Failure To File Documents" »

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 August 17 – August 23, 2007. A total of 53 new class action lawsuits were filed in these California state and federal courts were filed during that time period. New class action cases alleging employment law violations frequently top the list by a wide margin, and this was certainly true this past week. Twenty-two (22) new labor law class actions were filed this past week, representing 42% of the total number of class actions filed. No other category came close, and indeed no other category satisfied the 10% threshold. We note, however, that two categories tied for second with only 5 new cases each -- antitrust class actions, and product liability class actions.

Posted In: Class Actions In The News

Judicial Panel Denies Request, Opposed by Defense, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 Because Centralization will not Further Efficient Conduct of Class Action Litigation

Three lawsuits, including one class action, were filed against Pfizer and others alleging products liability claims. In re Depo-Provera Products Liab. Litig., ___ F.Supp.2d ___, 2007 WL 2301928, *1 (Jud.Pan.Mult.Lit. August 6, 2007). Plaintiff's lawyers in the two California actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the District of New Jersey, where the class action lawsuit was pending, id. Defense attorneys argued that pretrial coordination was inappropriate, id. The Judicial Panel agreed with defense attorneys and denied the motion to centralize the California cases with the New Jersey class action, id. The Panel explained at page *1, "[W]e are not persuaded that Section 1407 centralization would serve the convenience of the parties and witnesses or further the just and efficient conduct of this litigation. This motion involves only three actions. One action is a medical monitoring putative class action, while the other two actions are personal injury actions, which have already been consolidated before one judge in the Northern District of California. The proponents of centralization have failed to convince us that any common questions of fact among these three actions are sufficiently complex and/or numerous to justify Section 1407 transfer at this time.”

Posted In: Multidistrict Litigation, Class Action Court Decisions