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

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Securities Class Action Plaintiff Lawyer William Lerach Admits Conspiring To Obstruct Justice And Enters Guilty Plea In Federal Court

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

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MARK YOUR CALENDARS - CLASS ACTION CONFERENCE ON CLASS ACTION FAIRNESS ACT OF 2005 (CAFA) COMING TO PHILADELPHIA

The University of Pennsylvania Law Review 2007-2008 Symposium will be held on November 30 and December 1, 2007, and will focus 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 On: October 31, 2007 by Michael J. Hassen Email This Post

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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

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.

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

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Plaintiff Class Action Lawyer William Lerach Pleads Guilty To Federal Conspiracy Charge As Fallout From Criminal Indictment Against Class Action Law Firm Milberg Weiss Continues

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

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

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.

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

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

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.”

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

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Class Action Against Sprint Settled with Defense Agreement to Unlock Cell Phones of Departing Customers

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

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Employment Law Class Action Cases Again Predominate New Class Actions Filed In California State And Federal Courts

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

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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

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

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Class Action Defense Cases-In re TJX: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In District of Kansas

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.

Download PDF file of In re TJX Transfer Order

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

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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

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.

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

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Class Action Defense Cases-Georgia-Pacific v. Carter: Arkansas Supreme Court Reverses Certification Of Nuisance Class Action Against Georgia-Pacific Holding That Common Issues Did Not Predominate So Class Action Treatment Was Inappropriate

Class Action Complaint Asserting Toxic-Torts Mass Action by Property Owners for Private Nuisance did not Warrant Class Action Certification because Individual Issues would Necessarily Predominate over Common Issues of Fact or Law Arkansas Supreme Court Holds

Plaintiffs filed a class action lawsuit in Arkansas state court against Georgia-Pacific and the City of Crossett seeking “damages and injunctive relief arising out of vapors, gasses, odors, and other forms of hazardous, noxious, toxic and/or harmful substances and contamination issued and emitted from the industrial wastewater treatment system that the defendants…have operated throughout the West Crossett community over a period of many years, and which harmful substances and contamination have migrated through the air to and into the property, homes and persons of the plaintiffs, where such substances and contamination have occasioned injury, harm and inconvenience.” Georgia-Pacific Corp. v. Carter, ___ S.W.3d ___ [Slip Opn., at 2] (Ark. October 11, 2007). The class action complaint alleged theories of negligence, gross negligence, nuisance, trespass, strict liability and damages, additionally sought injunctive relief. Id. Plaintiffs moved for class action certification of a class of property owners; defense attorneys argued class action treatment was not warranted in part because common issues did not predominate over individual issues and a class action was not the superior means of resolving the dispute. Id., at 1-2. The circuit court “certified for class-action treatment ‘the plaintiffs’ private nuisance claims against G.P.’” but “held in abeyance” whether to certify a class action against the City. Id., at 2-3. Defense attorneys appealed. The Arkansas Supreme Court reversed, holding that class action treatment was inappropriate.

The Arkansas Supreme Court noted that “in order for a class-action suit to be certified, the party seeking certification must establish each of the following six factors: (1) numerosity; (2) commonality; (3) predominance[;] (4) typicality; (5) superiority; and (6) adequacy.” Georgia-Pacific, at 6 (citation omitted). The Court disagreed with defense arguments that the circuit court failed to consider the predominance requirement, holding that it “specifically found” that predominance had been met. Id., at 6-7. It agreed, however, that class action certification was inappropriate. Arkansas “distinguish[es] between class actions involving mass-tort claims and toxic-tort claims,” id., at 8; “mass-tort actions present unique certification problems because they generally involve numerous individual issues as to the defendant’s conduct, causation, and damages,” id., at 9. These concerns are not as significant when the injuries arise from a “single, catastrophic event” - what the Arkansas Supreme Court described as a “mass-accident” case, as opposed to injuries that arise from “a series of events occurring over a considerable length of time and under different circumstances,” which the Court described as “toxic-tort or products-liability” cases, id., at 9.

Continue reading "Class Action Defense Cases-Georgia-Pacific v. Carter: Arkansas Supreme Court Reverses Certification Of Nuisance Class Action Against Georgia-Pacific Holding That Common Issues Did Not Predominate So Class Action Treatment Was Inappropriate" »

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

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FedEx Class Action Defense Cases-In re FedEx Ground: Indiana Federal Court Certifies Kansas Class Action Under Rule 23(b)(3) And Nationwide ERISA Class Action Under Rule 23(b)(2) In Labor Law Class Action By Drivers Against FedEx

Kansas Class Representatives in Labor Law Class Action by Drivers Against FedEx Adequately Established Rule 23(b)(3) State-Wide Class Action for Misclassification of Drivers under Kansas Labor Laws and for Common Law Claims Against FedEx, and Rule 23(b)(2) Nationwide Class Action for Denial of ERISA Benefits Indiana Federal Court Holds

In 2005, the Judicial Panel on Multidistrict Litigation transferred numerous class action lawsuits to the Northern District of Indiana pursuant to 28 U.S.C. § 1407; ultimately, the MDL docket included 56 class action lawsuits filed in 30 states alleging that FedEx improperly classified drivers as independent contractors rather than employees and thus failed to pay wages due under state and federal wage statutes and failed to pay benefits due under ERISA. In re FedEx Ground Package Sys., Inc., Employment Prac. Litig., ___ F.Supp.2d ___ [Slip Opn., at 1-2] (N.D. Ind. October 15, 2007). The Kansas plaintiffs moved the federal court to certify a class action on their behalf, as well as a nationwide class action on behalf of the ERISA class, id., at 1. Defense attorneys opposed class action treatment, and submitted three expert reports purporting to show (1) “that FedEx Ground workers prefer to be independent contractors by a 52% to 20% margin,” id., at 8, (2) “that FedEx Ground delivery drivers are operating a business,” id., at 15, and (3) that the workers are independent contractors because there are “important variations in the contractors’ work,” id., at 20. Plaintiffs objected to the federal court considering these expert reports in deciding whether to certify a class action, and moved to strike the reports under Federal Rule of Evidence 702. Id., at 1-2. The district court denied plaintiffs’ motion to strike, but agreed that class action treatment was warranted.

The district court explained that the Kansas plaintiffs challenged the FedEx practice “of labeling its Ground and Home Delivery division drivers as independent contractors.” FedEx, at 22. According to the class action allegations, “the FedEx Operating Agreement signed by all FedEx drivers actually reserves to FedEx the right to exercise pervasive control over the method, manner, and means of the drivers’ work,” including “the drivers’ appearance and behavior, their pay and rates charged to customers, the vehicle they use and its appearance, their route and the number of packages they deliver each day, their delivery methods and mode of customer service, their hours of work, and their opportunity to increase their earnings.” Id., at 22-23. Class action treatment is further warranted, plaintiff argued, because “FedEx has a categorical policy of classifying its drivers as independent contractors” and because putative members of the proposed class action “share the same job title, signed the same nonnegotiable Operating Agreement, are paid under the same compensation formula, wear the same uniform, drive FedEx approved trucks bearing the FedEx logo, work exclusively for FedEx, and are all similarly integrated into FedEx’s operations.” Id., at 23. The class action sought rescission of the operating agreement and a declaration that defendant’s practices violated Kansas labor laws, id., at 30. Defense attorneys argued against class action treatment by arguing that numerous individualized factual inquiries exist, id., at 23.

Continue reading "FedEx Class Action Defense Cases-In re FedEx Ground: Indiana Federal Court Certifies Kansas Class Action Under Rule 23(b)(3) And Nationwide ERISA Class Action Under Rule 23(b)(2) In Labor Law Class Action By Drivers Against FedEx" »

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

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Class Action Defense Cases-Asher v. Baxter International: Seventh Circuit Dismisses Appeal From Court Order Refusing To Certify Class Action As Untimely

Rule 23(f) Requires Plaintiffs Seek Interlocutory Review from First Denial of Motion for Class Action Certification because 10-Day Window for Appeal does not Commence with Every Denial of such a Motion First Seventh Circuit Holds

Plaintiffs filed six securities fraud class action lawsuits against Baxter International. Asher v. Baxter Int’l Inc., 505 F.3d 736 [Slip Opn., at 1] (7th Cir. 2007). The district court granted a defense motion to dismiss the consolidated class action lawsuits based on the “safe harbor” provision for forecasts and other forward-looking statements created by the Private Securities Litigation Reform Act of 1995 (PSLRA), id., but the Seventh Circuit reversed, holding that the district court erred in dismissing the class action complaint based on the allegations in the complaint. See Asher v. Baxter Int’l Inc., 377 F.3d 727 (7th Cir. 2004). It was the Seventh Circuit’s expectation “that discovery sufficient to make a prompt decision about the safe harbor would follow [the] opinion, for the safe harbor is supposed to be applied at an early stage.” Asher, at 2. Instead, the litigation devolved into “extended wrangling about who should be the ‘lead plaintiff’ under the 1995 Act, and thus which law firm would control the plaintiffs’ side of the litigation.” Id. In the face of the infighting, “the district court eventually held that none of the persons proposed as lead plaintiffs is satisfactory and that the suit therefore cannot proceed as a class action.” Id. The motions panel for the Seventh Circuit permitted plaintiffs to file an interlocutory appeal under FRCP Rule 23(f) from the denial of class action treatment, id., but the Circuit Court dismissed the appeal as untimely, id., at 10.

The Seventh Circuit explained at page 2 that the purpose of designating “lead plaintiffs” in class actions is “to counteract the dominance of lawyers over class-action suits.” Asher, at 2 (italics added). Specifically, “[T]he district judge should select a representative with a financial stake large enough to make monitoring of counsel worthwhile, and with the time and skills needed to make monitoring productive. The idea is that securities suits then will proceed in the interest of investors rather than the lawyers who appoint themselves to prosecute these actions.Id. (italics added). (The Circuit Court’s observation and criticism may have been influenced by the criminal indictment of several securities fraud class action plaintiff lawyers - including Melvyn Weiss, David Bershad, Steven Schulman and William Lerach - most of whom have pleaded guilty to paying illegal kickbacks to individuals to serve as “lead plaintiffs” in securities fraud class action lawsuits.) According to the Seventh Circuit, “The principal substantive questions on appeal are (a) whether the City of Fayetteville Firemen’s Pension and Relief Fund (‘the Fund’) is unsuitable as a lead plaintiff because it learned about Baxter International’s supposed wrongs from a securities lawyer rather than from a business executive, and (b) whether ‘no one’ can be the answer to the question ‘who is the best representative of investors’? Perhaps, when all potential lead plaintiffs have shortcomings, the district judge must choose the least bad of a mediocre lot; after all, the 1995 statute refers to ‘the most adequate plaintiff’ among many, without setting a floor.” Asher, at 2 (italics added). While a district court may ensure “minimum standards of adequacy” under “adequacy” test of Rule 23(a)(4), in this case the lower court never made such an inquiry. Id., at 2-3.

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

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DuPont Loses Class Action Lawsuit In West Virginia As Jury Awards $250 Million In Nuisance Class Action Case Alleging Deliberate Dumping Of Heavy Metals

In a state notoriously difficult for individual and class action defendants alike, the Associated Press reports today that a jury awarded $196.2 million in punitive damages against DuPont in a class action that charged the company with “deliberately dumping dangerous heavy metals on an industrial site” resulting in property damage and health concerns of neighboring properties. This award was on top of the $55.5 million awarded in the class action to “clean up private properties.” DuPont was also ordered to provide medical monitories to people exposed to the chemicals, with that monitoring obligation to last 40 years. DuPont promises to appeal the decision.

The AP article, entitled “DuPont is Ordered to Pay $196.2 Million in Dumping Case,” may be found on The Wall Street Journal Online, posted on October 19, 2007.

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

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New Labor Law Class Action Lawsuit Retain Firm Grip On Top Spot Of Weekly Class Actions Filed In California State And Federal Courts

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 October 12 – October 18, 2007, during which time 50 new class action lawsuits were filed in these California state and federal courts. Labor law class action cases routinely lead the list by a wide margin, and this proved true yet again. During the past week, 23 new class actions were filed alleging employment law claims, representing 46% of the new class action filings for the week. Only two other categories managed to break the 10% threshold for this weekly class action report: eight (8) involved new unfair competition law (UCL) class action filings, which include false advertising claims (16% of the total number of new class actions), and five (5) involved securities fraud class actions (10%).

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

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Class Action Defense Cases-In re Depo-Provera: Judicial Panel On Multidistrict Litigation (MDL) Denies Plaintiff's Motion To Centralize Class Action Litigation

Judicial Panel Agrees with Defense that Pretrial Coordination of Individual Lawsuits with Class Action not Warranted

Three lawsuits - two by individuals filed in California and one putative class action filed in New Jersey - were brought against Pfizer advancing products liability claims. In re Depo-Provera Products Liab. Litig., 499 F.Supp.2d 1348, 1348-49 (Jud.Pan.Mult.Lit. 2007). Plaintiffs’ lawyers in the two California actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization with the class action pursuant to 28 U.S.C. § 1407 in the District of New Jersey. Defense attorneys objected to pretrial coordination, id. The Judicial Panel denied the motion, agreeing with defense attorneys that the class action in New Jersey - which seeks inter alia medical monitoring - should proceed on its own, separate from the individual actions - which seek damages for personal injuries. Id., at 1349. The Judicial Panel explained at page 1349, “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.” Id. Accordingly, the motion was denied.

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

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FACTA Class Action Defense Cases-Ehrheart v. Lifetime Brands: Pennsylvania Federal Court Denies Defense Motion To Dismiss FACTA Class Action Because Class Action Complaint Adequately Alleged Injury And Willful Misconduct

Allegations in Class Action Complaint that Defendant had been “Repeatedly Informed” of FACTA’s Requirements but Failed to Timely Comply Sufficient to Establish “Willful” Violation of FACTA so as Defeat Rule 12(b)(6) Motion to Dismiss Pennsylvania Federal Court Holds

Plaintiff filed a class action against Lifetime Brands for violating the federal Fair and Accurate Credit Transactions Act (FACTA). Ehrheart v. Lifetime Brands, Inc., 498 F.Supp. 753, 754 (E.D. Pa. 2007). The class action complaint alleged that defendant “willfully” failed to redact credit card information from electronically printed customer receipts, id. Defense attorneys moved to dismiss the class action for failure to state a claim, arguing that plaintiff had not pleaded injury in fact and that defendant had not acted willfully, id. The district court disagreed with the defense and denied the motion, holding that the class action complaint adequately pleaded claims under FACTA.

Recognizing that it was entitled to consider exhibits to the class action complaint in ruling upon the defense Rule 12(b)(6) motion, and that it need not accept as true “bald allegations” or “legal conclusions,” Ehrheart, at 755, the district court first held that a claim under FACTA does not require proof of identity theft. The class action alleged that defendant gave plaintiff credit or debit card receipts that violated FACTA because they contained more than the last five digits of card and/.or the expiration date of her credit card. Id. That is all that is required: “FACTA does not require that a plaintiff have suffered actual monetary damages in order to sue for violation of the Act” but, rather, provides for statutory damages irrespective of whether any actual injury is suffered. Id., at 755-56. Accordingly, the court rejected defense arguments challenging the class action complaint for failure to allege actual injury.

Continue reading "FACTA Class Action Defense Cases-Ehrheart v. Lifetime Brands: Pennsylvania Federal Court Denies Defense Motion To Dismiss FACTA Class Action Because Class Action Complaint Adequately Alleged Injury And Willful Misconduct" »

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

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Class Action Defense Issues-Slesinger v. Walt Disney: California Appellate Court Affirms Terminating Sanction For "Deliberate And Egregious" Discovery Misconduct

As a Matter of First Impression, Trial Court has Inherent Power to Impose Terminating Sanction in the Face of Deliberate and Egregious Misconduct and Properly Imposed such a Sanction in this Case California Appellate Court Holds

Though not a class action, this case presents a vivid reminder that attorneys are officers of the court and may be held accountable for the misconduct of their clients and experts. Plaintiff filed suit against Walt Disney alleging that it had failed to pay certain royalties due under a licensing agreement for the Winnie the Pooh children’s stories, and “to assist in prosecuting its lawsuit, [plaintiff] hired an investigator to surreptitiously obtain Disney documents.” Slesinger v. The Walt Disney Co., ___ Cal.App.4th ___ [Slip Opn., at 2] (Cal.App. September 25, 2007). An anonymous caller tipped Disney to the fact that confidential documents had been obtained by an investigator, id., at 6-7. Once Disney learned of the investigator’s misconduct, defense attorneys moved for terminating sanctions, id. Plaintiff argued that it had instructed the investigator to “obey the law,” id. The trial court concluded that only terminating sanctions could protect Disney from plaintiff’s use of the information illegally obtained by its investigator, and granted the defense motion. Id. The California Court of Appeal held as a matter of first impression that the trial court had the inherent power to impose terminating sanctions and affirmed.

At issue were thousands of pages of documents that plaintiff’s investigator obtained “by breaking into an uncertain number of Disney office buildings and secure trash receptacles, and by trespassing onto the secure facility of the company with which Disney had contracted to destroy its confidential documents,” including documents marked “privileged and confidential.” Slesinger, at 2. During the course of the “lengthy, bitter litigation,” the court imposed evidentiary and monetary sanctions against Disney for destroying certain documents, id., at 3. But it then “fell victim to its own litigation abuses,” id., at 4. According to the court, plaintiff hired an investigator for the purpose of “surreptitiously obtaining Disney documents,” id., at 5. And while plaintiff instructed the investigator to “make sure what you’re doing is legal and that you do it by the book,” no other steps were taken to ensure that he complied with that instruction. Id., at 6. To the contrary, plaintiff argued that supervising the investigator “wasn’t my job” and that all plaintiff “did was pay his bills…[and] receive[] documents.” Id.

We do not here summarize the numerous reasons that the court concluded plaintiff and their counsel knew of the investigator’s misconduct, or at the very least should have known of it. By way of example, the investigator had obtained the documents illegally because the investigator produced documents marked “CONFIDENTIAL - For Internal Use Only” in the footer, but when plaintiff finally produced these pages to the defense, this “confidential” tag had been eliminated. Slesinger, at 8. The fact “Slesinger or someone else on [plaintiff’s] behalf altered copies of [Disney documents] after receiving them from [the investigator] to delete any reference to their confidentiality” was evidence of plaintiff’s misconduct. Id., at 22-23.\

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

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Class Action Defense Cases-Grider v. Keystone Health: Pennsylvania Federal Court Sanctions Class Action Defense Counsel And Defendants For Bad Faith Conduct

Class Action Defense Counsel Engaged in Bad Faith Conduct in Connection with Discovery Warranting Sanctions Pennsylvania Federal Court Holds

In a blistering 77-page opinion, a Pennsylvania federal court provided a stern warning to class action lawyers, sanctioning not only defendants but their counsel for discovery abuse. Grider v. Keystone Health Plan Central, Inc., ___ F.Supp.2d ___ [Slip Opn., at 2-6] (E.D. Pa. September 28, 2007). While this opinion faulted class action defense counsel, we will discuss tomorrow Slesinger v. The Walt Disney Co., a mirror-image case that sanctions plaintiff and plaintiff’s counsel for abusive discovery tactics, though not in a class action context. Because of the length of the Grider opinion, we summarize it with broad brushstrokes; the slip opinion is well worth reading and may be downloaded at the end of this article. Briefly, in 2001, plaintiffs - a family doctor, and a medical corporation that services 4,000 patients - filed a putative class action in Pennsylvania state court against HMO Keystone Health Plan Central, Highmark (formerly Pennsylvania Blue Shield), Capital Blue Cross and others alleging that they conspired to defraud, delay payment and reduce payment on insurance claims; defense attorneys removed the class action to federal court. Grider v. Keystone Health Plan Central, Inc., ___ F.Supp.2d ___ [Slip Opn., at 7-9] (E.D. Pa. September 28, 2007). The court granted plaintiffs’ motion to certify the litigation as a class action, id., at 14-15. The class action turned on information in the defendants’ possession “that will either prove or disprove plaintiffs’ claims in this matter.” Id., at 38-39. Following years of discovery battles, plaintiffs filed two motions for sanctions against defendants and their counsel. The district court in substantial part granted the motions.

The hearing on sanctions resembled a trial - the parties called 16 witnesses and introduced 306 exhibits over the course of 9 court days, Grider, at 3-4, resulting in the court making 93 findings of fact, id., at 22-35, and 10 conclusions of law, id., at 35-36. At bottom, the discovery process was deeply affected by the animosity between the parties and their counsel. The district court described the discovery phase as “severely troubling” and summarized at page 37, “This case is nearly six-years old, and discovery is not complete. At times the discovery process has completely broken down. It was necessary to appoint a Special Discovery Master to regulate and control discovery.” The district court described “incessant motion practice” that “threatened to paralyze the operations” of the magistrate and the court, id. In part, the court found that defense counsel “attempt[ed] to subvert discovery by the use of general objections,” id., at 46, which they “raised…in every response to plaintiffs’ discovery” and “steadfastly maintained…were all completely proper,” id., at 47.

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

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Sharper Image Class Action Defense Cases-Figueroa v. Sharper Image: Florida Federal Court Rejects Class Action Settlement Because Class Counsel Negotiated From Position Of Weakness

Defense Negotiated Class Action Settlement with Florida Class Action Counsel Instead of California Class Action Counsel because of Leverage Over Class Counsel and Class Action Settlement Procedurally and Substantively Unfair Florida Federal Court Holds

Numerous class action and individual lawsuits were filed against Sharper Image alleging that its Ionic Breeze air purifier does not clean and purify the air as advertised and is harmful in that it omits excessive ozone; one such class action was filed in the Florida federal court and ultimately the parties sought court approval of a settlement of the class action. Figueroa v. Sharper Image Corp., ___ F.Supp.2d ___ [Slip Opn., at 1] (S.D. Fla. October 11, 2007). In broad terms, the class action settlement provided for $19 Sharper Image coupons or merchandise credits, an OzoneGuard “to protect against ozone emission,” injunctive relief, and $2 million for class counsel. Id., at 1-2. Defense attorneys stressed that the coupon represented the primary financial benefit to the class, not the OzoneGuard, id., at 2 n.2. The settlement provided to the court for final approval was the third amended class action settlement; the district court had given preliminary approval to an earlier version of the settlement agreement in January 2007, and a hearing on final approval of the proposed settlement was held in August 2007. Id., at 1. The federal court refused to approve the settlement.

The lawsuit was filed in May 2005 as a nationwide class action on behalf of purchasers of Sharper Image “ionizing air purifiers,” including the Ionic Breeze®, and sought damages for breach of contract, breach of warranty, money had and received, and unjust enrichment. Figueroa, at 2. In essence, the class action alleged that Sharper Image engaged in the “unlawful conduct of marketing and selling ionizing air purifiers that do not remove impurities from the air and that fail to perform as advertised and sold” and that “the ionizing air purifiers exposed consumers to hazardous levels of ozone.” Id. Defense attorneys moved to stay, dismiss or transfer the class action on the grounds that it simply copied several class action lawsuits filed in California; in response, plaintiffs’ lawyer sought leave to amend the complaint to add the inventor, Zenion Industries, as a party defendant, so the district court denied the defense motion as moot and granted plaintiffs leave to amend. Id., at 2-3. The federal court subsequently dismissed Zenion from the class action for lack of jurisdiction, id., at 5.

Before the district court ruled on plaintiffs’ motion to certify the lawsuit as a class action, the parties advised the court that “an agreement on all aspects of the class claims on a nationwide basis, and that what remained to be resolved was the issue of attorney’s fees.” Figueroa, at 5. The court therefore continued the hearing on the class certification motion in order to allow the parties to present a “complete package” for approval by the court. Id. Soon thereafter, however, class counsel for the certified nationwide class action pending in California contacted the district court and advised that he had “reason to believe that the parties here are attempting to settle the claims belonging to the California Actions class, without the knowledge or consent of the class representatives or Class Counsel” and that the parties to the Florida class action had refused voluntarily to provide information in this regard. Id., at 5-6. California counsel also sought discovery of documents filed under seal with the Florida district court, id., at 5, and, following a hearing and over defense objection, the federal court ordered defense counsel to produce certain documents, id., at 6. At that time, the court expressed concern “with the parties’ practice of filing documents under seal in a purported class action lawsuit.” Id., at 6.

The parties filed a proposed class action settlement that, which the district court summarized at pages 6 and 7 as follows: “The essence of this first Settlement Agreement was to provide to class members, limit one per household, a $19 merchandise credit, valid for one year, for use at Sharper Image retail stores on Sharper Image branded products. The first Agreement also provided class members the ability to purchase (during a six-month period of time) an OzoneGuard attachment, for Ionic Breeze® floor models only, for $7. Sharper Image also agreed to make modifications with respect to its advertisements of the Ionic Breeze®, for example, to not state that the Ionic Breeze® is a medical device and to remove the British Allergy Foundation and the Asthma and Allergy Foundation of America seals from its advertising.” The parties also represented to the court that the Florida class action was “significantly broader” than the California class action, particularly as the California class actions were “limited to claims under California state law,” and jointly moved the court to enjoin competing class actions from proceeding “in order to facilitate an efficient and expeditious settlement and approval process, and to preserve the Court’s jurisdiction to adjudicate the settlement.” Id., at 7. The federal court characterized as a “consistent theme” the argument that Sharper Image “was on the verge of bankruptcy, and that the proposal then under consideration was the best deal that could be arranged.” Id., at 30.

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

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Plaintiff Class Action Lawyer Melvyn Weiss Released On $1.5 Million Bond

Following Guilty Pleas of Former Partners, Weiss Vows to Fight Criminal Charges

Noted class action plaintiff lawyer Melvyn Weiss, co-founder of the Milberg Weiss securities fraud class action firm, has been released after depositing $1,000,000 in cash with the court, posting a $500,000 bond and surrendering his passport, Michael Parrish of the New York Times reports today. According to Parrish’s report, Weiss intends to fight the federal criminal charges of conspiracy, racketeering, obstruction of justice and making false statements under oath arising out of his alleged payment of millions of dollars in illegal kickbacks to various individuals in return for their agreement to serve as plaintiffs in shareholder class action lawsuits. We have previously reported that others indicted in connection with this scheme – including Weiss’s former partners David Bershad and Steven Schulman, and protégé William Lerach – have pleaded guilty. Weiss is reportedly permitted to travel throughout California, Florida and Washington, but must report travel of more than three days to any other state within the continental U.S.

Mr. Parrish’s article, entitled “Bail Is Set For Lawyer Who Sued For Investors,” may be found in Section C. of the October 13, 2007 edition of the New York Times.

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

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Weekly Class Action Lawsuit Filings Drop But Labor Law Class Action Cases Remain In Top Spot Of Class Actions Filed In California State And Federal Courts

In order to assist class action defense attorneys anticipate the cases against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. This report covers the time period from October 5 – October 11, 2007, during which time 29 new class action lawsuits were filed in these California state and federal courts. Last week, by contrast, more than 60 new class actions were filed in these courts. Generally, labor law class action cases lead the list by a wide margin, but the gap was necessarily narrower this past week in light of the smaller number of new class action lawsuits. During the time period at issue, 11 of the new class action filings involved labor law claims (38% of the total number of new class action cases), followed by seven (7) new antitrust class actions (24% of the total), mostly involving now-familiar claims against Korean Airlines. Two other categories of class actions managed to break the 10% threshold: four (4) involved new unfair competition law (UCL) class action filings, which include false advertising claims (14% of the total), and three (3) class actions alleging securities fraud (10%).

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

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Class Action Defense Cases-In re Pet Food: Judicial Panel On Multidistrict Litigation (MDL) Grants Motions To Centralize Class Action Litigation And Selects New Jersey As Transferee Court

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

Thirteen (13) lawsuits putative class actions were filed against Menu Foods asserting products liability claims arising out of the sale of allegedly tainted pet food products. In re Pet Food Products Liab. Litig., 499 F.Supp.2d 1346, 1346-47 (Jud.Pan.Mult.Lit. 2007). Three motions were filed with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization with the class action lawsuits pursuant to 28 U.S.C. § 1407, id., at 1346; the Judicial Panel was also advised that as many as 97 additional class action and individual lawsuits had been filed, which would be treated as “tag-along” actions, id. n.1. While all responding parties - plaintiff and defense - agreed that pretrial coordination was warranted, they disagreed on the appropriate transferee court, id., at 1346-47. Defense attorneys agreed that pretrial coordination was appropriate, but argued that the Northern District of Illinois was the appropriate transferee court, id., at 1347. Plaintiffs’ lawyers, on the other hand, requested transfer to New Jersey, Washington, Tennessee, Arkansas, California and Ohio. Id., at 1346-47. The Judicial Panel granted the motion to centralize the class actions and selected the District of New Jersey because "[p]retrial proceedings are advancing well there and about one-third of all pending actions are already in this district." Id., at 1347.

Download PDF file of In re Pet Food Transfer Order

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

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UCL Class Action Defense Issues-Buckland v. Threshold Enterprises: Plaintiff Who Buys Products For Purpose Of Filing Class Action Has Not Suffered Loss Supporting Dismissal Of UCL/CLRA Class Action California Court Holds

California Court Holds that Putative Class Action Alleging Violations of State’s Unfair Competition Law, False Advertising Law and Consumers Legal Remedies Act Fails for Lack of Actual Reliance and Lack of Standing Where Plaintiff Purchased Products for the Purpose of Filing Class Action

In a case with broad implications to class action lawsuits, plaintiffs filed an individual lawsuit in California state court against Threshold Enterprises and more than 30 other defendants alleging violations of the state’s unfair competition law (UCL), false advertising law (FAL) and Consumers Legal Remedies Act (CLRA) because its skin cream was a “misbranded or mislabeled drug.” Buckland v. Threshold Enterprises, Ltd., ___ Cal.App.4th ___, 2007 WL 2773497 (Cal.App. September 25, 2007) [Slip Opn., at 2]. Defense attorneys demurred to the complaint on the grounds that plaintiffs lacked standing to assert the various UCL, FAL and CLRA claims, id. at 3. The trial court sustained the defense demurrer to the complaint but granted plaintiffs leave to amend; plaintiffs refused to amend the complaint so the court entered judgments of dismissal and plaintiffs appealed. Id., at 2. The Court of Appeal affirmed, holding that .

Plaintiffs California Women’s Law Center and its executive director, Katherine Buckland, “seek[] to advance the civil rights of women and girls” and allege that the some skin creams and lotions sold by defendants contain progesterone or other chemicals regulated by the FDA but that defendants failed to provide adequate warnings in violation of FDA regulations. Buckland, at 2-3. Plaintiffs sought a preliminary injunction to enjoin Threshold from selling skin cream, id. at 3. Buckland admitted, however, that she did not suffer any personal injury but rather purchased the items for the express purpose of determining whether lawsuits could be filed based on the chemicals contained in them. Id. Threshold opposed the injunction on the grounds that plaintiff would not likely prevail on the merits and that the “balance of hardships” weighed against such relief. Id., at 3-4.

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

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Plaintiff Class Action Lawyer Steven Schulman Of Milberg Weiss Pleads Guilty To Federal Racketeering Charge

Michael Parrish of the New York Times reports that class action plaintiff lawyer Steven Schulman, formerly a named-partner at the plaintiff class action law firm now known as Milberg Weiss, has pleaded guilty to a federal racketeering conspiracy charge. According to Parrish’s article, Schulman “admitted in federal court to being part of a scheme in which the firm, known for its class-action lawsuits against companies, gave secret kickbacks to individuals who remained on call to act as lead plaintiffs.” Schulman is reportedly cooperating with federal prosecutors, and “agreed to forfeit $1.85 million in profit, pay a $250,000 fine and accept a prison sentence.” While Schulman could be sentenced to upwards of 20 years, Parrish reports that the sentence is expected to fall within the range of 27-33 months.

Mr. Parrish’s article, entitled “Ex-Partner at Law Firm Pleads Guilty in Kickback Case,” may be found in the October 10, 2007 edition of the New York Times.

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

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Class Action Defense Cases-Clark v. First Union: California Appellate Court Affirms Trial Court Order Vacating Referral Of Certain Class Action Claims To Arbitration And Staying Other Class Action Claims

Inherent Powers of Trial Court Include Power to Reconsider Interim Rulings Long After the Statutory Time Period for Motions for Reconsideration has Lapsed California Appellate Court Holds

Plaintiffs filed a putative class action against their employer, First Union Securities, and its successor, Wachovia Securities for alleged violations of state labor laws. Clark v. First Union Securities, Inc., ___ Cal.App.4th ___, 64 Cal.Rptr.3d 313, 315 (Cal.App. 2007). Defense attorneys moved to compel arbitration before the National Association of Securities Dealers (NASD) and to stay proceedings on the class action claims for injunctive or declaratory relief, which are not subject to arbitration, see Broughton v. Cigna Healthplans, 21 Cal.4th 1066, 1079-80 (Cal. 1999); the trial court granted the motion. Id. , at 314. After the arbitrators ruled that the class action claims were “not eligible for arbitration,” the trial court sua sponte reconsidered its ruling on the defense motion and ruled that the class action would proceed in state court. Id., at 314-15. Defense attorneys appealed, and the California court of appeal affirmed. The appellate court held that the trial court had the inherent authority to reconsider its ruling referring class action claims to arbitration, that the employment contract did not preclude state court jurisdiction over the putative class action complaint, and that the dismissal of the class action claims by the arbitrators did not constitute a class action waiver.

Plaintiff Clark was hired by First Union as an investment consultant candidate, which required that he hold a license from the NASD and to execute the SEC-approved Uniform Application for Securities Industry Registration or Transfer Form U-4 (Form U-4), which contains an arbitration clause that states "I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitutions, or by-laws of the [NASD] as may be amended from time to time and that any arbitration award rendered against me may be entered as a judgment in any court of competent jurisdiction." Clark, at 315. Plaintiff executed the form in October 1998 and began working for First Union in November 1998, id. The SEC promulgated several rules directly implicated by this case, including Rule 10301(d) which addresses investor class action lawsuits filed under FRCP Rule 23. Id., at 316. As the Court of Appeal noted at page 316, “The SEC issued a public notice in connection with the approval of Rule 10301(d). In this 1992 approval order, the SEC gave notice that under the new provision class actions were excluded from arbitration.”

The class action complaint alleged numerous labor law violations based on an array of alleged misconduct ranging “from misrepresentations regarding the sale of securities, to the failure to pay wages and to reimburse for business expenses.” Clark, at 317-18. Defense attorneys moved to compel arbitration of each cause of action in the class action complaint except the claims seeking injunctive and declaratory relief; the defense argued that “because all allegations arose out of Clark's employment or termination of employment, they must be resolved in arbitration pursuant to the arbitration provision in the Form U-4 and the NASD Code.” Id., at 318. The appellate court noted that defense attorneys did not cite Rule 10301(d) in support of the motion, id. Plaintiff countered that the NASD arbitration procedures were unconscionable - an issue the Court of Appeal found unnecessary to address - and that because the class action claim for unfair practices was asserted on behalf of all Wachovia employees it was not subject to arbitration. Id. Plaintiff’s lawyer argued, "The only forum for the unfair practice claims is a civil lawsuit. The NASD arbitration rules do not even permit putative or class claims to be arbitrated." Id.

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

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Court Approves $7 Million Class Action Settlement Ending 5-Year Class Action Against CP Rail Based On Train Derailment And Chemical Spill

The Associated Press reports that a North Dakota federal court has approved $7 million class action settlement, bringing to a close a 5-year-old class action against CP Rail arising from a January 2002 derailment and chemical spill that “sent a deadly cloud” into the air and killed a man. AP reports that more than 40% of the class action settlement proceeds will go to the plaintiffs’ lawyers, who will get $2.9 million. The three lead plaintiffs will reportedly receive $25,000 each, leaving the estimated 2000 absent class members of the class action to split the remainder (roughly $2000 per class member). Claims must be submitted by November 8, 2007. The class action settlement reportedly will not affect any individual lawsuits filed against CP Rail.

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

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Class Action Defense Cases-Gruer v. Merck-Medco: Second Circuit Reverses District Court Order Approving Class Action Settlement Holding Class Action Plaintiffs Were Not Representative Of Class

Interests of Plaintiffs in Class Action Conflicted with other Class Members, Warranting Certification of Subclass and new Hearing on Approval of Class Acton Settlement Second Circuit Holds

Plaintiffs filed a class action Merck-Medco managed Case, L.L.C., a/k/a Medco Health Solutions, Inc., a pharmaceutical benefits manager (PBM), and its former parent company Merck & Co. Inc. (collectively Medco) alleging violations of the Employee Retirement Income Security Act of 1974 (ERISA) for breach of fiduciary duties. Gruer v. Merck-Medco Managed Care, LLC, ___ F. 3d ___ (2d Cir. October 4, 2007) [Slip Opn., at 6]. Ultimately, the parties reached a tentative settlement of the class action. Important to our discussion, the class action settlement required Medco pay $42.5 million to class members, allocated primarily on a pro rata share of monies spent by each plan but reducing by 55% the share of certain plans because those plans could not have been injured directly by the conduct of Medco. Id., at 8. The district court approved the class action settlement, but the Second Circuit reversed and remanded holding that the lower court erred in failing to consider the conflict of interest between the purported representatives of the class action and other members of the class.

In very broad terms, plaintiffs in the class action complaint consisted of individuals, as beneficiaries of certain welfare benefit plans, and of trustees of welfare benefit plans. Gruer, at 4. The class action complaint alleged that Medco breached fiduciary duties under ERISA by “failing to act in their best interest in its capacity as a pharmaceutical benefits manager for the plans,” id., as set forth in the Note. A class action settlement was proposed, at which time certain entities sought leave to intervene and/or objected to the settlement. Id. The district court certified a class action, approved the settlement, awarded legal fees, and severed those cases in which ERISA plans opted out of the class action settlement, id.

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

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FLSA Class Action Defense Cases-Zhong v. August August: New York Federal Court Partially Grants Defense Motion To Dismiss Overtime/Minimum Wage Class Action Claims

Class Action Complaint Alleging Violations of Federal Fair Labor Standards Act (FLSA) and State Law Equivalent Failed to Adequately Plead Overtime Violations New York Federal Court Holds

Plaintiff filed a putative class action against his employer, August August Corp. (doing business as “River Vietnamese and Thai Restaurant”) alleging failure to pay overtime and minimum wages required by the federal Fair Labor Standards Act (FLSA) and New York’s Minimum Wage Act (NYMWA). Zhong v. August August Corp., 498 F.Supp.2d 625, 627 (S.D.N.Y. 2007). The class action complaint asserted that federal court jurisdiction exists under 28 U.S.C. § 1337 as to the FLSA §§ 206 and 207 claims (the first and second claims for relief), and under 28 U.S.C. §1367 (supplemental jurisdiction) over the third claim for relief brought under New York state law, id. Defense attorneys moved to dismiss the class action on several grounds; the district court granted the motion in part.

Preliminarily, the district court rejected defense claims that the class action complaint failed to adequately plead that defendant was plaintiff’s “employer” within the meaning of the FLSA, holding that under the liberal standards applicable to a motion to dismiss, the allegations that plaintiff was “an employee” and was “employed by” sufficiently placed defendant on notice of the claims against it. Zhong, at 628-29. The next question was whether defendant was “engaged in commerce or in the production of goods for commerce” within the meaning of the FLSA, id., at 629. Again, the federal court held that the class action complaint adequately alleged this element of an FLSA claim, id. Similarly, the allegation that plaintiff earned only $10 per day but worked 3 or 4 hours a day adequately pleaded a breach of the FLSA’s minimum wage requirement. Id., at 629. In this regard, while the district court acknowledged that plaintiff had not demanded any specific amount in damages, “he has provided enough information to give August sufficient notice from which to calculate the alleged damages” because he alleged that he worked “twenty hours per week, spread out over six days per week, at a wage of $10.00 per day, for a total of (roughly) twenty weeks.” Id., at 629-30.

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

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Merck Strategy Of Fighting For Individual Vioxx Lawsuits Rather Class Action Treatment Again Pays Off With Florida Jury Verdict In Favor Of Defense

The Wall Street Journal reports today that Merck has won another trial, bringing to 11 the number of verdicts in its favor against five (5) losses. The latest victory came at the hands of a Florida jury, reportedly the first Vioxx case to go to trial in that state. Thousands of individual and class action lawsuits were filed against Merck after it pulled Vioxx from the market in September 2004, and Merck has argued vigorously for the right to litigate each case on an individual rather than class action basis. In large part, Merck has been successful in defeating class action certification motions. The Journal reports that “Merck also claimed victory in two multibillion-dollar class-action lawsuits, on behalf of shareholders and private insurers seeking to recoup what they paid for Vioxx prescriptions.”

The article, entitled “Florida Circuit Court Rules In Merck’s Favor Over Vioxx,” may be found on page B7 of the October 7, 2007 edition of the Wall Street Journal.

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

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CB Richard Ellis Group Class Action Defense Team Settles Sexual Harassment Class Action Lawsuit

The Los Angeles Times reports today that CB Richard Ellis Group has agreed to pay upwards of $150,000 per female employee under a class action settlement of a lawsuit alleging sexual harassment. According to the report, the class action complaint alleged that female employees were “subjected to lewd remarks, unwanted groping and sexual propositions by male co-workers,” as well as pornographic material “distributed via email and displayed on office computers.” CB Richard Ellis did not admit any of the class action allegations, but agreed to pay $3.4 million in attorney fees, donate $400,000 to a trade group to “promote the advancement of women in the [commercial real estate brokerage] industry,” and pay from $1,500 to $150,000 to female employees in accordance with a graduated proof plan. According to the Times, female employees can maintain anonymity and still recover $1500 if they prove to an arbitrator that they were subjected to sexual harassment or discrimination. A “second tier” permits female employees to recover up to $15,000 but they must disclose their identity to defense attorneys and CB Richard Ellis would be entitled to submit documents disputing each claim. Women who participate in the top tier may recover up to $150,000 but their claims “would be subject to full arbitration hearings with witnesses.”

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

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Class Action Lawsuit Filings Surge But Labor Law Class Action Cases Retain Firm Grip On Top Spot In Weekly Class Action Lawsuits Filed In California State And Federal Courts

As a resources 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 September 28 – October 4, 2007, during which time 62 new class action lawsuits were filed in these California state and federal courts. Class actions asserting employment law violations generally lead the list, often by a wide margin, and this past week was no exception. During the time period at issue, 36 of the new class action filings involved labor law claims (58% of the total number of new class action cases). The only other category of class actions to break the 10% threshold involved new antitrust class action filings, which came in a distant second with 9 new class action cases (15%).

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

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Class Action Defense Cases-In re Wellnx: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Lawsuits But Selects District of Massachusetts As Transferee Court

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 but Rejects Defense Request to Centralize Class Actions in Maryland or New Jersey, Instead Transferring the Class Actions to the District of Massachusetts

Nine class action lawsuits were filed against Wellnx Life Sciences and others seeking damages for strict liability, fraud and unjust enrichment arising from the manufacture, marketing and sale of Wellnx Slimquick and/or NV products, and several class actions alleged that the marketing and sale of the products violated various state consumer protection laws. In re Wellnx Marketing & Sale Prac. Litig., 505 F.Supp.2d 1380, 1380 (Jud.Pan.Mult.Lit. 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 Maryland or the District of New Jersey. Id. All plaintiffs responding to the motion supported pretrial coordination, but argued alternatively for Arizona, Massachusetts or New Jersey as the appropriate transferee court. Id. The Judicial Panel granted the motion to centralize the class actions, agreeing that it would “eliminate duplicative discovery; prevent inconsistent pretrial rulings; and conserve the resources of the parties, their counsel and the judiciary.” Id., at 1381. The Panel concluded that the District of Massachusetts was the appropriate transferee court, but did not explain its reasoning for that selection. Id.

Download PDF file of In re Wellnx Transfer Order

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

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California Federal Court Grants Class Action Treatment to Lawsuit Challenging Accessibility of Target’s Website to the Blind

Class Action Certification Motion Granted by Federal Court in California Class Action Attacking Target’s Failure to Permit “Screen-Reading” Software to Work on its Website

Molly Selvin of the Los Angeles Times reports that U.S. District Court Judge Marilyn Hall Patel has granted plaintiffs’ class action certification motion in a California class action against Target challenging the accessibility of the company’s website to the blind. According to Ms. Selvin, the class action complaint alleges that Target’s website violates the federal Americans with Disabilities Act (ADA) as well as California state law because “screen-reading software doesn’t work on parts of its website, essentially making it unusable to blind people.” Plaintiffs sought class action treatment arguing that “Target hasn’t implemented ‘technologically simple and not economically prohibitive’ code into its site that would allow the software to vocalize all [of] the site’s content.” In agreeing that class action treatment was warranted, Judge Patel noted “that this is ‘an age when commerce is increasingly conducted on and through the Internet.’” Target promises to appeal the ruling.

Ms. Selvin’s article, entitled “Suit may spur greater Web access for blind,” may be found in the Business Section of the October 4, 2007 edition of the Los Angeles Times.

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

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Class Action Certification Motion Granted In ADA (Americans With Disabilities Act) California Class Action Against Target Challenging Target Website’s Limited Ability To Utilize Screen-Reading Software Used By The Blind

Molly Selvin of the Los Angeles Times reports today that a California federal district court has granted class action status to a lawsuit against Target seeking website accessibility for the blind. The class action complaint alleges that Target has failed to upgrade its website by implementing “technologically simple and not economically prohibitive” code that would allow screen-reading software to vocalize content on the Target website. In certifying the class action, the federal court reportedly noted that this is “an age when commerce is increasingly conducted on and through the Internet.” Ms. Selvin reports that defense attorneys plan to seek appellate review of the district court’s order.

Ms. Selvin’s article, entitled “Suit may spur greater Web access for blind,” may be found in the Business Section of the October 4, 2007 edition of the Los Angeles Times.

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

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Wal-Mart Reportedly Hit With Additional $62 Million Damage Award In Pennsylvania Labor Law Class Action Lawsuit

Following $78.5 Million Jury Verdict in Labor Law Class Action, Pennsylvania Court Awards an Additional $62.3 Million for Wal-Mart’s Withholding of Employee Pay for More than 30 Days

The Associated Press reports that a Pennsylvania court yesterday awarded an additional $62.3 million against Wal-Mart in a labor law class action. The class action resulted in a jury verdict of $78.5 million, but an additional 125,000 members of the class qualified for additional damages because Wal-Mart withheld their pay for more than 30 days. The court rejected the arguments made by Wal-Mart’s class action defense team, and awarded each class member an additional $500 in damages for violating Pennsylvania’s state employment laws. AP reports that this latest setback follows a $172 million damage award in a California class action, and a $50 million settlement of a Colorado class action. Wal-Mart’s defense team is preparing for trial in several other class action lawsuits as well, including Minnesota and New Jersey.

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

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Labor Law Class Action Defense Cases-Estrada v. FedEx: California State Court Upholds Class Action Judgment Against FedEx But Holds $14.4 Million Fee Award Must Be Reduced As Excessive

Trial Court Class Action Judgment Against FedEx for Labor Law Violations Generally Upheld but California State Appellate Court Reverses Attorney Fee Award as Excessive and because Multiplier Improperly Based on Same Facts that Triggered Entitlement to Fees

Plaintiffs filed a class action in California state court against FedEx Ground Package System, Inc. alleging violations of the state’s labor laws for failure to reimburse work-related expenses; the thrust of the class action complaint was that, “for the limited purpose of their entitlement to reimbursement for work-related expenses, [class members] were employees, not independent contractors.” Estrada v. FedEx Ground Package Sys., Inc., 64 Cal.Rptr.3d 327 330 (Cal.App. 2007). The trial court granted plaintiffs’ motion to certify the litigation as a class action, and a trifurcated trial followed during which (1) “the court found the drivers were employees within the meaning of Labor Code section 2802 (Phase I) , ordered FedEx to reimburse some (about $5 million, including prejudgment interest) but not all of their expenses (Phase II), granted most of the equitable relief sought by the drivers (Phase III), and ordered FedEx to pay the drivers' costs and attorneys' fees (about $12.3 million).” Id. Defense attorneys appealed and plaintiffs cross-appealed.

The Court of Appeal noted that this represented the third appeal in this case, and that it here considered defense challenges to the trial court order certifying the class action, the finding that the drivers were employees, the reimbursement findings, and the award of attorney fees. Estrada, at 330-31. The facts are quite detailed, and we do not repeat them here. See id., at 331-34. On the direct appeal, the Court of Appeal affirmed that the drivers were employees of FedEx, not independent contractors. Id., at 335. The appellate court noted that the California Labor Code does not define "employee" for purposes of section 2802 so the common law test applies, and explained at page 335 that under that test the question is “whether the principal has the right to control the manner and means by which the worker accomplishes the work” based on a number of factors including “(1) whether the worker is engaged in a distinct occupation or business, (2) whether, considering the kind of occupation and locality, the work is usually done under the principal's direction or by a specialist without supervision, (3) the skill required, (4) whether the principal or worker supplies the instrumentalities, tools, and place of work, (5) the length of time for which the services are to be performed, (6) the method of payment, whether by time or by job, (7) whether the work is part of the principal's regular business, and (8) whether the parties believe they are creating an employer-employee relationship.” (Citations omitted.) Under those factors, substantial evidence supported the finding that the drivers were “employees,” see id., at 336-37.

Next, the Court of Appeal affirmed that class action treatment was appropriate, holding that “it is clear that common issues - whether the drivers were employees and, if so, which expenses would be reimbursable - predominated.” Estrada, at 338. The appellate court affirmed also the trial court finding that FedEx failed to reimburse the drivers for all expenses required by law, see id., at 339.

Continue reading "Labor Law Class Action Defense Cases-Estrada v. FedEx: California State Court Upholds Class Action Judgment Against FedEx But Holds $14.4 Million Fee Award Must Be Reduced As Excessive" »

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

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FDCPA Class Action Defense Cases-Guevarra v. Progressive Financial: California Federal Court Holds Congress Must Address "Ethically Questionable" Conduct of Plaintiff's Counsel In Multiplying Class Action Litigation

Class Action Plaintiff Lawyer’s Collusion with Plaintiff’s Counsel in Separate Fair Debt Collection Practices Act (FDCPA) Class Action Against Same Defendant is not Condoned but Remedy lies with Congress not with Disciplinary Bodies California Federal Court Holds

Plaintiff filed a putative class action against a debt collection agency and one of its employees alleging that letters sent to debtors violated the federal Fair Debt Collection Practices Act (FDCPA) and California’s state law equivalent, the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act). Guevarra v. Progressive Fin. Servs., Inc., 497 F.Supp.2d 1090, 1090-91 (N.D. Cal. 2007). The class action complaint originally sought “class-wide relief on behalf of all debtors who received the letter at issue here”; however, plaintiff’s counsel subsequently amended the class action allegations to seek relief solely on behalf of debtors of a single creditor. IKEA. Id., at 1091. Plaintiff’s counsel then asked the district court to certify the litigation as a class action, and admitted at oral argument that counsel was “coordinating with plaintiff’s counsel in a separate [class action] pending in the Central District of California concerning the same letter as the one at issue here.” Id. As the district court explained at page 1091, “Apparently, plaintiff’s counsel agreed with counsel in the [other class action] to divide up the class between the IDEA and non-IKEA creditors.” The district court refused to certify the litigation as a class action and issued an Order to Show Cause why plaintiff’s counsel should not be referred to the State Bar for disciplinary action. Id.

The district court denied the class certification motion “citing plaintiff's arbitrary distinction between IKEA and non-IKEA creditors and concluding that plaintiff's proposed definition is not ‘superior’ to other means available under FRCP 23(b)(3).” Guevarra, at 1091. The federal court explained at page 1091, “Because plaintiff's counsel appeared to have divided up the class in order to maximize attorney fees without significant benefit to their clients, the court ordered plaintiff's counsel to show cause why the court should not refer this matter to the State Bar of California and the Northern District's Standing Committee on Professional Conduct” (citations omitted). The court also concluded that the case relied upon by plaintiff’s counsel, Mace v. Van Ru Credit Corp., 109 F.3d 338 (7th Cir.1997), was in applicable because the Mace court merely refused to impose on counsel a duty to bring a class action “on behalf of the broadest possible class”; “Mace does not, however, condone post-suit collusion between counsel in separate actions in order to cut a class in two.” Id., at 1091.

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

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Class Action Defense Cases-John v. National Security: Fifth Circuit Upholds District Court Dismissal Of Class Action Allegations Because Class Action Complaint Failed To Plead An Ascertainable Class

Class Action Requirements of Rule 23 Implicitly Require District Court to Determine Whether Class Action Complaint Adequately Pleads an Ascertainable Class Fifth Circuit Holds

Plaintiffs filed a class action lawsuit against their homeowner’s insurance carrier for damages caused by Hurricane Rita, alleging inter alia that the insurer “systematically under-adjust[ed] damages claims by failing to account for the inevitable inflation in the price of labor and materials for home repair that follows from natural disasters.” John v. National Sec. Fire & Cas. Co., 501 F.3d 443, 2007 WL 2743633, *1 (5th Cir. 2007). The class action complaint alleged further that the insurer breached the terms of its insurance policies by “systematically failing to account for general contractors’ overhead profit…when repair required the exercise of two or more trades.” Id. Defense attorneys moved to dismiss the class action for failure to state a claim, and for failure to plead an ascertainable class, id. The district court agreed with the defense arguments and dismissed the fraud claim and the class action allegations; the Fifth Circuit granted interlocutory review to resolve the issue of whether the district court erred in dismissing the class action allegations. The Circuit Court affirmed.

Preliminarily, the Fifth Circuit rejected plaintiffs’ efforts to redefine their class action allegations. Specifically, the Circuit Court noted that on appeal plaintiffs’ proposed two separate classes, and that plaintiffs “do not argue in favor of certifying a unitary class, as they proposed in their amended complaint.” John, at *1. Because, however, the Circuit Court’s jurisdiction was limited to whether the district court properly dismissed the unitary class action allegations in the pleadings, the Court explained at page *1 that it “may not consider whether the court should have certified two separate classes that were never proposed to it.” (Citing La. Patients’ Comp. Fund Oversight Bd. V. St. Paul Fire &Marine Ins. Co., 411 F.3d 585, 588 (5th Cir. 2005).) The Fifth Circuit rejected also plaintiffs’ claim that “dismissal of a class allegation on the pleadings is never proper.” Id. The Circuit Court explained at page *1:

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

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Class Action Defense Cases-In re Mutual Fund Market-Timing: Seventh Circuit Holds That It Lacks Jurisdiction To Review District Court Order Remanding Class Action Lawsuits To State Court

Circuit Court Lacks Jurisdiction to Review Order Remanding Class Action Lawsuits to State Court under 28 U.S.C. § 1446(c) Seventh Circuit Holds

This appeal resolving three class action lawsuits arose as follows: Plaintiffs (investors in various mutual funds) filed putative class action lawsuits in state court that defense attorneys removed to federal court. Following district court orders remanding the class actions to state court, the Seventh Circuit held that it had jurisdiction to review the remand orders and reversed. The Supreme Court subsequently held that the district court erred in its conclusion that federal jurisdiction did not exist, see Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S.71 (2006), but that district court orders remanding class actions to state court - even if error under the Securities Litigation Uniform Standards Act of 1998 (SLUSA) - were not reviewable on appeal. In re Mutual Fund Market-Timing Litig., 495 F.3d 366, 367 (7th Cir. 2007) (citing Kircher v. Putnam Funds Trust, ___ U.S. ___, 126 S.Ct. 2145 (2006). Once the class actions were back in state court, defense attorneys filed new notice of removal arguing that Dabit was “a new ‘order’ that creates another opportunity for removal under 28 U.S.C. § 1446(b).” Id., at 367-68. The district court handling two of the three class actions disagreed, and again remanded the lawsuits to state court, id., at 368. Defense attorneys appealed, and the Seventh Circuit held that it lacked jurisdiction to review the remand orders.

The Seventh Circuit explained that § 1447(d) precludes appellate review of remand orders to the extent that the district court remands the complaint to state court under § 1447(c). In re Mutual Fund, at 368. That statute covers remand orders based on lack of jurisdiction or defects in the removal process. Id. (citing Powerex Corp. v. Reliant Energy Services, Inc., __ U.S. ___, 127 S.Ct. 2411 (2007)). In this case, the district court remanded the class actions to state court because the notices of removal were untimely, and because they were “successive and represented attempts to relitigate issued decided adversely to defendants.” Id. Whether the district court was mistaken was irrelevant: the Seventh Circuit held that the remand order fell within the scope of § 1447(c) thereby precluding appellate review. Id. Accordingly, the Circuit Court dismissed the appeal for lack of jurisdiction. Id., at 369.

Download PDF file of In re Mutual Fund Market-Timing