Posted On: April 30, 2008 by Michael J. Hassen Email This Post

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Weyerhauser Loses Antitrust Class Action Lawsuit in Oregon As Jury Awards $28 Million

Oregon Jury Awards $28 Million in Antitrust Class Action Against Weyerhauser

On April 29, 2008, Weyerhauser lost a class action lawsuit filed in Oregon; the class action complaint reportedly alleged antitrust violations in that Weyerhauser allegedly monopolized the market for finished alder lumber. A jury found against Weyerhauser and awarded nearly $28 million in damages, which will be trebled under antitrust laws. Weyerhauser has promised to appeal the judgment.

Posted On: April 30, 2008 by Michael J. Hassen Email This Post

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Class Action Defense Cases–Ross v. Bank of America: Second Circuit Reinstates Antitrust Class Action Holding Cardholders Possessed Article III Standing To Pursue Class Action Claims Against Credit Card Issuers

District Court Erred in Dismissing Cardholder Class Action Against Credit Card Issuers, Alleging Conspiracy to Including Mandatory Arbitration Clauses in Credit Card Agreements in Violation of Federal Antitrust Laws, because Class Action Complaint Adequately Alleged Injury in Fact for Article III Standing Second Circuit Holds

Plaintiffs filed a putative class action against various credit card issuing banks for antitrust violations alleging that defendants “illegally colluded to force cardholders to accept mandatory arbitration clauses in their cardholder agreements.” Ross v. Bank of America N.A., ___ F.3d ___ (2d Cir. April 25, 2008) [Slip Opn at 4]. The class action complaint contained two antitrust claims based on violations of Section 1 of the Sherman Act: (1) that defendants “conspired to impose mandatory arbitration clauses,” and (2) that defendants “participated in a group boycott by refusing to issue cards to individuals who did not agree to arbitration.” Id., at 5-6. The class action prayed for an injunction and sought “to invalidate existing mandatory arbitration clauses, and to force the banks to withdraw all pending motions to compel arbitration.” Id., at 6. Defense attorneys moved to dismiss the class action under Rule 12(b)(1) and (b)(6) on the grounds that plaintiffs lacked standing to prosecute the antitrust class action claims, id. The district court granted the motions on the sole ground of lack of standing, and dismissed the class action complaint. See In re Currency Conversion Fee Antitrust Litig., No. 05 Civ. 7116 (WHP), 2006 U.S. Dist. LEXIS 66986 (S.D.N.Y. September 20, 2006). (A copy of the district court order dismissing the class action may be found here .) Plaintiffs appealed; the Second Circuit reversed and reinstated the class action.

The district court dismissed the class action complaint based on its belief that the injuries alleged by plaintiffs were “entirely speculative and, therefore, insufficient to establish Article III standing.” Ross, at 6 (quoting In re Currency Conversion, at *9, *12-13). As the Second Circuit explained at page 6, “Specifically, according to the district court, the cardholders’ injuries are ‘contingent on their speculation that someday (1) Defendants may engage in misconduct; (2) the parties will be unable to resolve their differences; (3) Plaintiffs may commence a lawsuit; (4) the dispute will remain unresolved; and (5) Defendants will seek to invoke arbitration provisions.’” Id., at 6-7 (quoting In re Currency Conversion, at *14-15). The district court also characterized any “alleged anticompetitive effects” as “inchoate.” Id., at 7 (quoting In re Currency Conversion, at *16). The Circuit Court disagreed.

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

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Class Action Defense News—Colorado State Court Grants Class Action Status To Complaint Against EchoStar

Eight Years After Filing of Class Action Complaint Against EchoStar, now Dish Network, Colorado State Court Grants Plaintiffs’ Motion to Certify Litigation as a Class Action

The Denver Post reports that the Arapahoe County trial court has granted plaintiffs’ motion to certify a lawsuit against EchoStar as a class action. The class action complaint reportedly was filed by “thousands of [EchoStar’s] retail distributors” eight years ago. The trial court, Judge John Wheeler, is quoted by the Post of accusing defense attorneys of “a willingness and proclivity for drawing out legal proceedings as long as humanly possible and burying their opponents in paperwork and filings.” According to the class action, EchoStar failed to pay commissions and fees due to direct and indirect retailers of its satellite television service.

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

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Labor Law Class Action Defense Cases–Isner v. Falkenberg: California Court Affirms Summary Judgment In Favor Of Defense In Labor Law Class Action Holding Resident Employees Need Only Be Compensated For Carrying Out Assigned Duties

Class Action Alleging Failure to Pay Resident Employees for Time Spent “On Call” though not Performing Assigned Tasks Properly Subject to Summary Judgment in Favor of Defense California State Court Holds

Plaintiffs filed a putative labor law class action against their former employer, a property management company, alleging inter alia that it had failed to pay them for overtime and waiting time; specifically, the class action complaint alleged that defendant failed to pay its “resident employees” for “on-call” time. Isner v. Falkenberg/Gilliam & Associates, Inc., 160 Cal.App.4th 1393, 73 Cal.Rptr.3d 433, 434 (Cal.App. 2008). The class action alleged that the resident employee employment agreement signed by plaintiffs required that they be on call “on designated evenings from 5:00 p.m. until 8:00 a.m. and on designated weekends from 5:00 p.m. Friday evening until 8:00 a.m. Monday morning.” The agreement further required employees to “remain on the facility premises within hearing distance of the emergency alarms systems and telephone” while on call, but provided that they were “otherwise free to use on-call time as he or she chooses.” Id. The appellate court explained, “The gravamen of the complaint was that these resident employees were entitled to payment not just for the hours they spent responding to emergencies while on call, but for all the hours they were on call and thus confined to their apartment or the building office so as to remain within audible range of the telephone and alarm.” Id., at 436. Defense attorneys moved for summary judgment arguing that plaintiffs were entitled to wages only for time spent on the job; the trial court agreed that payment was due only for work “actually performed” and, accordingly, granted summary judgment on the class action complaint. Id. The appellate court affirmed.

The pertinent facts established that resident employees were allowed to arrange for another resident employee to “respond to emergency calls with the Employee, or in the place of the Employee” and that employees would be paid for “[a]ll time spent in responding to emergencies.” Isner, at 434. Moreover, if emergencies prevent an employee from obtaining 5 hours of “uninterrupted sleep,” then defendant agreed to “credit Employee with eight hours' time worked under the terms of [the agreement].” Id., at 435. Plaintiffs were given an apartment to live in, and at least one of them stayed within range of the alarm and telephone while on duty or on call. Id. “While [plaintiffs] were on duty and on call, they slept, ate, talked on their personal telephone, used the internet, played computer games, read magazines or watched television in their apartment when they were not responding to an emergency.” However, while on duty or on call, plaintiffs could not go to the pool or walk around the apartment, because they would be unable to hear the alarm or telephone, and they could not leave the apartment. Id. It was plaintiffs’ responsibility to keep track of and bill their time with respect to “both their usual eight-hour work day and times spent responding to emergencies,” id. And while defendant permitted them to bill all time spent on the job, plaintiffs generally “recorded only the calls that took 15 minutes or more.” Id., at 435-36. “[T]here was never an occasion when [plaintiffs] were not paid for time they recorded on their time sheets.” Id., at 436.

Continue reading "Labor Law Class Action Defense Cases–Isner v. Falkenberg: California Court Affirms Summary Judgment In Favor Of Defense In Labor Law Class Action Holding Resident Employees Need Only Be Compensated For Carrying Out Assigned Duties" »

Posted On: April 28, 2008 by Michael J. Hassen Email This Post

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PSLRA Class Action Defense Cases–In re Charter Communications: Eighth Circuit Holds As Matter Of First Impression That District Court Failure To Include In Judgment Findings Required By Rule 11(b) Does Not Require Remand

Following Dismissal of Securities Fraud Class Action, District Court Failure to Include Rule 11(b) Statutory Findings in Judgment may be Decided by Court of Appeal Eighth Circuit Holds

Plaintiff filed a putative securities fraud class action against various defendants, including Scientific-Atlanta and Motorola. The district court dismissed the class action claims against Scientific-Atlanta and Motorola and entered a separate, final judgment under Rule 54(b). Plaintiff appealed, and the Eighth Circuit affirmed. See In re Charter Communications, Inc., Securities Litig., 443 F.3d 987 (8th Cir. 2006). Plaintiff filed a petition for writ of certiorari with the U.S. Supreme Court; the High Court granted the writ and affirmed the Eighth Circuit’s decision. See Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., ___ U.S. ___, 128 S.Ct. 761 (2008). (Our summary of the Supreme Court opinion may be found here.) On remand, the Eighth Circuit was confronted with a matter of first impression: specifically, a provision of the PSLRA (Private Securities Litigation Reform Act of 1995) states that the district court “shall include in the record specific findings regarding compliance by each party and each attorney representing any party with each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to any complaint, responsive pleading, or dispositive motion.” In re Charter Communications, Inc., Securities Litig., 519 F.3d 730, 731 (8th Cir. 2008) (quoting 15 U.S.C. § 78u-4(c)(1)). The district court had failed to include such findings, though no party had raised this issue either in the district court or on appeal. Id. Defense attorneys notified the Circuit Court that Scientific-Atlanta and Motorola “waive all rights in this case to assert, that Plaintiff-Appellant did not comply with Fed.R.Civ.P. 11(b)” and requested entry of a final judgment dismissing the class action complaint. Id.

The Eighth Circuit held that the failure to include the required findings “did not affect either the appealability or the validity of the district court's Rule 54(b) final judgment.” In re Charter Communications, at 731 (citation omitted). After noting that courts have reached different decisions as to whether the failure to include Rule 11(b) statutory findings required a remand to the district court or whether, in the absence of district court findings, the Circuit Court could decide the Rule 11(b), and after confirming that “Congress in the PSLRA clearly intended to reduce judicial discretion to ignore or not sanction Rule 11(b) violations,” the Eighth Circuit held that “the Rule 11(b) issue may still be waived on appeal, either when it is not timely raised by any party or when, as here, it is affirmatively waived by the parties who prevailed in the district court.” Id. Accordingly, the Circuit Court reissued its mandate affirming the final judgment of the district court, id., at 732.

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Posted On: April 28, 2008 by Michael J. Hassen Email This Post

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Attorney-Client Privilege/Class Action Defense Cases–Costco v. Superior Court: California State Court Denies Writ Relief Of Court Order Requiring Defense To Produce In Labor Law Class Action Copy Of Redacted Letter Prepared By Outside Counsel

Class Action Discovery Order Requiring Defense to Produce Redacted Letter Prepared by Outside Counsel did not Warrant Extraordinary Writ Relief because Unredacted Portions were “Inconsequential” and Disclosure to Class Action Plaintiffs would not cause Costco “Irreparable Harm” California Court Holds

Plaintiffs filed a putative labor law class action against Costco alleging that it “misclassified certain managers as exempt employees.” Costco Wholesale Corp. v. Superior Court, ___ Cal.App.4th ___, 74 Cal.Rptr.3d 345, 347 (Cal.App. 2008). According to the class action complaint, each Costco warehouse store “has hundreds of employees and up to 20 managers”; a “general manager” (apparently the most senior person at the warehouse store), and “ancillary managers” (in charge of various departments, such as meat, bakery, pharmacy, optical, etc.). Id., at 348. The class action alleges that “[s]enior operations personnel at Costco determine how to classify employees for compensation purposes,” and in June 2000 Costco’s corporate counsel hired a law firm to “‘undertake [a] comprehensive factual investigation and legal analysis regarding the classification of managers within Costco Warehouses.’” Id. In response to that request, outside counsel conducted interviews, performed legal research and prepared a 22-page letter dated August 4, 2000, addressed to Costco’s corporate counsel. Id. Internal meetings followed, attended by in-house counsel, and in 2001 Costco reclassified ancillary managers as non-exempt employees. Id., at 348-49. The gravamen of the class action is that Costco “unlawfully failed to pay overtime to ancillary managers…because Costco categorically had misclassified these employees as exempt employees”; Costco’s answer to the class action complaint included the affirmative defense that “plaintiffs were exempt from the protection of the California overtime laws (the exemption defense).” Id., at 349. In discovery, plaintiffs sought inter alia production of the August 4 letter, which defense attorneys had listed on a privilege log; the trial court ordered production of a redacted copy of the letter. Costco sought a writ of mandate but the Court of Appeal denied the petition.

This discovery dispute centered on whether Costco had placed the contents of the August 4 letter at issue by virtue of its affirmative exemption defense and other discovery responses. Specifically, in response to interrogatories Costco stated that it “reasonably expected that employees who held the position of salaried Costco manager regularly and customarily exercised their independent judgment and discretion performing such exempt tasks…for more than 50% of their time.” Costco, at 349. The defense “person most knowledgeable about Costco’s exemption defense” testified that “Costco relied, in part, on input from counsel in classifying its employees as exempt or nonexempt.” Id., at 350. Defense attorneys stated that Costco was not relying on “advice of counsel” as a defense, and asserted the attorney-client privilege as to any discussion with counsel, id. Plaintiffs demanded discovery of legal advice provided by outside counsel on the grounds that the privilege had been waived; defense attorneys reiterated that Costco’s “‘reasonable expectation’ exemption defense was not dependent upon legal advice.” Id.

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

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FACTA Class Action Defense Cases—In re OSI Restaurant: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Eastern District Of Pennsylvania

Judicial Panel Grants Defense Request for Pretrial Coordination of FACTA Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, and Agrees with Defense Recommendation of Eastern District of Pennsylvania as the Transferee Court

Four class action lawsuits were filed against OSI Restaurant Partners (OSI) alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA) based on OSI’s failure to delete certain information from customer credit and debit card receipts. The class actions were pending in the Eastern District of Pennsylvania (two), and the Western District of Pennsylvania and Northern District of Illinois (one each). In re OSI Restaurant Partners, LLC, Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 20, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the Eastern District of Pennsylvania; all parties agreed that pretrial coordination was appropriate, but plaintiffs’ lawyers in two of the class actions argued that the Western District of Pennsylvania was the appropriate transferee court. Id. The Judicial Panel granted the motion for centralization, but agreed with defense attorneys that the Eastern District of Pennsylvania was the appropriate transferee court. Id.

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

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Labor Law Class Action Lawsuits Continue To Dominate List Of Weekly Class Action Cases Filed In California State And Federal Courts

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 April 18 – 24, 2008, during which time 35 new class action lawsuits were filed. Once again class actions asserting employment-related claims topped the list of new class action filings by a wide margin. During the time period covered by this post, 21 new class actions were filed alleging employment-related claims (60% of the total number of new class action lawsuits). The only other category of class action lawsuits to break the 10% threshold alleged violations of California Unfair Competition Law (UCL), which includes false advertising claims, with 5 new filings (14%).

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

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Class Action Defense Cases—In re Aurora Dairy: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation But Selects Eastern District Of Missouri As Transferee Court

Judicial Panel Grants Plaintiff Request, over Defense Objection, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, but Transfers Class Actions to Eastern District of Missouri

Four class action lawsuits (2 in Colorado and 1 each in Florida and Missouri), each of which were filed as putative nationwide class actions, were filed against various Aurora Dairy Corp. alleging “Aurora misled them into believing that the milk they purchased was ‘organic’ or ‘USDA organic’ when in fact the milk failed to meet organic standards.” In re Aurora Dairy Corp. Organic Milk Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 20, 2008) [Slip Opn., at 1]. Plaintiffs in one of the Colorado class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the District of Colorado, id. Defense attorneys for common defendant Aurora opposed pretrial coordination, but alternatively supported Colorado as the transferee court; other plaintiffs also supported Colorado as the transferee court, but plaintiffs in the Missouri action supported centralization in that district. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, easily concluding that this will promote efficient handling of the litigation, id. In so holding, the Panel rejected defense arguments that centralization was unnecessary because “voluntary alternatives to Section 1407 are superior,” id., at 2. But the Judicial Panel selected the Easter District of Missouri as the transferee court, explaining that it was home to the first-filed class action and that “[g]iven the geographic dispersal of the constituent actions and the potential tag-along actions, the Eastern District of Missouri offers a relatively convenient forum for this litigation.” Id

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

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Microsoft Vista Class Action Defense Cases-Kelley v. Microsoft: Ninth Circuit Denies Review Of Certification Of Nationwide Class Action Against Microsoft By Washington Federal Court In Class Action Challenging OEM Marketing Of Vista Operating System

Microsoft Petition for Permission to Appeal Class Action Certification of Nationwide Class Action Challenging Labeling PCs as “Windows Vista Capable” even if PCs could not Run Premium Vista Properly Denied by Ninth Circuit

We previously reported on the nationwide class action certified against Microsoft arising out of a class action complaint that challenges the marketing of new “Windows Vista Capable” and “Express Upgrade” programs. That class action complaint alleged that almost a year before its release of the new Vista operating system, Microsoft “authorized original equipment manufacturers…to place a sticker on personal computers… indicating that the PCs had been certified by Microsoft as ‘Windows Vista Capable.’” See Kelley v. Microsoft Corp., ___ F.Supp.2d ___ (W.D. Wash. February 22, 2008) [Slip Opn., at 1]. The class action alleged further that a substantial number of PCs that were advertised as “Windows Vista Capable” were limited to “Vista Home Basic” which, according to the complaint, “does not include any of the enhanced features unique to Vista and which make Vista attractive to customers.” Id., at 2. The district court for the Western District of Washington granted class action certification of a nationwide class action. Our summary of that opinion may be found here. Defense attorneys filed a petition with the Ninth Circuit for permission to appeal the district court order certifying a nationwide class action. On April 21, 2008, the Ninth Circuit denied that request.

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

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Class Action Defense Cases–Vandyne v. Allied Mortgage: Missouri Supreme Court Reverses Certification Of Class Action Because Membership In Class Action Required A Finding Of Liability And Because Class Definition Ambiguous

Class Action Alleging Failure to Disclose “Loan-Related” Fees Improperly Certified as Class Action because Class Membership Turned on Finding of Defendant’s Liability and because Class Definition Failed to Adequately Describe “Loan-Related” Fees and Services, Requiring Reversal of Trial Court Order Missouri Supreme Court Holds

Plaintiffs filed a class action in Missouri state court against Allied Mortgage Capital Corporation alleging violations of the state’s Merchandising Practices Act “by misrepresenting charges for third-party services in connection with their loan transaction.” Vandyne v. Allied Mortgage Capital Corp., 242 S.W.3d 695, 696 (Mo. 2008). The class action alleged that Allied “failed to disclose costs incurred in processing Plaintiffs’ loans”; plaintiffs moved to certify the lawsuit as a class action, defining the class “in part as those individuals who paid costs based upon alleged ‘nondisclosures and false, unfair, deceptive or misleading disclosures’ by Allied.” Id., at 697. Defense attorneys objected that the definition of the class “requires the court to resolve a paramount liability question in order to identify class membership.” Id. The trial court granted plaintiffs’ motion for class action certification, but the Missouri Supreme Court unanimously reversed.

The Supreme Court agreed with defense attorneys that the definition of the class was improper; it held, however, that “the class definition can be cured by eliminating the phrase ‘nondisclosures and false, unfair, deceptive or misleading disclosures’ from the class definition.” Vandyne, at 697. The Supreme Court also agreed with a separate defense argument, that the definition of the class “is insufficiently definite with respect to defining what fees and services are ‘loan-related.’” Id. The Court explained that “the question as to whether a particular service or fee is ‘loan-related’ can only be reached through an analysis of each individual potential class members’ loan documents.” Id. Class counsel apparently represented at oral argument that, on remand, the class action complaint would be amended to “state separately those fees and services as to which class certification is sought.” Id., at 697-98

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

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CAFA Class Action Defense Cases–In re Katrina Canal: Fifth Circuit Affirms Denial Of Motion To Remand Class Action To State Court Holding State Sovereignty Did Not Preclude Removal Of Class Action Under CAFA Because Citizens Were Class Members

Class Action by State on Behalf of Itself and Citizens Properly Removed under Class Action Fairness Act (CAFA) because State’s Sovereign Immunity not Applicable to Citizens Fifth Circuit Holds

Louisiana’s Attorney General Louisiana filed a putative class action against more than 200 insurance companies on behalf of the State and numerous Louisiana citizens based on defendants’ alleged failure to pay for covered insurance claims arising out of Hurricanes Katrina and Rita; the class action complaint alleged only state law claims, and sought compensatory, declaratory and injunctive relief. In re Katrina Canal Litig. Breaches, 524 F.3d 700, 2008 WL 1118176, *1 (5th Cir. 2008). Defense attorneys removed the class action to federal court asserting removal jurisdiction under the Class Action Fairness Act (CAFA) and the Multiparty Multiform Trial Jurisdiction Act (MMTJA). Id., at *1, *3. Louisiana moved to remand the class action to state court, “arguing that CAFA did not apply and that Louisiana enjoyed sovereign immunity from involuntary removal to federal court in that it was suing in its state court to enforce state law.” Id., at *1. The district court denied the motion; because it found that removal jurisdiction existed under CAFA, it did not reach the issue of whether jurisdiction also existed under MMTJA. Id., at *3. The Fifth Circuit granted the State’s petition under CAFA for permission to appeal the remand order under CAFA, and then affirmed.

On appeal, Louisiana argued “CAFA does not apply, and that even if it does apply by its terms, it cannot abrogate sovereign immunity from federal process, or at the least Congress did not clearly do so in CAFA.” In re Katrina, at *3. (Louisiana also raised arguments under MMTJA, but the Fifth Circuit did not address this issue so we do not discuss it here.) The only aspect of CAFA removal jurisdiction challenged on appeal was diversity; specifically, Louisiana argued that a state is not a person for purposes of diversity jurisdiction and, further, that “it has not filed a class action as defined by CAFA.” Id. The Fifth Circuit held that this was not the relevant inquiry, because “Louisiana seeks relief for both the State and the citizens as “recipients” of insurance.” and the citizens adequately satisfied the minimal diversity required by CAFA. Id. The “difficult question” addressed by the Circuit Court was whether state sovereignty barred removal. Id.

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

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CAFA Class Action Defense Cases–Lussier v. Dollar Tree: Ninth Circuit Upholds Denial Of Attorney Fees For Flawed Removal Of Class Action Under Class Action Fairness Act Because Basis For Removal Was Objectively Reasonable

Following Remand of Labor Law Class Action to State Court on Grounds that Class Action had been “Commenced” Prior to Effective Date of Class Action Fairness Act of 2005 (CAFA) thus Precluding Removal Jurisdiction under CAFA, District Court did not Abuse its Discretion in Refusing to Award Plaintiffs Attorney Fees because Defense Removed Class Action under a Novel Theory of First Impression Ninth Circuit Holds

Plaintiffs filed a class action lawsuit against Dollar Tree Stores alleging various labor law violations. The class action was filed in Oregon state on February 14, 2005 – four days before the effective date of the Class Action Fairness Act of 2005 (CAFA) – and plaintiffs served Dollar Tree with the class action complaint on April 29, 2005. Lussier v. Dollar Tree Stores, Inc., ___ F.3d ___ (9th Cir. March 7, 2008) [Slip Opn., at 2204]. Defense attorneys removed the class action to federal court on May 27, 2005, alleging removal jurisdiction under CAFA, id., at 2204-05. Plaintiffs’ lawyers moved to remand the class action to state court on the ground that it had been filed prior to CAFA’s effective date, and had been “commenced” on the date it was filed rather than the date served. Id., at 2205. Dollar Tree responded that Ninth Circuit authority holds an action is not “commenced” under Oregon law until the complaint is served, see id., at 2205-06, but the district court granted the motion to remand the class action, holding that the authority relied on by defense attorneys applied only to statutes of limitation and not to “commencement” under CAFA, id., at 2206-07. Plaintiffs then sought attorney fees under 28 U.S.C. § 1447(c), but the district court denied the motion finding that Dollar Tree’s argument raised a novel issue of first impression, id., at 2207. Plaintiffs appealed the denial of attorney fees, and the Ninth Circuit affirmed.

The Circuit Court cited the now settled test that attorney fees arising out of remand motions are awarded based on the reasonableness of the act of removal: if an objectively reasonable ground existed for removing the action to federal court, then attorney fees should be denied. Lussier, at 2207-08 (quoting Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). Appellate review of such district court decisions is subject to an abuse of discretion standard, id., at 2208 (citations omitted). The Ninth Circuit concluded that while Dollar Tree’s arguments did not prevail, the district court did not abuse its discretion in determining that its interpretation of CAFA and Ninth Circuit case law was objectively reasonable. Id., at 2208-11. Accordingly, it affirmed the district court order denying attorney fees, id., at 2211.

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

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FLSA Class Action Defense Cases–In re Pilgrim’s Pride: Arkansas Federal Court Conditionally Certifies Class Action In MDL Labor Law Class Action Alleging Failure To Pay For Time Spent Donning And Doffing Protective Equipment

FLSA Class Action Alleging Failure to Compensate Workers for Time Spent Donning, Doffing and Cleaning Safety and Sanitary Gear Involved Putative Class Action Representatives “Similarly Situated” to Members of Proposed Class Warranting Certification of FLSA Collective Action for Purposes of Notice Despite Differences in Employee Equipment Utilized, Time Incurred and Timekeeping Methods Arkansas Federal Court Holds

Various class action lawsuits were filed against Pilgrim’s Pride for violations of the Fair Labor Standards Act (FLSA) alleging failure to compensate employees for time spent donning and doffing safety and sanitary gear at chicken processing plants; the Judicial Panel on Multidistrict Litigation centralized the class actions in the Western District of Arkansas, and plaintiffs filed a consolidated motion for class action certification (technically, a “collective action” under the FLSA). In re Pilgrim’s Pride Fair Labor Standards Act Litig., ___ F.Supp.2d ___ (W.D. Ark. March 13, 2008) [Slip Opn., at 1 and n.1]. The class action covered workers at 21 plants located in 10 states, and covered “tasks on the chicken processing line, such as slaughtering, cutting, deboning, cleaning, and packaging.” Id., at 1-2. The federal court explained at page 2, “Pilgrim’s provides to its employees a variety of required safety and sanitary gear, generally worn over the street clothes. However, the exact combination of protective and sanitary items worn by the employees varies by facility, department, production line, position, and individual.” Moreover, “Pilgrim’s implements various timekeeping systems for its employees who work on the chicken processing line, so that the method for timekeeping varies from facility to facility.” Id., at 2. The defense opposed class action treatment on the grounds that “significant differences exist between the facilities and workers,” id., at 7; the district court found that objection to be premature and conditionally certified the class action for notice purposes.

The district court utilized the two-stage approach to class action treatment of FLSA claims under which the court first considers the “notice stage” and then, after discovery is largely complete, the “opt-in or merits stage.” In re Pilgrim’s Pride, at 4-5. At the notice stage, the federal court considers only “whether notice should be given to potential class members,” id., at 5. The question at this stage is whether the putative class action representatives are “similarly situated” to the members of the proposed class, id., at 6. The court noted that more than 3000 declarations from employees at 20 plants had filed opt-in notices with the court, id.; the court considered, also, 37 declarations from workers at 18 plants describing the company’s “common practice” with respect to the donning, doffing and cleaning of safety and sanitary gear, id., at 6-7. In response, the defense argued that “there are differences in the safety and sanitary clothing worn by employees even within the same departments and variations in the amounts of time it takes different employees to don and doff the protective gear,” id., at 7, and argued also that timekeeping methods differed, particularly as to union employees whose collective bargaining agreement specifically “excludes time spent changing clothes and washing from the compensable workday,” id. and n.3. The court found these arguments “premature at this initial certification stage,” id., at 7. Accordingly, it granted plaintiffs’ consolidated motion for certification of a collective action for purposes of notice to the proposed class, id., at 8.

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

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Class Action Defense Cases—In re PepsiCo: Judicial Panel On Multidistrict Litigation (MDL) Grants Unopposed Defense Motion To Centralize Class Action Litigation In The Southern District Of New York

Judicial Panel Grants Defense Request for Pretrial Coordination of Individual and Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, and Accepts Defense Recommendation that Lawsuits be Transferred to the Southern District of New York

Four individual and class action lawsuits (two in New York, one in Tennessee and one in Texas) were filed against PepsiCo and Pepsi Bottling Group (Pepsi) arising “from allegations that Pepsi misled consumers of its Aquafina bottled water into believing that the water source of Aquafina was something different from and better than tap water.” In re PepsiCo, Inc., Bottled Water Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 14, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the Southern District of New York; the motion was unopposed. Id. The Judicial Panel granted the motion for centralization, and agreed that the Southern District of New York was an appropriate transferee court; accordingly, it ordered the class actions pending outside that district transferred to New York. Id., at 1-2.

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

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Class Action Defense Cases—In re Chiquita Brands: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Selects Southern District Of Florida As Transferee Court

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, but Rejects Defense Recommendation that Class Actions be Transferred to District of Columbia

Six class action lawsuits were filed against various defendants, including Chiquita Brands International and Chiquita Fresh North America (Chiquita), as well as current and former officers and directors of Chiquita Brands. The lawsuits fell into two categories: two shareholder derivative class action suits, filed in the District of Columbia and Ohio, and four class action suits under the Alien Tort Statute, filed in the District of Columbia, Florida, New Jersey and New York. In re Chiquita Brands Int’l, Inc., Alien Tort Statute & Shareholders Derivative Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 20, 2008) [Slip Opn., at 1]. Defense attorneys for Chiquita filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the District of the District of Columbia; plaintiffs’ lawyers in all other class actions opposed the motion. Id. Plaintiffs also argued that if the Panel granted pretrial coordination, then the cases should be transferred to district in which their action already was pending – viz., Florida, New York or Ohio. Id. Even though the class action complaints sought different relief under different theories, the Judicial Panel granted the motion for centralization: “All of these actions arise from allegations that Chiquita provided financial support to the Autodefensas Unidas de Columbia (AUC), a Colombian right-wing paramilitary organization engaged in an armed struggle against leftist guerilla groups in various parts of Colombia, including those where Chiquita had banana-producing operations.” Id. The Panel therefore concluded that pretrial coordination was warranted as it would “eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the recourses of the parties, their counsel and the judiciary.” Id., at 2. The Judicial Panel rejected plaintiffs’ concerns that the actions contained “non-common issues,” explaining that the transferee court could address those issues. Id. The Panel agreed, however, that the class actions should be transferred to the Southern District of Florida, rather than the District of the District of Columbia, “because the action there appears to be somewhat further than, or as advanced as, the other actions and the district is closer to Colombia, where many of the events that bear on this litigation took place,” id.

Download PDF file of In re Chiquita Brands Transfer Order

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

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New Employment-Related Class Action Lawsuits Rise As Labor Law Class Action Filings Again Top List Of Weekly Class Action Cases Filed In California State And Federal Courts

As a resource for 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 April 11 – 17, 2008, during which time 44 new class action lawsuits were filed. Labor law class actions generally top the list of new class action cases, often by a wide margin. During the time period covered by this post, 26 new class actions were filed alleging employment-related claims (59% of the total number of new class action lawsuits). No other category of class action lawsuits even managed to break the 10% threshold.

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

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Class Action Defense Cases—In re Gadolinium: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation But Selects Northern District Of Ohio

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of 24 Class Action and Individual Lawsuits Pursuant to 28 U.S.C. § 1407, but Concludes that Northern District of Ohio, rather than Southern District of Ohio, was Appropriate Transferee Court

Twenty-four class action lawsuits were filed in 13 different districts against various defendants, including General Electric, Bayer Healthcare, Tyco and Bracco Diagnostics, “arising out of the allegation that gadolinium based contrast dyes may cause nephrogenic systemic fibrosis in patients with impaired renal function.” In re Gadolinium Contrast Dyes Prods. Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 27, 2008) [Slip Opn., at 1-2]. Lawyers for plaintiffs’ in 12 of the class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the Southern District of Ohio; attorneys for a significant portion of the defense group supported pretrial coordination but argued that the Northern District of Ohio was the appropriate transferee court. Id., at 1. Defense attorneys for the Bracco defendants opposed centralization, arguing that “(1) the actions do not share sufficient questions of fact because each of the contrast agents is chemically and pharmacologically different; (2) because of the unique properties of each contrast agent, a global MDL will impinge upon the due process rights of the separate defendant companies; (3) when each defendant group is considered separately, there are too few actions to warrant MDL treatment for any claims other than those involving the GE defendants; and (4) alternatives to centralization are available and sufficient to coordinate the small number of claims involving Bracco and the Tyco and Bayer defendants.” Id., at 2. The Judicial Panel disagreed, holding that the efficiencies sought to be achieved by Section 1407 warranted pretrial coordination and explaining that the district court will be able to appropriately direct the proceedings. Id., at 2-3. The Panel also agreed with the defense request to transfer the class actions to the Northern District of Ohio, id., at 3.

Download PDF file of In re Gadolinium Contrast Dyes Transfer Order

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

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FCRA Class Action Defense Cases–Murray v. New Cingular: Seventh Circuit Limits Cole Opinion And Resolves Several Fair Credit Reporting Act (FCRA) Issues Of Importance To Class Action And Non-Class Action Cases Alike

Three Class Action Lawsuits Involving Six Issues Under the Federal Fair Credit Reporting Act (FCRA), Equally Important to Class Action and Non-Class Action Cases, Grouped Together for Resolution by Seventh Circuit

The Seventh Circuit yesterday issued an opinion that resolved various issues of interest under the federal Fair Credit Reporting Act (FCRA) presented by three lower court opinions – the putative class action styled Murray v. New Cingular Wireless Servs., Inc., out of the Northern District of Illinois, Case No. 04 CV 7666, the putative class action styled Bruce v. KeyBank N.A., out of the Northern District of Indiana, Case No. 2:05cv330, and the putative class action styled Price v. Capital One Bank (USA), N.A., out of the Eastern District of Wisconsin, Case No. 05-C-947 – explaining that the cases involve “issues that have arisen in numerous suits” and that each of the three cases “presents at least two issues, several of which recur in multiple appeals.” Murray v. New Cingular Wireless Servs., Inc., 523 F.3d 719 (7th Cir. 2008) [Slip Opn., at 2]. The Circuit Court organized its discussion around issues, rather than the facts of each appeal, id., so we summarize the opinion without providing an introductory factual summary of the cases. (For the convenience of the reader, the facts underlying the Murray class action may be found in lower court opinion at Murray v. New Cingular Wireless Servs., Inc., 432 F.Supp.2d 788 (N.D. Ill. 2006), the facts underlying the Bruce class action may be found in lower court opinion atBruce v. KeyBank N.A., 2006 WL 3743749 (N.D. Ind. December 15, 2006), and the facts underlying the Price class action may be found in the lower court opinion at Price v. Capital One Bank (USA), N.A., 2007 WL 1521525 (E.D. Wis. May 22, 2007). Additionally, our summary of the district court decision in Murray may be found here.) The issues addressed and conclusions reached by the Seventh Circuit, of importance to class action and non-class action cases alike, are: (1) whether an offer of credit must be valuable to all or most recipients, id., concluding the offer must be “firm” but need not be ‘valuable,” id., at 5, (2) whether an offer of “free” merchandise can constitute an offer of “credit,” id., concluding that it may, id., at 6, (3) whether flyers must contain all material terms of the offer of credit, id., concluding that it need not, id., at 8, (4) whether the fact that the terms of the offer may vary means that the offer is not “firm,” id., concluding that an offer may be firm even though “some matters [are left] for future determination,” id., at 10, (5) whether 6-point type is “conspicuous,” id., concluding that it is not, id., at 12, (6) whether use of 6-point type is a “willful” violation of the FCRA, id., concluding that it would be reckless “today” to do so but was not so at the time the documents in question were prepared, id., at 15.

Must an offer of credit must be valuable to all or most recipients? In Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), the Seventh Circuit held that if one offers a product (such as furniture) along with a “token line of credit,” then the FCRA requires that the credit offer have value to the consumer: “’From the consumer’s perspective, an offer of credit without value is the equivalent of an advertisement or solicitation [for the product rather than the loan].’” Murray, at 3 (quoting Cole, at 726-27). The Circuit Court noted that plaintiffs have twisted Cole to argue that it requires “even a simple offer of credit [to be] valuable enough to justify the use of consumers’ credit files.” Murray, at 3. These efforts must fail, the Seventh Circuit held, because the FCRA “calls for a firm offer of credit but not a valuable firm offer of credit.” Id., at 4 (citing 15 U.S.C. § 1681b(c)(1)(B)(i)). By contrast, “[t]he problem in Cole was how to disentangle an offer of merchandise from an offer of credit when they are made jointly.” Id. Cole thus does not apply to cases involving “pure offers of credit.” Id., at 5.

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

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Class Action Defense Cases—In re Medtronic: Judicial Panel On Multidistrict Litigation (MDL) Grants Joint Plaintiffs’ Motion To Centralize Class Action Litigation And Selects District of Minnesota as Transferee Court

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, but Decides on District of Minnesota as Transferee Court from among the Nine Districts Recommended by Various Parties

Twenty-seven individual and class action lawsuits, followed by 60 related “tag-along” individual and class action filings, were brought against Medtronic and others arising out of allegations that the implantation of Sprint Fidelis leads in defibrillators caused injuries. In re Medtronic, Inc., Sprint Fidelis Leads Prod. Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 21, 2008) [Slip Opn., at 1]. Plaintiffs’ lawyers in four of the class action cases filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407; while no party opposed the motion, various parties alternatively argued over (9) districts as the appropriate transferee court. Id. The Judicial Panel granted the motion for pretrial coordination of the class action lawsuits, and selected the District of Minnesota as the transferee court because Medtronic is headquartered in that district so “relevant discovery may be found there” and because the district is “centrally located.” Id

Download PDF file of In re Medtronic, Inc., Sprint Fidelis Leads Transfer Order

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

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Coca-Cola Class Action Defense Cases–Coca-Cola v. Honorable W. Stephen Nixon: Missouri Supreme Court Reverses Order Granting Class Action Certification Holding That Definition Of Class Action Membership Was Overly Broad And Indefinite

Class Action Complaint Alleging Failure to Disclose Type of Sweetener used in Diet Drink Improperly Granted Class Action Treatment because Definition of Class Included Millions of Uninjured Individuals and Class Definition could not be Permissibly Limited Missouri Supreme Court Holds

Plaintiff filed a putative class action lawsuit in Missouri state court against Coca-Cola alleging that it “made affirmative misrepresentations and omitted material information regarding the types of artificial sweeteners used in fountain Diet Coke” in violation of state law; Specifically, the class action alleged that Coca-Cola “misled consumers into believing that fountain Diet Coke is the same product as bottled Diet Coke,” when in point of fact the fountain Diet Coke is sweetened with aspartame and saccharin while bottled Diet Coke is sweetened only with aspartame. State ex rel. The Coca-Cola Company v. The Honorable W. Stephen Nixon, ___ S.W.3d ___ (Mo. April 15, 2008) [Slip Opn., at 3]. According to the allegations underlying the class action, plaintiff and other putative class members would not have purchased the fountain drink if they had known that it was made with saccharin. Id. Plaintiff filed a motion requesting that the trial court certify the litigation as a class action; she proposed to define the class as “All individuals who purchased for consumption and not resale fountain diet Coke in the State of Missouri after March 24, 1999 through the date of this order.” Id. Defense attorneys opposed the motion on the grounds that the proposed class was overly broad and indefinite, id. Despite the fact that plaintiff provided no estimate of the size of the class, the trial court accepted the proposed definition and granted class action treatment. Id. Ultimately, defense attorneys filed a petition for writ of prohibition with the Missouri Supreme Court, arguing that the trial court abused its discretion in granting class action certification; the Court reversed. Id.

After rejecting plaintiff’s claim that interlocutory relief should not be considered, see Coca-Cola, at 3-4, and after noting that the standard of review was abuse of discretion, id., at 4, the Missouri Supreme Court turned to the merits. It noted that “the underlying question in any class action certification is whether the class action device provides the most efficient and just method to resolve the controversy at hand, all things considered,” id., at 4, and that implicit in the statutory scheme governing certification of class actions is the requirement that the class definition be proper, id., at 4-5 (citations omitted). In fact, the Supreme Court stated that the first task facing a court in ruling on a motion for class certification is “‘to determine whether the class exists and is capable of legal definition.’” Id., at 5 (citation omitted). The Court explained at page 5, “A class definition that encompasses more than a relatively small number of uninjured putative members is overly broad and improper.” (Citations omitted.) And while it was permissible to certify a class action such that the putative class “initially include[s] members who could not have brought the underlying action in their own name,” the definition ultimately must be capable of being modified so as to “remove the uninjured putative members.” Id. (citations omitted). This requires that only “a relatively small number of uninjured putative members remain,” because the trial court may then “easily resolve individual questions after the common questions have been answered.” Id. If it will not be possible to modify the class definition in this manner, then “the putative class is impermissibly overbroad.” Id.

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

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PSLRA Class Action Defense Cases–Grillo v. Tempur-Pedic: Kentucky Federal Court Dismisses Securities Class Action Complaint With Prejudice Finding Class Action Allegations Failed To Plead Scienter With Specificity Required Under PSLRA

Class Action Alleging Securities Violations Failed to Plead “Strong Inference of Scienter” as Required by the Private Securities Litigation Reform Act (PSLRA) Warranting Dismissal of Class Action With Prejudice Kentucky Federal Court Holds

Plaintiffs filed a class action lawsuit against Tempur-Pedic and others alleging securities laws violations arising out of allegedly false and misleading statements regarding the company’s financial situation as part of a scheme to drive up the stock price thereby allowing insiders “to sell more than $246 million worth of stock at an inflated price.” Grillo v. Tempur-Pedic Int’l, Inc., ___ F.Supp.2d ___ (E.D. Ky. March 28, 2008) [Slip Opn, at 1-2]. In essence, the class action alleged that after Tempur-Pedic announced a 6% price increase in its mattress lines in January 2005, it “caused a frenzy of retailers to stock up on their inventory needs before the price increase occurred.” Id., at 5. According to plaintiffs, this caused a “huge amount” of the company’s revenue to be “pulled forward,” but Tempur-Pedic denied this when asked by Goldman Sachs, id. The company reported record earnings and represented to the public that its growth could be “sustained,” when (according to the class action allegations) the company’s retail sales actually were “volatile and irregular.” Id., at 5-6. Plaintiffs’ class action complaint followed a September 19, 2005 press release that lowered guidance for the year, causing the stock to plummet 28% in a single day. Id., at 9. The complaint also detailed allegedly improper insider trading, see id., at 10-11. The class action alleged violations of Sections 10(b), 20(a) and 20A of the Securities and Exchange Act of 1934, and Rule 10b-5, id., at 2. Defense attorneys moved to dismiss the class action on the grounds that it failed to plead the specificity required under the Private Securities Litigation Reform Act (PSLRA). Id., at 2-3. The district court granted the defense motion and dismissed the class action complaint.

The federal court began with the now well known Supreme Court holding that, under the PSLRA, “‘a complaint will survive…only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.’” Grillo, at 17 (citation omitted). Plaintiffs’ mere allegation that defendants had access to internal financial reports and that those reports demonstrate the inaccuracy of the company’s financial representations was held to be inadequate, as they failed to provide any of those reports to the court or to “cite any of their specific details.” Id., at 18-19. Under the district court’s analysis, the allegations underlying the class action failed to meet the requisite level of scienter. For example, the mere fact that certain defendants held high positions within the company, or that they sold stock, were insufficient, as “[holding] high positions in the Company…is not enough to establish scienter,” id., at 19-20, and plaintiffs failed to demonstrate that the stock trades were “unusual or suspicious,” id., at 23-24. (The district court provided a detailed discussion of the stock trade issue. See id., at 24-27.) At bottom, the court concluded that the “strong inference” of scienter had not been shown.

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

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Wells Fargo UCL Class Action Defense Cases–Puentes v. Wells Fargo: California Court Affirms Summary Judgment In Favor Of Wells Fargo In UCL Class Action Holding Charging Monthly (Rather Than Daily) Interest On Loans Was Not Unlawful

Trial Court Properly Granted Defense Summary Judgment Motion in Class Action Alleging Bank Violated California’s Unfair Competition Law (UCL) by Calculating Interest on a Monthly rather than Daily Basis because Federal Law Permits this Method, it is Consistent with Industry Conduct and it is Required for Sale of Loans on the Secondary Market California Court Holds

Plaintiffs filed a class action against their mortgage lender, Wells Fargo, alleging violations of California’s unfair competition law (UCL) based on the fact that it failed to charge monthly interest based on the number of days in the month, and failed to disclose that it treated each month as one-twelfth of the year, regardless of the number of days in the month. Puentes v. Wells Fargo Home Mortgage, Inc., ___ Cal.App.4th ___, 72 Cal.Rptr.3d 903, 906 (Cal.App. 2008). The class action complaint alleged that plaintiffs obtained a 30-year fixed-rate mortgage from Wells Fargo, evidenced by a promissory note on a multi-state form approved by Fannie Mae and Freddie Mac; the promissory note provided for equal monthly payments and stated, “Interest will be charged on unpaid principal until the full amount of Principal has been paid. I will pay interest at a yearly rate of 6.500 [percent].” Id. The class action further alleged that plaintiffs paid off the loan only seven months later, but, that “[i]n determining the amount of interest owed to retire the obligation, Wells Fargo treated February, as it did for each of the previous full months of the loan, as one-twelfth of a year, or approximately 30.4 days.” Id. After the trial court granted plaintiffs motion for class action treatment of the lawsuit, defense attorneys moved for summary judgment arguing that “[the] interest calculation was consistent with the terms of the note, federal regulations and the uniform nationwide practice of the mortgage industry, and thus as a matter of law cannot constitute an unfair business practice under the UCL.” Id., at 907. The trial court granted the motion, and the Court of Appeal affirmed.

The multi-state form used by Wells Fargo had been approved by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Company (Freddie Mac). Puentes, at 906. In addition to the disclosures in the promissory note, the Truth in Lending Act (TILA) disclosure stated “[i]f you pay off your loan early you will not receive a refund of the part of the finance charge that you have already paid.” Id. Nonetheless, plaintiffs alleged that they and the putative class members “paid Wells Fargo ‘interest for non-existent days ... in the year of early pay off of their residential mortgage loan.’” Id., at 906-07. Based on their view that the bank’s formulation “resulted in charges for 182.5 days during the five full months of the loan instead of the actual 181 days,” they alleged that Wells Fargo “overcharged them $71.98 in interest for days not actually in the loan period, thereby breaching the promissory note by imposing a yearly interest rate of approximately 6.549 percent.” Id., at 907. The trial court granted the defense motion for summary judgment based on federal preemption, and on its finding that the bank’s interest calculation was reasonable under the terms of the note and “comported with industry standards and was not an unfair business practice.” Id.

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

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Labor Law Class Action Filings Drop But Maintain Grip On Top Spot Of Weekly Class Action Filings In California State And Federal Courts

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 April 4 – 10, 2008, during which time 42 new class action lawsuits were filed. Class actions alleging employment-related claims typically top the list of new class action cases by a wide margin. Last week, for example, 61% of the new class action filings were labor law class actions, while the next nearest category accounted for only 12% of the new class actions filed that week. During the time period covered by this post, 19 new class actions were filed alleging employment-related claims (45% of the total number of new class action lawsuits). Only two other categories managed to break the 10% threshold: class actions alleging violations of California's unfair competition law (UCL) class action cases, which includes class actions alleging false advertising claims, and class actions alleging violations of federal securities laws, each of which had five (5) new filings (12%).

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

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Class Action Defense Cases—In re Saturn: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation In The District of Nebraska

Judicial Panel Grants Plaintiff’s Unopposed Request for Pretrial Coordination of 3 Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Transfers Class Actions to the District of Nebraska

Three class action lawsuits (2 in Illinois and 1 in Nebraska) were filed against General Motors and Saturn Corp. asserting products liability claims based on “allegations that certain Saturn vehicles have defective metal timing chains and oiler nozzles.” In re Saturn L-Series Timing Chain Products Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 19, 2008) [Slip Opn., at 1]. (For the convenience of the reader, a copy of the one of the class action complaints may be found here.) Plaintiff’s lawyer in one of the class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the District of Nebraska; no party responded to the motion. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the moving plaintiff defense that the District of Nebraska was an appropriate transferee forum “because the first-filed action was brought there and it is movant’s unopposed choice.” Id. Accordingly, the Panel ordered the Illinois class actions to be transferred to Nebraska, id.

Download PDF file of In re Saturn L-Series Timing Chain Products Transfer Order

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

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Class Action Defense Discovery Cases-Montoya v. S.C.C.P. Painting: Maryland Federal Court Holds Employer Bank Records Relevant But Discovery Concerning Immigration Status Irrelevant To Class Action Certification Issues

Labor Law Class Action Plaintiffs Entitled to Redacted Bank Records of Putative Class Members because Defendant Lacked other Business Records Relevant to Class Action Numerosity and Commonality Requirements, and Class Action Defense Attorneys Entitled to Information Regarding Specific Terms of Plaintiffs’ Employment Agreements because Relevant to Typicality and Commonality but not Entitled to Information Concerning Immigration Status, Maryland Federal Court Holds

Plaintiffs filed a labor law class action against S.C.C.P. Painting alleging that it “failed to pay wages for all work performed, failed to pay wages for work directed to be performed but not accounted for on timesheets, failed to pay time and a half for hours worked greater than 40 hours, and deducted wages from paychecks, purportedly for tax withholding purposes but not in fact withheld for that purpose.” Montoya v. S.C.C.P. Painting Contractors, Inc., 530 F.Supp.2d 746, 747 (D.Md. 2008). The class action alleged violations of both state and federal law, and sought to proceed both as a class action under Rule 23 and as a collective action under 29 U.S.C. § 216(b), id. As discovery limited to class action certification issues proceeded, disputes arose and each side filed motions to compel discovery. Id., at 747-48. Plaintiffs’ lawyer sought bank records; defense attorneys sought inter alia information concerning plaintiffs’ immigration status and concerning the specific employment agreements between the putative class representatives and defendant. The court granted the plaintiffs’ motion, and granted and denied the defense motion.

The district court first addressed plaintiffs’ request for bank records, which sought documents “reflecting wages paid to any employees.” Montoya, at 748. The court held that information sought was relevant to issues of numerosity and commonality, and that privacy concerns were resolved by plaintiffs’ agreement that the names of the employees may be redacted from the bank records. Id. The court noted that the records were necessary “in light of the absence of other business records,” and that according to defense attorneys “SCCP did not have any payroll records, no information submitted to tax authorities, no tax sheets or sign-in sheets, no personnel files and no documents showing the rates of pay for any person.” Id. Because the company did not have any information necessary to support a motion for class action certification, plaintiffs were entitled to obtain the bank records.

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

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Class Action Defense Cases-CashCall v. Superior Court: California State Court Affirms Trial Court Order Permitting Class Action Plaintiff Who Was Never Member Of Putative Class To Obtain Precertification Discovery Of Actual Class Member Identities

As Matter of First Impression, Request in Class Action for Precertification Discovery by Plaintiffs who Learns They were Never Members of Putative Class is not Automatically Prohibited and Trial Court did not Err in Permitting such Discovery where Wrong Alleged Involved Surreptitious Recording of Telephone Calls so Class Members would not Know Their Privacy Rights had been Violated California State Court Holds

Plaintiffs filed class action against their lender, CashCall, alleging that it secretly and illegally monitored its collection calls in violation of the borrowers’ privacy rights; they subsequently filed an amended class action complaint alleging further that defendant “surreptitiously monitored or eavesdropped on their conversations through a machine or other manner” in violation of California law. CashCall, Inc. v. Superior Court, ___ Cal.App.4th ___, 2008 WL 192282, *1 (Cal.App. January 24, 2008). After discovering that the plaintiffs named in the class action had not had their calls monitored, the class action complaint was further amended to substitute new named plaintiffs, id. However, the new plaintiffs, too, were not members of the putative class so plaintiffs sought precertification discovery for the identities of the apparently 551 members of the putative class action whose calls had been surreptitiously recorded. Id., at 1-2. Defense attorneys argued a bright-line rule exists in class actions that preclude discovery of the identity of class members if the named plaintiffs were never members of the class, id., at *3. The trial court disagreed and defense attorneys petitioned the Court of Appeal for writ relief.

The appellate court summarized plaintiffs’ argument as follows: CashCall disclosed in discovery that it had monitored collection calls at least 551 times but refused to disclose the names or contact information of the borrowers at issue. CashCall, at *2. Plaintiffs argued, “It is the clandestine component that makes [CashCall's] monitoring illegal, and it is that aspect [that] makes it difficult, if not impossible, for a victim to ever learn [his or her] rights were violated.” Id. Absent the requested discovery, “the class action might be dismissed for lack of a suitable class representative and then the one-year statute of limitations” may run, “leaving the actual class members without a remedy for CashCall's violation of their privacy rights.” Id. Plaintiffs argued that the trial court should apply a “balancing test” and “should conclude the rights of the parties (i.e., class members) outweigh any potential abuse of the class action procedure and therefore should order that CashCall disclose the names and contact information of the 551 putative class members.” Id. They relied on Parris v. Superior Court, 109 Cal.App.4th 285, 300-01, which held that in determining whether to grant precertification discovery of the identities of putative members of the class action, the “trial court must…expressly identify any potential abuses of the class action procedure that may be created if the discovery is permitted, and weight the danger of such abuses against the rights of the parties under the circumstances.”

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

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Class Action Defense Cases-Holmgren v. County of Los Angeles: California State Court Affirms Judgment Adverse To Class Action Plaintiffs Holding Engineers Of Firms Under Contract With County Were Not Common Law Employees Of County

Trial Court Properly Entered Judgment for Defense in Class Action by Engineers, Employed by Firms Working under Contract for County, because Engineers were not “Common Law Employees” of County California State Court Holds

Plaintiff-engineers filed a putative class action against the County of Los Angeles alleging that they had been designated improperly as employees of the independent contractors hired to perform work for the County, rather than as employees of the County itself. Holmgren v. County of Los Angeles, ___ Cal.App.4th ___, 71 Cal.Rptr.3d 611, 613 (Cal.App. 2008). As authorized by the California Government Code, Los Angeles outsourced engineering work to two firms: “The engineers were employees of the contracting firms and paid by the contracting firms, and all signed written acknowledgements that they were not employees of the County and not entitled to any of the benefits available to County employees.” Id., at 612. Nonetheless, plaintiffs filed the class action complaint alleging that they were “common law employees” of the County and, as such, entitled to benefits under the County’s retirement plan. Id., at 612-13. The “theme” of the class action complaint was that even though plaintiffs were paid by the independent contractor and designated as a contract employees, they had been “screened, interviewed, and effectively hired by the County; worked solely on County business; had [their] salary fixed by the County; [were] subject to the direct supervision and control of the County; and used County facilities, equipment and supplies to perform County business.” Id., at 613-14. The class action further alleged that plaintiffs performed the same work as, and worked side-by-side with, “recognized County employees,” but for lower pay and without receiving the benefits of County employees. Id., at 614. The trial court granted plaintiffs’ motion for class action treatment of the lawsuit, id., but decided three critical “threshold” issues in favor of the County that effectively eviscerated the class action, see id., at 614-15. Accordingly, plaintiffs stipulated to entry of judgment in favor of the County and appealed, id., at 615. The Court of Appeal affirmed, holding that the engineers were not County employees.

The facts underlying the class action claims were as follows: The County entered into “Master Agreements” with two firms for engineering services pursuant to which each firm would supply the County with the firm’s own employees, bill the County for work performed, and receive payment from the County. The Master Agreement provided that each firm was “solely liable” for the compensation and benefits of their employees, and expressly prohibited the County from soliciting the firms’ engineers. Holmgren, at 613. The named plaintiffs in the putative class action each acknowledged, in writing, that they were not County employees and that they “do not have and will not acquire any rights or salary benefits of any kind from the County of Los Angeles by virtue of my performance of work [for the County].” Id. and n.1. The class action alleged that plaintiffs were “temporary” or “leased” employees, entitled to County benefits, id., at 613.

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

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HP Class Action Defense Cases–Indiana Electrical Workers v. Dunn: California Federal Court Grants Defense Motion To Dismiss Class Action Challenging $21.4 Million Severance Package Hewlett-Packard Paid Former CEO Fiorina

Class Action Derivative Claims Challenging Severance Package Paid by HP to Former CEO Dismissed for Failure to Make Requisite Demand on Board and Failure to Establish Futility California Federal Court Holds

Plaintiffs filed a class action against Hewlett-Packard, its former chief executive officer, Carleton Fiorina, and various other individual defendants challenging the severance package HP paid Fiorina. Indiana Electrical Workers Pension Trust Fund v. Dunn, ___ F.Supp.2d ___ (N.D. Cal. March 28, 2008) [Slip Opn., at 1-2]. The class action complaint outlined Fiorina’s role in HP’s merger with Compaq, over board member Walter Hewlett’s vigorous opposition, and alleged that Fiorina and HP used knowingly false financial projections to secure approval of the merger. Id., at 2-3. The class action also alleged that after the merger was characterized as a failure, HP fired Fiorina and paid her more than $40 million in benefits, including a $21.4 million severance package that, plaintiffs allege, was aimed at “mak[ing] sure that Fiorina kept quiet about the Compaq merger debacle.” Id., at 3. The second amended class action complaint charges that Fiorina’s severance package were ‘far in excess” of “the express terms of the Company’s Severance Policies,” id. The gravamen of the complaint was that Fiorina termination was “involuntarily” and, accordingly, “she was not entitled to any accelerated vesting of payments under HP’s Long-Term Performance Cash (‘LTPC’) Program.” Id., at 3-4. Defense attorneys for HP and the individual defendants moved to dismiss the class action; the district court granted the motion.

The defense motion to dismiss the class action advanced two main arguments. First, defense attorneys argued that the class action complaint’s derivative claims failed because plaintiffs never made the requisite demand on HP’s board of directors. Dunn, at 8. The district court explained that “[a] shareholder seeking to vindicate the interests of a corporation through a derivative suit must first demand action from the corporation's directors or plead with particularity the reasons why such demand would have been futile.” Id., at 8-9 (citing In re Silicon Graphics Inc. Securities Litig., 183 F.3d 970, 989-90 (9th Cir. 1999)). Because the laws of the state in which HP is incorporated govern whether it would be futile to make the requisite demand and because HP is incorporated in Delaware, the court analyzed futility under Delaware law. Id., at 9. Based on its detailed factual analysis, the district court rejected plaintiffs’ counter that making the requisite demand on the board would have been futile. See id., at 9-14. The district court also concluded that the business judgment rule insulates the board’s decision to pay Fiorina the $21 million severance. Id., at 14. The court explained at pages 14 and 15 that it was incumbent upon plaintiffs to “allege facts sufficient to rebut a presumption that the decision was a result of a valid exercise of business judgment.” Based on the federal court’s analysis, plaintiffs failed to rebut this presumption, see id., at 15-17, and failed to establish that the board’s acts were ultra vires, see id., at 17-21.

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

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ERISA Class Action Defense Cases–Adams v. IBM: New York Federal Court Grants Defense Motion To Dismiss ERISA Class Action Finding Res Judicata Barred Class Action Against Plan And Plan Administrator

ERISA Class Action Barred by Plaintiff’s Prior Lawsuit Against IBM thus Supporting Defense Motion to Dismiss Class Action New York Federal Court Holds

Plaintiff filed a putative class action in New York against his former employer’s pension plan and its administrator alleging violations of ERISA (Employee Retirement Income Security Act of 1974) by failing to pay him plan benefits. Adams v. IBM Personal Pension Plan, 533 F.Supp.2d 342, 343 (S.D.N.Y. 2008). Defense attorneys moved to dismiss the class action on the grounds that res judicata barred plaintiff’s claim “as the result of Adams's prior action in the United States District Court for the Northern District of Georgia, in which the court granted the summary judgment motion filed against Adams by IBM, the only defendant in that action.” Id. Plaintiff’s lawyer argued that res judicata did not bar the current class action because the prior lawsuit was against IBM, not the plan or the plan’s administrator, id. Because the parties in the two actions differed – IBM in the Georgia action, and the Plan and Plan Administrator in the New York action – the only way res judicata would apply would be “if the Court finds either that the Plan and Plan Administrator are ‘privies’ of IBM, or that an exception to the mutuality requirement for res judicata applies.” Id. Because the federal court found that IBM, and the Plan and Plan Administrator, are “closely related,” it held that res judicata applied. Id., at 344. Specifically, the prior action alleged the “same misconduct” and it appears that plaintiff erred in filing his first lawsuit against IBM rather than the plan and its administrator, id. The district court concluded at page 344, “In these circumstances, and particularly where the party seeking to avoid claim preclusion was the plaintiff in the prior action and the sole source of the error in naming the incorrect party, res judicata should bar the plaintiff from gaining a second opportunity to litigate the very same claims, even where complete identity between the parties is lacking.” Accordingly, the court granted the motion to dismiss the class action, id.¸at 345.

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

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Employment-Related Class Action Lawsuits Command Top Spot On 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 28 – April 4, 2008, during which time 49 new class action lawsuits were filed. It is a rare week in which labor law class action cases do not lead this list, and during this past week 30 new class actions were filed alleging employment-related claims (61% of the total number of new class action lawsuits). Only one other category even 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 six (6) new filings (12%).

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

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Copycat Class Action Filed Against Starbucks In New York Following $100+ Million Class Action Judgment In California

Second Circuit Rules District Court Erred in Certifying Class Action because Individual Proof of Reliance on Tobacco Companies’ Marketing of “Light” Cigarettes would be Required

Steven Greenhouse of The New York Times reports today that a copycat lawsuit has been filed in New York federal court against Starbucks seeking damages arising out of the company policy of sharing store tips with shift supervisors. The class action, filed by a former barista, comes hot on the heels of a $105 million California class action judgment against Starbucks. (Our summary of that judgment may be found here.) Mr. Greenhouse quotes plaintiffs’ counsel as admitting that the New York class action “mak[es] literally the same pitch as was made in the California case.” Starbucks has vowed to appeal the California judgment. Starbucks insists that shift supervisors are essentially baristas and therefore may share in customer tips. The New York Times quotes a company statement that “Shift supervisors are not managers and have no managerial authority.”

Mr. Greenhouse’s article, entitled “Starbucks Sued in New York Over Tip Issue,” may be found in Section B of the April 4, 2008 edition of The New York Times.

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

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Second Circuit Reverses District Court Certification Of Class Action Against Tobacco Companies In “Light Cigarette” Class Action Case

The Los Angeles Times reports today on the Second Circuit opinion reversing class action certification of a fraud under RICO class action against various tobacco companies. (Our initial news on this opinion may be found here, and our summary of the Circuit Court opinion may be found here.) The Los Angeles Times notes that the damages sought by the class action “theoretically could have ballooned to as much as $800 billion,” and quotes a defense attorney as noting that the decision has “tremendous significance” due to its potential impact on numerous similar class action lawsuits pending in other state and federal courts.

The article, entitled “Light cigarette smokers lose class-action status,” may be found in the Business Section of the April 4, 2008 edition of the Los Angeles Times.

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

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Second Circuit Court of Appeals Reverses District Court Order Certifying Class Action Against Tobacco Companies In “Light” Cigarettes Case Holding that Individual Proof of Reliance on Defendants’ Marketing Precluded Class Action Treatment

Chad Bray and Anjali Cordeiro of The Wall Street Journal report today on the Second Circuit ruling that reverses class action certification in a tobacco lights case. (Our news report may be found here, and our summary of the Second Circuit opinion may be found here.) Noting that the class action sought “$280 billion in damages, which could be tripled to more than $800 billion if the smokers’ federal racketeering claims are granted,” the Circuit Court concluded that “difference[s] in plaintiffs’ knowledge and levels of awareness made it difficult to establish a common reliance by the entire class of smokers on the cigarette maker’s marketing.” The lower court had agreed with plaintiffs that the tobacco company defendants had misled the public into believing that “light” cigarettes were less harmful than regular cigarettes, but the Court of Appeals agreed with defense attorneys that individual issues predominate over common issues. The Wall Street Journal summarizes the defense claim that “the issues were so individualized for each brand or each smoker’s own circumstances that the case couldn’t be effectively grouped in such a class.” The article also quotes from the Circuit Court opinion, “Each plaintiff in this case could have elected to purchase light cigarettes for any number of reasons, including a preference for the taste and a feeling that smoking lights was ‘cool.’”

The article, entitled “Tobacco Firms Score Victory As Class-Action Suit is Denied,” may be found on page B3 of the April 4, 2008 edition of The Wall Street Journal.

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

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District Court Erred In Certifying Class Action Against Tobacco Companies In “Light” Cigarettes Case Second Circuit Holds

Second Circuit Rules District Court Erred in Certifying Class Action because Individual Proof of Reliance on Tobacco Companies’ Marketing of “Light” Cigarettes would be Required

Stephanie Saul of The New York Times reports today on a “victory for the tobacco industry” – the Second Circuit opinion reversing class action certification of “an $800 billion class-action lawsuit on behalf of smokers who said they had been misled that light cigarettes were safer than regular ones.” (Our initial report on that decision may be found here, and our summary of the Circuit Court opinion may be found here.) Ms. Saul notes that the Second Circuit concluded it would not be possible “to generalize about why smokers chose light cigarettes.” And while the ruling may potentially impact some of the numerous similar class action lawsuits pending in other state and federal courts, the Times explains that the basis of this particular class action was not that smokers suffered personal injury from smoking “light” cigarettes, but rather that they suffered economically because had they known that “light” cigarettes were just as harmful as regular cigarettes, smokers would have purchased the less expensive, regular cigarettes. Ms. Saul notes also that many cases are waiting for the United States Supreme Court to weigh in on the issue, as a decision out of Maine is presently pending before the High Court.

Ms. Saul’s article, entitled “Appeals Court Panel Throws out Class Action Over Light Cigarettes,” may be found in Section C of the April 4, 2008 edition of The New York Times.

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

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Cigarette Class Action Defense Cases–McLaughlin v. Philip Morris: Second Circuit Reverses Certification Of Class Action Alleging Deceptive Advertising Of "Light" Cigarettes Holding Individual Questions of Reliance Predominate

Class Action Alleging Fraud Under RICO in Advertising of Light Cigarettes Fails to Satisfy Prerequisites for Class Action Certification Under Rule 23 because Individual Issues Predominate Second Circuit Holds

Judge Jack Weinstein of the United States District Court for the Eastern District of New York certified a class action against Philip Morris USA, R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co., Ligget Group, American Tobacco Co., Altria Group, and British American Tobacco; the underlying class action complaint alleged the tobacco companies duped smokers into believing that “light” cigarettes were less harmful to them. <i>See Schwab v. Phillip Morris USA, Inc.</i>, 449 F.Supp.2d 992 (E.D.N.Y. 2006). We have previously reported on the district court’s 540-page opinion in that class action, and a copy of that summary may be found here. The theory underlying the class action was that defendants deceived smokers “by convincing them that smoking ‘light’ cigarettes was safer for their health.” 449 F.Supp.2d at 1018. As the Second Circuit explained, the class action claims were “brought as based in fraud under the Racketeer Influenced and Corrupt Organizations Act (RICO)…, but under RICO, each plaintiff must prove reliance, injury, and damages.” McLaughlin v. Philip Morris USA, Inc., ___ F.3d ___ (2d Cir. April 3, 2008) [Slip Opn., at 4]. Accordingly, the Circuit Court reversed class action certification, finding that “Plaintiffs’ putative class action suffers from an insurmountable deficit of collective legal or factual questions.” Id.

The district court based its certification of the class action on its belief that there was “evidence of fraud on the class appears to be quite strong”: “If, as contended by plaintiffs, a huge fraud was perpetrated on tens of millions of people causing them billions of dollars in loss—measured largely by the difference between the value people were led to believe they were getting when they bought ‘light’ cigarettes for safety, and what they received, a non-safe product—recovery dependent on proof should be allowed.” Schwab, at 1021. The district court explained at page 1018:

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

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Breaking News--Second Circuit Reverses Class Action Certification Against Philip Morris In "Light Cigarettes" Class Action Case

We have previously reported on the 540-page district court opinion certifying a class action against Philip Morris USA alleging fraud under the Racketeer Influenced and Corrupt Organizations Act (RICO) arising out of the advertising and sale of "light cigarettes." See Schwab v. Phillip Morris USA, Inc., 449 F.Supp.2d 992 (E.D.N.Y. 2006). That articule may be found here. The Second Circuit today reversed that district court opinion because "under RICO, each plaintiff must prove reliance, injury, and damages." Slip Opn., at 4. The Circuit Court held that the requirements for class action certification under Rule 23(b)(3) could not be met because individual questions predominate. Id., at 9.

We will post an article on the Second Circuit opinion tomorrow morning, but the interested reader may find the circuit court opinion below.

Download PDF file of McLaughlin v. Philip Morris USA, Inc.

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

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FedEx Class Action Defense Cases–In re FedEx Ground: Indiana Federal Court Grants Class Action Treatment In 19 Labor Law Class Action Cases Alleging Misclassification Of Pickup/Delivery Drivers But Denies Certification In 9 Other Class Actions

In Considering Class Action Certification in 28 Labor Law Class Action Lawsuits Centralized by the Judicial Panel on Multidistrict Litigation, 19 Cases Satisfied Class Action Prerequisites but 9 other Putative Class Actions would Require Individualized Inquiries Sufficient to Defeat Class Action Treatment Indiana Federal Court Holds

Numerous class action lawsuits were filed against FedEx Ground alleging that the company misclassified its pickup and delivery drivers as independent contractors rather than employees; the Judicial Panel on Multidistrict Litigation consolidated the class actions in the Northern District of Indiana, and the plaintiffs in the class action cases characterized as “Wave 1,” “Wave 2” and “Wave 3” moved the district court for class action certification. In re FedEx Ground Package System, Inc., Employment Prac. Litig., ___ F.Supp.2d ___ (N.D. Ind. March 25, 2008) [Slip Opn., at 1]. As the federal court summarized, these class action plaintiffs “assert that although FedEx Ground represents to its drivers that they are only partnering with FedEx Ground and will essentially own their own businesses, all FedEx Ground drivers sign the FedEx Ground Operating Agreement, which actually reserves to FedEx Ground the right to exercise pervasive control over the method, manner, and means of the drivers’ work,” id. FedEx opposed class action treatment, arguing that “the plaintiffs’ claims turn on individualized issues, including whether contractors should be classified as employees under the states’ statutory tests, and whether any individual contractor can meet the high bar for rescission of his individual contract.” Id., at 2. In a 164-page opinion, the district court certified the Wave 1, Wave 2 and Wave 3 cases as class actions with respect to cases involving drivers from Alabama, Arkansas, California, Florida, Indiana, Kentucky, Maryland, Minnesota, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, West Virginia and Wisconsin; the court denied class action treatment for drivers from Illinois, Iowa, Massachusetts, Michigan, Mississippi, Missouri, Montana, South Dakota and Virginia. Id., at 3. The district court noted that it had previously granted class action certification with respect to drivers from Kansas, id., at 9, bringing to 20 the total number of states for which class action treatment has been approved.

Given the extraordinary length and detail of the district court opinion, we provide here only a broad outline of its holdings. Because it had previously granted class action treatment on behalf of the Kansas drivers, the district court used its prior ruling as a benchmark against which it considered the new class action certification motions. In re FedEx Ground, at 9. The court held that class action complaints containing only former drivers as named-plaintiffs could still proceed as class actions on behalf of former and current drivers because “courts have held that former employees have standing to represent a class consisting of both current and past employees.” Id., at 10 (citations omitted); see also, e.g., id., at 24-25 and 30. But with respect to defense attorney efforts to defeat class action treatment on the ground that individual inquiries would be required to determine whether the Operating Agreements were valid and the manner and extent to which the “right to control” will impact the validity of the Operating Agreements, the federal court rejected this argument with respect to the laws of certain states, see, e.g., id., at 14-16 (Tennessee), 25-27 (Arkansas) and 39-42 (Texas), but agreed with FedEx Ground that common questions would not predominate under the laws of other states, see, e.g., id., at 18-20 (Montana), 20-23 (Mississippi) and 80-84 (Michigan). For example, with respect to the Missouri putative class action, the district court explained that class action certification was not warranted because “Whether FedEx Ground has the right to control its drivers within the meaning of Missouri agency law cannot be resolved by simple reference to the Operating Agreements and corporate policies.” Id., at 105. Rather, “Missouri courts define the ‘right to control’ with reference to the actual exercise of control, [citation], which will require a driver-by-driver, terminal-by-terminal, supervisor-by-supervisor analysis that is unnecessary in most other states.” Id., at 105-06. This presented the primary basis for the difference among states for which the court certified class actions and states for which it denied motions for class certification.

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Posted On: April 2, 2008 by Michael J. Hassen Email This Post

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Class Action Defense Cases-Pfeiffer v. Himax: California Federal Court Denies Defense Motion To Transfer Securities Fraud Class Action To New York

Defendant in Securities Fraud Class Action Failed to Establish Grounds to Transfer Class Action to New York, Particularly in Light of Defendant’s Waiver in Deposit Agreement to Right to Challenge Venue California Federal Court Holds

Plaintiffs filed a class action in California federal court against Himax Technologies alleging securities fraud in connection with the initial public offering of Himax stock; a related class action, entitled Oh v. Chan, CV 07-4891 DDP (AJWx), also has been filed, and a motion seeking “to certify a securities class action for substantially similar claims” is pending in that action. Pfeiffer v. Himax Technologies, Inc., 530 F.Supp.2d 1121, 1122-23 (C.D. Cal. 2008). Defense attorneys filed a motion to transfer the class action to the Southern District of New York pursuant to 28 U.S.C. § 1404(a); plaintiffs in both class actions filed a competing motion, seeking to consolidate the putative class actions. Id., at 1123. Plaintiffs opposed the motion to transfer venue, and the Oh plaintiffs filed papers also opposing transfer, id. The district court denied the motion to transfer venue.

By seeking to transfer the class action to New York under § 1404(a), defense attorneys argued that “the convenience of parties and witnesses” warranted transfer, and that such transfer would “promote the interests of justice.” Pfeiffer, at 1123. The district court explained at page 1123, “The parties do not dispute that venue would be proper in this district or in the Southern District of New York, nor do they dispute the Southern District of New York's jurisdiction. The parties contest whether transfer of venue will serve the convenience of the parties and witnesses, and promote the interests of justice.” Preliminarily, the district court agreed that plaintiffs’ “choice of forum” was entitled to “only minimal consideration” in this case, because “[t]his is a purported class action lawsuit where Plaintiffs do not reside in the district, the facts did not occur in the district, and the district does not have a local interest in the action.” Id., at 1124. It thus found that “[t]hese factors weigh in favor of transfer of venue.” Id. The federal court further concluded that “convenience to the witnesses and parties” did not “favor either forum.” Id. Nonetheless, based on the court’s analysis of the various factors implicated by venue transfer motions, see id., at 1123-26, it concluded at page 1126 that “the permissive forum selection clause is insufficient to warrant transfer where the IPO documents specifically contemplate Himax's waiver of any challenges to venue in any state or federal court.” Accordingly, it denied the motion to transfer, id. at 1126.

NOTE: The district court quoted the following language from the deposit agreement: “The Company irrevocably and unconditionally waives to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any actions, suits or proceeding brought in any court provided in this Section 7.6, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suits or proceeding brought in any such court has been brought in an inconvenient forum.” Pfeiffer, at 1125. In conjunction with other language in the deposit agreement, the district court concluded that “the deposit agreement contains a waiver to Himax challenging venue in any such action in federal court by a shareholder.” Id.

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

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Class Action Defense Cases–Allen v. Holiday Universal: Pennsylvania Federal Court Certifies Class Action Against Health Clubs Alleging Excessive Membership Fees In Violation Of State Law But Denies Class Action Treatment Of Unjust Enrichment Claim

Class Action Treatment Warranted for Class Action Claims Against Health Clubs based on Violations of State Law but not as to Class Action Complaint’s Unjust Enrichment Claim Pennsylvania Federal Court Holds

Plaintiffs filed a putative class action in Pennsylvania state court against three health clubs (Holiday Universal, Scandinavian Health Spa and Bally Total Fitness) alleging violations of Pennsylvania’s Health Club Act and Unfair Trade Practices and Consumer Protection Law (UTPCPL); defense attorneys removed the class action to federal court. Allen v. Holiday Universal, ___ F.Supp.2d ___ (E.D. Pa. March 11, 2008) [Slip Opn, at 1]. The class action complaint alleged that plaintiffs entered into “Retail Installment Contract” prepared by defendants that required payment of a membership fee ($632 for one of the named plaintiffs, which she financed at 17.50% interest, and $1275 for the other named plaintiff, which he financed at 13% interest) and monthly dues; the health club memberships renewed automatically. Id., at 3. The theory underlying the class action was that the health clubs charged “grossly excessive initiation fees” in violation of Pennsylvania state law. Id. Plaintiffs moved the district court to certify the litigation as a class action, id., at 2; defense attorneys opposed the motion. The federal court found the elements of Rule 23 satisfied and granted plaintiffs’ request for class action treatment.

The defense first argued that the definition of the proposed class was overly broad because it included within its sweep individuals who suffered no damage because they wanted, accepted and benefited from the health club memberships. Allen, at 6-8. The district court disagreed, holding that if the initiation fees were excessive under Pennsylvania law then every member of the proposed class action suffered damage, regardless of whether they wanted and utilized the health club services, id., at 8. The district court also rejected a claim that the class action’s definition of the class was improper because it created a “‘fail/safe’ class, that is, membership in a portion of the Class depends upon a finding for Plaintiffs’ on the merits.” Id., at 15. In essence, the defense argued that inclusion in the class turned on whether a particular health club was owned by defendant Bally Holding; plaintiffs countered that club ownership was not the “central issue of liability” presented by the class action and, accordingly, there was no improper “fail/safe” class. Id., at 15-16. The district court agreed with plaintiffs, and noted that “the question of whether any particular health club in Pennsylvania is owned by the Health Clubs is a question of fact not central to the question of liability and easily answered through further discovery.” Id., at 16. However, the federal court made it clear that it “expect[ed] the parties to promptly clarify any remaining confusion as to this issue.” Id. (The court also rejected a “ratification” argument, but that is not summarized here. See id., at 8-15.)

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