Class Action Defense Blog

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

Eleven (11) class action lawsuits (5 in California, 2 in New York and Pennsylvania, and 1 in Indiana and South Carolina) against various defendants, including Mattel and Fisher-Price, arising out of the “the production of defendants’ toys in China with surface paints that allegedly contain elevated levels of lead and the sale of those toys in the United States.” In re Mattel, Inc., Toy Lead Paint Prods. Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 18, 2007) [Slip Opn., at 1]. Defense attorneys for Mattel and Fisher-Price, together with lawyers for plaintiffs in three of the 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 Central District of California. Id. South Carolina and New York plaintiffs’ lawyers supported the motion, but each argued that the district wherein their action was pending was the appropriate transferee court, id. Pennsylvania plaintiff’s lawyer opposed pretrial coordination, arguing that her action should be treated separately because it seeks only medical monitoring, id. The Judicial Panel granted the motion to centralize the class action lawsuits, noting that other class action complaints also sought medical monitoring (not solely the Pennsylvania class action), and that centralization would “eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary. Id. The Panel also agreed that the Central District of California, where Mattel is headquartered and where the first class action was filed, was the appropriate transferee court. Id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Waiver Unconscionable Under Washington State Law and Federal Arbitration Act (FAA) so District Court Properly Denied Defense Motion to Dismiss Class Action Complaint and Order Individual Claims to Arbitration Ninth Circuit Holds

Plaintiffs filed a class action in Washington state court against their cellular telephone service provider, T-Mobile, “alleging that the service provider had improperly charged them for certain fees beyond the advertised price of service, charged them for calls during a billing period other than that in which the calls were made, and charged them for roaming and other services that should have been free.” Lowden v. T-Mobile USA, Inc., 512 F. 3d 1213, 1215 (9th Cir. 2008). The service agreements underlying the class action plaintiffs’ claims contained mandatory arbitration provisions that barred class action litigation, id. Defense attorneys removed the class action to federal court, and then moved the federal court to compel arbitration of the claims on an individual rather than class action basis. Id., at 1214. The district court denied the motion, concluding that the arbitration clauses were unenforceable because the class action waivers and the limitation on punitive damages rendered them substantively unconscionable, id., at 1217. Defense attorneys appealed and the Ninth Circuit affirmed.

The service agreements signed by the class action plaintiffs stated, directly above the signature line, that any disputes would be submitted to mandatory arbitration. Lowden, at 1215-16. The specific language in the two service agreements underlying the class action complaint differed slightly, but the differences did not impact the district court’s decision: each arbitration clause precluded class action litigation. Id. In ruling on T-Mobile’s motion to compel arbitration, the district court concluded that the arbitration provisions were not procedurally unconscionable, but “held that the prohibition on class relief and the limitation on punitive damages, found in both agreements, were each substantively unconscionable.” id., at 1217. The Ninth Circuit defined the issues on appeal as whether T-Mobile’s arbitration provisions “are enforceable under Washington state law and, if not, whether the state law is preempted by the Federal Arbitration Act (‘FAA’), 9 U.S.C. §§ 1-16.” Lowden, at 1214. It concluded that, in light of the Washington State’s Supreme Court opinion in Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007), “T-Mobile's arbitration provision is substantively unconscionable and unenforceable under Washington state law,” and that the FAA did not preempt Washington state law. Lowden, at 1214-15.

Continue reading "Arbitration Class Action Defense Cases-Lowden v. T-Mobile: Ninth Circuit Affirms District Court Denial Of Defense Motion To Compel Arbitration Of Class Action Finding Class Action Waiver In Arbitration Agreements Unconscionable And Unenforceable" »

Posted In: Arbitration, Class Action Court Decisions

Defense Motion to Dismiss California Class Action Alleging Misclassification of Employees and Seeking Damages under California State Law Fails because Class Action was not Incompatible with Illinois Class Action by Same Plaintiff Lawyer Alleging Misclassification of Same Group of Employees and Seeking Damages under Federal Fair Labor Standards Act (FLSA) California Federal Court Holds

Plaintiff filed a putative class action against Abbott Laboratories in California state court on September 25, 2007, and defense attorneys removed the class action complaint to federal court on November 7, 2007, arguing that removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA). Thorpe v. Abbott Laboratories, Inc., ___ F.Supp.2d ___ (N.D. Cal. February 12, 2008) [Slip Opn., at 1]. The class action complaint stated that plaintiff formerly had been employed by Abbott as a Pharmaceutical Representative, and alleged that improperly classified him and other Pharmaceutical Representatives as “exempt” employees and that he was required to work more than 8 hours per day or 40 hours per week without overtime, and was denied meal and rest periods. Id., at 2. The class action further alleged that Abbott failed to provide accurate wage statements as required by California law. Id. Defense attorneys moved to dismiss the class action or, in the alternative, to strike the class action allegations, id., at 1-2. The federal court denied the motion.

The defense argued that the class action complaint must be dismissed, or the class action allegations stricken, “because plaintiff's claims for unpaid overtime for Pharmaceutical Representatives at Abbott are based on the same facts and circumstances as those alleged in a parallel federal action, Jirak v. Abbott Laboratories, et al., 07-03636 (‘Jirak action’), filed by plaintiff's counsel and currently pending in the District Court in the Northern District of Illinois.” Thorpe, at 2. Defense attorneys argued that even though Thorpe was not a plaintiff in the Jirak action, “the present complaint is an attempt by plaintiff's counsel to circumvent the requirements for maintaining a class action under the Fair Labor Standards Act (‘FLSA’)… by filing two class actions based on the same circumstances, namely that Abbott mis-classified Pharmaceutical Representatives as exempt employees.” Id., at 2-3. In essence, the defense argued “the opt-out class action that plaintiff seeks to maintain for his claims under California law is incompatible with the FLSA opt-in class action proceeding concurrently in the Northern District of Illinois.” Id., at 3.

Continue reading "Class Action Defense Cases-Thorpe v. Abbott Labs: California Federal Court Denies Defense Motion To Dismiss Class Action Finding California State Law Class Action Claims Were Not Incompatible With Illinois FLSA Class Action" »

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

Defense Motion to Dismiss Class Action Alleging Gasoline Retailers Overcharged Consumers by Failing to Account for Differences Based on Temperature of Gasoline Sold Denied because Class Action Allegations Adequately Pleaded Claims for Breach of Contract, Violation of Consumer Protection Statutes, and Various Other Claims Kansas Federal Court Holds

Several putative class action lawsuits were filed against various motor fuel retailers in 26 states, the District of Columbia and Guam (“the Region”); the class actions were consolidated in the District of Kansas for pretrial purposes by the Judicial Panel on Multidistrict Litigation (a summary of the Judicial Panel’s order may be found here). Though it alleged numerous causes of action, in essence the consolidated class action complaint alleged that defendants’ sale of gasoline “for a specified price per gallon without disclosing or adjusting for temperature expansion” subjects them to liability “under various state law theories including breach of contract, breach of warranty, fraud and consumer protection.” In re Motor Fuel Temperature Sales Prac. Litig., 534 F.Supp.2d 1214 (D. Kan. 2008) [Slip Opn., at 1]. Defense attorneys moved to dismiss the class action on ten (10) different grounds, see id., at 13-14, but framed the arguments “in general terms” that did not “identify the elements of each cause of action or discuss whether the laws of each jurisdiction are the same,” id., at 14. The district court denied the motion.

In broad terms, the consolidated class action complaint alleged that gasoline expands when heated and so a given volume has less mass at warmer temperatures than the same fuel would have at cooler temperatures. In re Motor Fuel, at 3. Because of this, the industry has standardized the sale of gasoline based on temperature, defining a “gallon” as 231 cubic inches at 60 degrees Fahrenheit, and this standard - known as D-1250 - is used “at every state of the process except at retail.” Id. Retail gasoline is sold “based solely on volume (i.e. 231 cubic inches) without regard to temperature,” and is advertised without defining for the term “gallon” for the consumer, id. Further, the industry has fought selling gasoline at the D-1250 standard, so “Plaintiffs pay billions of extra dollars every year because retailers deliver fuel which is - on average - at least 10 degrees higher than the industry standard without making any correction in price and/or volume.” Id., at 4. This practice also “generate[s] hidden profits in the form of excess reimbursement for taxes paid on wholesale purchases,” because defendants pay federal and state taxes on the D-1250 standard, but collects reimbursement of those taxes from consumers on the additional gallons sold at higher temperatures, id. Finally, the class action alleges that equipment is available (and in use in Canada) to adjust the retail sale of gasoline to the D-1250 standard, but defendants have opposed putting the equipment into use by falsely claiming the average temperature of gasoline sold in the U.S. is 56^◦ F, while the American Petroleum Institute now concedes that it is higher than 60^◦ F, and that it would cost more than $6 billion to put the equipment to use, while the industry now estimates that cost to be $2.2 billion. Id., at 4-5. The nine (9) separate claims alleged in the class action complaint are discussed at pages 6 through 13 of the opinion.

Continue reading "Class Action Defense Cases-In re Motor Fuel: Kansas Federal Court Denies Defense Motion To Dismiss Class Action Challenging Practice Of Selling Gasoline Based On Volume Regardless Of Temperature" »

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Challenging Labeling PCs as “Windows Vista Capable” even if PCs could not Run Premium Vista Properly Certified as Nationwide Class Action and Washington State Law may be Applied to Claims of All Members of Class Action Washington Federal Court Holds

Plaintiffs filed a putative class action lawsuit against Microsoft challenging the marketing of its new “Windows Vista Capable” and “Express Upgrade” programs; specifically, the class action complaint alleged that almost a year before its release of the new Vista operating system, Microsoft “authorized original equipment manufacturers…to place a sticker on personal computers… indicating that the PCs had been certified by Microsoft as ‘Windows Vista Capable.’” Kelley v. Microsoft Corp., ___ F.Supp.2d ___ (W.D. Wash. February 22, 2008) [Slip Opn., at 1]. The class action alleged further that a substantial number of PCs that were advertised as “Windows Vista Capable” were limited to “Vista Home Basic” which, according to the complaint, “does not include any of the enhanced features unique to Vista and which make Vista attractive to customers.” Id., at 2. Some PCs were labeled as “Premium Ready” rather than “Windows Vista Capable,” id., but at that time consumers were unaware of the various Vista operating systems that would be available or the differences between them. The class action also alleged that Microsoft offered an “Express Upgrade Guarantee Program” to PC customers that would allow purchasers to “Windows Vista Capable” PCs to upgrade to Vista for little or no cost, but failed to disclose that the upgrade generally would be limited to Vista Home Basic. Id. Plaintiffs moved for the district court to certify the litigation as a nationwide class action and to apply Washington law to the class action. Id., at 1. Defense attorneys opposed both motions. The district court granted class action certification and agreed that Washington law governs the lawsuits.

The gravamen of the class action complaint was that “Microsoft eventually released four versions of Vista - Basic, Premium, Business, and Ultimate” - but that “the Premium version that is the ‘real’ Vista.” Kelley, at 2. Computers were advertised as “Windows Vista Capable,” the class action alleged, in order to “boost holiday sales of personal computers after delaying the release of Vista from March 2006 to early 2007” because Microsoft was “concerned that consumers looking to buy a new computer would delay their purchases until the release of Vista (and therefore after the holiday season).” Id. Thus, Microsoft allegedly engaged in the false and deceptive business practice of advertising PCs as “Windows Vista Capable” even if they could only run the Basic version “because Microsoft was concerned that few PCs on the market at the time could run the more premium versions of Vista” and so it “endeavored to assure consumers that their new computers would run the soon-to-be released Vista operating system.” Id. Microsoft countered that while Vista Home Basic “lack[ed] some of the capabilities of the premium versions of Vista, [it] still provides material improvements over Microsoft’s earlier operating system, Windows XP,” id., and pointed to various “marketing materials, sales aids, and training materials that described what features the different Windows Vista editions would provide and explained that not every ‘Windows Vista Capable’ computer would be able to provide every advanced feature available in every edition of Windows Vista,” id., at 3.

At the time plaintiffs sought class action treatment, the complaint sought relief for unjust enrichment and for violation of Washington’s Consumer Protection Act (CPA) or other state consumer protection acts. Kelley, at 4. Plaintiffs sought to certify a nationwide class action, and argued that Washington law applied to the claims of all class members. Id. The district court began its analysis by addressing the choice of law question, id. Defense attorneys argued that “the laws of all 50 states are relevant to Plaintiffs’ claims,” id., at 5. The federal court explained that it must first determine whether applying Washington law would be unconstitutional, and if not, whether applying Washington law would be “appropriate under Washington’s choice of law rules.” Id. (citing Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985)). The district court easily concluded that applying Washington law would not violate the Constitution because “[a]lthough the injury to Plaintiffs and the potential class members may have occurred outside of Washington, application of Washington law is not arbitrary, unfair, or unforeseeable.” Id., at 5-6 (citation omitted). The court’s analysis of Washington’s choice of law rules was much more extensive, see id., at 6-11. Washington law requires a determination first of whether an actual conflict exists between the laws of Washington and other states, and if so, “the forum or fora that have the ‘most significant relationship’ to the action to determine the applicable law.” Id., at 6 (citation omitted).

Continue reading "Microsoft Vista Class Action Defense Cases-Kelley v. Microsoft: Washington Federal Court Certifies Nationwide Class Action Against Microsoft For Class Action Complaint Challenging OEM Marketing Of Vista Operating System" »

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

To assist class action defense attorneys anticipate the types of lawsuits 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 February 15 – 21, 2008, during which time 22 new class action lawsuits were filed. Class actions implicating labor law claims generally top this list, and once again this was the case. During the past week, 13 new labor law class action filings (59% of the total number of new class action lawsuits). The only other category of class action complaints to break the 10% threshold were antitrust class actions, which had only three (3) new class action filings (14%).

Posted In: Class Actions In The News

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 in Northern District of Illinois, Rejecting Motion of California Class Action Plaintiff to Centralize Litigation in the Central District of California

Fourteen (14) class action lawsuits (9 in Illinois, and 1 in Arkansas, California, Indiana, New Jersey and New York) were filed against various defendants, including RC2 Corp. and Learning Curve Brands, “stem[ming] from certain toys that were manufactured and/or distributed by defendants and recalled due to the presence of elevated levels of lead in surface paints. In re RC2 Corp. Toy Lead Paint Products Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 19, 2007) [Slip Opn., at 1]. Defense attorneys for RC2 and Learning Curve filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class action litigation pursuant to 28 U.S.C. § 1407 in the Northern District of Illinois; California plaintiff’s lawyer for one of the class actions filed a competing motion for centralization in the Central District of California; no other party responded to the motion. Id. All responding parties supported pretrial coordination and concurred with defense attorneys that the Northern District of Illinois was the appropriate transferee court. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the defense that the Northern District of Illinois was the appropriate forum as “[t]he majority of the actions are pending there, defendant RC2 is headquartered there, and, therefore, discovery will likely be found there. Id. Accordingly, the Panel transferred the class action lawsuits to Illinois, id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Amount in Controversy Required for Removal Jurisdiction under CAFA (Class Action Fairness Act) not Defeated by Plaintiff’s Statement in Class Action Complaint that Damages “May” not Exceed $5 Million Kansas Federal Court Holds

Plaintiff filed a class action lawsuit in Kansas state court against BP America on behalf of royalty owners alleging that BP engaged in self-dealing and “failed to properly account and pay royalties to the plaintiff and the class”; defense attorneys removed the class action to federal court arguing that removal jurisdiction existed under the Class Action Fairness Act (CAFA). Eatinger v. BP America Prod. Co., 524 F.Supp.2d 1342, 2007 WL 4395068, *1 (D. Kan. 2007). Plaintiff’s lawyer moved to remand the class action to state court on the ground that the amount in controversy failed under either test because the class action complaint specifically pleads amounts in controversy below the jurisdictional requirements. Id. The district court denied the motion to remand.

The district court noted plaintiff did not dispute diversity,” Eatinger, at *5; accordingly, the jurisdictional issue is whether the amount in controversy requirement is met. Accordingly, “the single matter in dispute” is whether “the requisite amount in controversy” had been shown, id., at *1. Defense attorneys submitted that, based on the definition of the proposed class, “the minimum amount of total royalty payments alleged to be in controversy to be at least $693,000,000” so unless the alleged underpayment is less than .7215009% the amount in controversy exceeds $5,000,000. Id. Moreover, the defense argued that plaintiff’s individual claim places in excess of $440,000 at issue, so unless he claims less than a 16% underpayment his amount in will exceed $75,000. Id. Plaintiff’s lawyer responded that central to BP’s arguments is the claim that plaintiff has “refused to stipulate to an amount of damages at stake,” and advanced various objections to this reasoning, id., at *2. Defense attorneys countered that requiring more than its percentage-based calculations of damages “would create a virtually impossible standard of proof,” id. Additionally, plaintiff’s “vague statement in the initial complaint that the amount in controversy ‘may’ exceed $5 million,” combined with his refusal to stipulate otherwise, “is sufficient to establish jurisdiction in federal court.” Id.

Continue reading "BP CAFA Removal Class Action Defense Cases-Eatinger v. BP: Kansas Federal Court Refuses To Remand Class Action To State Court Holding Removal Jurisdiction Exists Under Class Action Fairness Act (CAFA)" »

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

Defense Motion to Dismiss Securities Class Action Against H&R Block and Individual Defendants Granted because Class Action Complaint Failed to Meet Heightened Pleading Requirements Mandated by the Private Securities Litigation Reform Act of 1995 (PSLRA) Missouri Federal Court Holds

Plaintiffs filed a class action against H&R Block and various individual defendants alleging violations of section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities Exchange Commission, and seeking derivative “controlling persons” liability under section 20(a) of the 1934 Act. In re H&R Block Securities Litig., ___ F.Supp.2d ___ (W.D. Mo. February 19, 2008) [Slip Opn., at 1]. The class action alleged that H&R Block failed to attribute its financial success to “deceptive consumer practices” which “thereby artificially inflating its reported earnings,” failed to properly account for its effective income tax rate thereby “requiring a restatement of reported financial results,” and failed to implement “a system of safeguards and procedural controls” to ensure that financial statements and reports were reliable rather than “materially overstated.” Id., at 2. Defense attorneys moved to dismiss the class action complaint; the district court granted the motion but granted leave to amend as to the restatement of financials claim if plaintiffs could plead with specificity “that the Company knew, not just that it had internal control weaknesses, but that it was releasing materially false financial information as a result.” Id., at 2-3. Plaintiffs filed an amended class action complaint, id., at 3, alleging that defendants “misled the Company’s public investors by disseminating a series of materially false and misleading statements concerning the Company’s revenues, earnings, profitability, and financial condition,” and defense attorneys again moved to dismiss the class action. Id., at 1-2. The district court granted the motion and dismissed the securities class action complaint.

Analyzing the allegations of the class action complaint under the heightened pleading requirements dictated by the Private Securities Litigation Reform Act of 1995 (PSLRA), In re H&R Block, at 4, the federal court turned first to the Section 10(b) claim. Defense attorneys claimed that the amended class action complaint failed to cure the deficiencies in the original class action complaint; specifically, it failed to “plead facts giving rise to a strong inference that the Defendants acted with scienter when accounting errors caused inaccurate financial statements to be released.” Id., at 4-5. Relying on the test enunciated by the Supreme Court in Tellabs, Inc. v. Makor Issues & Rights, Ltd., ___ U.S. ___, 127 S.Ct. 2499 (2007), a summary of which may be found here, the district court held that plaintiff’s “four confidential sources” were insufficient -- not because the sources were unnamed, but because plaintiffs had failed to establish that the information from these sources was reliable, id., at 6 (citation omitted). The federal court also concluded that even if the information from the unnamed sources was reliable, the allegations failed to satisfy the PSLRA’s heightened pleading requirements because the company had issued warnings of possible problems with its financial statements and had conducted an investigation in conjunction with an independent auditor, thus undermining a claimed intent to deceive. Id., at 7-8. As the court summarized at page 9, “[T]he Court is left with statements by confidential informants suggesting that Defendants knew they had problems involving corporate tax accounting controls. The Company repeatedly disclosed the problems to investors beginning in July 2004. The Company continued to evaluate and work towards remedying the problems, including by hiring the help of an independent third-party. The culmination of the investigation led to a Restatement. Thus, Plaintiff has still not pled facts giving rise to a strong inference that Defendants acted with an intent to deceive the investing public by releasing incorrect financial statements.”

Continue reading "PSLRA Class Action Defense Cases-In re H&R Block: Missouri Federal Court Dismisses Securities Class Action Against H&R Block Concluding Class Action Allegations Failed To Satisfy PSLRA's Heightened Pleading Requirements" »

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