Class Action Defense Blog

Denial of Class Action Certification Motion Improper in Class Action Case Against Insurer Alleging Violations of State Unfair Competition Law (UCL) because Equitable Defenses of Fraud and Unclean Hands cannot be used to Defeat UCL Claims so Individual Issues Related to such Defenses will not Predominate over Common Issues California Appellate Court Holds

Plaintiff filed a putative class action complaint against his health insurer, Blue Shield of California, alleging inter alia that Blue Shield violated California’s unfair competition law (UCL) and state insurance code “by failing to attach his application to or endorse it on the insurance policy when issued, and later rescinding the policy on the ground he had made misrepresentations in that application.” Ticconi v. Blue Shield of Cal. Life & Health Ins. Co., 157 Cal.App.4th 707, 68 Cal.Rptr.3d 785, 788-89 (Cal.App. 2007). Plaintiff moved the trial court for class action treatment; defense attorneys opposed the class action certification motion on the ground the individual issues related to Blue Shield’s fraud and unclean hands defenses would predominate over common issues. Id., at 789. The trial court agreed with defense counsel and refused to grant class action status. Id. The Court of Appeal reversed, holding that the trial court abused its discretion in denying the class action certification motion because “[e]quitable defenses cannot be used to defeat a UCL cause of action and Blue Shield Life may not raise the defense of fraud based on statements that insureds made in an application for insurance where the application had been neither attached to nor endorsed on the policy when issued,” id. (citations omitted).

According to the class action complaint, plaintiff applied for a short-term health and accidental death insurance policy from Blue Shield. Ticconi, at 789. The application completed by plaintiff “was neither attached to the policy nor endorsed onto it when the policy was issued.” Id. Blue Shield issued the policy, and plaintiff paid the premiums as required, id. During the policy period, plaintiff’s health care bills exceeded $100,000, but upon receiving the bills Blue Shield refused payment and rescinded the policy on the ground that plaintiff “made material misrepresentations in his application for insurance about the condition of his health.” Id. Plaintiff denied this claim, insisting that he “answered truthfully all health questions posed on the policy application” and that “a reasonable investigation would have shown this.” Id. The class action further alleged that Blue Shield violated California law because it failed to attach or endorse a copy of his application to the policy, and Insurance Code section 10113 forbids incorporation of the application by reference, and that even if his statements were false, plaintiff “not bound by any statement made therein because that document had not been attached to or endorsed on the policy when issued.” Id., at 789-90. Plaintiff filed his lawsuit as a class action alleging that Blue Shield similarly “had rescinded a large number of policies that did not have the applications attached to or endorsed on the policies” in violation of Insurance Code sections 10113 and 10381.5, and that as such the rescissions represented an unlawful business practice under the UCL. Id., at 790.

Continue reading "UCL Class Action Defense Cases-Ticconi v. Blue Shield: California Court Reverses Denial Of Class Action Motion Holding Trial Court Erred In Refusing Class Action Treatment Based on Equitable Defenses To Unfair Competition Law (UCL) Claims Against Insurer" »

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

The Associated Press reports today that U.S. District Court Judge Harry Barnes of Arkansas has denied plaintiffs’ class action certification motion, but has permitted the lawsuit to proceed on an individual basis. According to AP, the class action complaint was filed following the 2005 derailment of a Union Pacific train; the derailment caused an explosion that killed a woman. Judge Barnes ruled that the lawsuit failed to satisfy the requirements for a class action, AP reports, but permitted that the four named plaintiffs may proceed to trial on June 2, 2008, on their individual claims.

The article, entitled “Judge denies class-action for lawsuit over 2005 UP train derailment,” was published by AP on December 31, 2007.

Posted In: Class Actions In The News

In Class Action Lawsuit Alleging Fraud, Trial Court Abused its Discretion in Decertifying Class Action because Subsequent Discovery did not Amount to “Changed Circumstances” Necessary to Support Decertification of Class Action, but Summary Judgment in Favor of Defense Properly Granted because Class Action Representative could not Establish Reliance thus Requiring Appointment of New Class Representative Illinois Appellate Court Holds

Plaintiff filed a class action lawsuit against her insurer, Health Care Service Corporation (dba BlueCross BlueShield of Illinois), alleging common law fraud and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act arising out of the company’s allegedly fraudulent business practices in the setting and revising of its policyholders’ premium rates. Wernikoff v. Health Care Serv. Corp., 877 N.E.2d 11, 13-14 (Ill.App. 2007). Specifically, the class action complaint alleged that defendant “failed to disclose to policyholders the option of reapplying as a new policyholder and, if approved, paying the new business rate premium.” Id., at 14. Plaintiff filed a class action certification motion in 2003, which the trial court granted, id., at 13. In 2006, after the case had been reassigned to a new judge, defense attorneys moved to decertify the class action and for summary judgment; the trial court granted both motions. Id., at 14. The appellate court reversed the order decertifying the class action, but affirmed the order granting summary judgment.

Addressing the order decertifying the class action, the appellate court explained that “an order setting aside an earlier determination of class certification would be proper if clearly changed circumstances or more complete discovery warranted it, rather than mere feelings of error regarding the original certification order.” Wernikoff, at 14 (citing Barliant v. Follett Corp., 74 Ill.2d 226, 231 (Ill. 1978)). An order decertifying a class action is reviewed for abuse of discretion. Id., at 14-15 (citation omitted). Plaintiff argued that the trial court abused its discretion because there were no “changed circumstances” and because the additional discovery did not warrant decertification; defense attorneys countered that more than 24 additional depositions had been taken and that the circumstances had changed. Id., at 15. “Specifically, defendant points to plaintiff's second deposition, which occurred after the class was certified, in which plaintiff admitted that he knew about the option to reapply to receive the new business rate but chose not to do so for several years. Defendant also points to the fact that the depositions of many policyholders revealed that not all policyholders relied on the ‘standard written materials’ but relied on the statements made in oral communications with defendant's customer service representatives.” Id.

Continue reading "Class Action Defense Cases-Wernikoff v. Health Care Service: Illinois Appellate Court Reverses Order Decertifying Class Action But Affirms Summary Judgment As To Plaintiff's Claims Thus Requiring Appointment Of New Class Representative" »

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

As frequent visitors to this site know, each Saturday 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 preceding week. However, in light of the limited number of court days this past week and this upcoming week, we have decided to delay today's class action filing report. Next Saturday, the class action report shall include the cases filed over a two-week period.

Posted In: Class Actions In The News

Judicial Panel Grants Defense Request, Over Objection of Certain Plaintiffs, for Pretrial Coordination of ERISA Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Concurs with Defense Request to Transfer Class Actions to Northern District of Texas

Four class action lawsuits - there in the Northern District of Texas and one in the Eastern District of Texas - were filed against RadioShack and other defendants alleging breach of fiduciary duties under the federal Employee Retirement Income Security Act (ERISA). In re RadioShack Corp. “ERISA” Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 22, 2007) [Slip Opn., at 1]. 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 Northern District of Texas, id. Plaintiff lawyers for the Northern District of Texas class action did not oppose pretrial coordination but argued that the Eastern District of Texas was the appropriate transferee court; plaintiff lawyers for the Eastern District of Texas class action opposed pretrial coordination but argued alternatively for transfer to the Eastern District of Texas. Id. The Judicial Panel granted the defense motion to centralize the class action lawsuits, finding that the various class action complaints present “common factual questions [that] clearly predominate over any unique questions of fact” and that centralization “will eliminate duplicative discovery; prevent inconsistent rulings on pretrial motions, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.” Id. The Panel also agreed with defense attorneys that the Northern District of Texas was the appropriate transferee court because three of the four class actions are pending there and RadioShack is headquartered in that district. Id., at 2.

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

Order Granting Intervention to New Party Plaintiffs did not “Commence” Class Action for Purposes of Removal Jurisdiction under CAFA (Class Action Fairness Act of 2005) Tenth Circuit Holds

Plaintiffs, owners of royalty interests filed a class action lawsuit in Oklahoma state court against Mobil Oil and Mobil Exploration & Producing, North America: The class action complaint, filed in May 2001, “sought damages for breach of contract, breach of plan unitization, conversion, fraud, breach of fiduciary duties, and for a violation of the Oklahoma Production Revenue Standards Act.” Weber v. Mobil Oil Corp., 506 F.3d 1311, 1312 (10th Cir. 2007). The class action complaint was amended in December 2004 to add Mobil Exploration & Producing, U.S. and Mobil Natural Gas, Inc. as party-defendants, id., at 1313. In September 2005, defense attorneys removed the putative class action to federal court under the Class Action Fairness Act of 2005 (CAFA ). Id. The federal court remanded the class action to state court, and defense attorneys sought leave to appeal the remand order. Id. The Tenth Circuit denied the request, concluding that the class action did not fall within the scope of CAFA and, accordingly, that it lacked jurisdiction to consider the appeal.

As a preliminary matter, the Tenth Circuit noted that the parties agreed that the class action was properly removed to federal court if the Class Action Fairness Act applied. Weber, at 1314 n.4. The original complaint was filed in 2001, but in October 2004 other members of the putative class filed a “similar, though not identical, class action in federal district court against the same two defendants.” Id., at 1313. The federal court class action defined the class more broadly than the state court class action, and it additionally sought certain damages not requested in the state court complaint. Id. In December 2004, the state court class action complaint was amended to add Mobil Exploration & Producing, U.S. and Mobil Natural Gas, Inc. as defendants, neither of which was ever named in the federal court class action. Id. In September 2005, plaintiffs in the federal and state court actions agreed that the class action pending in federal court would be voluntarily dismissed and a petition for leave to intervene filed in the state court class action, id. As part of the intervention motion, the plaintiff-intervenors “sought to assert class claims under its expanded class definition and to assert the additional claims for damages and equitable relief it raised in its federal petition.” Id. The state court granted the motion for intervention, but restricted the intervenors to the claims and class definition asserted in the then-pending state court complaint, id. Based on the granting of the motion for intervention, defense attorneys for Mobil Exploration & Producing, U.S. and Mobil Natural Gas, Inc. removed the class action to federal court, arguing that CAFA provided removal jurisdiction; plaintiffs moved to remand the class action to state court on the ground that CAFA did not apply, and the district court ordered remand. Id.

Continue reading "CAFA Class Action Defense Cases-Weber v. Mobil Oil: Tenth Circuit Dismisses Appeal Of Order Remanding Class Action To State Court Holding Class Action Fairness Act (CAFA) Did Not Afford Jurisdiction To Consider Appeal" »

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

District Court Abused Discretion by Requiring Any Objector to Class Action Settlement Post $150,000 Bond in Order to Appeal Approval of Class Action Settlement Fifth Circuit Holds

Plaintiffs filed a class action against American Honda Motor alleging that the odometers in certain vehicles overstated the actual mileage. Vaughn v. American Honda Motor Co., Inc., 507 F.3d 295, 297 (5th Cir. 2007). Eventually the parties agreed upon a proposed settlement of the class action, including certification of a settlement class: “The proposed settlement provides some class members various forms of relief, including warranty extensions, lease extensions, lease refunds, and repair reimbursements.” Id. The class action settlement was estimated to cost Honda $115 million, but “[the] value on the open market would be approximately $244 million.” Id. Among the terms of the class action settlement was the requirement that Honda pay $10 million in lease refunds, but did not provide any compensation to class members who had sold or traded their vehicle, id., at 297-98. Various class members objected to the proposed settlement, including one individual (Hawthorn) who had sold his vehicle; the district court overruled the objection and required any objector post a $150,000 bond as part of any appeal. Id., at 297. The objector asked the Circuit Court to reduce the amount of the bond to $1,000.00, and the Fifth Circuit agreed.

In opposing the class action settlement, “Hawthorn specifically objected that the settlement provides no compensation to him or other class members who sold or traded their vehicles. He contends that the settlement should include amounts for ‘diminution in value,’ or value lost on a sale or trade-in due to inflated odometer readings.” Vaughn, at 298. The federal court disagreed and overruled the objection, id. Apparently reflecting the frustration experienced by many class action plaintiff lawyers to the role played by professional objectors, class counsel asked the district court to require an appeal bond under FRAP 7 be posted by any objector who filed a notice of appeal. Id. Based on the “detrimental impact of an appeal as to the entire class,” and the court’s “opinion” that any objector’s appeal will carry with it the “significant possibility” that any appeal will be subject to summary denial and an award of attorney fees and costs under FRAP 38, the district court granted the motion and set the appeal bond at $150,000. Id.

Continue reading "Honda Class Action Defense Cases-Vaughn v. American Honda: Fifth Circuit Rejects Arguments By Parties To Class Action And Reduces Rule 7 Bond Required To Appeal Class Action Settlement From $150,000 To $1,000" »

Posted In: Class Action Court Decisions

The author of the Class Action Defense Blog wishes all of you a very happy holiday season. A new class action article will be published tomorrow.

Posted In: Class Actions In The News

Judicial Panel Grants Plaintiffs’ Request, Unopposed by Defense, for Pretrial Coordination of 25 Antitrust Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, and Transfers Class Actions to Central District of California

Twenty-five class action lawsuits were filed in six (6) federal district courts (10 in the Northern District and 2 in the Central District of California, 10 in the Western District of Washington, and 1 each in Massachusetts, Nevada and the Eastern District of New York) against Korean Air Lines and Asiana Airlines alleging that they “conspired to fix prices of passenger airfares between the United States and Korea in violation of the Sherman Antitrust Act.” In re Korean Air Lines Co., Ltd., Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 19, 2007) [Slip Opn., at 1]. Plaintiff lawyers in three of the actions moved the Judicial Panel for Multidistrict Litigation (MDL) for centralization of the class action litigation pursuant to 28 U.S.C. § 1407, each requesting transfer to the court in which their respective action was pending - viz., the Western District of Washington, the Northern District of California, or the Central District of California. Id. All responding parties supported pretrial coordination but they could not agree on an appropriate transferee court and, in fact, added requests for transfer to Massachusetts and New York into the mix. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and selected the Central District of California because, in addition to the two actions already pending in that district, 16 potential tag-along class actions also had been filed in that district. Id. Additionally, the Panel selected the Central District of California for the consolidated class action litigation to proceed because each defendant “maintain[s] their primary domestic office in Los Angeles, where discovery may be found.” Id. Accordingly, all class actions pending outside the Central District of California were ordered transferred there, id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

The Wall Street Journal reports today that U.S. District Court Judge Robert Lasnik of Seattle, Washington, has dismissed a putative class action against lawyer-rating website Avvo. The class action complaint challenged Avvo’s method of rating lawyers, and was filed by two lawyers who objected to the ratings they had received. According to The Wall Street Journal, the district court “ruled that there was no basis for cracking down on a lawyer-rating Web site merely because some of its rates didn’t like how they were portrayed.”

The article, entitled “Judging Lawyers,” may be found in the “Review & Outlook” section on page A10 of the December 24, 2007 edition of The Wall Street Journal.

Posted In: Class Actions In The News

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Rejects Defense Attorney Request to Transfer Class Actions to Southern District of New York

Seven class action lawsuits were filed against various defendants alleging violations of federal securities laws based on allegations that Sterling Financial “issued materially false and misleading statements relating to its wholly-owned subsidiary, EFI, which artificially inflated Sterling’s stock price.” In re Sterling Financial Corp. Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 26, 2007) [Slip Opn., at 1]. Plaintiff lawyers in the Pennsylvania class action filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of Pennsylvania; plaintiff lawyers in the other class actions supported the motion, and defense attorneys did not oppose pretrial coordination of the class action litigation but argued that the Southern District of New York was a more appropriate transferee court. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with plaintiff that the Eastern District of Pennsylvania was the appropriate transferee court because “(1) defendants maintain business operations within this district; (2) the conduct at issue allegedly took place in Pennsylvania; and (3) accordingly, relevant documents and witnesses will likely be located there.” Id. Accordingly, the Panel ordered all class actions pending outside that district transferred to the Eastern District of Pennsylvania. Id., at 2.

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

Key Provision that Class Action Counsel Recommend Proposed Settlement of Class Action to All Clients Challenged by Certain Plaintiff Lawyers

As the hearing date on approval of the proposed Vioxx class action settlement nears, some of the lawyers for class action plaintiffs are seeking out of a key part of the settlement agreement. Specifically, the proposed settlement requires plaintiff counsel recommend the settlement to all of their clients; now, however, lawyers representing thousands of class action plaintiffs want permission to advise their clients to reject the deal. Merck reportedly considered this provision critical to the $4.85 billion settlement agreement, which would resolve more than 50,000 claims arising out of the prescription drug Vioxx. The lawyers argue that the settlement agreement infringes on their right to provide independent legal advice to their clients. In essence, plaintiff lawyers want to require Merck to settle the weak claims, but risk further litigation involving comparatively stronger claims. Merck’s approach had been to vigorously defend the Vioxx lawsuits, and it had prevailed in most of the 18 cases that had gone to trial.

Posted In: Class Actions In The News

Corey Dade of The Wall Street Journal reports today that the Internal Revenue Service has dealt a blow to FedEx in connection with labor law class action claims. Dade reports that the IRS “has determined that the roughly 13,000 independent contractors for Fed Corp.’s U.S. ground-delivery business in 2002 were, in fact, employees and assessed the company $319 million in back taxes and fines.” The article, based on information disclosed by FedEx in a filing with the Securities and Commission, characterizes the IRS ruling as “the most significant blow to an embattled model whose low operating costs have been critical to [its] rapid growth.” But FedEx has been hit with scores of lawsuits, including several class action suits alleging labor law violations. FedEx will reportedly appeal the IRS ruling, so the impact of the ruling on pending lawsuits is uncertain.

Corey Dade’s article, entitled “IRS Deals FedEx Setback on Classification of Workers,” may be found on page A4 of the December 22, 2007 edition of The Wall Street Journal.

Posted In: Class Actions In The News

The New York Times reported yesterday that class action lawsuits are on the rise because “[l]itigation stemming from the housing crisis is driving an increase in class-action filings.” The article, by Karen Donovan, states that class action filings in 2007 are up 58% from class action cases in 2006; while not explicitly stated in the article, it is clear that Ms. Donovan is referring to securities class actions only. The Wall Street Journal reports slightly different figures today, with an article by Nathan Koppel putting the increase in securities class action lawsuits at 43%. Whether one uses Ms. Donovan’s figure of 38 subprime-based securities class action filings in 2007 or Mr. Koppel’s figure of 32 subprime-based securities class action cases in 2007, the number is substantial in light of the fact that less than 200 total securities class action cases were filed last year and that no subprime-based securities class actions were filed in 2006.

Ms. Donovan’s article, entitled “Class-Action Cases Rise, Fueled by Subprime Troubles,” may be found online at nytimes.com and was posted on December 21, 2007. Mr. Koppel’s article, entitled “Securities Class-Action Lawsuits Climb by 43%,” may be found online at The Wall Street Journal Online and was posted on December 22, 2007.

Posted In: Class Actions In The News

In order to assist class action defense attorneys anticipate the type of cases against which they will have to defend, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers the time period of December 14 – December 20, 2007, during which time 37 new class action lawsuits were filed. Labor law class action cases generally top this list, and this proved to be true again. Sixteen (16) employment-related class action lawsuits were filed during this time period, representing 43% of the total number of new class action filings. Class actions alleging violations of federal antitrust laws came in second with 10 new filings (27%). The only other category of class actions to crack the 10% threshold alleged violations of California's unfair competition law (UCL), which include false advertising claims, with 4 new class action filings (11%).

Posted In: Class Actions In The News

Federal Court Rejects Bid By Defense Attorneys to Move Criminal Trial of Class Action Lawyer Melvyn Weiss to New York

We have previously discussed the criminal indictment of noted class action plaintiff lawyer Melvyn Weiss, co-founder of the securities fraud class action firm formerly known as Milberg Weiss . The Los Angeles Times reports today that Judge John Walter of the United States District Court for the Southern District of Calfornia denied a motion by Weiss's defense attorneys to move the case from Los Angeles to New York. Weiss previously announced his intention to vigorously 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. Federal prosecutors estimate that the scheme netted Weiss's law firm more than one-quarter of a billion dollars in attorney fees. Defense attorneys expressed confidence that Weiss would be acquitted, despite the fact 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.

The article, entitled “Weiss kickback trial to stay in L.A., judge says,” may be found in the Business Section of the December 21, 2007 edition of the Los Angeles Times.

Posted In: Class Actions In The News

Judicial Panel Grants Plaintiffs’ Request, Unopposed by Defense, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Concurs with Request to Transfer Class Actions Alleging Violations of Federal Truth in Lending Act (TILA) to Northern District of Illinois

Three class action lawsuits were filed against Long Beach Mortgage and other defendants alleging violations of the federal Truth in lending Act (TILA) or state law equivalent statutes. In re Long Beach Mortgage Co. Truth in Lending Act 1-4 Family Rider Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. November 14, 2007) [Slip Opn., at 1]. Plaintiffs’ lawyers in all three class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of Illinois; no opposition was filed by the defense. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with plaintiffs’ recommendation of the Northern District of Illinois as the appropriate transferee court. Id.

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

A class action against Merrill Lynch & Co. alleging that the company provided false research reports on Internet companies ended yesterday when a federal court gave final approval to a settlement of the class action. The class action settlement requires Merrill Lynch to pay $15 million; this is in addition to the $100 million Merrill Lynch agreed to pay to settle a separate action filed by the Attorney General of the State of New York. The class action complaint was filed after the New York A.G.’s investigation into Merrill Lynch became public in 2002.

Posted In: Class Actions In The News

Plaintiff is not an Adequate Class Representative if She does not have a Viable Claim Against Defendant thus Compelling Denial of Class Action Certification Motion in Breach of Contract Class Action Against Life Insurer Pennsylvania Federal Court Holds

Plaintiff filed a putative class action against life insurance company for breach of contract, constructive fraud and unjust enrichment alleging that State Farm the premiums it charged for the insurance policies covering the lives of her two minor children “was based on an aggregate of mortality rates for both smokers and non-smokers, rather than a premium based solely on the mortality rate of non-smokers.” Alleman v. State Farm Life Ins. Co., 508 F.Supp.2d 452, 453 (W.D.Pa. 2007). Plaintiff moved for certification of a class action on the breach of contract claim only; defense attorneys opposed class action treatment and moved for summary judgment on the grounds that plaintiff did not have a viable breach of contract claim. Id. The district court agreed with the defense, denied the class action certification motion, and granted summary judgment in favor of the defense.

The federal court began its analysis by explaining the need to consider the class action certification motion and summary judgment motion as one - a point that often puzzles inexperienced state and federal courts that are concerned with ruling on the “merits” prior to class certification. As the district court explained at page 453, “Because the issue of whether plaintiff's claims are typical of the class and whether plaintiff is an adequate representative as required by [Rule 23] and defendant's summary judgment motion turn on whether plaintiff has a viable breach of contract claim we will address the two issues as one.” In other words, a court must determine as a threshold matter whether a particular putative class representative may assert a valid claim against the defendant in his or her own name; if not, then class action treatment is inappropriate because there is no adequate class representative to pursue the claim. As the Third Circuit explained, “Depending on the circumstances, class certification questions are sometimes enmeshed in the factual and legal issues comprising the plaintiff's cause of action and courts may delve beyond the pleadings to determine whether the requirements for class certification are satisfied.” Beck v. Maximus Inc., 457 F.3d 291, 297 (3d Cir. 2006) (citations and internal quotations omitted). Here, for example, because the plaintiff did not herself have a viable breach of contract claim, she was not an adequate class representative (compelling denial of the class action certification motion) and supporting the defense motion for summary judgment. Id., at 453-54.

Continue reading "State Farm Class Action Defense Cases-Alleman v. State Farm: Pennsylvania Federal Court Refuses To Certify Breach Of Contract Class Action Challenging Calculation Of Insurance Premiums And Grants Defense Summary Judgment Motion On Contract Claim" »

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

Class Action Claims Alleging Violations of Sections 34(b), 36(a) and 48(a) of Investment Company Act (ICA) Dismissed for Lack of Private Right of Action and Class Action’s ICA Section 36(b) Claim Fails to Allege Excessive Fees Connecticut Federal Court Holds

Shareholders-plaintiffs filed a putative class action against various mutual funds, trustees and investment advisors in part for violations of the Investment Company Act (ICA) by alleging charging “excessive” fees within the meaning of the ICA. Alexander v. Allianz Dresdner Asset Mgmt. of Am. Holding, Inc., 509 F.Supp.2d 190, 192-93 (D.Conn. 2007). The class action alleged that defendants “acquire[d] ‘shelf-space’ at brokerage firms, i.e., that they paid excessive commissions to brokers to promote the sale of fund shares to investors” and that they benefited financially from directing investors to certain mutual funds. Id., at 193. The class action complaint alleged violations of ICA §§ 34(b), 36(a), 36(b) and 48(a), as well as state law and Investment Advisers Act (IAA) claims, Id., at 193-94. We focus here on the ICA claims only. In connection with those claims, defense attorneys moved to dismiss the class action complaint because (1) no private right of action exists under ICA §§ 34(b), 36(a) or 48(a), and (2) the allegations in the class action complaint failed to allege “excessive fees” within the meaning of ICA § 36(b). Id., at 194-95. The district court agreed.

With respect to the ICA §§ 34(b), 36(a) and 48(a) claims in the complaint, the district court agreed with defense counsel that the Second Circuit has held no private right of action may be asserted. Alexander, at 194 (citing Bellikoff v. Eaton Vance Corp., 481 F.3d 110, 114 (2d Cir. 2007). With respect to the ICA § 36(b) claim in the complaint, the district court held that had failed to allege that the fees were “excessive”; rather, the class action complaint asserted “only that the defendants used fees for an improper purpose.” Id., at 195. Specifically, “the plaintiffs do not allege that the compensation paid to the defendants was disproportionate to the services rendered.” Id. Under the Second Circuit’s opinion in Eaton Vance, that is insufficient: “‘[i]n order to state a claim under § 36(b), one must allege excessive fees, rather than fees that might simply be described as “improper.”’” Alexander, at 195 (quoting Eaton Vance, at 118). Accordingly, the federal court granted the defense motion to dismiss the ICA § 36(b) claim in the class action complaint. Id., at 195-96.

NOTE: For reasons not discussed here, the district court also granted the defense motion to dismiss the other claims in the class action complaint. See Alexander, at 196-98.

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

An Attorney “may not Read a Document any more Closely than is Necessary to Ascertain that it is Privileged” and Once it is “Apparent” that Document is Privileged then Attorney Must Immediately Notify Opposing Counsel; Plaintiffs’ Counsel Extensive Review and Distribution of Defense Counsel’s Work Product Document Compelled Disqualification of Plaintiffs’ Counsel and Experts in Products Liability (not Class Action) Case California Supreme Court Holds

Plaintiffs filed a products liability lawsuit against Mitsubishi Motors and others because their Mitsubishi Montero “rolled over while being driven on a freeway.” Rico v. Mitsubishi Motors Corp., ___ Cal.4th ___ (Cal. December 13, 2007) [Slip Opn., at 2]. Though the case was not filed as a class action, the ethical issues raised are important not only to class action defense counsel, but to class action plaintiff lawyers as well. As part of his preparations, defense counsel (Yukevich) and Mitsubishi’s case manager (Rowley) met with and two defense experts “to discuss their litigation strategy and vulnerabilities.” Id. Rowley functioned as a “paralegal” during this six-hour meeting, taking notes on Yukevich’s computer and never seeing a print copy of those notes. “Yukevich printed only one copy of the notes, which he later edited and annotated,” and the trial court found that “the sole purpose of the document was to help Yukevich defend the case.” Id. Yukevich printed a copy of this document, which was not labeled as “confidential” or “work product,” and somehow plaintiffs’ counsel obtained a copy (see Note). When defense counsel learned this fact he demanded the document and all duplicates be returned and immediately moved to disqualify “plaintiffs’ legal team and their experts.” Id., at 4-5. The trial court granted the motion, and the Court of Appeal affirmed. The California Supreme Court concurred that the invasion of defense counsel’ work product compelled disqualification of plaintiffs’ counsel and experts.

After summarizing well-settled law governing attorney work product, see Rico, at 6-7, the Supreme Court rejected plaintiffs’ argument that the document “is not work product because it reflects the statements of declared experts,” id., at 7. The Supreme Court explained that the document was not a “transcript” of the six-hour meeting; rather, “[i]t contains Rowley’s summaries of points from the strategy session, made at Yukevich’s direction” that Yukevich edited “in order to add his own thoughts and comments, further inextricably intertwining his personal impressions with the summary.” Id., at 7. As the Court concluded at page 8, “[T]he document does not qualify as an expert’s report, writing, declaration, or testimony. The notes reflect the paralegal’s summary along with counsel’s thoughts and impressions about the case.” (Italics in original.) Thus, the Supreme Court held, “The document was absolutely protected work product because it contained the ideas of Yukevich and his legal team about the case.” Id., at 8.

Continue reading "Ethics And Class Action Defense Issues-Rico v. Mitsubishi: California Supreme Court Affirms Disqualification Of Plaintiffs' Counsel And Experts In Products Liability Case (Not Class Action) For Unethical Conduct In Reviewing Defense Counsel's Work Product" »

Posted In: Class Action Court Decisions

Ninth Circuit Reaffirms that District Court did not Abuse its "Broad Discretion" in Certifying Nationwide Sex Discrimination Class Action Against Wal-Mart Creating "the Largest Certified Class in History"

In June 2001, plaintiffs filed a putative class action against Wal-Mart in the San Francisco federal court alleging sex discrimination in the payment of wages and in promotions. In April 2003, plaintiffs moved to certify a nationwide class action on behalf of 1.5 million former and present female employees “employed in a range of Wal-Mart positions - from part-time, entry-level, hourly employees to salaried managers.” Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. 2007). Defense attorneys argued that the requirements of Rule 23 had not been satisfied, stressing in particular several problems inherent in litigating a class of record size. More than a year later, in an 84-page decision handed down in June 2004, the district court rejected all but one of the defense arguments and, save for that one point, certified the class action as requested by plaintiffs. Both sides appealed and on February 6, 2007 the Ninth Circuit affirmed the district court order in all respects; our article discussing that opinion may be found here .Defense attorneys asked the Panel to reconsider its decision, and on December 11, 2007 the Ninth Circuit again affirmed class action treatment of the claims against Wal-Mart. Dukes v. Wal-Mart, Inc., ___ F.3d ___ (9th Cir. December 11, 2007) [Slip Opn., at 16207 et seq.] The Panel denied rehearing, withdrew its February 6, 2007 opinion, and filed a new Opinion and Dissent affirming the class action order. Id., at 16212.

Plaintiffs’ motion sought certification of a nationwide class action on behalf of “All women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart’s challenged pay and management track promotions policies and practices.” Dukes, at 16213. Wal-Mart stressed the “‘historic’ nature of Plaintiffs’ motion, inasmuch as it concerns a class of approximately 1.5 million women who work or worked in one or more of Wal-Mart’s 3,400 stores in 41 regions at any time since 1998.” Id., at 16214. The district court recognized Wal-Mart’s concerns but concluded that “while the class size was large, the issues were not unusual.” Id. The Ninth Circuit summarized the district court’s order at page 16214 as follows:

Continue reading "Wal-Mart Class Action Defense Case-Dukes v. Wal-Mart: Ninth Circuit Again Upholds Class Action Certification Order In Nationwide Sex Discrimination Lawsuit Against Wal-Mart Finding Class Action With 1.5 Million Members Was Nonetheless Manageable" »

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

To assist California class action defense attorneys predict the cases against which they will have to defend, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers the time period of December 7 – December 13, 2007, during which time only 39 new class action lawsuits were filed. We have repeatedly noted that labor law class action cases generally top this list, often by a wide margin. This past week saw yet another decline in the total number of employment-related class action lawsuit filings, but nonetheless more labor law class action lawsuits were filed than any other category. Specifically, only a dozen new class actions alleging employment law claims were filed this past week, representing 31% of the total number of new class action filings. Class actions alleging violations of federal securities laws came in second with 8 new filings (21%), followed by class actions alleging violations of California's unfair competition law (UCL), which include false advertising claims, and antitrust class actions, which tied for third with 6 new class action filings (representing 15% each of the total new class action cases). No other category passed the 10% threshold.

Posted In: Class Actions In The News

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Transfers Class Actions to Eastern District of Louisiana

Four class action lawsuits were filed against various defendants alleging “that trailers - provided by the Federal Emergency Management Agency in the wake of Hurricanes Rita and Katrina - contain materials which emit dangerous, excessive levels of formaldehyde.” In re FEMA Trailer Formaldehyde Prod. Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 24, 2007) [Slip Opn., at 1]. Plaintiff lawyers in one action pending in the Eastern District of Louisiana filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in that district, and all plaintiffs in the other class actions supported the motion. Id. Defense attorneys opposed pretrial coordination of the class action litigation, but supported plaintiffs’ choice of the Eastern District of Louisiana if the motion was granted. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, concluding that this would “eliminate duplicative discovery; avoid inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.” Id. Accordingly, the Panel ordered all class actions pending outside that district transferred to the Eastern District of Louisiana. Id., at 2.Download PDF file of In re FEMA Trailer Transfer Order

Posted In: Multidistrict Litigation, Class Action Court Decisions

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Amendment of Class Action Complaint After Effective Date of Class Action Fairness Act of 2005 (CAFA) did not Trigger Removal Period Because Under State Law the Amendment Related Back to Original Complaint Alabama Federal Court Holds

Plaintiff, operator of three gasoline distribution facilities, filed a putative class action against Total Containment (TCI) arising out of the manufacture, sale and installation of allegedly defective gas station piping systems. May's Distributing Co. Inc. v. Total Containment, Inc., 523 F.Supp.2d 1303, 2007 WL 4180362, *1 (M.D. Ala. November 28, 2007). The class action complaint was filed in January 2003, and was amended twice prior to March 2004 to add new defendants, including Underwriters Laboratories (UL). Id. In March 2004, TCI filed for bankruptcy protection and defense attorneys removed the class action to federal court on the ground that it was “related to” the bankruptcy, id. On February 16, 2005, two days before the effective date of the Class Action Fairness Act of 2005 (CAFA), the district court remanded the class action to state court finding (1) the complaint was not related to TCI’s bankruptcy, and (2) even if it was, abstention was appropriate. Id., at *2. In September 2005 plaintiffs filed a third amended class action complaint that “added certain allegations related to UL,” and in July 2006 plaintiffs amended the class action yet again, this time to “add[] to its statement of facts and consolidate[] its claims against all defendants into one negligence claim.” Id. In August 2006, defense attorneys again removed the class action to federal court, this time arguing that removal jurisdiction existed under CAFA. Id. The district court disagreed and remanded the class action to state court.

The issue presented is whether the post-CAFA amendments to the class action complaint were sufficient so as to constitute “commencement” of the action after CAFA’s February 18, 2005, effective date. May’s Distributing, at *3. With respect to the threshold inquiry of whether a post-CAFA amendment to a class action complaint may constitute “commencement” under CAFA, the district court concluded that the Eleventh Circuit had not squarely addressed the issue, id., at *3-*4, but adopted the majority view that “an amendment to a complaint does not commence a new action for CAFA purposes if the amended complaint ‘relates back’ to the original complaint under state law.” Id., at *4. Defense attorneys argued that the July 2006 amendment to the class action “was such a dramatic change from the prior complaints, that it constituted a new claim against them.” Id., at *3. The district court rejected this argument, concluding that the fourth amended complaint “arises out of the same ‘conduct, transaction, or occurrence’ as the original complaint.” Id., at *5. Accordingly, removal jurisdiction under CAFA did not exist and the class action was remanded to state court. Id., at *5-*6.

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

The Kansas City Star reports that a state court judge granted final approval today to a class action settlement that “resolves a class-action lawsuit against Sprint Nextel Corp. over the recombination of its tracking stocks in 2004.” Johnson County District Judge Kevin Moriarty gave final approval to the settlement, which requires Sprint Nextel pay $57.5 million. The court also awarded class action counsel about $18 million in attorney fees and costs, but ordered further that about $1.6 million of the attorney fees be withheld pending disbursement of the settlement proceeds to the class. The Star explains that the class action alleged “that Sprint management manipulated its FON wireline business at the expense of its PCS wireless venture and undervalued PCS shares when the stocks were recombined in April 2004.” More specifically, “Sprint divided its stock in 1998, with shares trading under the ‘FON’ ticker symbol reflecting its local and long-distance business, and shares trading under ‘PCS’ reflecting its wireless business. At the time, the wireless unit was in start-up mode and the wireline unit was the company’s big cash producer.” According to the class action allegations, “management artificially depressed the value of PCS by having FON lend it money at an unduly high rate, by failing to properly account for $700 million in tax credits when valuing PCS to determine the conversion ratio when the stocks were recombined, and by using defective or dated information when it calculated the ratio.” The class action covers more than 300,000 potential claimants.

Posted In: Class Actions In The News

Copyright Act Section 411(a) Limits Federal Court Jurisdiction to Registered Works and District Court Lacked Jurisdiction to Approve Class Action Settlement that Included Unregistered Copyrights Second Circuit Holds

Plaintiffs filed a class action on behalf of a class that consisted primarily “of freelance writers who contracted with publishers to author the works for publication in print media, and retained the copyrights in those works,” but whose work had been reproduced without their consent on various electronic databases. In re Literary Works In Electronic Databases Copyright Litig., ___ F. 3d ___ (2d Cir. November 29, 2007) [Slip Opn., at 3]. The legal foundation of the class action rested on New York Times Co. v. Tasini, 533 U.S. 483, 488 (2001), which “held that § 201(c) of the Copyright Act does not permit publishers to reproduce freelance works electronically when they lack specific authorization to do so.” Id., at 4. Essentially, Tasini requires publishers obtain a separate license to reproduce written works electronically. Defense counsel argued, however, relying on section 411(a) of the Copyright Act, that the district court lacked jurisdiction over the class action because putative members of the class action generally failed to register their copyrights. Id., at 5. The Circuit Court noted at page 3 that “The overwhelming majority of claims within the certified class arise from the infringement of unregistered copyrights.” Nonetheless, based on Tasini the district court ordered the parties to mediation, and after three years a settlement was reached, id., at 6. The district court eventually approved the class action settlement, and several objectors appealed. Id., at 7-8. The Second Circuit reversed, holding that the district court lacked jurisdiction to approve the settlement.

We do not here discuss the details of the class action allegations or the terms of the class action settlement. For present purposes, it is sufficient to note that class was defined so as to include works that had not been registered, In re Literary Works, at 6, and that defense counsel argued “that this litigation possessed scant settlement value because the District Court could never certify the vast majority of the claims for inclusion in any proposed class” because section 411(a) of the Copyright Act provides that “no action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title,” id., at 5 (quoting 17 U.S.C. § 411(a)). Defense counsel introduced survey evidence suggesting that less than one percent of the works had been registered; thus, according to the defense the jurisdictional defect exited as to “more than 99 percent of the claims at issue.” Id., at 5-6. Plaintiffs’ lawyers did not concede the precise number at issue, but admitted that “the large majority of ‘subject works’ have not been registered with the U.S. Copyright Office.” Id., at 6. “The District Court never considered whether it had jurisdiction to certify a class consisting mostly of claims arising from unregistered copyrights, or to approve a settlement resolving those claims.” Id., at 8.

Continue reading "Class Action Defense Cases-John v. National Security: Second Circuit Reverses District Court Approval Of Class Action Settlement Holding Lower Court Lacked Jurisdiction Over Class Action Claims For Unregistered Copyrights" »

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

Amendment to Complaint Adding Class Action Allegations “Commences” Action within Meaning of Class Action Fairness Act (CAFA) but Plaintiff may Disclaim Damages in Order to Defeat Federal Court Jurisdiction and Defense Failed to Establish Requisite Amount in Controversy to Satisfy CAFA Removal Jurisdiction Sixth Circuit Holds

In 2004, plaintiff filed an individual lawsuit (not a class action) in Tennessee state court against his automobile insurance carrier for failing to pay for the post-repair loss of value he suffered - that is, alleging that when the insurer pays for repairs to the vehicle, it is further “obligated to restore vehicles to their prior appearance, function and value” and breaches this alleged duty “by not assessing the vehicle after it [is] repaired, not informing Plaintiff of any lost value following such an assessment, and failing to pay the post-repair loss of value unless Plaintiff demands and proves loss of value.” Smith v. Nationwide Prop. & Cas. Ins. Co., 505 F. 3d 401, 403 (6th Cir. 2007). Plaintiff amended the complaint so as to assert class action allegations in September 2006, and limited recovery on behalf of individual insureds to $74,999, and on behalf of the class to $4,999,999. Id. Defense attorneys removed the class action complaint to federal court under the Class Action Fairness Act of 205 (CAFA), but the district court granted plaintiff’s motion to remand the class action to state court. Id., at 402-03. Defense counsel appealed this order pursuant to 28 U.S.C. § 1453(c)(1), id., at 404, and the Sixth Circuit affirmed.

The Sixth Circuit began its analysis by employing the majority rule that CAFA does not alter the defendant’s burden of establishing federal court jurisdiction. Smith, at 404-05. It then turned to the question of whether CAFA applies to this class action, given that the original complaint was filed in 2004 but the class action allegations were not added until 2006. Id., at 405. The Circuit Court held that under Tennessee law the class action was “commenced” after the effective date of CAFA because “Defendant was neither afforded adequate notice of the generic identity of the proposed class nor provided adequate notice of claims of all plaintiffs who might someday fall within a putative class by virtue of [the] original complaint.” Id., at 406. Accordingly, the Sixth Circuit resolved the threshold inquiry by holding that defendant’s notice of removal was timely, id., at 406-07.

Continue reading "CAFA Class Action Defense Cases-Smith v. Nationwide: Sixth Circuit Affirms Applicability Of CAFA To Class Action Complaint And Affirms Order Remanding Class Action To State Court Because Plaintiff Disclaimed Damages Over $5 Million" »

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

Judge Who Learns He is Member of Class Action need not Recuse Himself from Hearing Appeal of Class Action Settlement if Financial Interest is Small and He Promptly Divests Himself of that Interest Second Circuit Holds

Prior to hearing oral argument in an appeal from a class action settlement, but after the three-judge panel had completed a substantial amount of work in preparing for oral argument, the Second Circuit panel learned that two of the judges may be members of the class action. In re Literary Works in Electronic Databases Copyright Litig., ___ F. 3d ___ (2d Cir. November 29, 2007) [Slip Opn., at 2 and n.1]. The Circuit Court requested that the Committee on Codes of Conduct of the Judicial Conference opine as to whether the panel should recuse itself from hearing the appeal; by letter dated March 22, 2007, the Committee concluded that recusal was required. Id. The Panel advised the Committee of additional facts not previously known

A class action was filed “on behalf of freelance authors whose work has been reproduced without their express consent on a variety of electronic databases, including but not limited to LexisNexis and Westlaw.” Literary Works, at 4. The class action was certified and ultimately settled. Notice of the class action settlement was given to class members by mail and publication, and required members of the class action submit proofs of claim by September 30, 2005. Id. The class action settlement received final approval on September 27, 2005, id., and on October 21, 2005, several of the class members who had objected to the settlement filed an appeal, id., at 5. Months after the claims period had expired, the three-judge panel received the briefing on the appeal and in March 2007, “after extensive pre-argument preparation,” two of the judges learned that they may be members of the class because “there was a high probability that we held copyrights in works, such as law review articles and speeches, reproduced on defendants’ databases.” Id. At oral argument, the panel members disclaimed any financial interest in the settlement; no one advised the Panel that the claims period already had expired so they “were at that point ineligible to recover anything in the class action in any event.” Id.

Continue reading "Class Action Defense Cases-In re Literary Works: Second Circuit Rejects Ethics Committee Recommendation For Recusal From Hearing Class Action Settlement Appeal Based On Judges Membership In Class Action" »

Posted In: Class Action Court Decisions

As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers the time period of November 30 – December 6, 2007, during which time 52 new class action lawsuits were filed. It is rare that labor law class action cases do not top this list, and this past week was no exception. During this past week, 19 new class actions alleging employment law claims were filed, representing 37% of the total number of new class action filings. Class actions alleging violations of California's unfair competition law (UCL), which include false advertising claims, came in second with 13 new filings (25% of the total). The only other category to meet the 10% threshold involved class actions alleging violations of federal securities laws with 6 new cases (12%).

Posted In: Class Actions In The News

Judicial Panel Grants Plaintiff Request, Over Defense Objection, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 but Agrees With Defense Request to Transfer Class Actions to Eastern District of Pennsylvania

Two class action lawsuits (followed by 28 potential tag-along class actions) were filed against various defendants, including SmithKlineBeecham Corp., arising out of the manufacture and sale of certain diabetes drugs that allegedly caused increased risk of heart attack and other injuries. In re Avandia Marketing, Sales Prac. & Prods. Liab. Litig., ___ F.Supp.2d ___, 2007 WL 3119378, *1 (Jud.Pan.Mult.Lit. October 16, 2007). Louisiana plaintiffs 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 Puerto Rico or in Louisiana. Id. Puerto Rico plaintiffs supported the motion, and plaintiffs in the tag-along actions supported pretrial coordination but could not agree on the appropriate transferee court, id. Defense attorneys for SmithKlineBeecham initially opposed pretrial coordination but subsequently supported centralization in the Eastern District of Pennsylvania. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the defense that the Eastern District of Pennsylvania “will serve the convenience of the parties and witnesses and promote the just and efficient conduct of the litigation,” particularly since SmithKlineBeecham’s principal place of business is located there. Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Based on the Specific Facts Presented by this Class Action Case, the District Court Properly Compelled Arbitration of Plaintiffs’ Fair Labor Standards Act and State Law Equivalent Class Action Claims but Properly Found that the Class Action Waiver Clauses in the Employer’s Dispute Resolution Program were Unconscionable First Circuit Holds

Plaintiffs filed a class action lawsuit against their former employer, Dynamics Research, alleging violations of the federal Fair Labor Standards Act (FLSA) and the Massachusetts Minimum Fair Wage Law. Skirchak v. Dynamics Research Corp., ___ F. 3d ___, 2007 WL 4098823, *1 (1st Cir. November 19, 2007). The class action complaint followed a complaint by Skirchak with the U.S. Department of Labor that resulted in an agreement by the company to pay back $75,000 to employees and to change its practices, id. Plaintiffs’ class action alleged that Dynamics misclassified employees as exempt in order to avoid paying them overtime and improperly made partial-day deductions from employee paid leave balances, and sought damages beyond those recovered by the DOL. Id. Defense attorneys moved to dismiss the complaint and compel arbitration pursuant to the terms of a Dispute Resolution Program that required arbitration of all disputes and prohibited class action claims. Id., at *2. The district court granted the defense motion to compel arbitration, but held that class-wide relief could be pursued therein because the class action waiver was unconscionable under Massachusetts state law, id. Our prior article discussing the district court opinion may be found here. Both sides appealed: the defense challenged the striking of the class action waiver; plaintiffs challenged the order compelling arbitration. Id. Plaintiffs subsequently agreed to arbitration but insisted on the right to pursue a class action because the class action waiver was unenforceable, id. The First Circuit affirmed.

Preliminarily, it bears noting that the First Circuit “[did] not reach the argument that waivers of class actions themselves violate either the FLSA or public policy.” Skirchak, at *1. Further, whether plaintiffs will succeed in obtaining class action certification was left to the arbitrator, id. The Circuit Court addressed only (1) whether the arbitration clause was enforceable, and (2) whether the class action waiver was enforceable. The First Circuit began by summarizing the Dispute Resolution Program and the notice provided to employees of its terms. See id., at *2-*3. In pertinent part, the Circuit Court observed that if an employee “read only the e-mail, the descriptive memorandum and the fifteen-page Program description” concerning the Program, she “would not know of the class action waiver.” Id., at *3. The class action waiver clauses were contained only in the Appendices to the Program, id., but even if an employee found the class action waiver provisions he “would likely still be confused” because of apparent inconsistencies in the documentation, id., at *4. Finally, the First Circuit noted that the adopted and implemented by e-mail notification to employees sent shortly before a holiday that deemed employees to have consented to the class action waivers if they returned to work following the holiday. Id., at *5.

Continue reading "Arbitration Class Action Defense Cases-Skirchak v. Dynamics Research: First Circuit Holds Class Action Waiver In Arbitration Clause Unconscionable And Thus Unenforceable In FLSA Class Action" »

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

Trial Court Properly Held Illinois Law Applied to Class Action Certification Motion but Improperly Certified Statewide Fraud Class Action Against Intel because Company’s Allegedly Deceptive Statements were not Actionable Illinois Supreme Court Holds

Purchasers of computers run by Intel’s Pentium 4 processors filed a putative nationwide class action in Illinois state court alleging claims for unfair business practices under California law and Illinois law based on the allegation that, contrary to its billion-dollar marketing campaign that “4 is better than 3,” the Pentium 4 performed no better than the Pentium III. Barbara’s Sales, Inc. v. Intel Corp., 879 N.E.2d 910 (Ill. 2007) [Slip Opn., at 1-2]. The class action complaint essentially alleged that the Pentium 4 was not “better” than its predecessor and did not necessarily make programs run faster than its predecessor, id., at 5-6. Defense attorneys opposed class certification in part on the grounds that Illinois law applied and further argued that the decision to purchaser a Pentium 4 was not made “simply based on the number 4 being higher than the number 3.” Id., at 7. The parties’ experts disagreed on whether Pentium 4 outperformed the Pentium III, id., at 6-8. The trial court agreed that Illinois law applied and denied class certification on the California-law claims. The trial court also found that Illinois law could not be applied to a nationwide class action and so certified only a statewide class under the Illinois Consumer Fraud and Deceptive Business Practices Act claim, id., at 8. Our previous article summarizing the July 2006 Illinois appellate court opinion that had reversed the trial court statewide class certification order - holding that California law applies and a nationwide class action should have been certified - may be found here. Defense attorneys appealed to the Illinois Supreme Court, which held that Illinois law applied and that class action treatment should have been denied.

The Supreme Court explained that it certified review only of (1) whether Illinois or California law applied to the nationwide class action complaint, and (2) whether the lawsuit should have been certified as a class action. Intel, at 10. The class action sought relief on behalf of ‘a nationwide class of consumers who have made purchases and received representations in all 50 states and the District of Columbia,” and the Illinois High Court recognized “substantial differences” among the fraud laws of the 50 states, id., at 11. As “the masters of their complaint,” however, plaintiffs limited the class action to “relief only under Illinois or California,” id. After a detailed analysis, see id., at 11-20, the Supreme Court concluded that Illinois law applied, id., at 20-21. The Court noted also that plaintiffs did not argue that Illinois law should be applied to a nationwide class, so the only remaining inquiry was whether a statewide class action should have been certified, id., at 21.

Continue reading "Intel Class Action Defense Cases-Barbara's Sales v. Intel: Illinois Supreme Court Applies Illinois Law To Fraud Class Action And Reverses Certification Of Class Action Against Intel" »

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

Class Action Alleging Milk Processors and Retailers Breached a Duty to Warn Purchasers that They may be Lactose Intolerant Failed to State a Tort Claim under D.C. law District of Columbia Circuit Holds

In what the Circuit Court of Appeals for the District of Columbia charitably characterized as “an unusual class-action lawsuit,” plaintiffs filed a putative class action against nine sellers of milk - seven dairy processors and two grocery stores - alleging “that they consumed milk before they were aware of their lactose intolerance and, as a result, suffered temporary gas and stomach discomfort.” Mills v. Giant of Maryland, LLC, 508 F.3d 1, 2007 WL 3404447, *1 (D.C. Cir. 2007). The class action alleged that defendants owed a duty to warn consumers of this possible risk and “should have put warnings on the labels, informing consumers that some individuals might be intolerant of milk.” Id. Defendants attorneys moved to dismiss the class action complaint for failure to state a claim under District of Columbia law; the district court granted the motion and plaintiffs appealed. The Court of Appeals affirmed, holding that the “novel claim” advanced by the putative class action “falls far short of what D.C. law requires.” Id.

The Circuit Court recognized that millions of people are lactose intolerant, Mills, at *1; however, “[t]he problem for plaintiffs is that a manufacturer’s or sellers duty of reasonable care does not entail a duty to warn of risks ‘that should be obvious to, or generally known by, foreseeable product users,’” id., at *2 (citations omitted). The Court cited numerous cases rejecting failure to warn claims based on “widely known risks of consuming certain foods.” Id., at *3 (citations omitted). Boiled down to its essentials, a seller is not required to warn purchasers that they may suffer from common allergies: “‘The seller may reasonably assume that those with common allergies, as for example to eggs or strawberries, will be aware of them, and he is not required to warn against them.’” Id. (citation omitted). Because this class action did not involve an “unknown ingredient” claim or an “unknown harm” claim, the district court properly dismissed the complaint. As the Circuit Court summarized at page *4, “We will not belabor the obvious. For purposes of tort law, the risk that milk will cause some people to experience temporary gas and related stomach discomfort is ‘widely known - even if lactose intolerance as the cause is not. As a result, the risk that milk will cause temporary gas and stomach discomfort to lactose-intolerant individuals who do not yet know of their condition cannot support a failure-to-warn tort claim under D.C. tort law.” (Footnote omitted.) Accordingly, the D.C. Circuit affirmed the judgment dismissing the class action complaint. Id.

Posted In: Class Action Court Decisions

NYSE Entitled to Absolute Immunity Against Class Action’s Regulatory Violations Claims but District Court Misinterpreted Rule 10b-5 Case Law Regarding Standing in Dismissing Balance of Class Action Complaint thus Necessitating Remand as to those Claims Second Circuit Holds

Plaintiffs filed a class action against the New York Stock Exchange (NYSE) seeking damages for its alleged failure to “regulate and provide a fair and orderly market” as required by federal law and for violations of Rule 10b-5. In re NYSE Specialists Securities Litig., 503 F. 3d 89, 90-91 (2d Cir. 2007). The class action alleged that the NYSE, a nonprofit corporation that oversees the world’s largest stock exchange and facilitates trades for more than 2800 companies through seven Specialist Firms, “which are charged with managing ‘the stocks assigned to them to create a fair, competitive, orderly and efficient market,’” allowed the Specialist Firms to manipulate the prices at which it traded stocks to their own financial benefit. Id., at 91-92. NYSE defense attorneys moved to dismiss the class action complaint’s Rule 10b-5 claim arguing that plaintiffs’ lacked standing; defense attorneys moved to dismiss the class action’s regulatory claims on the ground that the NYSE enjoyed absolute immunity. Id., at 91. Lawyers for lead-plaintiff California Public Employees’ Retirement System (CalPERS) and Empire Programs countered that the NYSE lost this immunity because it “abandoned its regulatory role to maintain a fair and orderly market” and acted contrary to its quasi-governmental powers “when it permitted and encouraged misconduct and fraud on its trading floor.” Id. The district court agreed with defense counsel and dismissed the class action claims against the NYSE, id. The Second Circuit affirmed the judgment with respect to the regulatory claims, agreeing with the district court that the NYSE enjoyed absolute immunity and that the fraud exception did not save the class action claims; the Circuit Court reversed, however, as to the Rule 10b-5 claim.

Preliminarily, the Circuit Court recognized that “[t]he substantial powers of, and the near-total control exercised by, the Specialist Firms over any given stock on the NYSE create an opportunity to manipulate the market for self-gain.” In re NYSE, at 92. An SEC investigation precipitated this class action, as that SEC report reportedly found “that the NYSE had failed ‘to police its elite floor-trading firms’ and ‘ignor[ed] blatant violations’ of prohibitions on self-dealing,” and concluded “that the Exchange was ‘an in-house regulator either ill-quipped or too worried about increasing its workload to care’; and that the NYSE had ‘no meaningful surveillance, allowing inappropriate behavior to continue’ and causing ‘significant’ customer harm totaling in the hundreds of millions of dollars.” Id., at 93-94. According to the class action complaint, however, the NYSE repeatedly released statements to the public alleging that it provided oversight of the daily functions of the Specialist Firms, id., at 94, and that the members of the putative class action relied on those misrepresentations in choosing to trade stocks listed on the NYSE, id., at 95.

Continue reading "NYSE Class Action Defense Cases-In re NYSE Specialists: Second Circuit Upholds District Court Dismissal Of Class Action Against New York Stock Exchange Holding Absolute Immunity Applied To Its Quasi-Governmental Regulatory Role" »

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

To aid class action defense attorneys anticipate the types of class actions 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 preceding week. This report covers the time period of November 16 – November 29, 2007, during which time 92 new class action lawsuits were filed. New labor law class action cases routinely lead this lead, and that pattern continued. During the relevant time period, 38 new class actions alleging employment law claims were filed, representing 41% of the total number of new class action filings. Class actions alleging violations of California's unfair competition law (UCL), which include false advertising claims, came in a distant second, with 22 new filings (24% of the total). The only two other categories to crack the 10% threshold involved class actions alleging violations of securities laws and antitrust laws, with 10 and 9 new cases (11% and 10%), respectively.

Posted In: Class Actions In The News