Posted On: March 31, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Countrywide Class Action Defense Cases--In re Countrywide: California Federal Court Stays Class Action Claims Against Countrywide And Denies Plaintiffs' Motion For Constructive Trust/Preliminary Injunction And Plaintiffs' Request For Expedited Discovery

Securities Class Action Claims Pending in California Paralleled Class Action Claims in Delaware and Colorado River Factors Supported Stay of California Class Action California Federal Court Holds

Several class action lawsuits were filed against Countrywide Financial Corp. and others alleging violations of various state and federal securities laws, including class action complaints that were filed in the United States District Court for the Central District of California. In re Countrywide Financial Corp. Derivative Litig., ___ F.Supp.2d ___ (C.D. Cal. March 28, 2008) [Slip Opn., at 2-3]. Last Friday, the California district court addressed three separate motions that “generally relate to the series of cases before [it] and other courts involving Countrywide…, Bank of America…, and several current and former Countrywide directors and officers.” Id., at 1. The district court summarized four separate categories of class action lawsuits that had been filed in state and federal courts against Countrywide prior to the announced merger with Bank of America, see id., at 3-6, as well as the various state and federal class action complaints filed immediately after the announced merger, see id., at 7-8. One of the pre-merger series of class action lawsuits “consolidated under Arkansas Teachers, No. CV-07-06923,” were filed in the California federal court “alleging that Countrywide directors engaged in an extensive pattern of misconduct in disregard of their fiduciary duties to the corporation,” id., at 6, and plaintiffs a 200-page amended consolidated class action complaint after the announcement of the merger to add class action claims against Bank of America, id., at 8-9.

The district court first addressed the defense motion to stay Arkansas Teachers in favor of litigation pending in Delaware. In re Countrywide, at 9. The court concluded that “the federal and state class action merger claims are substantially similar,” id., at 10-11; accordingly, “the ‘parallelism requirement for a [Colorado River Water Conservation Dist. V. United States, 424 U.S. 800 (1976)] stay is easily met due to the striking similarity of the class action claims in Arkansas Teachers and Freedman,” id., at 11. The federal court next held that partial stays are permissible under Colorado River, id., at 12-13, and that it would issue such a stay in this case because “while the class action claims are sufficiently parallel, the Delaware case does not contain the derivative claims present in this case,” id., at 11-12. The court’s Colorado River analysis may be found at pages 14 through 16 of the slip opinion.

Continue reading "Countrywide Class Action Defense Cases--In re Countrywide: California Federal Court Stays Class Action Claims Against Countrywide And Denies Plaintiffs' Motion For Constructive Trust/Preliminary Injunction And Plaintiffs' Request For Expedited Discovery" »

Posted On: March 29, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

No Surprise -- Labor Law Class Action Lawsuits Again Hold On To Top Spot In Weekly Class Action Filings In California State And Federal Courts

As a resource to defense attorneys who defend class actions in California, we provide weekly, unofficial summaries of the legal categories of 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 March 21 – 27, 2008, during which time 38 new class action lawsuits were filed (down substantially from the 58 new class action filings of the preceding week). Readers of this Blog know that class action lawsuits alleging labor lawclaims almost always top this list by a wide margin, and this past week was no exception. During the past week, 18 new class actions were filed alleging employment-related claims (47% of the total number of new class action lawsuits). Only two other categories managed to break the 10% threshold for this class action report: California unfair competition law (UCL) class action cases,which includes class actions alleging false advertising claims, with 10 new filings (26%), and federal antitrust class actions, with 4 new filings (11%).

Posted On: March 27, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

ADEA Class Action Defense Cases-Peterson v. Seagate: Minnesota Federal Court Denies Motion To Certify Interlocutory Appeal Of Order Denying Defense Motion To Dismiss Class Action Claims In Age Discrimination Class Action

Order Denying Motion to Dismiss ADEA (Age Discrimination in Employment Act) Class Action Claims did not Warrant Interlocutory Appeal Minnesota Federal Court Holds

Plaintiffs filed a class action lawsuit against their employer, Seagate, alleging age discrimination in violation of the federal Age Discrimination in Employment Act (ADEA). Peterson v. Seagate U.S. LLC, 534 F.Supp.2d 996, 2008 WL 398968, *1 (D.Minn. 2008). The putative class action also sought “declaratory relief relating to the enforceability of a purported release and waiver that was signed by many of the plaintiffs upon the termination of their employment with Seagate.” Id. Defense attorneys moved to dismiss the class action as to “the claims of those named plaintiffs that signed a release and waiver”; the district court denied the motion, as well as a subsequent motion for reconsideration. Id. Defense attorneys requested that the district court certify the issue for interlocutory appeal, id. The district court denied the motion.

Defense attorneys sought certification on two grounds: “1) whether nineteen plaintiffs who failed to file an EEOC charge properly exhausted their administrative remedies with respect to their age discrimination claims; and 2) whether the SIRP Release that plaintiff Paul Calcagno signed in connection with Defendants' 2004 voluntary early retirement program is valid and enforceable.” Peterson, at *1. The district court noted that such certification is only appropriate if the order “involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” Id. (quoting 28 U.S.C. § 1292(b)). The court concluded that this test was not satisfied.

Continue reading "ADEA Class Action Defense Cases-Peterson v. Seagate: Minnesota Federal Court Denies Motion To Certify Interlocutory Appeal Of Order Denying Defense Motion To Dismiss Class Action Claims In Age Discrimination Class Action" »

Posted On: March 26, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Labor Law Class Action Defense Cases-Schachter v. Citigroup: California State Court Affirms Summary Judgment In Favor Of Defense In Labor Law Class Action Challenging Forfeiture Provisions Of Voluntary Employee Incentive Compensation Plan

Defense Motion for Summary Judgment in Labor Law Class Action Properly Granted because Employee Incentive Compensation Plan did not Violate California law by Providing for Forfeiture of Stock for Following Resignation or Termination for Cause During Plan’s Two-Year Vesting Period California State Court Holds

Plaintiffs filed a putative class action against their employer, Citigroup, alleging violations of California’s Labor Code; specifically, the class action alleged that the financial brokerage company’s voluntary incentive compensation plan - which “allows participants the option of using a portion of their annual earnings to purchase shares in the company's stock at a price below the stock's publicly-traded market price” but provides further that “[i]f the participating employee resigns or is terminated for cause within a two-year vesting period, the employee forfeits the stock as well as the money used to purchase it” - violates California law because the money used to purchase the shares were wages and their forfeiture constituted a conversion of wages. Schachter v. Citigroup, Inc., 159 Cal.App.4th 10, 70 Cal.Rptr.3d 776, 778 (Cal.App. 2008). Defense attorneys moved for summary judgment; the trial court granted the motion and dismissed the class action. The Court of Appeal affirmed.

The appellate court framed the issue as follows: “Do the forfeiture provisions of this voluntary incentive compensation plan violate Labor Code sections 201 and 202, which require an employer to pay its employee all earned but unpaid compensation following the employee's discharge or his or her voluntary termination of employment?” Schachter, at 778 (footnote omitted). In brief, the Plan permitted employees to purchase company stock “at a 25 percent discount below the stock's then-current market price,” but the stock “could not be sold, transferred, pledged or assigned during a two-year period, which commenced on the date the stock was initially acquired.” Id., at 779. During this two-year vesting period, the employees received any stock dividends and exercised the right to vote their shares. At the end of the two-year period, the stock fully vested in the employee, but if “the employee voluntarily terminated his or her employment or was terminated for cause during the two-year period, he or she forfeited the shares, as well as the money used to purchase them.” Id. The employee could contribute from 5-25% of their compensation to the program, id. n.4, and employees who retired or were involuntarily terminated without cause were not subject to the forfeiture provisions of the Plan, id. n.7. The appellate court concluded at page 778, “As a matter of economic reality, employees who elect to participate in the plan's stock-purchase program are paid all the wages they designate to invest in company stock. Thus, the plan's forfeiture provisions do not violate the Labor Code; and the trial court in this case properly granted summary judgment in favor of the brokerage company.”

Continue reading "Labor Law Class Action Defense Cases-Schachter v. Citigroup: California State Court Affirms Summary Judgment In Favor Of Defense In Labor Law Class Action Challenging Forfeiture Provisions Of Voluntary Employee Incentive Compensation Plan" »

Posted On: March 25, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Class Action Defense Cases-Farm Raised Salmon Cases: California Supreme Court Holds Class Action Concerning Artificially Colored Salmon Not Preempted By Federal Law And Reverses Dismissal Of Class Action

Trial Court Erred in Holding that Class Action Under California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA) Alleging Failure to Disclose Artificial Coloring of Farm Raised Salmon was Preempted by Federal Law because Congress Allows “Identical” State Laws and did not Preclude Private Rights of Action to Enforce such State Laws California Supreme Court Holds

Class action lawsuits were filed against various grocery stores alleging violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA) by “[selling] artificially colored farmed salmon without disclosing to consumers the use of color additives”; ultimately, the separate class actions were coordinated and in March 2004 a coordinated class action complaint was filed. Farm Raised Salmon Cases, ___ Cal.4th ___, 72 Cal.Rptr.3d 112, 116 (Cal. 2008). The coordinated class action complaint that alleged “fish farmers feed farm-raised salmon the chemicals astaxanthin and canthaxanthin to obtain a color of flesh resembling that of wild salmon,” that without these chemicals the farm-raised salmon would appear “grayish,” and that “consumers believe the color of salmon is an indication of its origin, quality, freshness, flavor, and other characteristics.” Id. According to the class action allegations, consumers are misled into believing that colored farm-raised salmon is actually wild salmon, id. The class action further alleged that artificially colored salmon raises health concerns, and that state and federal laws “require food labeling to state that farmed salmon is artificially colored and defendants failed to comply with those requirements.” Id. Defense attorneys demurred to the class action complaint in part on the ground that the state law claims were preempted by the federal Food, Drug, and Cosmetic Act (FDCA), which precludes private enforcement; the trial court agreed and dismissed the class action. Id., at 116-17. The Court of Appeal also held that plaintiffs’ state law claims were preempted by the FDCA because they are “predicated on a violation of the FDCA”; it therefore affirmed the judgment in favor of the defendants. Id., at 117. The California Supreme Court reversed.

After summarizing that the FDCA prohibits the misbranding of any food, and that “a food is…deemed misbranded if ‘[i]t bears or contains any ... artificial coloring ... unless it bears labeling stating that fact ....,’” the Supreme Court noted that “FDA regulations permit the use of the chemical substances astaxanthin and canthaxanthin in ‘the feed of salmonid fish’ as color additives ‘to enhance the pink to orange-red color of the flesh of salmonid fish.’” Farm Raised Salmon, at 117 (citations omitted). The FDA provides various means of disclosing the existence of these chemicals, the presence of which “must be declared as prescribed by the FDA,” id., at 117-18 (citations omitted). Congress also enacted the Nutrition Labeling and Education Act of 1990 (NLEA) “to create uniform national standards regarding the labeling of food and to prevent states from adopting inconsistent requirements with respect to the labeling of nutrients.” Id., at 118 (citation omitted). The NLEA thus expressly preempts state laws that affect “any food in interstate commerce,” including “any requirement for the labeling of food of the type required by section ... 343(k) of this title that is not identical to the requirement of such section,” id. (citation omitted). Thus, state laws impliedly “may establish their own requirements pertaining to the labeling of artificially colored food so long as their requirements are identical to those contained in the FDCA in section 343(k).” Id.

Continue reading "Class Action Defense Cases-Farm Raised Salmon Cases: California Supreme Court Holds Class Action Concerning Artificially Colored Salmon Not Preempted By Federal Law And Reverses Dismissal Of Class Action" »

Posted On: March 24, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Countrywide RESPA Class Action Defense Cases-Krupa v. Landsafe: Eleventh Circuit Affirms Summary Judgment In Favor Of Defense In RESPA Class Action Holding No Kickback Or Markup Violations Occurred

Defense Judgment in Class Action for Kickback and Markup Violations of RESPA (Real Estate Settlement Procedures Act) Proper because Increased Credit Report Fee Requested by Lender was Passed through to Borrowers and no Additional Business was Given in Exchange for New Pricing Policy Requested by Lender Eleventh Circuit Holds

Plaintiffs filed a class action lawsuit against Countrywide Home Loans and Landsafe Credit (each subsidiaries of Countrywide Financial) alleging violations of the federal Real Estate Settlement Procedures Act (RESPA); the class action complaint alleged that Countrywide obtained virtually all of its credit reports from Landsafe, that prior to August 2002 Landsafe charged Countrywide $25 per credit report, and that Countrywide passed this fee on to borrowers who “locked in” or obtained a loan from Countrywide, but absorbed the fee if the loan did not go through. Krupa v. Landsafe, Inc., 514 F.3d 1153, 1154-55 (11th Cir. 2008). The class action alleged further that Countrywide asked Landsafe to modify its pricing policy in order to allow Countrywide to avoid absorbing credit report fees; specifically, “Countrywide asked Landsafe to change its pricing policy to charge more for the cost of credit reports on applicants who locked in loans and nothing for the reports on applicants who did not.” Id., at 1155. Landsafe modified its pricing schedule in August 2002, charging $35 for the credit report if a loan closed, and nothing if the loan did not; Countrywide passed the $35 fee on if a loan closed. Id. The class action alleged that this modification violated the anti-kickback and anti-markup provisions of RESPA; defense attorneys moved for and obtained summary judgment, with the district court agreeing that the challenged conduct was not improper. Id., at 1155. The Eleventh Circuit affirmed.

In discussing the pricing change, the Eleventh Circuit noted at page 1155, “The price point was set so that the new pricing policy would be ‘revenue-neutral,’ and it achieved that goal: Landsafe's revenues from the credit reports it sold to Countrywide were the same after the new policy was implemented as they had been before.” Nonetheless, plaintiffs complained that Landsafe was giving Countrywide “free credit reports” in connection with loan transactions that did not close. Krupa, at 1155. The district court had held “that the revised pricing policy did not violate RESPA's anti-kickback provision because it is undisputed that: (1) Landsafe made no more or less money as a result; and (2) Countywide purchased the same percentage (virtually all) of the credit reports it needed from Landsafe as it had before the change”; and the Circuit Court agreed. Id. RESPA prohibits paying a kickback in return for referral of business, but here Landsafe already received virtually all of Countrywide’s business: “In order for there to have been a forbidden kickback, there would have to have been an agreement between the two that Countrywide would give Landsafe more of its credit reporting business than it was giving Landsafe before the agreement, or at least an agreement that it would not give Landsafe any less of that business.” id., at 1156. Even if Countrywide received “value” by the changed pricing schedule, it could not constitute a forbidden kickback unless Countrywide promised Landsafe that it would receive business in return. Id. As plaintiffs conceded that this was not the case, the district court did not err in concluding that the class action kickback claim failed as a matter of law. Id.

Continue reading "Countrywide RESPA Class Action Defense Cases-Krupa v. Landsafe: Eleventh Circuit Affirms Summary Judgment In Favor Of Defense In RESPA Class Action Holding No Kickback Or Markup Violations Occurred" »

Posted On: March 23, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Sears Class Action Defense Cases-Berbig v. Sears: Illinois State Court Holds Trial Court Erred In Denying Motion To Dismiss Products Liability Class Action On Grounds Of Forum Non Conveniens

Products Liability Class Action should have been Filed in Minnesota, not Illinois, and Trial Court Abused its Discretion in Denying Defense Motion to Dismiss Class Action on Grounds of Forum Non Conveniens Illinois State Court Holds

Plaintiff filed a products liability class action in Illinois state court against Sears Roebuck after he sustained injuries while using a Craftsman GT 5000 Riding Lawnmower. The class action complaint alleged that plaintiff’s right foot got caught in the lawnmower’s blade while he was using it at his home in Minnesota, and that plaintiff had purchased the lawnmower in Minnesota. The class action further alleged that plaintiff had been treated for his injuries at a hospital in Minnesota, and that he received further treatment in Illinois. Berbig v. Sears Roebuck & Co., Inc., ___ N.E.2d ___, 2007 WL 4562890 (Ill.App. December 26, 2007). Plaintiff identified as witnesses two individuals who lived in Minnesota. Defense attorneys moved to dismiss the class action based on interstate forum non conveniens, see Supreme Court Rule 187 (134 Ill.2d R. 187). The defense argued the class action should be dismissed because the lawnmower was purchased in Minnesota, plaintiff lives in Minnesota, the accident occurred in Minnesota, and plaintiff’s initial medical treatment was performed in Minnesota. Defense attorneys also argued that no witnesses lived in Cook County, and that the Cook County court’s docket is more congested than the court in Hennepin County. The trial court denied the motion “concluding that defendants had not made a strong factual showing that trying the case in Cook County, as opposed to Minnesota, would be more costly or inconvenient or pose a hardship.” The defense petitioned the appellate court for leave to appeal; the appellate court granted the petition and reversed.

The sole issue on appeal was “whether the trial court abused its discretion in denying defendants' motion to dismiss based upon interstate forum non conveniens.” The appellate court began by noting that Electrolux Home Products, a co-defendant and the manufacturer of the lawnmower in question, was based in South Carolina and the lawnmower had been manufactured in South Carolina. Sears, on the other hand, has its principal place of business in Illinois, and its laboratory and marketing department, as well as corporate records, are in Illinois, but it did not test the lawnmower in Illinois. The defense argued that the class action should have been filed in Minnesota, and that the trial court “accorded undue weight to the location of Sears' corporate headquarters in [Illinois], especially when none of the personnel or documents relevant to this case are located there.” The appellate court agreed.

Continue reading "Sears Class Action Defense Cases-Berbig v. Sears: Illinois State Court Holds Trial Court Erred In Denying Motion To Dismiss Products Liability Class Action On Grounds Of Forum Non Conveniens" »

Posted On: March 22, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Labor Law Class Action Lawsuits Continue Dominance In Weekly Class Action Filings In California State And Federal Courts

In order to assist class action defense attorneys anticipate the types of cases against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers March 14 – 20, 2008, during which time 58 new class action lawsuits were filed. Class action lawsuits alleging employment-related claims generally top this list, often by a wide margin, and this again proved to be true. During the past week, 28 new class actions were filed alleging employment-related claims (48% of the total number of new class action lawsuits). Only two other categories managed to break the 10% threshold for this class action report: California unfair competition law (UCL) class action cases,which includes class actions alleging false advertising claims, with 14 new filings (24%), and federal antitrust class actions, with 7 new filings (12%).

Posted On: March 21, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Starbucks Hit With $105 Million Judgment In Labor Law Class Action Brought By Baristas Alleging Improper Sharing Of Tips With Shift Supervisors

Andrea Chang of the Los Angeles Times reports today that a California state court in San Diego has ordered Starbucks to pay more than $100 in a class action brought by baristas. The class action – filed in 2004 – alleged “that shift supervisors, who also make coffee and serve customers, were illegally getting a cut of employee tips,” Ms. Chang reports. The San Diego Superior Court certified the class action in 2006, defining a class that reportedly “could affect as many as 100,000 current and former baristas who worked in California stores since October 2000.” Starbucks has vowed to appeal the judgment.

Ms. Chang’s article, entitled “Tips ruling is made to order for baristas: Starbucks must repay $100 million for gratuities shared with supervisors, a San Diego judge rules,” may be found in the Main News Section of the March 21, 2008 edition of the Los Angeles Times.

Posted On: March 21, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Labor Law Class Action Against Starbucks, Alleging Improper Sharing Of Baristas Tips With Supervisors, Results In $105 Million Judgment And Injunctive Relief In Favor Of Members Of Class Action Suit

Vikas Bajaj of the New York Times reports today on the $105 million class action ruling by a California state court against Starbucks. The class action alleged, and the San Diego Superior Court agreed, that Starbucks improperly had permitted shift supervisors to share in tips left by customers for baristas. The New York Times reports, “The case centers on the division of labor between managers and rank-and-file workers. Under California labor law and rules, tips can be pooled and shared among workers but restaurant owners or their ‘agents,’ which are typically construed to mean managers and supervisors, cannot share in the money.” Like baristas, the shift supervisors at issue in the class action served customers and make coffee, but they also acted in a managerial capacity, “directing other employees, setting schedules and doing other managerial work.” In addition to the monetary award, the class action award included an injunction that would prohibit Starbucks from permitting shift supervisors from sharing in tips in the future. Separately, Starbucks has announced its intention to appeal the judgment.

Vikas Bajaj’s article, entitled “California Court Awards Starbucks Baristas $105 Million in Tip Dispute,” may be found in Section C. of the March 21, 2008 edition of the New York Times.

Posted On: March 21, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Class Action Defense Cases-In re Southeastern Milk: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Selects Eastern District of Tennessee As Transferee Court

Judicial Panel Grants Defense Request, Opposed by Plaintiffs, for Pretrial Coordination of 4 Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, but Transfers Actions to Eastern District of Tennessee

Four class action lawsuits, 2 in the Middle District of Tennessee and 2 in the Eastern District of Tennessee, were filed against various defendants alleging antitrust violations for failing to “compete for the purchase of raw Grade A milk produced, marketed and processed in the Southeast United States.” In re Southeastern Milk Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. January 7, 2008) [Slip Opn., at 1]. Defense attorneys in all four class actions moved the Judicial Panel for Multidistrict Litigation (MDL) for centralization of the class action litigation pursuant to 28 U.S.C. § 1407 in the Middle District of Tennessee. Id. Plaintiffs in the class actions pending in the Middle District of Tennessee supported the defense motion, as did plaintiffs for one of the class actions pending in the Eastern District of Tennessee, id. Plaintiff’s lawyer in the other Eastern District class action opposed pretrial coordination, and argued alternatively for transfer to the Eastern District. Id. The Judicial Panel rejected the argument that “discovery will likely be straightforward” so centralization was unnecessary, id., at 1-2. And while the Panel supported all voluntary efforts to coordinate the various class actions, this did not defeat the motion, id., at 2. But even though the Judicial Panel granted the motion to centralize the class action lawsuits, and though it agreed that either district court would be workable as a transferee court, it noted that there were “[v]arious conflict and caseload concerns within the Middle District [that] made transfer there difficult.” Id. Accordingly, it granted the defense motion and transferred the class action litigation to the Eastern District of Tennessee.

Download PDF file of In re Southeastern Milk Transfer Order

Posted On: March 20, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

ERISA Class Action Defense Cases-In re Federal National Mortgage: District Of Columbia Federal Court Grants Motion To Certify Securities Class Action Against Fannie Mae and KPMG But Grants Defense Request To Limit Class Period

Federal Securities Class Action Satisfied Rule 23 Requirements for Class Action Treatment but Duration of Class Period must be Limited as Requested by Defense District of Columbia Federal Court Holds

Several federal securities class action lawsuits were filed against various defendants Federal National Mortgage Association (Fannie Mae) and its former accountant KPMG, as well as various officers and directors of Fannie Mae alleging that they “intentionally manipulated earnings and violated Generally Accepted Accounting Principles (‘GAAP’), causing losses to investors.” In re Federal Nat’l Mortgage Ass’n Securities, Derivative, & “ERISA” Litig., 247 F.R.D. 32, 33-34 (D.D.C. 2008) (footnote omitted). The class actions were consolidated, and the consolidated class action complaint alleged accounting discrepancies at Fannie Mae in violation of GAAP and inadequate internal controls, id., at 34-35. The class action cited to an SEC investigation and to the Paul Weiss report, each of which confirmed accounting problems at Fannie Mae. Id., at 35-36. The class action alleged that Fannie Mae was ordered to restate its financial statements, and that concerns with these financial reports caused the stock to drop dramatically. Id., at 35. Plaintiffs moved for certification of the litigation as a class action and for appointment of class counsel, id., at 33. Defense attorneys apparently did not oppose class certification per se, id., at 36, but rather objected to the proposed duration of the class period (April 2001 to September 2005) and the identity of the putative class members, id., at 33-34. The district court granted the motion in part.

In addressing whether to grant class action treatment, the district court noted that “[t]he requirements of Rule 23(a) are so clearly met in this case that the defendants raise no opposition to this requirement being satisfied.” In re Federal Nat’l Mortgage, at 37. Defense attorneys did oppose, however, the relevant class period: The parties (other than KPMG) agreed that the start date was April 17, 2001, but while plaintiff sought an end date of September 27, 2005, the defense (except KPMG) sought an end date of December 22, 2004. Id. The defense argued that after December 22, 2004, “it was unreasonable, as a matter of law, for any investor to rely on Fannie Mae's financial statements as a basis to allege that they were a victim under a fraud on the market theory.” Id., at 37-38. The defense selected that date because Fannie Mae issued a corrective disclosure warning on December 22, 2004 that disavowed its earlier financial reports; accordingly, the defense argued that “any purchasers who acquired stock after December 22, 2004, cannot rely on that presumption because Fannie Mae's corrective disclosure cured the fraud on the market and thus rebutted the presumption of reliance, leaving only individual issues of reliance to predominate thereafter.” Id., at 38. The district court agreed.

Continue reading "ERISA Class Action Defense Cases-In re Federal National Mortgage: District Of Columbia Federal Court Grants Motion To Certify Securities Class Action Against Fannie Mae and KPMG But Grants Defense Request To Limit Class Period" »

Posted On: March 19, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

E*Trade TILA Class Action Defense Cases-Silvas v. E*Trade: Ninth Circuit Affirms Dismissal Of UCL Class Action Premised On TILA Violations For Failure To Refund Loan Lock-In Fees Holding Federal Law Preempted Class Action Claims

Class Action Alleging Unfair Competition Law (UCL) and False Advertising Preempted by Federal Law because Class Action Claims were Premised on Alleged Violations of Truth in Lending Act (TILA) for Conduct Governed by HOLA (Home Owners’ Loan Act) and Implementing OTS Regulations Ninth Circuit Holds

Plaintiffs filed a class action in California state court against E*Trade Mortgage alleging violations of the state’s Unfair Competition Law (UCL); the gravamen of the class action complaint was that E*Trade failed to refund loan rate lock-in fees following the exercise of a right of rescission under the federal Truth in Lending Act (TILA). Silvas v. E*Trade Mortgage Corp., 514 F.3d 1001, 1003 (9th Cir. 2008). Plaintiffs alleged that they paid a $400 fee to lock in an interest rate but subsequently exercised their 3-day right to rescind the loan transaction under TILA; E*Trade refused to reimburse the $400 fee, and the class action alleged that it was corporate policy not to refund lock-in fees following such rescissions. Id. Defense attorneys removed the class action to federal court, and then moved to dismiss the class action complaint on the ground that federal law preempted the UCL claims. Id. The agreed with the defense and dismissed the class action, id.; the Ninth Circuit affirmed.

Preliminarily, the Ninth Circuit held that the general presumption against federal preemption did not apply to this case because it involved a field long-regulated by the federal government. Silvas, at 1004. Congress enacted the Home Owners’ Loan Act (HOLA) for the purpose of restoring public confidence in federal savings and loan associations, and the Ninth Circuit previously has “described HOLA and its following agency regulations as a ‘radical and comprehensive response to the inadequacies of the existing state system,’ and ‘so pervasive as to leave no room for state regulatory control.’” Id., at 1004-05 (citation omitted). Congress provided the Office of Thrift Supervision (OTS) “broad authority to issue regulations governing thrifts,” and these, too, are afforded preemptive effect. Id., at 1005. Because E*Trade is subject to HOLA and the OTS regulations, see id., at 1006 n.2, and because the false advertising and other UCL claims are expressly preempted by federal law, see id., at 1006-07, the district court did not err in dismissing the class action.

Continue reading "E*Trade TILA Class Action Defense Cases-Silvas v. E*Trade: Ninth Circuit Affirms Dismissal Of UCL Class Action Premised On TILA Violations For Failure To Refund Loan Lock-In Fees Holding Federal Law Preempted Class Action Claims" »

Posted On: March 18, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

ERISA Class Action Defense Cases-Robinson v. Sheet Metal Workers’: Second Circuit Affirms District Court Judgment In ERISA Class Action In Favor Of Defense Holding Trustees Did Not Violate Anti-Cutback Rule Or Breach Contract

ERISA Class Action Failed to Establish Violation of Anti-Cutback Rule or Breach of Contract or Fiduciary Duties because Industry-Related Disability Pension was a Welfare Benefit Plan and an Ancillary Benefit Second Circuit Holds

Plaintiffs, as recipients of an Industry-Related Disability Pension (IRD), filed a putative class action against the Sheet Metal Workers' National Pension Fund alleging breach of contract and breach of fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA). Robinson v. Sheet Metal Workers' Nat’l Pension Fund, Plan A, ___ F. 3d ___, 2008 WL 302610, *1 (2d Cir. February 5, 2008). After the district court certified the litigation as a class action, plaintiff and defense attorneys presented the matter to the federal court for resolution on a stipulated record. Id. We do not here discuss the facts underlying the litigation, see id., at *1-*3; we note only that the Plan expressly provided that the Trustees had “‘the sole and absolute power, authority and discretion’ to interpret and apply the Plan,” id., at *1, and that the district court expressly found “that the IRD is a welfare benefit plan, not a pension plan, as those terms are used in ERISA” and “that the IRD is an ancillary benefit, not an accrued benefit,” id., at *3. The district court entered judgment in favor of the defense, and plaintiffs appealed, id. The Circuit Court affirmed.

The Second Circuit addressed three issues: (1) that the Plan’s earnings limitations violate ERISA’s “anti-cutback” rule; (2) that the earnings limitations constitute a breach of contract; and (3) that the earnings limitations constitute a breach of fiduciary duties. Robinson, at *3. The Circuit Court disagreed. As to the first issue, the Circuit Court “concur[red] completely” with the district court’s conclusion that the IRD is a welfare benefit plan and that it is an ancillary benefit, and noted that “[e]ither of these findings would suffice to exempt the IRD from ERISA's anti-cutback rule.” Id. As to the breach of contract claim, which focused on whether the Plan required “lifetime” benefits be provided, the Circuit Court conducted a detailed analysis of the various definitions in the Plan and the discretion afforded the Trustees to modify the Plan, and concluded that the district court did not err in concluding that the Trustees did not breach the contract. Id., at *3-*5. Specifically, the Second Circuit held at page *5, “Read in context, then, the ‘lifetime’ language does not give [plaintiffs] a contractual and absolute right to continue receiving the IRD for their lives.” Finally, as to the breach of fiduciary duty claim, the Second Circuit observed that it is “derive[d] from the contract claim, the ERISA claim, or both,” and so “its survival [depends] on the validity of these latter claims.” Robinson, at *3. Because the district court properly rejected the anti-cutback and breach of contract claims, the breach of fiduciary duty claim could not stand. Id., at *5. (The appeal was dismissed as to one of the named plaintiffs and “those class members over the age of fifty-five” for reasons we do not here discuss. See id., at *5 and n.4.)

Download PDF file of Robinson v. Sheet Metal Workers'

Posted On: March 17, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Attorney Fee Awards in Class Action Cases-In re High Sulfur Content Litigation: Fifth Circuit Reverses Portion Of District Court Class Action Settlement Order Allocating Attorney Fees Among Class Action Plaintiff Lawyers For Procedural Defects

District Court Order Allocating $6.875 Million in Attorney Fees to 79 Class Action Plaintiff Lawyers Following Final Approval of Class Action Settlement Required Reversal because District Court “Abdicated its Responsibility to Ensure that the Individual Awards Recommended by the Fee Committee were Fair and Reasonable” Second Circuit Holds

Various plaintiffs filed class action lawsuits against Shell Oil alleging that its Louisiana refineries “produced contaminated gasoline that was purchased and used by thousands of motorists, damaging, inter alia, their fuel gauges.” In re High Sulfur Content Gas. Prods. Liab. Litig., 517 F.3d 220, 2008 WL 287347, *1 (5th Cir. 2008). The class actions were “consolidated in a federal class action,” id. Shell initiated a program to repair damaged fuel gauges, id. Eventually, the parties agreed to the terms of a class action settlement under which Shell agreed to expand its repair program, pay $3.7 million in damages for class members, and pay $6.875 million in attorney fees and costs: The trial court approved the class action settlement, and “appointed a five-member Fee Committee to allocate the fee award among approximately thirty-two law firms and seventy-nine plaintiffs' attorneys who worked on the case.” Id. The Fee Committee presented its recommendations at an ex parte status conference - none of the other 74 class action plaintiff attorneys knew of the hearing and, also without their knowledge, the proposed order not only discussed allocation of attorney fees but “(a) placed under seal the document prepared by the Fee Committee listing each attorney's fee award…; (b) prohibited each plaintiffs' attorney from disclosing to anyone, including his clients and other attorneys, the amount of his award under penalty of sanctions to be imposed by the court; (c) required fees, costs, and expenses to be ‘distributed immediately;’ (d) mandated that fee award checks bear a full and final release; and (e) established the district court's process for dealing with any objections to fee awards.” Id., at 1-2 (footnotes omitted). The ex parte hearing on allocation of the attorney fees under the class action settlement lasted 20 minutes; the court signed the proposed order “apparently without modification” and sealed the transcript of the hearing on the motion, id., at *3. Some of the attorneys, disgruntled that approximately half of the attorney fee award went to the law firms of the five members of the Fee Committee, requested that the district court reconsider its ruling and unseal the hearing transcript; that failing, they appealed the fee award. Id. The Fifth Circuit reversed.

As this case involves the narrow issue of the allocation of attorney fees only, we do not discuss it at length. We note simply that the court order is reviewed for abuse of discretion, and that the appeal involved but a single issue - “the procedures the district court used to allocate the $6.875 million lump-sum attorneys' fee award among plaintiffs' counsel.” In re High Sulfur Content, at *3. The Fifth Circuit reversed the fee allocation order, agreeing with the appellants that the district court “used flawed procedures to award individual attorneys' fees and to review objections to those fees.” Id., at *4. The Circuit Court explained at page *4, “For all practical purposes the five-member Fee Committee controlled the allocation of attorneys' fees in this case.” And while the federal court was entitled to appoint a committee to recommend allocation of attorney fees, “the appointment of a committee does not relieve a district court of its responsibility to closely scrutinize the attorneys' fee allocation, especially when the attorneys recommending the allocation have a financial interest in the resulting awards.” Id. In this case, the Fifth Circuit held that “the district court abdicated its responsibility to ensure that the individual awards recommended by the Fee Committee were fair and reasonable.” Id.

Continue reading "Attorney Fee Awards in Class Action Cases-In re High Sulfur Content Litigation: Fifth Circuit Reverses Portion Of District Court Class Action Settlement Order Allocating Attorney Fees Among Class Action Plaintiff Lawyers For Procedural Defects" »

Posted On: March 16, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Arbitration Class Action Defense Cases-Aguilar v. BLH Construction: California Court Affirms Trial Court Order Denying Petition To Compel Arbitration Of Class Action Thereby Permitting Labor Law Class Action To Proceed In State Court

In an Unpublished Opinion, California Appellate Court Holds that Trial Court did not Abuse Discretion in Denying Petition to Compel Arbitration of Labor Law Class Action on Ground that Defense Attorneys Failed to Prove that Plaintiffs Signed Arbitration Agreement

Plaintiffs filed a class action lawsuit against their employer, BLH Construction alleging labor law wage and hour claims. Aguilar v. BLH Construction Co., 2007 WL 4418105, *1 (Cal.App. December 19, 2007). Defense attorneys moved to compel arbitration, but the court opinion is silent on the arbitration clause purported to bar class actions or whether the defense sought to enforce a class action arbitration waiver. Id. The trial court denied the motion, finding that plaintiffs had not signed the arbitration agreement, id. The defense appealed, arguing that the trial court abused its discretion “by not continuing the hearing to permit oral testimony and cross-examination of witnesses on the issue.” Id. The Court of Appeal affirmed.

BLH hired plaintiffs as construction workers in February 2005 and, on the day they were hired, provided each plaintiff with an employee handbook, a form entitled “Receipt of Handbook and Acknowledgement of At-Will Employment,” and a form entitled “Mutually Binding Arbitration Agreement.” Aguilar, at *1. “Each form had lines for the employee's signature and the date of signing.” Id. As part of the petition to compel arbitration, defense attorneys submitted signed copies of the “Mutually Binding Arbitration Agreement.” Id. Plaintiffs, however, insisted that they had not signed this document and by declaration claimed that their signatures had been forged, id. In response, defense attorneys submitted (1) the declaration of a supervisor stating that he had given plaintiffs the employee documents referenced above and that plaintiffs “signed and dated the two signature pages contained within the Employee Handbook,” (2) the declaration of BLH’s chief operations officer stating that plaintiffs had signed the mutually binding arbitration agreement, and (3) the declaration of BLH’s counsel stating that the signed documents had been obtained from the BLH custodian of records, “and that it was BLH's custom and practice to have each employee sign the arbitration agreement.” Id.

Continue reading "Arbitration Class Action Defense Cases-Aguilar v. BLH Construction: California Court Affirms Trial Court Order Denying Petition To Compel Arbitration Of Class Action Thereby Permitting Labor Law Class Action To Proceed In State Court" »

Posted On: March 15, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

New Class Action Lawsuits Alleging Employment-Related Claims Top List Of Weekly Class Action Filings In California State And Federal Courts

As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers March 7 – 13, 2008, during which time 54 new class action lawsuits were filed. It is a rare week in which labor law class action cases do not lead this list. During the past week, 29 new class actions were filed alleging employment-related claims (54% of the total number of new class action lawsuits). Only two other categories managed to break the 10% threshold for this class action report: federal antitrust class actions, with 7 new filings (13%), and California unfair competition law (UCL) class action cases,which includes class actions alleging false advertising claims, with six (6) new filings (11%).

Posted On: March 14, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Class Action Defense Cases-In re Mercedes-Benz: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In District of New Jersey

Judicial Panel Grants Defense Request, Supported by Plaintiffs, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Agrees with Defense Attorneys that District of New Jersey is Appropriate Transferee Court

Three class action lawsuits (and subsequent tag-along lawsuits) were filed against Mercedes-Benz “relating to (1) the impact of the conversion of the cellular network from an analog/digital network to a digital-only network in early 2008, and (2) the availability of Tele Aid service in certain Mercedes vehicles thereafter.” In re Mercedes-Benz Tele Aid Contract Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 26, 2008) [Slip Opn., at 1]. Defense attorneys 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 District of New Jersey; plaintiffs’ lawyers in the various class actions and in the tag-along lawsuits supported the motion, though they suggested alternate districts as the appropriate transferee court. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the defense that the District of New Jersey was the proper forum because that class action is the most advanced and because Mercedes is headquartered in New Jersey. Id. Accordingly, the Panel ordered the class actions transferred to the District of New Jersey, id., at 2.

Download PDF file of In re Mercedes-Benz Transfer Order

Posted On: March 13, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Hurricane Class Action Defense Cases-Audler v. CBC Innovis: Fifth Circuit Holds Plaintiff Lacked Standing To Prosecute Class Action Against Companies Unrelated To His Property And Affirms Dismissal Of Class Action Complaint Against Remaining Defendant

Class Action Alleging Companies Erroneously Advised Lenders that Homes were Outside Flood Zones Properly Dismissed because (1) Plaintiff Lacked Standing to Pursue Class Action Claims Against Companies that did not Provide Plaintiff’s Lender with Flood Zone Determination and (2) Company that Provided such Determination on Plaintiff’s Property owed Duties Only to Lender not Plaintiff Fifth Circuit Holds

After his home suffered floodwater damage from Hurricane Katrina, plaintiff filed a putative class action in Louisiana state court against numerous defendants that provide flood zone determinations to lenders; the class action alleged that defendants failed to properly determine whether homes were located within a Special Flood Hazard Area (SFHA), and sought damages under state law based on theories of negligence, failure to warn, detrimental reliance, and breach of guaranty or warranty. Audler v. CBC Innovis Inc., 519 F.3d 239, 2008 WL 509323 (5th Cir. 2008). Each claim in the class action complaint was “separate and apart from the federal flood insurance legislation governing lenders and… none of [the] claims arise under that legislation.” Id., at *3. In essence, the class action alleged that the class members failed to secure flood insurance because defendants erroneously advised them that their homes were outside a SFHA, so they were uninsured when Hurricane Katrina struck. Id., at *2. Defense attorneys removed the class action to federal court on the ground of diversity jurisdiction and under the Class Action Fairness Act of 2005 (CAFA), id., at *3. The defense then moved to dismiss the class action complaint for failure to state a claim and for lack of standing, id. The district court agreed with the defense arguments and dismissed the class action. Id. The Fifth Circuit affirmed.

Preliminarily, it bears noting that “[a] determination…that a property is not located within a SFHA does not prevent a borrower from purchasing private flood insurance.” Audler, at *2. The defendant involved in plaintiff’s loan (CBC) argued that it prepared flood zone determinations for the lender and that it owed no duties to the borrower in the loan transaction. Id., at *3. The other class action defendants argued that they were not involved in plaintiff’s loan and thus he lacked standing to prosecute any claims against them, id. Following dismissal of the class action complaint, plaintiff appealed to the Fifth Circuit; two defendants moved to dismiss the appeal for lack of standing. Id.

Continue reading "Hurricane Class Action Defense Cases-Audler v. CBC Innovis: Fifth Circuit Holds Plaintiff Lacked Standing To Prosecute Class Action Against Companies Unrelated To His Property And Affirms Dismissal Of Class Action Complaint Against Remaining Defendant" »

Posted On: March 12, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

ADEA Class Action Defense Cases-Schuler v. PricewaterhouseCoopers: District of Columbia Circuit Reverses District Court Order Dismissing ADEA Class Action Finding Plaintiff Satisfied ADEA Prerequisites For Filing Class Action

District Court Erred in Dismissing ADEA (Age Discrimination in Employment Act) Class Action because Plaintiff Satisfied ADEA Prerequisites for Filing Class Action Complaint and because Plaintiff was not Required to File Separate Charges for each Allegedly Discriminatory Failure to Promote Plaintiff District of Columbia Circuit Court Holds

Plaintiff, who worked in Washington, D.C., filed an EEOC (Equal Employment Opportunity Commission) charge in New York alleging PricewaterhouseCoopers discriminated against him on the basis of age in violation of the federal Age Discrimination in Employment Act (ADEA) “by maintaining a discriminatory partnership policy under which the company refuses to promote older qualified employees.” Schuler v. PricewaterhouseCoopers, LLP, ___ F.3d ___, 2008 WL 398968, *1 (D.C. Cir. February 12, 2008). The EEOC dismissed the charge and informed plaintiff of his right to sue. Plaintiff responded by filing a class action complaint in the district court for the District of Columbia; the class action alleged violations of the ADEA and of D.C.’s Human Rights Act. Id. Defense attorneys moved to dismiss the class action complaint: The district court dismissed the class action on the ground that plaintiff “failed to satisfy the ADEA's procedural requirements because he failed to file (1) his EEOC charge with the D.C. Office of Human Rights and (2) a new EEOC charge following the company's allegedly unlawful July 2005 promotion denial.” Id. Plaintiff appealed and the Circuit Court reversed, reinstating his class action.

The class action alleged that PricewaterhouseCoopers requires mandatory retirement at age 60, and that as a result it “rarely promotes employees over the age of forty-five to partner.” Schuler, at *2. This damages qualified employees because “Partners enjoy higher salaries, more generous retirement benefits, and greater responsibilities than other professional employees.” Id. The class action complaint further alleges that PricewaterhouseCoopers “refuses to promote him ‘and other qualified older professional employees’ to partner on the basis of age in violation of the ADEA” and that “he is the longest serving managing director in the firm, having been promoted to that position in 1994, and that his education, training, and experience qualify him for partnership.” Id. (Plaintiff previously sued PwC in 2002 over the same allegedly discriminatory partnership policy. Id., at *2.) The Circuit Court also noted that plaintiff’s EEOC charge had included the instruction: “I want this Class Action Charge filed with both the EEOC and the State and local Agency, if any.” Id., at *3.

Continue reading "ADEA Class Action Defense Cases-Schuler v. PricewaterhouseCoopers: District of Columbia Circuit Reverses District Court Order Dismissing ADEA Class Action Finding Plaintiff Satisfied ADEA Prerequisites For Filing Class Action" »

Posted On: March 11, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Class Action Defense Cases-In re Ingram Barge Company: Fifth Circuit Dismisses Appeal From Order Granting Defense Motion To Strike Class Action Allegations For Lack Of Appellate Jurisdiction

District Court Order Striking Class Action Allegations but Permitting Named Plaintiffs to Pursue Individual Claims not Appealable thus Requiring Dismissal of Appeal from Class Action Order Fifth Circuit Holds

Plaintiffs filed a class action lawsuit against various defendants alleging that the Army Corps of Engineers had defectively designed and constructed various levee and floodwall systems that failed during a hurricane, resulting in flood damage. In re Complaint of Ingram Barge Co., 517 F.3d 246, 2008 WL 315465, *1 (5th Cir. 2008). Defense attorneys moved to strike the class action allegations and plaintiffs’ demand for a jury trial. Ingram, at *1. The district court granted the motion, but though it struck the class action allegations it permitted the plaintiffs to pursue their claims individually. Id. Plaintiffs appealed, contending that appellate jurisdiction existed under 28 U.S.C. §§ 1291 and 1292(a)(3); defense attorneys moved to dismiss the appeal on the ground that the order striking the class action allegations was not an appealable final decision because the district court permitted plaintiffs to pursue their claims individually. Id. The Fifth Circuit agreed with the defense and dismissed the appeal for lack of jurisdiction.

The Circuit Court noted that plaintiffs had not sought a Rule 54(b) certification, and that while Rule 23(f) confers appellate jurisdiction over orders granting or denying class action certification, appellate review thereunder must be sought within 10 days of entry of the class action certification order. Ingram, at *1. Plaintiffs did not seek such review. Accordingly, the sole issue was whether the district court order striking the class action allegations constituted a final decision within the meaning of § 1291, and the Fifth Circuit held that it did not. Id. Accordingly, it dismissed the appeal for lack of jurisdiction.

Download PDF file of In re Complaint of Ingram Barge Co.

Posted On: March 10, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

ERISA Class Action Defense Cases-In re Syncor: Ninth Circuit Reverses Defense Judgment In Class Action Holding District Court Erred In Failing To First Consider Proposed Class Action Settlement Under Rule 23(e)

District Court Erred in Granting Summary Judgment in ERISA Class Action Because it should have Considering Proposed Class Action Settlement Prior to Ruling on Summary Judgment and Because Third Circuit’s Moench Presumption not Applicable in Ninth Circuit Triable Issues of Fact Existed Precluding Summary Judgment Ninth Circuit Holds

Plaintiffs, participants in employee stock ownership plan (ESOP), filed a class action against their employer, Syncor International, and two board of directors alleging breach of fiduciary duties under ERISA (Employee Retirement Income Security Act); the class action alleged that Syncor administered an Employee's Saving and Stock Ownership retirement plan governed by ERISA (“the Plan”), and permitted employees to invest in Syncor stock even though they knew that Syncor’s Taiwanese subsidiary and other foreign offices systematically used bribes to increase sales and to grow Syncor’s business in violation of the Foreign Corrupt Practices Act (FCPA). In re Syncor ERISA Litig., 516 F.3d 1095, 2008 WL 427763, *1-*2 (9th Cir. 2008). Once news of the illegal payments became public Syncor's stock price lost half of its value, decreasing the value of the Plan by at least $24 million and precipitating the filing of the class action lawsuit on behalf of Plan participants. Id., at *2. Plaintiffs’ lawyers sought and obtained certification of the litigation as a class action, id. Syncor Taiwan pleaded guilty to violating the FCPA, and a member of the board of directors surrendered $2.5 million worth of personal Syncor stock to reimburse the company for fines levied by governmental agencies. Id. Following the filing of a consolidated class action complaint, defense attorneys filed a motion for summary judgment; simultaneously, the parties participated in settlement discussions. Id. In December 2005, the district court took the summary judgment motions under submission, and in January 2006, without knowing that the district court had decided the summary judgment motion, the parties signed a proposed settlement of the class action. Id. The parties notified the court of the tentative settlement on January 10, 2006, but failed to provide the court with the term sheet evidencing the settlement; that same day, the district court entered an order granting summary judgment in favor of the defense. Id. The following day, the parties requested that the court not rule on the summary judgment motions because of the proposed settlement, but again failed to provide a term sheet, id., at *3. Nonetheless, on January 12, 2006, the district court entered judgment in favor of defendants on the class action complaint, and denied as moot the proposed class action settlement, id. The Ninth Circuit reversed.

The Ninth Circuit summarized its holding as follows: “We hold that, when parties (1) enter into a binding class action settlement agreement, which requires court approval pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, and (2) provide the required notice of the settlement to the district court prior to the district court's entry of the final judgments, the district court should hold a hearing and review the settlement agreement to determine if it is fair, reasonable, and adequate…. Failure to do so-even when the district court has already drafted a summary judgment order-is an abuse of discretion.” In re Syncor, at *1. The Circuit Court further held that the district court erred in granting summary judgment “genuine issues of material fact exist regarding whether the Defendants breached their fiduciary duty under ERISA,” id.

Continue reading "ERISA Class Action Defense Cases-In re Syncor: Ninth Circuit Reverses Defense Judgment In Class Action Holding District Court Erred In Failing To First Consider Proposed Class Action Settlement Under Rule 23(e)" »

Posted On: March 9, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Class Action Defense Cases—In re Transpacific: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation In Northern District of California

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiff or by any Class Action Defendants, and Transfers Class Actions to Northern District of California

Two class actions – one in the Central District of California and one in the Northern District of California – were filed against Air New Zealand and other airlines alleging antitrust violations; specifically, each class action alleged that “[the] airline defendants conspired to fix the price of passenger airfares for flights between the United States and transpacific destinations in violation of the Sherman Antitrust Act.” In re Transpacific Passenger Air Transportation Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 19, 2008) [Slip Opn., at 1]. In addition, 13 potentially-related class action lawsuits also had been filed. Plaintiff lawyers in the Northern District 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 Northern District of California; plaintiffs in the Central District class action did not oppose the motion, nor did any of the class action defendants. Id. However, the parties each argued in support of three different federal judges to handle the class action litigation in the Northern District, id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Northern District of California was the appropriate transferee court. Id. The Panel selected Judge Charles Breyer to handle the litigation, and ordered the matters transferred to him. Id., at 1-2.

Download PDF file of In re Transpacific Passenger Air Transportation Transfer Order

Posted On: March 9, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Class Action Defense Cases-Anderson v. CNH: Eighth Circuit Dismisses As Moot Appeal From District Court Order Denying Class Action Certification

Class Action Settlement Reached after District Court Denied Motion for Class Action Treatment Precluded Settling Plaintiffs from Appealing Denial of Class Action Motion Eighth Circuit Holds

Plaintiffs, retirees of Case Corporation, filed a putative class action against administrators of the company’s pension and retirement plans for “violat[ing] the terms of the retirees' pension plan by failing to make certain payments the month after each retiree turned 62 years old. Anderson v. CNH U.S. Pension Plan, 515 F.3d 823 (5th Cir. 2008) [Slip Opn., at 1-3]. In response to the class action complaint, defendants “conceded that they had mistakenly violated [the Plans], and agreed to tender the missed payment (plus interest) to both the named and unnamed members of the putative class.” Id., at 3-4. Plaintiffs filed a motion for certification of the litigation as a class action; simultaneously, the parties were negotiating a potential settlement of the class action claims. Id. By the time the district court ruled on the class action certification motion, defendants had made a substantial portion of the supplemental payments required and had expressed an intention to tender the remaining payments. Id., at 4. The district court denied class certification finding it “unnecessary and inappropriate at this time.” Id. The parties soon thereafter reached a settlement, and plaintiffs then appealed the district court order denying their class action certification motion. Id., at 5. The Eighth Circuit dismissed the appeal as moot.

The Circuit Court held that it did not have jurisdiction over the appeal because there was no Article III case or controversy: Once plaintiffs settled the underlying class action, their claims became moot as they no longer had “a legally cognizable interest in the outcome” of the case. Anderson, at 5 (citing U.S. Parole Comm'n v. Geraghty, 445 U.S. 388, 396 (1980)).

Download PDF file of Anderson v. CNH

Posted On: March 8, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Labor Law Class Action Lawsuits Continue To Top List In Weekly Class Action Filings In California State And Federal Courts

To assist class action defense attorneys anticipate the cases against which they may have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers February 29 – March 6, 2008, during which time 38 new class action lawsuits were filed. Labor law class actions generally top this list by a wide margin. During the past week, 16 new class actions were filed alleging employment-related claims (42% of the total number of new class action lawsuits). The only other categories to break the 10% threshold were California unfair competition law (UCL) class action cases,which includes class actions alleging false advertising claims, with eight (8) new filings (21%), and disability rights class action lawsuits, which had five (5) new class action filings (13%).

Posted On: March 7, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Attorney Fees Class Action Defense Cases-Harrington v. Payroll Entertainment: California State Court Holds Plaintiff Lawyers Who Filed Labor Law Class Action Deserved Only $500 In Fees Because Class Action Complaint Was Not Viable

Lawyers who Filed Putative Class Action Alleging State Labor Law Claims but Failed to Secure Class Action Certification were Entitled to Reasonable Attorney Fees as a Matter of Right under Settlement of Individual Claim Declaring Plaintiff “Prevailing Party” but Reasonable Fee Award for Filing a Frivolous Class Action Based on a $44 Overtime Claim Warranted only $500 in Attorney Fes California State Court Holds

Plaintiff, an off-duty police officer, filed a class action against Payroll Entertainment Services alleging violations of California’s labor laws; specifically, the class action alleged that Payroll would hire retired and off-duty police officers to provide “traffic and crowd control services,” and that Payroll underpaid him after he worked a single 14-hour day. Harrington v. Payroll Entertainment Servs., Inc., ___ Cal.App.4th ___, 72 Cal.Rptr.3d 922 (Cal.App. 2008) [Slip Opn., at 2]. Plaintiff alleged to have filed the class action complaint on behalf of all retired and off-duty police officers who had worked for Payroll Entertainment, id. In response to plaintiff’s motion to certify the litigation as a class action, defense attorneys acknowledged the error in calculating plaintiff’s pay, but explained that Payroll Entertainment “had based its wage calculations on a memorandum issued by the Los Angeles Police Protective League without realizing that the formula set out in the memo violated California’s overtime wage laws,” id. The defense argued further that class action treatment was unnecessary because it had hired only 16 officers for the event in question and that the amount at stake was only $714. Id. The trial court denied the class action certification motion; specifically, the trial court found that plaintiff had failed to establish numerosity, typicality or superiority to support class action treatment. Id., at 4. The litigation proceeded as to plaintiff’s individual claim, settling shortly before trial for $10,500. Id., at 2-3. Plaintiff’s lawyers sought attorney fees but the trial court denied the motion, id., at 3. Plaintiff appealed. The appellate court reversed but awarded plaintiff’s lawyers only $500.

As part of the settlement, in addition to its monetary payment, Payroll Entertainment agreed that plaintiff was a “prevailing party” for purposes of recovering attorney fees and that the trial court would determine the amount of fees that were reasonably incurred by plaintiff. Harrington, at 3. Plaintiff’s lawyers filed a motion requesting $46,000 in attorney fees; in opposition, defense attorneys argued that plaintiff should not be awarded any attorney fees. Id. The trial court’s rationale is set forth in detail at pages 3 through 6 of the appellate court’s slip opinion. In pertinent part, the trial court found that plaintiff had retained counsel and filed suit to recover $44, id., at 5. The Court of Appeal quoted the following language from the trial court’s order at page 5:

Continue reading "Attorney Fees Class Action Defense Cases-Harrington v. Payroll Entertainment: California State Court Holds Plaintiff Lawyers Who Filed Labor Law Class Action Deserved Only $500 In Fees Because Class Action Complaint Was Not Viable" »

Posted On: March 6, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Labor Law Class Action Defense Cases-McClain v. Lufkin: Fifth Circuit Issues Mixed Opinion On Class Action Appeal Following Judgment In Favor Of Plaintiff On Title VII/§ 1981 Discrimination Class Action Complaint

District Court Judgment on Discrimination Class Action Complaint Required Reversal and Remand as to Certain Issues Necessitating Remand of Class Action to District Court for Further Proceedings Fifth Circuit Holds

Plaintiffs filed a class action against their employer, Lufkin Industries, alleging violations of Title VII and 42 U.S.C. § 1981 based on the allegation that Lufkin’s “practice of delegating subjective decision-making authority to its managers with respect to initial assignments and promotions disparately affected them.” McClain v. Lufkin Industries, Inc., ___ F.3d ___ (5th Cir. February 29, 2008) [Slip Opn., at 2]. Among the many named plaintiffs in the class action complaint, only two had filed charges with the EEOC and received right-to-sue letters, id. The class action involved all four of Lufkin’s production divisions, and the company has approximately 1,500 hourly and salaried workers. Id. The district court granted plaintiffs’ request to certify the litigation as a class action with respect to the disparate-impact claims, but the court refused to give class action treatment to plaintiffs’ disparate-treatment claims. Id., at 3. Following a bench trial, at which “the court strictly limited each party to twenty hours for the presentation of its case,” the court found in favor of the plaintiffs and awarded $3.4 million in back pay, together with injunctive relief and attorney fees. Id. Both sides appealed: plaintiffs argued the court should have granted class action treatment to the disparate-treatment claims, and defense attorneys argued (1) plaintiffs failed to exhaust administrative remedies, (2) lacked standing to represent the class, and (3) the district court committed various errors in finding for plaintiffs and calculating damages. Id., at 4. The Fifth Circuit issued an opinion “unfortunately inconclusive of the litigation,” id., at 1.

The Fifth Circuit addressed first the defense claim that plaintiffs failed to exhaust their EEOC remedies, which the Circuit Court characterized as the “mainstay of proper enforcement of Title VII remedies.” McClain, at 4. The defense argued that the class action’s disparate-impact claims concerning its hiring and promotional practices, id., at 4-5. Relying on Pacheco v. Mineta, 448 F.3d 783 (5th Cir.), cert. denied, 127 S.Ct. 299 (2006), the Circuit Court concluded that the January 1995 letter from plaintiff McClain to the EEOC (relied on by the district court in finding that plaintiffs had exhausted their administrative remedies) complained only about demotion and was thus insufficient to support the hiring and promotion class action claims. See McClain, at 5-8. The Court concluded, however, that plaintiff Thomas’s EEOC charge satisfied the exhaustion requirement, id., at 8-9. However, the Fifth Circuit agreed with defense attorneys that neither McClain nor Thomas adequately complained about Lufkin’s “Foundry” division, and therefore vacated the judgment insofar as it affected the Foundry division, id., at 9. Indeed, the Court noted that “considerable doubt” existed as to whether either of these individuals even had standing to represent a class consisting of Foundry division workers. Id., at 9 n.2.

Continue reading "Labor Law Class Action Defense Cases-McClain v. Lufkin: Fifth Circuit Issues Mixed Opinion On Class Action Appeal Following Judgment In Favor Of Plaintiff On Title VII/§ 1981 Discrimination Class Action Complaint" »

Posted On: March 5, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

FDCPA Class Action Defense Cases-Jacobson v. Healthcare Financial: Second Circuit Reverses Summary Judgment In Favor Of Defense In FDCPA Class Action And Vacates Award Of Attorney Fees And Costs Against Class Action Plaintiff

As Matter of First Impression, FDCPA Permits Consumers to Notify Debt Collectors of Dispute Within 30 Days of Receiving Debt Collectors’ Letter Necessitating Reversal of Summary Judgment in Favor of Defense in FDCPA Class Action Second Circuit Holds

Plaintiff filed a putative nationwide class action complaint against Healthcare Financial Services (HFS), a “debt collector” within the meaning of the federal Fair Debt Collection Practices Act (FDCPA), alleging that a debt collection letter he received from HFS violated the FDCPA by failing to advise debtors of their right to dispute the validity of the debt. Jacobson v. Healthcare Fin. Servs., Inc., 516 F.3d 85, 2008 WL 383060, *1 (2d Cir. 2008). The class action complaint did not allege that plaintiff suffered any actual loss, limiting recover to statutory damages and attorney fees. Id. Defense attorneys moved to dismiss the class action, or in alternative sought summary judgment, on the ground that the debt collection letter did not violate the FDCPA; the defense also sought attorney fees from plaintiff, arguing that he had filed the class action “in bad faith and for the purpose of harassment,” see 15 U.S.C. § 1692k(a)(3). Id. The district court granted summary judgment in favor of HFS and awarded HFS attorney fees and costs, id. The Second Circuit affirmed in part and reversed in part.

The FDCPA provision at issue provides that a debtor has the right to dispute a debt and seek verification of the validity of the debt by notifying the debt collector of the right to dispute the debt. Jacobson, at *2. The Second Circuit recognized that it must view the issue from the perspective of the “least sophisticated consumer,” see id., at *3 (citing Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993)), but observed also that “the objective test we apply [also] protects debt collectors from unreasonable constructions of their communications,” that the Second Circuit has “carefully preserved the concept of reasonableness,” and that “the FDCPA does not aid plaintiffs whose claims are based on ‘bizarre or idiosyncratic interpretations of collection notices.’” Id. (citations omitted). So viewed, the Circuit Court held that the letter sent by HFS clearly advised debtors of their right to dispute the validity of the alleged debt.

Continue reading "FDCPA Class Action Defense Cases-Jacobson v. Healthcare Financial: Second Circuit Reverses Summary Judgment In Favor Of Defense In FDCPA Class Action And Vacates Award Of Attorney Fees And Costs Against Class Action Plaintiff" »

Posted On: March 4, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

BP Class Action Defense Cases-Rees v. BP America: Oklahoma State Court Affirms Dismissal Of Class Action Complaint Holding Plaintiff's Class Action Barred Because He Was Absent Class Member Of Prior Class Action

Trial Court Order Denying Class Action Certification Barred Subsequent Class Action Filed by Absent Class Member of Prior Class Action Oklahoma State Court Holds, Otherwise “Plaintiffs [could] Continue Filing Broad Class Actions…Until a Trial Court Grants Class Certification, Rendering Ineffective the Previous Denials of Other Courts”

Plaintiff filed a putative class action in Oklahoma state court (LeFlore County) against BP America alleging “BP underpaid royalties by wrongfully charging marketing fees and costs of making the gas marketable, including costs for gathering, treatment, compression, and dehydration, to royalty owners.” Rees v. BP America Prod. Co., ___ F. 3d ___ (Okla.App. February 22, 2008) [Slip Opn., at 2]. The complaint purported to be a class action, brought on behalf of “all similarly situated persons and entities who have received royalty payments from [BP] on Gas Substances produced from the Red Oak-Norris Field.” Id. Defense attorneys moved to dismiss the class action on the ground that two other class actions were pending against BP alleging underpaid royalties (Watts and Chockley); alternatively, defense attorneys requested that the Rees class action litigation be stayed or transferred to the county in which the Watts class action was pending (Pittsburg County). Id. The basis for the defense motion was that the Watts class action purported to represent a class of royalty owners in several counties, including LeFlore, id., at 2-3. The Chockley class action also was defined broadly enough to arguably include plaintiff’s claims within its scope, id., at 3.

The plaintiffs in the Watts class action had moved the court to certify that litigation as a class action, but the trial court denied the motion. Rees, at 3. The Oklahoma Court of Civil Appeals affirmed the denial of class action treatment, and the Oklahoma Supreme Court denied certiorari. Id., at 3-4. The trial court in the Rees class action granted a stay, over plaintiff’s objection, pending the appellate court decision in Watts, id., at 3, and then granted BP’s motion to dismiss the Rees complaint, id., at 4. Specifically, “the trial court applied the principle of issue preclusion in ruling Rees, as an unnamed member of the proposed class in Watts, was bound by the decision in Watts denying class action certification.” Id. (citing In re Bridgestone/Firestone, Inc., Tires Products Liab. Litig., 333 F.3d 763 (7th Cir. 2003)).

Continue reading "BP Class Action Defense Cases-Rees v. BP America: Oklahoma State Court Affirms Dismissal Of Class Action Complaint Holding Plaintiff's Class Action Barred Because He Was Absent Class Member Of Prior Class Action" »

Posted On: March 3, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

CAFA Removal Class Action Defense Cases-Alicea v. Circuit City: New York Federal Court Awards Plaintiff Attorney Fees Following Remand Of Class Action To State Court Holding Removal Jurisdiction Did Not Reasonably Exist Under Class Action Fairness Act

Defense Removal of Class Action to New York Federal Court under CAFA (Class Action Fairness Act of 2005) was not Objectively Reasonable thus Warranting Award of Attorney Fees to Plaintiff Following Remand of Class Action to State Court

Plaintiff filed a putative class action lawsuit in New York state court against Circuit City. Alicea v. Circuit City Stores, Inc., 534 F.Supp.2d 432, 2008 WL 344695, *1 (S.D.N.Y. 2008). The class action complaint, a copy of which may be found here, alleged that Circuit City’s “return policy and imposition of a ‘restocking fee’ in the amount of 15% of the purchase price of certain returned items” violated New York General Business Law § 349. Defense attorneys removed the class action to federal court on the ground that removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA); plaintiff’s lawyer moved to remand the class action complaint to state court arguing that Circuit City had failed to establish that the $5 million amount-in-controversy requirement had been met for CAFA removal jurisdiction. Alicea, at *1. Plaintiff also sought attorney fees under 28 U.S.C. § 1447(c), id. The district court granted the motion to remand the class action to state court, and in the order summarized here, awarded plaintiff attorney fees under § 1447(c). (The order remanding the class action to state court may be found here.)

As a threshold matter, the district court noted that “the standard governing the application of section 1447(c)…is whether the removing party ‘lacked an objectively reasonable basis for seeking removal.’” Alicea, at *1 (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). The federal court also “‘recognize[d] the desire to deter removals sought for the purpose of prolonging litigation and imposing costs on the opposing party, while not undermining Congress’ basic decision to afford defendants a right to remove as a general matter, when the statutory criteria are satisfied.’” Id. (quoting Martin, at 140). Here, defense attorneys argued that a reasonable basis existed for removing the class action under CAFA because “(1) it was ‘unclear to defendant whether plaintiff was seeking treble damages’…, (2) ‘at the time of removal, it objectively appeared that plaintiff’s claims were not limited to New York State consumers’…, and (3) ‘the costs of compliance would extend in perpetuity,’ and thus ‘CAFA’s jurisdictional limits would have been easily met.’…” Id. The district court rejected each of these arguments.

Continue reading "CAFA Removal Class Action Defense Cases-Alicea v. Circuit City: New York Federal Court Awards Plaintiff Attorney Fees Following Remand Of Class Action To State Court Holding Removal Jurisdiction Did Not Reasonably Exist Under Class Action Fairness Act" »

Posted On: March 1, 2008 by Michael J. Hassen Email This Post

Bookmark and Share

Class Action Lawsuit Filings Rise But Labor Law Class Action Cases Again Hold Top Spot In Weekly Class Action Filings In California State And Federal Courts

As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers February 22 – 28, 2008, during which time 29 new class action lawsuits were filed. Employment law class actions generally top this list, often by a wide margin, and last week did not buck that trend. During the past week, 26 new labor law class action suits were filed (53% of the total number of new class action lawsuits). The only other categories to break the 10% threshold were antitrust class actions, which had seven (7) new class action filings (14%), and California unfair competition law (UCL) class action cases,which includes class actions alleging false advertising claims, with six (6) new filings (12%).