Class Action Defense Blog

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 In: Class Action Court Decisions, RESPA/TILA Class Actions

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 In: Class Actions In The News

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 In: Employment Law Class Actions, Class Action Court Decisions

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 In: Employment Law Class Actions, Class Action Court Decisions

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 In: Class Action Court Decisions

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 In: Class Action Court Decisions, RESPA/TILA Class Actions

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 In: Class Action Court Decisions

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 In: Class Actions In The News

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 In: Class Actions In The News

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 In: Class Actions In The News