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 PSLRA’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

Federal Court Holds Least Sophisticated Debtor would be Misled by Language in Debt Collection Letter thus Entitling Plaintiff in FDCPA Class Action to Summary Judgment and Finds Fact Plaintiff was not Misled Irrelevant to its Decision or to Defense Motion to Decertify Class Action

Plaintiff filed a class action in California federal court against Arrow Financial Services alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and its state-law equivalent, California’s Rosenthal Act, in that debt collection letters sent by defendant failed to comply with the applicable laws. Gonzales v. Arrow Fin. Servs. LLC, 489 F.Supp.2d 1140, 1143 (S.D. Cal. 2007). The class action complaint was premised on the following language in defendant’s “form collection letters”: “Upon receipt of the settlement amount and clearance of funds, and if we are reporting the account, the appropriate credit bureaus will be notified that this account has been settled.” Id. Plaintiff alleged this violated the FDCPA and the Rosenthal Act because the debt underlying defendant’s collection effort had been charged off more than 7 years ago and “a credit bureau cannot report a debt charged off more than 7 years previously,” id. An unsophisticated consumer thus may be misled by the form letter into believing that “payment or nonpayment of the claimed debt may impact the consumer's credit reporting, when that is not true.” Id., at 1143-44. After the district court certified the lawsuit as a class action, defense and plaintiff attorneys filed cross-motions for summary judgment, and defense attorneys moved to decertify the class, id., at 1144. The district court denied both defense motions, and granted partial summary judgment in favor of plaintiff.

After summarizing the FDCPA and the “least sophisticated debtor” standard applied in the Ninth Circuit, Arrow, at 1146, a determination made by the court, not a jury, measured by an “objective standard,” id., and after setting forth the relevant section of the Rosenthal Act, id. (quoting Cal. Civil Code, § 1788.13(f)), the district court turned to the defense motion for summary judgment. Defense attorneys argued that the debt collection letters did not violate the FDCPA or the Rosenthal Act because the letters are not false or misleading – the letters did not “illegally threaten[] any action” or mislead or deceive anyone, and “Arrow does not have a policy to report debts such as plaintiff's debts to the credit bureaus and in no way seeks to use credit reporting as a means to illegally collect debts.” Id., at 1147. The defense also relied on plaintiff’s deposition testimony that (1) he knew he did not have to pay the debt and that Arrow would not report such a failure to credit bureaus, and (2) he was not confused by the letter he received from Arrow, id. The federal court noted that it had already found the letters to be misleading or deceptive because “without any explanation detailing what debts are likely to be reported or even if the subject debt is one that is reportable, ‘the least sophisticated debtor could likely believe his [or her] debt is reportable just because the letters indicate the credit bureaus will be notified’” and that even though the letters did not expressly threaten to contact credit bureaus they implied that “the status of the debt may have already been or may, at some later date, be submitted to the credit bureaus” and that such conduct “is actionable under the Act.” Id., at 1148 n.1.

Continue reading "FDCPA Class Action Defense Cases–Gonzales v. Arrow Financial: California Federal Court Holds Debt Collection Letter Violated FDCPA And California Rosenthal Act And Denies Defense Motion To Decertify Class Action" »

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

Letter from Plaintiff’s Counsel Sent as Part of Effort to Settlement Labor Law Class Action and Estimating Damages at $10 Million Placed Defense on Notice that Class Action Sought Damages in Excess of Amount Required by Class Action Fairness Act (CAFA) Requiring Removal of Class Action to Federal Court Within 30 Days of Letter Ninth Circuit Holds

In April 2005, plaintiffs filed a class action lawsuit in California state court against LensCrafters alleging violations of various labor laws. Babasa v. LensCrafters, Inc., ___ F.3d ___, Slip Opn., at 2 (9th Cir. August 16, 2007). An amended class action complaint was filed in September 2005, and soon thereafter defense and plaintiffs’ attorneys agreed to mediate the dispute: as part of that process, in December 2005 plaintiffs’ lawyer sent LensCrafters a letter opining that damages would approach $10 million, id. Mediation efforts failed, and state court discovery ensued: in November 2006, plaintiffs’ counsel again stated that damages would exceed $5 million, id. Approximately 4 weeks later, defense attorneys removed the action to federal court under the Class Action Fairness Act of 2005 (CAFA), alleging that the November 1, 2006 telephone conference with opposing counsel “first put it on notice that the amount in controversy exceeded the jurisdictional amount,” id., at 2-3. The district court granted plaintiffs’ motion to remand the class action to state court, holding that the December 2005 letter placed defense counsel on notice of the amount in controversy. Id., at 3. The Ninth Circuit affirmed.

Defense attorneys argued that December 2005 letter “could not serve as proper notice of the amount in controversy for removal purposes, because the letter is privileged under state law.” Babasa, at 3. The Ninth Circuit held that Rule 501 of the Federal Rules of Evidence governs, not California state law, id., at 4-5, and that “LensCrafters could have ascertained, upon receiving the [December 2005] letter, that the case was removable,” id., at 5. The Circuit Court explained at page 5, “We have previously held that ‘[a] settlement letter is relevant evidence of the amount in controversy if it appears to reflect a reasonable estimate of the plaintiff’s claim.’” (Citation omitted.) Here, the December 2005 letter estimated “$4.5 million in unpaid wages, based on missed meal periods, plus an addition[al] $5 million in civil penalties,” and that these amounts easily satisfied the jurisdictional limit under CAFA, id., at 6. The class action thus was not removable in November 2006, because LensCrafters knew in December 2005 that the amount placed in controversy by the class action allegations exceeded CAFA’s jurisdictional limit. Id. Accordingly, the Ninth Circuit affirmed the district court order remanding the class action to state court, id., at 6-7.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Modification of Telephone Service Contract to Include Class Action Waiver and Arbitration Clause not Binding on Class Action Plaintiff Where Customer did not Receive Notice of Change in Contract Terms Ninth Circuit Holds, Reversing District Court Order Compelling Arbitration in Favor of Telephone Company in Class Action Challenging New, Undisclosed Charges

Plaintiff filed a putative class action in California federal court against Talk America, his long distance telephone service company, alleging violations of the Federal Communications Act, breach of contract, and violations of various California consumer protection laws based on its unilateral revision of the service contract, without notice, to add additional service charges. Douglas v. U.S. District Court, 495 F.3d 1062, Slip Opn., at 2 (9th Cir. 2007). Defense attorneys moved to compel arbitration based on another unilateral revision to the service contract that added, without notice to customers, an arbitration clause as well as a class action waiver. Id. The district court granted the motion, and plaintiff petitioned for a writ of mandate because the Federal Arbitration Act does not authorize interlocutory appeals. Id., at 2-3.

Talk America acquired AOL’s long distance telephone service, and then modified the terms of the service contract with former AOL customers to add four provisions: “(1) additional service charges; (2) a class action waiver; (3) an arbitration clause; and (4) a choice-of-law provision point to New York law.” Douglas, at 2. The class action complaint alleged that Talk America did not provide notice of these revisions to its customers, and that the revised contract was only available on Talk America’s website. Id., at 4. The class action alleged that a customer would only learn of the revisions to the service contract if he visited the website and compared the terms of the contract online with prior versions of the contract, id. The district court “seems to have assumed” plaintiff did this as it noted that the contract was available on “the web site on which Plaintiff paid his bills,” id.; but plaintiff argued that “he authorized AOL to charge his credit card automatically and Talk America continued this practice, so he had no occasion to visit Talk America’s website to pay his bills” and that in any event “he would have had no reason to look at the contract posted there” as he was not notified that the terms of the contract had been changed. Id.

Continue reading "Arbitration Class Action Defense Cases-Douglas v. U.S. District Court: Ninth Circuit Holds Class Action Plaintiff Cannot Be Compelled To Arbitrate Class Action Dispute Against Long Distance Telephone Service Carrier If Not Told Of Contract Modifications" »

Posted In: Arbitration, Class Action Court Decisions

Enforceability of Class Action Arbitration Waiver Clause is Governed by State Law and District Court Erred in Granting Defense Motion to Compel Arbitration and Dismiss Class Action Complaint because Class Action Arbitration Waiver in Consumer Contract was Unconscionable under California Law Ninth Circuit Holds

Last Friday, the Ninth Circuit held that a class action arbitration waiver in a cellular telephone service contract is unconscionable under California law, and that the Federal Arbitration Act (FAA) did not protect the class action waiver. Shroyer v. New Cingular Wireless Services, Inc., 498 F.3d 976, Slip Opn., at 9993 et seq. (9th Cir. 2007). Plaintiff filed a class action in California state court against New Cingular Wireless and AT&T alleging that cellular phone service “deteriorated significantly” following the merger of the two companies, id., at 9997-98. The class action complaint alleged in part various violations of California’s unfair competition law, id., at 9998, and defense attorneys removed the class action to federal court, id., at 10000. Defense attorneys then moved the district court to compel arbitration and dismiss the class action; arguing that the arbitration clause is enforceable under the FAA; the district court agreed and plaintiff appealed. Id., at 10000-01. The Ninth Circuit reversed.

The Ninth Circuit summarized the case as requiring it to consider “whether a class arbitration waiver in New Cingular Wireless Service Inc.’s standard contract for cellular phone services is unconscionable under California law, and whether the [FAA] preempts a holding that the waiver is unenforceable.” Shroyer, at 9997. The cellular service contract plaintiff signed with AT&T in 2000 and 2003 apparently did not contain class action waiver; but when he switched his account to Cingular in January 2005 – which he did via telephone – the contract he agreed to included a binding arbitration clause that included a class action waiver. Id., at 9998-10000. The Ninth Circuit held that, under the FAA, whether the class action arbitration clause was enforceable turned on state law, and that under Discover Bank v. Superior Court, 36 Cal.4th 148 (Cal. 2005), the class action arbitration provision in plaintiff’s service contract was “both procedurally and substantively unconscionable and, therefore, unenforceable.” Id., at 10002.

The Circuit Court summarized California and Ninth Circuit case law regarding unconscionability of class action arbitration waivers, culminating in the three-part test set forth in Discover Bank. Shroyer, at 10002-05. That test requires court determine (1) whether the consumer contract is one of adhesion, (2) whether the contract involves disputes of “predictably…small amounts of damages,” and (3) whether the alleged intent of the contract is to permit the company to “carr[y] out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.” Id., at 10005 (quoting Discover Bank, at 162-63). The Ninth Circuit found each of these tests satisfied in this case, id. at 10006-08.

Continue reading "Arbitration Class Action Defense Cases--Shroyer v. New Cingular: Ninth Circuit Holds Class Action Arbitration Waiver Unconscionable Under California Law And Federal Arbitration Act Does Not Preempt Enforceability Of Class Action Waiver Provision" »

Posted In: Arbitration, Class Action Court Decisions

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 transaction fees under the PSLRA in 15 U.S.C. § 78ee, which provides as follows:

§ 78ee. Transaction fees

(a) Recovery of cost of services

The Commission shall, in accordance with this section, collect transaction fees and assessments that are designed to recover the costs to the Government of the supervision and regulation of securities markets and securities professionals, and costs related to such supervision and regulation, including enforcement activities, policy and rulemaking activities, administration, legal services, and international regulatory activities.

(b) Exchange-traded securities

Subject to subsection (j) of this section, each national securities exchange shall pay to the Commission a fee at a rate equal to $15 per $1,000,000 of the aggregate dollar amount of sales of securities (other than bonds, debentures, other evidences of indebtedness, security futures products, and options on securities indexes (excluding a narrow-based security index)) transacted on such national securities exchange.

Continue reading "15 U.S.C. § 78ee—Transaction Fees And The Federal Private Securities Litigation Reform Act (PSLRA) Governing Individual And Class Action Lawsuits For Securities Fraud" »

Posted In: Statutes & Rules

To assist defense attorneys in California predict the type of cases against which they may have to defend, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. This report covers the time period from August 10 – August 16, 2007, during which time 46 new class action cases were initiated in these California state and federal courts. Generally, class action cases alleging employment law violations top the list, often by a wide margin, and this past week labor law class actions surged from the prior week. While only 9 new labor law class action had been filed for our last report, this past week 20 new class action complaints were filed alleging employment law claims, representing 43% of the total number of new class actions filed last week. New class actions alleging violations of California's unfair competition law (UCL) also saw an increase, with 13 new class action complaints filed (28%). The only other category to meet the 10% threshold involved class actions alleging securities law violations, with 5 new filings (11%).

Posted In: Class Actions In The News

Judicial Panel Grants Request, Over Defense Objection, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Transfers Class Actions to District of Minnesota, but Panel Refuses Joint Request to Circumscribe Authority of Transferee Court

Hundreds of lawsuits, many of them putative class actions, were filed against C.H. Robinson Worldwide alleging failure to pay overtime in violation of the federal Fair Labor Standards Act (FLSA). In re C.H. Robinson Worldwide, Inc., Overtime Pay Litig., 502 F.Supp.2d 1347, 2007 WL 2068113, *1 (Jud.Pan.Mult.Lit. 2007). Plaintiff's lawyers in more than 100 of the 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 either the Northern District of Illinois or the District of Minnesota, id. Defense attorneys for the lone defendant initially opposed pretrial coordination, but subsequently joined in a request that the Panel centralize the litigation “for the limited purpose of obtaining settlement approval.” Id. The Judicial Panel granted the motion to centralize the class actions and selected the District of Minnesota because 25% of the pending actions were pending in that district and because of the familiarity of court who has been “presiding over two related action for the past five years,” id.; but the Panel refused "to circumscribe the breadth of the pretrial proceedings as requested by the parties, leaving such matters to the discretion of the transferee judge," id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

The American Conference Institute is sponsoring a two-day seminar on "Defending Fraud Claims in Consumer Class Actions." The conference will be held in New York on October 15 and 16, 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

Putative Class Action Alleging False Advertising Against Manufacturer did not Warrant Class Action Treatment Because Proposed Class was Overly Broad, not Readily Ascertainable, Plaintiff was not an Adequate Class Representative, Commonality was not Shown as Individual Issues would Predominate over Common Questions, and Class Action Device was not Superior Method of Resolving Dispute California Appellate Court Holds

Plaintiff filed a putative class action in California state court against Mecta Corporation, the manufacturer of an electro-convulsive therapy (ECT) machine, alleging violations of the state’s Unfair Competition Law (UCL) based on false advertising. Akkerman v. Mecta Corp., Inc., 152 Cal.App.4th 1094, 62 Cal.Rptr.3d 39, 42 (Cal.App. 2007). Plaintiff filed a motion to certify the litigation as a class action; defense attorneys argued that class action treatment was inappropriate for a litany of reasons. The trial court agreed with defense attorneys and refused to certify a class action finding that plaintiff “did not establish the elements for class certification; did not adequately define an ascertainable class; did not show that he could represent it; and did not demonstrate a sufficient community of interest among the class members.” Id. Further, class action treatment was inappropriate because “[t]he factual issues pertaining to each class member's tort restitution claim predominate over common questions of law and fact for the class.” Id. The California Court of Appeal affirmed.

In 1999, plaintiff began receiving ECT treatments to address severe depression; plaintiff filed a putative class action against Mecta in federal court claiming that the electric shocks resulted in memory loss and impaired cognitive functioning. Akkerman, at 42. The class action claims alleged violations of California’s UCL, and the federal court remanded the class action causes of action to state court, id., at 43. Ultimately, the federal court ruled in favor of the defense on the remaining causes of action, id. Plaintiff also filed a state-court lawsuit against his doctor, id., at 42-43, but that, too, ultimately resulted in judgment for the defense, id., at 43. What remained, then, was plaintiff’s state-court UCL class action complaint against Mecta, which was premised on the allegations that his doctor “falsely represented” that the ECT treatments were “not harmful” based on “false information provided to him by Mecta.” Id., at 43-44.

Plaintiff’s motion for class certification defined the class as “all members of the public who have received shock treatment in California from MECTA devices after September of 1997.” Akkerman, at 44. The trial court agreed with the defense that class action treatment was not warranted, and “denied the motion ‘based on the inability to determine the class, and for failure to show other elements necessary for class certification.’” Id. Plaintiff then filed a motion asking the trial court to order hospitals that were not parties to the lawsuit to notify their patients that had received ECT treatments of the putative class action: the trial court initially granted the motion, but reversed that decision after an appellate court issued an alternative writ of mandate, id. Plaintiff appealed, arguing that the trial court erred in refusing to certify a class action and in refusing to order hospitals to give the pre-certification notice he requested. Each of these claims is reviewed for abuse of discretion, id.

Continue reading "UCL Class Action Defense Cases- Akkerman v. Mecta Corp.: California Court Upholds Denial Of Class Action Treatment For Class Action Complaint Premised On False Advertising/Unfair Competition Law (UCL) Violations" »

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

FedEx reports that on August 14, 2007, Judge Susan Illston of the U.S. District Court for the Northern District of California gave final approval to a class action settlement in Satchell v. FedEx Express, a class action that alleged racial discrimination by the company. In part, the terms of the class action settlement require FedEx discontinue its use of a Basic Skills Test (BST), which the company believed necessary to “ensure that customer-facing employees possess the basic skills required for successful job performance”; the class action alleged that the BST acted as a barrier to minority advancement in the company. FedEx further reports that the class action settlement requires payment of roughly $55 million to 23,000 class members, from which will be deducted $15 million in attorney fees and costs.

The company’s summary may be found at news.van.fedex.com/node/3974.

Posted In: Class Actions In The News

District Court Grants Plaintiffs’ Motion for Partial Summary Judgment as to Whether in Connection with Plaintiffs’ Loans NovaStar Fell Within the Bona Fide Secondary Market Transaction Exemption Afforded by RESPA (Real Estate Settlement Procedures Act), but Triable Issues of Fact as to the Adequacy of NovaStar’s Disclosures of Yield Spread Premiums (YSPs) Precluded Summary Judgment on RESPA Claims

Plaintiffs filed a class action against NovaStar Mortgage alleging that it failed to adequately disclose yield spread premiums (YSPs) - payments made to mortgage brokers by lenders “as an incentive to induce borrowers to enter into mortgages with higher interest rates” - on its good faith estimates, in violation of Washington’s Consumer Protection Act (CPA). Pierce v. NovaStar Mortgage, Inc., 489 F.Supp.2d 1206, 1208 (W.D. Wash. 2007). The district court certified the litigation as a class action, id., at 1208-09. Plaintiffs’ lawyer filed a motion for partial summary judgment on the ground that NovaStar’s conduct was “per se unfair or deceptive under the CPA” and thus violated the Consumer Loan Act (CLA), id., at 1209; defense attorneys opposed the motion, arguing that it purchased the loans “in a bona fide secondary market transaction,” id., at 1210. The district court rejected the defense argument as to whether the disclosures were required, but agreed that triable issues of fact existed that precluded summary judgment.

The class action complaint alleged that in May 2004 plaintiff Larry Brown sought to refinance his home loan through NovaStar Home Mortgage, and Brown maintained that he was “not aware of any distinction between NovaStar Home and NovaStar Mortgage or that NovaStar Mortgage agreed to pay a fee to NovaStar Home” but that the payment of that fee “significantly increased interest rate on his loan.” Pierce, at 1209. NovaStar Mortgage’s “Loan Approval Summary” to NovaStar Home described the latter as a “customer,” stated the initial interest rate on Brown’s adjustable rate loan would be 8.2%, and discloses that NovaStar Mortgage would pay NovaStar Home a broker fee of 3% of the loan amount. Id. This summary also revealed that the interest rate on the loan in the absence of the YSP would have been 6.45%, id. The class action alleged that Brown never received a good faith estimate; an allegation NovaStar disputed. Id., at 1209-10. Brown signed the promissory note on May 28, 2004, and that same date NovaStar Home transferred the loan to NovaStar Mortgage through an allonge. Id., at 1209. The loan was funded through a “UBS warehouse loan,” and then transferred to a Wachovia Bank line of credit, id., at 1210. The loan documents provided to Brown “[did] not clearly distinguish between NovaStar Home and NovaStar Mortgage,” id.

Continue reading "RESPA Class Action Defense Cases-Pierce v. NovaStar: Washington Federal Court Rejects Defense Claim In RESPA Class Action That NovaStar Purchased Loans On Secondary Market But Finds Triable Issues As To Whether Lender Violated RESPA" »

Posted In: Class Action Court Decisions, RESPA/TILA Class Actions

1999 Nationwide Class Action Settlement of Federal Court Class Action Challenging Insurer’s Marketing and Sales Practices of Life Insurance Policies was Entitled to Res Judicata Effect and thus Barred 2005 State Court Class Actions Against Insurer Eleventh Circuit Holds

A class action was filed against insurer Southern Farm in Georgia federal court culminating in a nationwide class action settlement in 1999, but in 2005 two new class action lawsuits were filed against Southern Farm, this time in Mississippi state court, presenting the issue of whether the new class actions were barred by res judicata. Adams v. Southern Farm Bureau Life Ins. Co., 493 F.3d 1276, 2007 WL 2119182, *1 (11th Cir. 2007). Defense attorneys moved to enjoin the new class actions from proceeding on the ground that they were barred by the Adams class action settlement, id., at *5; plaintiffs argued that notice afforded in the Adams class action was “constitutionally inadequate” and that the types of claims they asserted in the new class actions were different from those settled and released in the Adams class action id., at *6. The district court granted the defense motion, and the Eleventh Circuit affirmed.

In January 1998, Walter Adams filed a putative class action in Georgia federal court against insurer Southern Farm alleging fraudulent and deceptive practices in its marketing and sale of flexible premium and universal life insurance policies by “misrepresenting the benefits of the new policies; failing to provide an adequate explanation of concepts such as the policy's ‘cash value’ and the ‘premium’ required by the policy; and ‘employing performance projections based on unreasonable explanations concerning interest rates and misrepresenting and/or omitting adequate explanation of the consequences of less favorable performance.’” Adams, at *1. The Adams class action eventually settled as a nationwide class, defined as “those persons and entities who currently own, or have owned, one or more flexible premium or universal life insurance policies [] issued between January 1, 1983 and March 24, 1999 by [Southern Farm] to replace other life insurance policies.” Id. Class notice was mailed via first class to the last known of address of 174,000 class members, a toll-free telephone number was established to answer questions about the class action, notice was published in USA Today, and information about the class action and the settlement was posted on the insurer’s website. Id.

The notice sent out in the Adams class action was a 48-page “Q & A”-type notice that disclosed that the Adams class action “involv[ed] claims about how flexible premium and universal life insurance policies have been sold and how those policies have performed” and, specifically, in a section entitled “Description of the Lawsuit,” that the Adams Class Action alleged Southern Farm had “made misrepresentations or omissions of fact in connection with the sale of flexible premium and universal life insurance policies,” including (1)”misleading policyowners to believe that only a single or fixed, limited number of out-of-pocket premium payments would be required to keep a policy in force, and that the promised death benefits and increasing or stable cash values would continue to exist, without the policymaker making any further out-of-pocket premium payments;” and (2) “misleading policy owners to believe that interest rates illustrated at the time the policies were sold to Class Members were reasonable, and that such rates were not likely to change, or would not change in an amount sufficient to cause the policies to perform differently than was represented at the time of sale.” Adams, at *2. The class notice described the two forms of relief provided to participants in the Adams class action settlement, and warned putative class members that they would be bound by the terms of the class action settlement unless they affirmatively opted out, and provided notice of the release and waiver of claims applicable to all participants in the class action settlement. Id., at *2-*3. The Adams class action settlement was approved in August 1999, with the district court retaining jurisdiction as to enforcement of the class action settlement. Id., at *4. Notice of final approval of the class action settlement was also provided to class members, id.

Continue reading "Class Action Defense Cases-Adams v. Southern Farm: Eleventh Circuit Holds Class Action Plaintiffs Bound By Settlement Of Prior Class Action Compelling Dismissal Of Class Action Complaint On Grounds Of Res Judicata" »

Posted In: Class Action Court Decisions

District Court Erred in Denying American Pipe Tolling to Individual Plaintiffs who had Filed Lawsuits Prior to Court Ruling on Class Certification Motion in Securities Class Action, because as Matter of First Impression Class Action Complaint Tolled Statute of Limitations even as to Claims by all Putative Class Members Regardless of Whether They had Filed Individual Lawsuits Second Circuit Holds

Hundreds of individual and class action lawsuits were filed in state and federal courts against WorldCom and various bond underwriters, each of which ultimately found their way to the United States District Court for the Southern District of New York. In re WorldCom Sec. Litig., 496 F.3d 245, 2007 WL 2127874, *1 (2d Cir. 2007). After the district court certified a class action, defense attorneys for certain bond underwriters moved to dismiss the individual actions on the ground that they were time-barred because they had been added as named defendants after the limitations period had expired, id. Plaintiffs argued that the limitations period was tolled as to later-named defendants even though they had filed individual actions prior to a court ruling on whether to certify a class action, id. The district court agreed with defense attorneys, ruling that the plaintiffs’ claims were not tolled. The Second Circuit reversed, holding that even though plaintiffs had filed their individual lawsuits prior to the district court’s ruling on class certification, their claims were tolled under American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), during the pendency of the class action litigation.

The district court summarized the facts underlying this litigation as follows: “For many years, WorldCom grew by acquisitions. By 1998, it had acquired more than sixty companies in transactions valued at over $70 billion.... In early 2000, however, its attempt to acquire Sprint collapsed. During this period of acquisition-driven expansion, WorldCom had used accounting devices to inflate its reported earnings. Senior WorldCom management instructed personnel in the company's controller's office on a quarterly basis to falsify WorldCom's books to reduce WorldCom's reported costs and thereby to increase its reported earnings. When the pace of acquisitions slowed, it added new strategies to disguise a decline in its revenues. In 2002, however, the scheme collapsed.” In re WorldCom, Inc. Sec. Litig., 294 F.Supp.2d 392, 400 (S.D.N.Y. 2003). In April 2002, the first class action lawsuit was filed against WorldCom, and a few months later, on June 25, “WorldCom admitted publicly that it had previously issued false and misleading financial statements” and that “it had overstated earnings and had falsely reported ordinary costs as capital expenditures.” In re WorldCom, 2007 WL 2127874 at *2. Soon after making these admissions WorldCom filed bankruptcy. Id. These admissions spawned dozens of securities class action lawsuits - transferred in August 2002 to the Southern District of New York by the Judicial Panel on Multidistrict Litigation - and hundreds of individual lawsuits. Id. Between July 2002 and October 2003, more than 100 pension funds filed individual lawsuits against WorldCom in state courts; the actions were ultimately removed to federal court under 28 U.S.C. § 1452(a) by virtue of WorldCom’s bankruptcy filing; in May 2003, these individual actions were consolidated with the class actions id.

A state-court class action was filed on April 21, 2003, in Alaska state court against several underwriters of WorldCom bonds; the class action was removed to the Southern District of New York in August 2003, and the following month, on September 24, 2003, the class action complaint was amended to name additional bond underwriters as defendants, among these the “Caboto defendants,” for violations of § 11 of the Securities Act but these allegations were “not based on fraud, but rather on negligence and strict liability for registration statements containing untrue statements of material fact.” In re WorldCom, 2007 WL at *3.

Continue reading "Class Action Defense Cases-In re WorldCom: Second Circuit Reverses Judgment In Favor Of Defense Holding That Class Action Lawsuits Tolled Statutes Of Limitation For Claims By Putative Class Members Who Filed Individual Actions" »

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

Defense Motion to Dismiss Class Action Granted because Florida State Law Prohibiting “Sliding” in Connection with Sale of Ancillary Insurance Products is a Regulatory Statute and does not Authorize a Private Right of Action to Support Class Action Against Insurer

Plaintiffs filed a putative class action lawsuit in Florida against Direct General Insurance alleging a violation of a Florida state law that prohibits the act or practice of “sliding” with respect to the sale of certain ancillary insurance products. Buell v. Direct General Ins. Agency, Inc., 488 F.Supp.2d 1215 (M.D. Fla. 2007). The underlying statute - Florida Statutes, § 626.954(1)(z) - is part of Florida’s statutory scheme concerning unfair insurance trade practices, id., at n.4. The district court granted a defense motion to dismiss the class action complaint, but ruled that while plaintiffs may not amend to allege a class action, the plaintiffs could amend to assert individual claims, id., at 1216. On plaintiffs’ motion for rehearing, the district court dismissed the class action with prejudice, concluding that the underlying statute did not give rise to private rights of action.

Following the district court’s May 1, 2007, entry of an order dismissing the third amended class action complaint without prejudice to plaintiffs filing individual claims within 10 days, plaintiffs moved the court to reconsider its ruling and permit them to file a fourth amended class action complaint. Buell, at 1216. Defense attorneys countered with a motion requesting that the court modify its order dismissing the class action complaint so as to bar the filing of individual claims, id. The defense motion was premised on its prior argument that the underlying Florida statute did not provide for private rights of action; the district court originally rejected this argument based on its interpretation of the Eleventh Circuit decision in Davis v. Travelers Indem. Co., 800 F.2d 1050 (11th Cir. 1986). Id. The basis for the new defense motion was that post-Davis appellate opinions by Florida state courts, including the Florida Supreme Court, “had undermined Davis to the extent that Davis no longer represented the law of Florida with regard to how a court determines whether an alleged statutory violation bestows a private right of action on an individual.” Id. After initially denying the motion, the district court reversed its position and explained at page 1217:

Continue reading "Class Action Defense Cases-Buell v. Direct General: Florida Federal Court Dismisses Class Action Complaint And Holds No Private Right Of Action Exists Under Florida Statutes Section 626.954(1)(z)" »

Posted In: Class Action Court Decisions

As a service to class action defense attorneys who defend 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 persons other than issuers or domestic concerns under the PSLRA in 15 U.S.C. § 78dd-3, which states:

§ 78dd–3. Prohibited foreign trade practices by persons other than issuers or domestic concerns

(a) Prohibition

It shall be unlawful for any person other than an issuer that is subject to section 78dd–1 of this title or a domestic concern (as defined in section 78dd–2 of this title), or for any officer, director, employee, or agent of such person or any stockholder thereof acting on behalf of such person, while in the territory of the United States, corruptly to make use of the mails or any means or instrumentality of interstate commerce or to do any other act 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-3— Prohibited Foreign Trade Practices By Persons Other Than Issuers Or Domestic Concerns Under The Federal Private Securities Litigation Reform Act (PSLRA) Governing Individual And Class Action Lawsuits For Securities Fraud" »

Posted In: Statutes & Rules

District Court Properly Granted Defense Motion to Dismiss Class Action Alleging Insurer Failed to Pay Insurance Benefits Because Court Correctly Determined that Class Action Allegations did not Support a Breach of Contract Claim

Plaintiff filed a putative class action in Louisiana state court against her insured, State Farm, for failing to pay insurance policy benefits for loss suffered as a result of power outages caused by Hurricane Katrina. Arias-Benn v. State Farm Fire & Cas. Ins. Co., 495 F.3d 228, 2007 WL 2230175, *1 (5th Cir. August 6, 2007). Defense attorneys removed the action to federal court, and then moved to dismiss the class action complaint for failure to state a claim; the district court agreed and dismissed the class action with prejudice, id. The Fifth Circuit affirmed, holding that the class action allegations failed to state a claim for breach under the insurance policy.

The basis of the class action complaint was plaintiff’s claim that their homeowner’s insurance policy covered the cost to “replace refrigerators and freezers damaged due to the spoilage of their contents caused by the prolonged power outage that occurred because of Hurricane Katrina.” Arias-Benn, at *1. The Circuit Court held that, based on Louisiana law governing interpretation of insurance contracts, the defense was correct in its argument that plaintiff’s claim did not fall within the scope of insurance benefits, id., at *2-*3. Further, because each of the class action claims depended on the viability of the breach of contract claim, the Fifth Circuit held that they, too, failed as a matter law, id., at *3. Accordingly, the Circuit Court affirmed the judgment of the district court dismissing the class action complaint with prejudice, id., at *4.

Posted In: Class Action Court Decisions

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 3 – August 9, 2007. During that time period, 35 new class action cases were initiated in these California state and federal courts. Generally, class action cases alleging employment law violations top the list, often by a wide margin. This past week, however, there was a significant drop in the number of labor law class action filings. New class actions alleging violations of California's unfair competition law (UCL) tied new labor law class action lawsuits, with nine (9) new cases each (26%). No other category cracked the 10% threshold of new class action cases.

Posted In: Class Actions In The News

Judicial Panel Grants Defense Request, Unopposed by Plaintiffs’ Lawyers, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Transfers Class Actions to Western District of Arkansas

Five labor law class action lawsuits were filed against Pilgrim’s Pride alleging failure to comply with the federal Fair Labor Standards Act (FLSA). In re Pilgrim’s Pride Labor Standards Act Litig., 489 F.Supp.2d 1381, 1381 (Jud.Pan.Mult.Lit. 2007). Defense attorneys for the common defendant filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of Texas or, alternatively, in the Western District of Arkansas; all plaintiffs supported pretrial coordination, but they disagreed on where the class actions should be transferred. Id. The Judicial Panel granted the motion to centralize the five class actions, and selected the Western District of Arkansas as the appropriate transferee court. Id., at 1381-82.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Judicial Panel Grants Request, Unopposed by Defense and Other Responding Plaintiffs, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Transfers Class Actions to Northern District of Georgia

Twenty (20) products liability class action lawsuits were filed in 13 different federal district courts against various defendants arising from the consumption of contaminated peanut butter. In re ConAgra Peanut Butter Products Liab. Litig., 495 F.Supp.2d 1381, 1381-82 (Jud.Pan.Mult.Lit. 2007). Plaintiffs’ lawyers in three of the class actions filed motions with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of Georgia, the District of South Carolina and the Western District of Washington, respectively. Id., at 1382. Defense attorneys and responding plaintiffs in other class actions agreed that pretrial coordination was appropriate, but argued for transfer to district courts in Missouri, Colorado, Illinois, Mississippi, New Jersey or Pennsylvania. Id. The Judicial Panel granted the motion to centralize the class actions and selected the Northern District of Georgia because three class actions (and two tag-along actions) are pending there, because common defendant ConAgra supported transfer there if the case was not sent to Missouri, and because “the manufacturing plant where the contamination occurred and the governmental agency that investigated the contamination are located there." Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Following Defense Judgment in Class Action Complaint for Aiding and Abetting Intentional Tort, California Court Affirms as to PayPal and Neovi Defendants but Holds Plaintiff is Entitled to Opportunity to Amend as to PaySystems and Ginix Defendants

Plaintiff filed a putative class action lawsuit in California state court against Neovi Data Corporation, Ginix, PaySystems and PayPal, alleging that they aided and abetted the operation of an illegal lottery. Schulz v. Neovi Data Corp., 152 Cal.App.4th 86, 60 Cal.Rptr.3d 810, 812-13 (Cal.App. 2007). The trial court sustained a demurrer to the second amended class action complaint without leave to amend, id., at 812. The appellate court affirmed the judgment as to Neovi and PayPal, but reversed as to Ginix and PaySystems, concluding that plaintiff should be given an additional opportunity to amend the class action complaint in an effort to state a claim against those defendants, id., at 812-13.

The second amended class action complaint alleged that defendant EZ Expo operated an Internet site that purportedly provided consumers the chance to “receive expensive electronic products for a fraction of the price” but requires that participants “pay[] a fee to enter a ‘matrix’” and that other consumers “join the ‘matrix’ after him.” Schulz, at 813. The class action alleged that to get a $5500, 50-inch plasma television at EZ’s website, a consumer “enters the plasma television matrix by purchasing the required three ‘E-books’ for $150” and their name is then “placed on the list of those eligible to receive the television.” Id. According to the class action complaint, “[W]hen 50 persons have each paid $150, the first person to enter will receive the plasma television ‘for free’ and his name is removed from the list.” Id. The appellate court explained at page 813 that once a participant gets the TV then “the second name on the list moves to the top and 50 more people need to enter for that person to receive the television.” Plaintiff alleged further that EZ “encourage[d] participants to recruit others to enter the matrix.” Id. The complaint alleged that the E-books themselves have “minimal” value and that EZ sold millions of dollars in E-books. Id.

Continue reading "Class Action Defense Cases-Schulz v. Neovi Data: California Court Affirms Defense Judgment In Class Action As To Certain Defendants But Grants Plaintiff Leave To Amend Class Action Claims Against Other Defendants" »

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

Class Action Against Tobacco Companies Alleging UCL Claims for Marketing Cigarettes to Minors is Preempted by Federal Cigarette Labeling and Advertising Act (FCLAA) California Supreme Court Holds

In 1994, the California Supreme Court held that a lawsuit against tobacco companies alleging violations of the state’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code, § 17200 et seq., was not preempted by the Federal Cigarette Labeling and Advertising Act (FCLAA). See Mangini v. R.J. Reynolds Tobacco Co., 7 Cal.4th 1057 (Cal. 1994). In 1998, plaintiffs filed a class action against Phillip Morris, R.J. Reynolds, Lorillard and Brown & Williamson on behalf of minors who “smoked one or more cigarettes” alleging violations of the UCL in that the tobacco companies’ cigarette advertising unlawfully targeted minors: specifically, the class action alleged that defendants “conducted marketing studies to determine how best to induce teenagers ages 13 to 17 to begin smoking,” designed ads to appeal to minors, placed the ads near schools and other areas frequented by teens, and sponsored events that appeal to teens. In re Tobacco Cases II, ___ Cal.4th ___ (Cal. August 2, 2007) [Slip Opn., at 2-3]. Other class actions alleging similar claims followed and were consolidated, and the trial court eventually certified the litigation as a class action. Id., at 3. Defense attorneys moved for summary judgment on the ground that the FCLAA preempted the UCL claims underlying the class action complaint; the trial court granted the defense motion and dismissed the class action. Id., at 3-4. The Court of Appeal affirmed, holding that the U.S. Supreme Court impliedly disapproved Mangini in Lorillard Tobacco Co. v. Reilly, 533 U.S. 525 (2001). The California Supreme Court agreed, reversed its decision in Mangini, and affirmed the dismissal of the class action.

The defense argued that in enacting the FCLAA Congress explicitly preempted state laws concerning tobacco advertising. In re Tobacco Cases II, at 5-6. After analyzing the FCLAA and Lorillard, see id., at 6-14, the California Supreme Court agreed. The court explained at page 17, “Plaintiffs’ unfair competition claim here seeks to impose on defendant tobacco companies a duty not to advertise in a way that could encourage minors to smoke. That is precisely the duty that the United States Supreme Court in Lorillard … held subject to FCLAA preemption because it is necessarily and inherently based on concerns about smoking and health. Accordingly, plaintiffs’ unfair competition claim is preempted, unless it falls within an exception to FCLAA preemption.” The California Supreme Court then rejected plaintiffs’ claim that their class action claims fell within the exception that allows states to “prohibit conduct that constitutes an inchoate crime,” id., finding that the conduct at issue was commercial speech protected by the First Amendment, id., at 18-20.

The California Supreme Court overruled its decision in Mangini, and affirmed the judgment dismissing the class action complaint as preempted by the FCLAA. In re Tobacco Cases II, at 20.

Posted In: Class Action Court Decisions

Posted In: Class Actions In The News

After Denying Motion to Certify Class Action on Grounds that Named Plaintiff would be an Inadequate Class Representative, New York District Court Denies Plaintiff's Lawyer Leave to Conduct Discovery to Identify New Class Representative and Dismisses Class Action Because Subject Matter Jurisdiction Under Class Action Fairness Act of 2005 (CAFA) no Longer Existed

Plaintiff filed a putative class action against Philips Electronics alleging design defects in certain television models that caused them to require repair after the expiration of the express warranty period; federal court jurisdiction existed solely because of the Class Action Fairness Act (CAFA). Falcon v. Philips Electronics North Am. Corp., 489 F.Supp.2d 367,368 (S.D.N.Y. 2007). Plaintiff moved the district court for an order certifying the litigation as a class action; the district court denied the motion, agreeing with defense attorneys that plaintiff was not an adequate representative of the class. Id. Plaintiff’s lawyers then sought further discovery in an effort to find an adequate representative of the class, id. The district court denied the motion and dismissed the class action for lack of jurisdiction.

The district court order refusing to certify a class action turned on the fact that the sole named plaintiff “could not be an adequate class representative, because, among other problems, she did not actually purchase the television in question and because after receiving it, she subsequently discarded it.” Falcon, at 368. Plaintiff’s lawyer sought discovery of the names of customers who complained about the television models identified in the class action complaint “in the hope that that will lead to identification of an adequate class representative.” Id. The district court refused to reopen discovery so plaintiff’s lawyer could go “fishing” for a new class representative, explaining at page 369:

Continue reading "CAFA Class Action Defense Cases-Falcon v. Philips Electronics: New York District Court Holds Plaintiff's Lawyer Not Entitled To Go "Fishing" For New Class Representative And Dismisses Class Action For Lack Of Jurisdiction" »

Posted In: Class Action Fairness Act (CAFA), Certification of Class Actions, Class Action Court Decisions

Class Action Complaint Alleging Damages from Sale of CCA-Treated Wood did not Warrant Class Action Treatment as Defense Showed Individual Defenses and Individual Damage Analyses would Predominate over Fact Questions Common to Class Illinois Court Holds

Plaintiffs filed a putative class action in Illinois state court against Home Depot alleging violations of the state’s unfair and deceptive business practices statutes arising out of its sale of outdoor products made with wood treated with chromate copper arsenate (CCA) on the theory that “all CCA-treated wood is defective because it leaches toxic chemicals, such as arsenic and chromium VI to the surface of the wood and to nearby soil.” Kitzes v. Home Depot, U.S.A., Inc., 872 N.E.2d 53, Slip Opn., at 1 (Ill.App. June 28, 2007). Plaintiffs’ moved the trial court to certify the litigation as a class action; defense attorneys opposed class action treatment. The appellate court affirmed.

The class action complaint alleged that Home Depot misrepresented that CCA-treated wood was safe for outdoor use. Kitzes, at 1-2. Plaintiffs’ class action certification motion was supported by an expert declaration claiming “a reasonably high degree of scientific certainty that CCA-treated wood used in outdoor settings leaches arsenic to the surface of the wood and the surrounding soil, regardless of factors such as use, location, age and sealant history (except for very recently sealed surfaces),” and an expert declaration that “proposed methodology for calculating the removal and replacement costs associated with pressure-treated lumber in residential settings in multiple states.” Id., at 2. Among the pieces of evidence submitted against class action treatment, defense attorneys introduced plaintiffs’ deposition testimony (1) that they still used the CCA-treated wood deck, and had wood replaced and treated several times, (2) that no one told them that the CCA-treated wood deck diminished the value of their property, and (3) that they had a fence built with wood that had been treated with arsenic. Id., at 2-3. Defense attorneys also submitted press releases from the Environmental Protection Agency concerning the industry’s decision to stop using CCA-treated wood, and stating:

Continue reading "Home Depot Class Action Defense Case-Kitzes v. Home Depot: Illinois Court Holds Denial Of Class Action Was Not Improper Because Individual Issues Would Predominate Over Common Questions Of Fact" »

Posted In: Certification of Class Actions, 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 described prohibited foreign trade practices by domestic concerns under the PSLRA in 15 U.S.C. § 78dd-2, which states:

§ 78dd–2. Prohibited foreign trade practices by domestic concerns

(a) Prohibition

It shall be unlawful for any domestic concern, other than an issuer which is subject to section 78dd–1 of this title, or for any officer, director, employee, or agent of such domestic concern or any stockholder thereof acting on behalf of such domestic concern, 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

(B) inducing such foreign official to use his influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality,

in order to assist such domestic concern in obtaining or retaining business for or with, or directing business to, any person;

(2) any foreign political party or official thereof or any candidate for foreign political office for purposes of—

Continue reading "15 U.S.C. § 78dd-2—Prohibited Foreign Trade Practices By Domestic Concerns Under The Federal Private Securities Litigation Reform Act (PSLRA) Governing Individual And Class Action Securities Lawsuits" »

Posted In: Statutes & Rules

In order to assist California class action defense attorneys anticipate the new class action 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 27 – August 2, 2007, during which time 40 new class action cases were initiated in these California state and federal courts. Yet again, new employment class action cases topped the list with 14 new cases, or 35% 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 (18%), followed by 5 new class action alleging antitrust violations (13%).

Posted In: Class Actions In The News

In Class Action Alleging Violations of Federal Fair Labor Standards Act (FLSA), $3,000 Rule Crafted by District Court as Exception to Overtime Pay Lacked Support in Record and was Unworkable in Practice Ninth Circuit Holds

Plaintiffs, former and current insurance claims adjusters for Farmers Insurance Exchange, filed a class action against their employer alleging that they were misclassified as exempt employees and denied overtime pay in violation of the federal Fair Labor Standards Act (FLSA). In re Farmers Ins. Exch., Claims Representatives’ Overtime Pay Litig., 481 F.3d 1119, 1124 (9th Cir. 2007). The district court established a “$3,000 in claims paid per month” rule and, applying that test, concluded that some of the claims adjusters were exempt but others were not. Id. Before the Ninth Circuit, all parties agreed that the district court’s $3,000 rule “is neither workable nor supported by the evidence.” Id. The Circuit Court agreed, holding that “all of the adjusters in this case are exempt,” id. The Ninth Circuit stated that “For more than 50 years, the Department of Labor has considered claims adjusters exempt from the Fair Labor Standard Act's overtime requirement.” Id.

For purposes of this article, we address solely the “$3,000 rule” creatively crafted by the district court. On this point, the Ninth Circuit concluded that the district court’s rule not only “lack[ed] support in the record,” but is “simply unworkable in practice.” In re Farmers, at 1132. The Circuit Court explained at page 1132,

Continue reading "Class Action Defense Cases-In re Farmers Insurance Exchange: Ninth Circuit Rejects "$3,000 Rule" Created By District Court In FLSA Class Action" »

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

Judicial Panel Grants Defense Request, Over Plaintiffs’ Objection, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and but Rejects Defense Request to Transfer Class Actions to District of Kansas

Two class action lawsuits were filed against Wells Fargo, one in California and one in Kansas, alleging labor law violations based on the company’s alleged failure to pay overtime to its loan processors. In re Wells Fargo Loan Processor Overtime Pay Litig., 493 F.Supp.2d 1380, 2007 WL 1853954, *1 (Jud.Pan.Mult.Lit. 2007). Defense attorneys for common defendant Wells Fargo Home Mortgage 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 Kansas. Plaintiffs’ objected to pretrial coordination, and argued alternatively that if the motion was granted then the Northern District of California was the appropriate transferee court. Even though there were only two class action lawsuits pending, the Judicial Panel granted the motion to centralize the class actions, finding 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. The Panel selected the Northern District of California as the appropriate transferee court because “i) a somewhat related multidistrict litigation docket, In re Wells Fargo Home Mortgage Overtime Pay Litigation (MDL-1770), is already pending there; and ii) the action in this district is the broader of the two before the Panel.” Id.

NOTE: The case illustrates that the Judicial Panel on Multidistrict Litigation looks solely to the issue of whether the request falls within the mandate of 28 U.S.C. § 1407, and is not influenced by the mere number of cases pending.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Ninth Circuit Holds that Prior Case Law Concerning “Enterprises” under Racketeer Influenced and Corrupt Organizations Act (RICO) is Confusing and Inconsistent with Supreme Court Authority, Overrules Prior Authority and Under new Standard Reverses Dismissal of RICO Class Action

Plaintiffs filed a putative class action against Microsoft and Best Buy alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) based on an agreement under which Microsoft paid Best Buy to promote MSN Internet service. Odom v. Microsoft Corp., 486 F.3d 541, 543 (9th Cir. 2007). Defense attorneys moved to dismiss the class action complaint under Rule 12(b)(6) because it did not “allege an ‘associated in fact’ ‘enterprise’ under RICO” and under Rule 9(b) because it did not “plead wire fraud with particularity,” id. The district court agreed, dismissing the class action without leave to amend. Id. The Ninth Circuit reversed.

The putative RICO class action alleged that Microsoft and Best Buy agreed that Microsoft would invest $200 million in Best Buy and to promote Best Buy through its MSN Internet service, that Best Buy in turn would promote MSN and other Microsoft products. Odom, at 543. Best Buy allegedly gave customers different MSN trial software depending in the product purchased, and scanned debit/credit card information with the trial software not for “inventory control” (as purportedly represented to customers) but so Microsoft would have billing information for customers who failed to cancel their trial subscriptions to MSN. Id. Specifically, plaintiff alleged that he purchased a laptop computer from Best Buy and told the company that he did not need the MSN trial software because he used another Internet service, that he never used the MSN software during the 6-month trial period following his purchase, and that after 6 months MSN began charging the credit card he used to purchase the laptop for Internet service. Id., at 543-44. Plaintiff telephoned Microsoft and canceled the service, id., at 544. The putative class action was transferred to the Western District of Washington pursuant to the MSN subscriber agreement where plaintiff amended the complaint to include an additional plaintiff who, following the purchase of a cell phone from Best Buy and receiving a 30-day MSN trial CD, found that MSN had been billing her debit card for 1½ years without her knowledge or consent. Id.

Continue reading "Microsoft Class Action Defense Case-Odom v. Microsoft: Ninth Circuit Overrules Prior Circuit Law Defining "Enterprise" Under RICO And Reverses District Court Order Dismissing Class Action Complaint" »

Posted In: Class Action Court Decisions

Dismissal of Class Action Alleging Violations of Federal Fair Debt Collection Practices Act (FDCPA) did not Warrant Notice to Absent Members of Putative Class because no Evidence of Reasonable Reliance on Prosecution of Class Action Ohio Federal Court Holds

Plaintiff/debtor filed a putative class action against attorneys for a creditor alleging that the law firm’s collection efforts violated the federal Fair Debt Collection Practices Act (FDCPA). Defense attorneys successfully moved to dismiss plaintiff’s claims in her class action complaint on the ground that she lacked standing to prosecute claims that now belonged to the bankruptcy trustee, and the federal court rejected plaintiff’s effort to bar the bankruptcy trustee from settling with the defense. Thereafter, the bankruptcy trustee “acting in good faith on behalf of the estate's creditors, negotiated a settlement with Defendants”; however, the district court agreed with plaintiff/debtor that “notice of the involuntary dismissal should be given to the putative class members, because some risk existed that those class members would be prejudiced by the expiration of the statute of limitations later this year.” Griffith v. Javitch, Block & Rathbone, LLP, 241 F.R.D. 600, 601 (S.D. Ohio 2007). Plaintiff filed her proposed notices and requested that defendant be ordered to pay for the notice; defense attorneys moved the court to reconsider its order requiring notice to putative class members, id. The court granted the defense motion, holding that notice need not be provided to putative class members.

Preliminarily, the federal court found that the proposed notices prepared by plaintiff’s counsel were “clearly inadequate” and that they “simply invite contact with Plaintiff's counsel.” Griffith, at 601. The court further stated that it would not order defendant to pay the costs of the notice, noting that as a general rule in class actions the plaintiff is responsible for the costs associated with notices to the class, especially when the court has not yet ruled on the merits of any claim alleged in the class action complaint id.

Continue reading "FDCPA Class Action Defense Case-Griffith v. Javitch: Ohio Federal Court Holds Pre-Certification Notice To Putative Class Of Dismissal Of Class Action Not Required Because No Evidence Of Reliance Or Prejudice" »

Posted In: FDCPA Class Actions, Class Action Court Decisions