Class Action Defense Blog

Molly Selvin of the Los Angeles Times reported yesterday that securities class action plaintiff lawyer William Lerach has pleaded guilty “to a criminal charge that could send him to prison for up to two years,” but only if the federal court agrees to the terms of his plea bargain, which includes a provision insulating his San Diego class action law firm from criminal prosecution. While he was not named in the federal indictment handed down last year against plaintiff class action law firm Milberg Weiss and two of its then-named partners, Steven Schulman and David Bershad, Ms. Selvin reports that Lerach “is widely believed to be one of the unnamed partners referred to frequently throughout the 20-count indictment.” In addition to the possibility of a two-year prison term, Lerach is to pay an $8 million fine.

Ms. Selvin’s article, entitled “Lawyer enters plea of guilty: William Lerach pleads in a scheme to bribe plaintiffs in class-action suits for shareholders,” may be found in the Business Section of the October 30, 2007 edition of the Los Angeles Times.

Posted In: Class Actions In The News

The University of Pennsylvania Law Review 2007-2008 Symposium will be held on November 30 and December 1, 2007, and will focuse on the Class Action Fairness Act of 2005 (CAFA). The Symposium promises to address six different perspectives of the Class Action Fairness Act: "history, jurisdictional policy, federalism, regulatory policy, impact on the federal courts, and impact on the legal profession." The conference will be held at the University of Pennsylvania Law School. Further details of the conference, its location and its topics may be found here.

Posted In: Class Actions In The News

SLUSA Preemption does not Require Class Action Allegation of Purchase or Sale of Listed Security, and Securities Class Action was Properly Removed to Federal Court and District Court Properly Dismissed Class Action Complaint as Barred by SLUSA Ninth Circuit Holds

Plaintiffs-investors filed a securities fraud class action lawsuit against Nevada-based real estate development company Saxton and its Chairman, President and CEO, as well as against other defendants, alleging that they placed false financial information in Saxton’s public reports in violation of Arizona state laws. U.S. Mortgage, Inc. v. Saxton, 494 F.3d 833, 836 (9th Cir. 2007). Defense attorneys removed the class action complaint to federal court, arguing that it fell within the scope of the Securities Litigation Uniform Standards Act of 1998 (SLUSA), and the district court then granted a defense motion to dismiss the class action on the grounds that the class action complaint failed to “state a claim upon which relief can be granted in conformity with SLUSA.” Id. The Ninth Circuit affirmed both removal jurisdiction over the class action and dismissal of the class action complaint based on SLUSA preemption.

Saxton’s stock traded on the NASDAQ market. Saxton, at 836. The company was “engaged in several real estate development projects that it financed, in part, with loans from individuals, trusts, and commercial investors,” id. This putative class action was brought on behalf of hundreds of investors and “arise out of twelve separate loan investments that Saxton solicited from various members of the plaintiff class to finance several of its projects and activities,” id. The class action allegations common to each of twelve loan transactions is the lenders would not have done business with Saxton had they known its true financial condition. See id., at 836-39. In 2000, Saxton restated its financial results to “correct a miscalculation of certain interest expenses” that had “caused Saxton to overstate its earnings in several public filings and accompanying press releases in 1998 and 1999.” Id., at 839. As was to be expected, a securities fraud class action was filed in federal court against Saxton and others alleging that they misrepresented the company’s finances in order to artificially inflate the stock price, that class members purchased Saxton stock in reliance on the financial reports, and that Saxton “used its artificially-inflated shares as payment for its acquisition of several entities,” id. The federal court dismissed the class action complaint based on the Private Securities Litigation Reform Act of 1995 (PSLRA), and the Ninth Circuit affirmed. See id.

Continue reading "SLUSA Class Action Defense Cases-U.S. Mortgage v. Saxton: Ninth Circuit Affirms District Court Dismissal Of Class Action Finding Securities Fraud Class Action Complaint Fell Within Scope Of SLUSA" »

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

Michael Parrish of the New York Times reports that class action plaintiff lawyer William Lerach has pleaded guilty to conspiracy to obstruct justice “for concealing his secret, illegal payments to Dr. Steven G. Cooperman, who was a plaintiff in the class-action lawsuits for which [the Milberg Weiss law firm] became famous.” Dr. Cooperman previously admitted to “participating in the scheme.” This represents but the latest in a series of guilty pleas obtained by the federal government following the criminal indictment of the plaintiff class action law firm Milberg Weiss, two of its named partners and others. Mr. Parrish reports that criminal charges are still pending against the law firm itself, Melvyn Weiss, and an attorney out of Palm Springs, Paul Selzer, “who is accused of being an intermediary, laundering money between the firm and the on-call plaintiffs.”

Mr. Parrish’s article, entitled “Leading Class-Action Lawyer Pleads Guilty to Conspiracy,” may be found in Section C of the October 30, 2007 edition of the New York Times.

Posted In: Class Actions In The News

Class Action Waiver in Arbitration Provision Substantively Unconscionable “to the Extent it Prohibits the Subscribers from Bringing a Class Action Alleging State Law Claims” and Entire Arbitration Clause Fails Because Class Action Waiver “Cannot be Severed from the Agreement” Eleventh Circuit Holds

Plaintiffs filed a class action against their cable television service provider, Comcast, in Georgia state court alleging that it improperly passed through to customers franchise fees based on estimated revenue instead of the actual franchise fees paid local governments as allowed by the Cable Communications Policy Act of 1984, and that these estimates resulted in overcharges to subscribers. Dale v. Comcast Corp., 498 F.3d 1216, 1217-18 (11th Cir. 2007). Defense attorneys removed the class action to federal court, and then moved to compel arbitration and dismiss the class action complaint based on the mandatory arbitration clause (that included a class action waiver) contained in the subscriber agreements, id., at 1218. The “Mandatory & Binding Arbitration” provision permits either party to elect arbitration and “contains a class action waiver clause prohibiting subscribers from bringing claims on a class action or consolidated basis,” expressly providing that “[a]ll parties to the arbitration must be individually named” and that the parties shall have “no right or authority for any claims to be arbitrated or litigated on a class-action or consolidated basis.” Id. Plaintiffs’ lawyer argued that the class action waiver was unconscionable; the district court disagreed and granted the defense motion to compel arbitration and dismiss the class action complaint. Id. The Eleventh Circuit reversed.

It is well established that the enforceability of an arbitration clause is determined based on state law. Dale, at 1219 n.2. This is true because the Federal Arbitration Act (FAA) requires that federal court look to state law governing contracts generally (not arbitration agreements specifically) to determine the validity and enforceability of an arbitration agreement, id., at 1219 (citation omitted). Accordingly, the issue on appeal was “whether the Arbitration Provision’s class action waiver is unconscionable under Georgia law and thus unenforceable as a matter of law.” Id. Georgia law recognizes both procedural and substantive unconscionability, and the Circuit Court focused on substantive unconscionability of the class action waiver. Id.

Continue reading "Arbitration Class Action Defense Cases-Dale v. Comcast: Eleventh Circuit Holds Class Action Arbitration Waiver Unenforceable And Reinstates Class Action By Subscribers Against Comcast" »

Posted In: Arbitration, Class Action Court Decisions

Class Action Waiver Unconscionable and Contractual Provision Requiring Arbitrator to Determine Enforceability of Class Action Waiver and Arbitration Provision also Unconscionable California Court Holds

Plaintiff filed a class action lawsuit against his employer, a payday lending company, for violations of state labor laws alleging “failure to pay…overtime…, accurate itemized wage statements, adequate meal and rest periods, and wages upon termination.” Murphy v. Check ‘N Go of Cal., Inc., ___ Cal.App.4th ___, 67 Cal.Rptr.3d 120, 2007 WL 3016414, *1 (Cal.App. 2007). Defense attorneys moved to compel arbitration and dismiss the class action complaint on the grounds that plaintiff had signed a “Dispute Resolution Agreement” that included an arbitration provision and a class action waiver, id. The trial court refused to compel arbitration, concluding that the class action waiver rendered the arbitration agreement unconscionable, id. Defense attorneys appealed, contending that the class action waiver is not unconscionable and that whether the class action waiver was unconscionable should be decided by the arbitrator, not by the trial court. Id. The Court of Appeal rejected the defense arguments and affirmed the trial court order.

Plaintiff spent 7 years as a “salaried retail manager” for defendant; her class action complaint alleged that defendant misclassified salaried retail managers as exempt employees and thus failed to pay overtime, failed to provide accurate wage statements, failed to provide required meal and rest periods, and failed to provide wages due on termination. Murphy, at *1. The class action complaint alleged that every employee had to sign the arbitration agreement, which covered “all claims arising from or relating to plaintiff’s employment,” including any claim that the arbitration agreement was “substantively or procedurally unconscionable.” Id. As noted above, the arbitration agreement contained a class action waiver, requiring that any dispute be maintained as an individual action only, id. Defense attorneys moved to dismiss the class action complaint and compel arbitration, arguing in part that the agreement expressly vests in the arbitrator the power to decide whether the class action waiver is unconscionable. Id., at *2. The Court of Appeal summarized the trial court’s order at page *2 as follows: “the court determined that : (1) it had the power to rule on the unconscionability issues; (2) the parties’ agreement…was a contract of adhesion; (3) the agreement’s class action waiver was substantively unconscionable under Discover Bank v. Superior Court (2005) 36 Cal.4th 148…; (4) the agreement’s provisions for arbitration of unconscionability issues and pre-existing claims were also substantively unconscionable; and (5) the unconscionability terms would not be severed from the agreement.”

Continue reading "Class Action Defense Cases-Murphy v. Check ‘N Go: California Appellate Court Upholds Trial Court Order That Class Action Waiver Rendered Arbitration Clause Unenforceable" »

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

Tentative Class Action Settlement Requires Sprint to Unlock Phones so they can be Utilized with Competitors’ Services and May Impact Similar Industry Class Action Lawsuits

The New York Times reports today that Sprint’s defense team has negotiated a tentative class action settlement of a California class action challenging the company’s practice of “locking” its phones so that they cannot be used on competing networks. According to Katie Hafner’s article, the class action challenged Sprint’s practice of “locking” its phones so that it could not operate with other networks. The terms of the class action settlement, awaiting final approval by a California state court, would require Sprint “to provide departing customers with the code necessary to unlock their phones’ software to the handsets they own can be used on competitors’ networks.” However, “The codes will not work on Nextel-branded phones made by Motorola that use another network protocol, called iDen. Nor will the cods enable customers to switch to AT&T or T-Mobile, as those carriers use network technology known as global system for mobile communication, or GSM.” Nonetheless, the article speculates that the settlement may impact similar class action lawsuits, such as those challenging the Apple iPhone.

Ms. Hafner’s article, entitled “Sprint Nextel Settles Lawsuit Over Switching to New Carriers,” may be found in Section C of the October 27, 2007 edition of the New York Times.

Posted In: Class Actions In The News

To assist class action defense attorneys anticipate the types of cases against which they may have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. This report covers the time period from October 19 – October 25, 2007, during which time 48 new class action lawsuits were filed in these California state and federal courts. Generally, more labor law class action lawsuits are filed than any other category of cases, and this past week was no exception with the filing of 25 new class actions alleging employment law claims (52% of the new class action filings for the week). Only one other category managed to break the 10% threshold for this weekly class action report; there were ten (10) new antitrust class action lawsuits filed (21%).

Posted In: Class Actions In The News

Using Consolidated Individual and Class Action Lawsuits Alleging Various Violations of the Federal Fair Debt Collection Practices Act (FDCPA), Seventh Circuit Resolves Nine Issues of Recurring Concern Including Debt Collection Communications with Lawyers for Consumers

The Seventh Circuit consolidated for decision four class action and individual lawsuits brought under the federal Fair Debt Collection Practices Act (FDCPA) “that present nine questions…, several of which have engendered considerable controversy at the circuit level and even some circuit splits.” Evory v. RJM Acquisitions Funding LLC, ___ F.3d ___ [Slip Opn., at 3] (7th Cir. October 23, 2007). Two of the consolidated cases were filed as putative class action lawsuits, but the issues addressed by the Seventh Circuit frequently arise in FDCPA class action litigation. The nine questions are: (1) the FDCPA notice requirements apply if the consumer is represented by legal counsel; (2) whether the FDCPA prohibition against “harassing, deceptive, and unfair practices in debt collection” applies to communications with a debtor’s lawyer and, if so, (3) whether the applicable standard for determining if such a violation occurred is the same if made to a lawyer as if made to the debtor; (4) whether the FDCPA prohibits debt collectors from including settlement offers in a debt collection letter and, if not per se unlawful, (5) whether it matters if the offer is made to a lawyer rather than directly to a debtor; (6) whether a safe harbor exists for debt collectors accused of violating § 1692e based on settlement offers and, if so, (7) the evidence required to establish that a settlement offer violates that statute; and finally, (8) “[w]hether the determination that a representation is or is not false, deceptive, or misleading under section 1692 is always to be treated as a matter of law,” and, if not, (9) whether the court may nonetheless dismiss a claim under § 1692e “on the ground that the challenged representation was, as a matter of law, not false or misleading.” Id., at 3-4.

The Seventh Circuit held as follows. First, that the notice requirements apply regardless of whether the debtor is represented by counsel because it would be “odd if the fact that a consumer was represented excused the debt collector from having to convey to the consumer the information to which the statute entitles him.” Evory, at 6. Second, that while lawyers are “less likely to be deceived,” the FDCPA prohibits debt collectors from using “any unfair or unconscionable means to collect or attempt to collect any debt” and there is no reason to “immuniz[e] practices forbidden by the statute when they are directed against a consumer’s lawyer.” Id., at 7. However, the Circuit Court held that the standard generally applicable for determining violations of the FDCPA - viz., whether the representation would mislead an “unsophisticated consumer” - does not apply to communications with lawyers, id., at 7-8; rather, the Seventh Circuit held “that a representation by a debt collector that would be unlikely to deceive a competent lawyer, even if he is not a specialist in consumer debt law, should not be actionable,” id., at 9. But this is not true for statements that are false or misleading, because “[a] false claim of fact…may be as difficult for a lawyer to see through as a consumer.” Id., at 9. Representations that are false or misleading - that is, where the lawyer “might be unable to discover the falsity of the representation without an investigation that he might be unable, depending on his client’s resources, to undertake” - are actionable irrespective of whether they are made to the debtor or to the debtor’s counsel. Id., at 9-10.

Continue reading "FDCPA Class Action Defense Cases-Evory v. RJM Acquisitions: Seventh Circuit Consolidates Class Action And Individual Lawsuits To Resolve Nine Difficult FDCPA Questions With Direct Impact On FDCPA Class Actions" »

Posted In: FDCPA Class Actions, Class Action Court Decisions

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Rejects Plaintiffs’ Requests to Transfer Class Actions to California, Illinois, Massachusetts or Nevada

Six class action lawsuits were filed against The TJX Companies alleging violations of the Fair and Accurate Credit Transactions Act (FACTA). In re The TJX Cos., Inc., Fair & Acc. Credit Trans. Act (FACTA) Litig., ___ F.Supp.2d ___, 2007 WL 2602045, *1 (Jud.Pan.Mult.Lit. August 31, 2007). Defense attorneys 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’ lawyers agreed that pretrial coordination was appropriate, but argued alternatively for centralization in California, Illinois, Massachusetts or Nevada. Id. The Judicial Panel granted the motion to centralize the class actions and selected the District of Kansas because of its central location, explaining at page *1: "Given the geographic dispersal of the actions, no district stands out as the geographic focal point for this nationwide docket. Thus, we have sought a transferee district that is centrally located for the parties, and a transferee judge with the time and experience to steer this litigation on a prudent course. Accordingly, we are persuaded that the District of Kansas is an appropriate transferee forum for this litigation." Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Injunctive Relief Claims in Class Action Alleging Breach of Contract for Shipping Services Preempted by Federal Aviation Administration Authorization Act (FAAAA) and Contract Claims Time-Barred under Interstate Commerce Act Alabama Federal Court Holds

Plaintiff Barber Auto Sales filed a putative class action against United Parcel Services for breach of contract, alleging that it overcharged customers for shipping services. Barber Auto Sales, Inc. v. United Parcel Services, Inc., 494 F.Supp.2d 1290, 1291 (N.D. Ala. 2007). Defense attorneys moved for judgment on the pleadings, arguing that the Federal Aviation Administration Authorization Act (FAAAA) preempted the class action claim for equitable relief, and that the breach of contract claims were time-barred under the Interstate Commerce Act. The district court granted the defense motion and dismissed the class action.

Barber and UPS entered into a shipping contract under which the rates charged by UPS would vary “based upon a number of factors including the level of service provided and the weight and size of the shipment.” Barber, at 1291. The contract also provided that UPS would charge the greater of the “actual weight” or the “dimensional weight.” Id. Because the contract permitted plaintiff to “self-select” the “level of service and weights and sizes of the packages it ships and by which it is charged for UPS services,” UPS was permitted to audit the shipments to insure that plaintiff was not under- or over-charged. Id. Further, the contract required plaintiff to dispute any shipping charges within 180 days of its receipt of the relevant invoice. Id., at 1291-92.

Plaintiff’s class action complaint alleged that UPS breached the terms of the shipping contract by manipulating the audit process “so that it could improperly invoice plaintiff increased shipping charges based on false dimensions.” Barber, at 1292. The putative class action sought “(1) monetary damages for breach of contract, (2) an order voiding all contracts ‘to the extent that [UPS] assessed improper increased shipping charge corrections’ on packages; and (3) an injunction prohibiting UPS from assessing improper shipping charges and requiring UPS to conform its practices to comply with the terms and conditions and courses of dealing between the parties.” Id.

Continue reading "UPS Class Action Defense Cases-Barber v. United Parcel Services: Alabama Federal Court Grants Defense Motion For Judgment On The Pleadings In Breach Of Contract Class Action Based On FAAAA Preemption And Statute Of Limitations" »

Posted In: Class Action Court Decisions