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

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Employment-Related Class Action Lawsuit Filings Drop But Labor Law Class Actions Retain Top Spot 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 May 23 – 29, 2008, during which time 48 new class action lawsuits were filed. Typically, labor law class action lawsuits top the list of new class action filings by a wide margin. This past week, the number of new employment-related class action lawsuits filed in California dropped, from 30 during the prior reporting period to 23, but this still represented 48% of the total number of new class actions filed this past week...more than enough to retain the top spot. Like last week, the only other class action category to meet the 10% threshold alleged violations of California Unfair Competition Law (UCL), which includes false advertising claims, with 9 new filings (19%).

Posted On: May 30, 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 Defense Motion To Centralize Class Action Litigation In Southern District of New York

Judicial Panel Grants Defense Motion, Unopposed by Any Class Action Plaintiff, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Centralizes Class Actions in Southern District of New York

Four class action lawsuits – two in New York, one in Tennessee and one in Texas – were filed against defendants PepsiCo and Pepsi Bottling Group alleging that defendants “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 Practices Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 7, 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; no plaintiff in any of the class actions opposed the motion. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, explaining at page 1: “Centralization under Section 1407 will eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel and the judiciary.” The Judicial Panel also agreed that the Southern District of New York was the appropriate transferee court “because two of the four actions are already pending there and, by centralizing them before Judge Charles L. Brieant, we are assigning the litigation to a jurist who has the experience to steer it on a prudent course.” Id.

Download PDF file of In re PepsiCo, Inc., Bottled Water Marketing & Sales Practices Litigation Transfer Order

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

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Class Action Defense Removal Cases–Gerlinger v. Amazon.com: Ninth Circuit Affirms Dismissal Of Antitrust Class Action Because Plaintiff Lacked Standing To Pursue Class Action

Antitrust Class Action Properly Dismissed with Prejudice because Plaintiff Failed to Establish Injury-in-Fact Required for Article III Standing to Prosecute Class Action Ninth Circuit Holds

Plaintiff filed a putative class action against Amazon.com and book-seller Borders Group alleging antitrust violations; the class action complaint alleged that, following unsuccessful attempts to operate its own online website, Borders entered into an agreement with Amazon to “direct[] shoppers to what is known as a mirror website, a site hosted by Amazon.” Gerlinger v. Amazon.com Inc., ___ F.3d ___ (9th Cir. May 27, 2008) [Slip Opn., at 6029-30]. The class action alleged that Amazon would sell and ship the books, but Borders would receive a commission for each book sold. Id., at 6030. The class action complaint alleged further that Borders agreed to abandon “direct participation in the online market” during the life of its agreement with Amazon. Id. Plaintiff’s theory was that this agreement constituted a “per se market allocation” agreement in violation of the Sherman Act. Id. Defense attorneys moved for summary judgment; in part, the defense motion was supported by a declaration establishing that book prices on Amazon’s website declined following the agreement between Amazon and Borders. Id. The district court sought supplemental briefing as to whether plaintiff had standing to prosecute the class action complaint, and ultimately dismissed the class action on the ground that plaintiff had suffered no injury. Id., at 6030-31. The Ninth Circuit affirmed.

The governing law is simple and well-settled: “Article III standing…is a jurisdictional prerequisite to the consideration of any federal claim,” and “Article III standing requires proof of injury-in-fact, causation, and redressibility.” Gerlinger, at 6031 (citations omitted). Defense attorneys established that plaintiff had not suffered any injury. On the contrary, defense declarations established that “the prices [plaintiff] paid for books purchased from Amazon after the agreement became effective were the same, or even lower, than the prices listed before the defendants entered into the agreement.” Id., at 6030-31. Plaintiff, by contrast, presented no evidence in support of his claim that “prices would have been even lower if there had been no agreement.” Id., at 6031. The Circuit Court concluded that, based on the evidence presented, plaintiff was obligated to “show some injury,” id., at 6032. He failed to do so. Id. Accordingly, the district court properly dismissed the antitrust class action with prejudice for lack of Article III standing, id., at 6033.

Download PDF file of Gerlinger v. Amazon.com Inc.

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

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Time Warner Class Action Defense Cases–Clark v. Time Warner: Ninth Circuit Affirms "Primary Jurisdiction" Dismissal of Class Action And Referral To FCC Of Issue Central To Class Action Complaint

District Court Dismissal of Class Action Complaint and Referral to Federal Communications Commission (FCC) of “Novel and Technical Question” of Issue Central to Class Action Claims was Proper Ninth Circuit Holds

Plaintiff filed a putative class action against Time Warner Cable alleging that it engaged in the practice of “slamming” in violation of 47 U.S.C. § 258(a); the class action complaint alleged further the Time Warner violated the parallel state statute. Clark v. Time Warner Cable, 523 F.3d 1110, 1112 (9th Cir. 2008). The class action advanced also state law claims, as well as RICO (Racketeer Influenced and Corrupt Organizations Act), id. According to the class action’s allegations, defendant telephoned plaintiff marketing a digital phone package; the package utilized Voice over Internet Protocol (VoIP) technology, rather than “the traditional public switched telephone network (PSTN). Id. Plaintiff alleges she rejected the invitation, but defendant disconnected her existing telephone service and sent a technician to install her new service. Id. Defense attorneys moved to dismiss the class action on the grounds that the FCC had not yet decided whether § 258(a) applies to VoIP providers as well as a “telecommunications carriers.” Id., at 1112-13. In addition to referring the § 258(a) class action claim to the FCC, the district court dismissed, without prejudice, plaintiff’s remaining claims. Id., at 1113. The Ninth Circuit affirmed.

The Circuit Court explained that this appeal presents the issue of “whether the doctrine of primary jurisdiction permits a district court to refer a claim raising a novel and technical question of federal telecommunications policy to the Federal Communications Commission for its consideration in the first instance.” Clark, at 1112. “The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency.” Id., at 1114. Put simply, the Telecommunications Act of 1996 “imposes a variety of obligations on telecommunications carriers,” id., at 1113, and expressly prohibits “slamming” – “the practice in which a telecommunications carrier switches a consumer's telephone service without the consumer's consent,” id., at 1112. Specifically, § 258(a) states that “[n]o telecommunications carrier shall submit or execute a change in a subscriber's selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the [FCC] shall prescribe” (italics added). The Ninth Circuit explained at pages 1113 and 1114:

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

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Class Action Defense Issues–New York Attorney General Wins “Class Action” Against Dell Alleging Fraud, False Advertising And Deceptive Business Practices

In May 2007, New York State Attorney General Andrew Cuomo filed a lawsuit against Dell and Dell Financial Services (collectively “Dell”) on behalf of New York residents alleging that it advertised “attractively priced computer packages, promotional financing that typically features a no interest and/or no payment period, large rebates, and free or upgraded accessories,” but that “many of the benefits and inducements featured in Dell's advertisements are illusory.” A copy of the lawsuit may be found here. New York’s Attorney General today announced that it won this lawsuit, obtaining a court finding that “Dell has engaged in repeated misleading, deceptive and unlawful business conduct, including false and deceptive advertising of financing promotions and the terms of warranties, fraudulent, misleading and deceptive practices in credit financing and failure to provide warranty service and rebates.” A copy of the trial court’s order and decision may be found here.

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

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Privacy Class Action Defense Cases–TJX v. Superior Court: California Court Holds One-Year Limitations Period Applies To Class Action Complaint Under Song-Beverly Act And Class Action Complaint Cannot Include Merchandise Return Transactions

Class Action Alleging Violations of California’s Song-Beverly Act Limited by One-Year Statute of Limitations Period and cannot Encompass Customers from Whom Information was Sought as Part of Merchandise Return Transactions because Song-Beverly does not Apply to Returns, only Point of Sale, California State Court Holds

Plaintiffs filed a putative class action against TJX, TJ Maxx, Marshalls and other defendants alleging violations of California’ Song-Beverly Act, Civil Code § 1747 et seq., which prohibits businesses from requiring customers to provide certain personal information in connection with credit card purchases, and which “bans the use of forms that facilitate the obtaining of such information”; the class action complaint purported to represent individuals who had made credit card purchases over the prior three-year period, and the class action purported to seek damages on behalf of customers from whom information was requested as part of merchandise return transactions. TJX Cos., Inc. v. Superior Court, ___ Cal.App.4th ___, 77 Cal.Rptr.3d 114, 2008 WL 213132573, *1 (Cal.App. May 22, 2008). Defense attorneys demurred to the class action complaint on the grounds that “customers who returned merchandise were not covered under section 1747.08,” and sought to strike those portions of the class action complaint that sought to define the class as extending back three years. Id. The trial court overruled the demurrer and motion to strike. Defense attorneys sought petitions for mandate from the appellate court, and the appellate court reversed.

With respect to the limitations period, Song-Beverly provides for statutory penalties “not to exceed two hundred fifty dollars ($250) for the first violation and one thousand dollars ($1,000) for each subsequent violation.” Cal. Civ. Code, § 1747.08(e). Plaintiffs’ lawyer argued that this provision constitutes a “liability created by statute, other than a penalty or forfeiture,” so as to fall within the three-year statute of limitations set forth in California Code of Civil Procedure section 338. TJX, at *3. Defense attorneys, however, argued that the class action’s Song-Beverly Act claims constitute “[a]n action upon a statute for a penalty,” and thus fall within the one-year statute of limitations set forth in California Code of Civil Procedure section 340. Id. The appellate court sided with the defense. It explained that while the amount of penalty to be set in the event of a violation is within the sound discretion of the trial court, “[p]resumably…span[ning] between a penny (or even the proverbial peppercorn we all encountered in law school) to the maximum amounts authorized by the statute,” it does not have discretion to deny awarding damages entirely. Id., at *2-*3. Because the trial court must impose a penalty in the event of a violation, the class action complaint falls within the scope of section 340 and is subject to a one-year limitations period. Id., at *3-*4. Accordingly, the Court of Appeal granted the petition for writ of mandate as to the motion to strike those portions of the class action complaint seeking to impose liability on defendants for more than one year. Id., at *6.

Continue reading "Privacy Class Action Defense Cases–TJX v. Superior Court: California Court Holds One-Year Limitations Period Applies To Class Action Complaint Under Song-Beverly Act And Class Action Complaint Cannot Include Merchandise Return Transactions" »

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

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HAPPY MEMORIAL DAY FROM THE CLASS ACTION DEFENSE BLOG

The author of the Class Action Defense Blog wishes all of you a very happy Memorial Day. A new class action article, summarizing the recent California Court of Appeal opinion discussing California's Song-Beverly Act, will be published tomorrow.

Posted On: May 24, 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 May 16 – 22, 2008, during which time 47 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, 30 new class actions were filed alleging employment-related claims (64% 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 (11%).

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

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

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 over Defense Objection

Two class action lawsuits – one in Illinois and one in Pennsylvania – were filed in against defendants Texas Roadhouse Holdings LLC and Texas Roadhouse, Inc., for violations of the Fair and Accurate Credit Transactions Act (FACTA), alleging that defendants printed information on credit card and debit card customer receipts that FACTA required be excluded therefrom. In re Texas Roadhouse Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 7, 2008) [Slip Opn., at 1]. Plaintiff’s lawyer in the Pennsylvania class action 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 Northern District of Illinois; plaintiff in the Illinois class action supported the motion. Id. Defense attorneys opposed pretrial coordination, and alternatively filed motions under 28 U.S.C. § 1404 to transfer the class actions to Kentucky, id. The Judicial Panel granted the motion to centralize the class action lawsuits, explaining at page 1: “Common discovery is likely, as defendants have suggested that discovery related to their credit and debit card receipt policies will be company-wide. Centralization under Section 1407 will eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.” The Judicial Panel also agreed that the Northern District of Illinois was the appropriate transferee court. Id., at 1-2.

Download PDF file of In re Texas Roadhouse Fair & Accurate Credit Transactions Act (FACTA) Litigation Transfer Order

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

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FCRA Class Action Defense Cases–Sullivan v. Greenwood Credit Union: In Case Of First Impression First Circuit Affirms Summary Judgment In Favor Of Defense In FCRA Class Action Holding Creditor’s Letter Was A “Firm Offer” Under FCRA

Affirming Summary Judgment in Favor of Defense in Class Action Alleging Violations of FCRA (Fair Credit Reporting Act), Class Action Complaint Properly Dismissed because, as Matter of First Impression, Offer of Credit Satisfies FCRA if Creditor will not Deny Credit to Consumers who Meet Pre-Selection Criteria First Circuit Holds

Plaintiff filed a putative class action against Greenwood Credit Union alleging violations of the Fair Credit Reporting Act (FCRA) arising out of “an unsolicited letter to a consumer about the offering of credit for a home loan.” Sullivan v. Greenwood Credit Union, 520 F.3d 70, 71 (1st Cir. 2008). Greenwood had purchased credit reports for purposes of pre-screening individuals, and then sent home loan offers to “a list of individuals meeting certain minimal credit requirements”: the class action complaint alleged that the unsolicited letters fall within the FCRA and that consumer credit information had been obtained for an improper purpose; defense attorneys argued that the FCRA permits obtaining credit reports for various purposes, including extending a “firm offer of credit.” Id. The First Circuit explained at page 71, “This case is about plaintiff's efforts to collect that statutory penalty for a class of consumers; there is no claim [he] was wrongfully denied credit.” The thrust of the class action claims was that the offer of credit “was based on such minimal criteria and the actual extension of credit was so contingent on other conditions that the letter could not be a firm offer of credit.” Id. Defense attorneys moved for summary judgment on the class action complaint, and the district court granted the motion. As a matter of first impression in the First Circuit, the Circuit Court considered the phrase “firm offer of credit” and affirmed.

Defense attorneys argued that Greenwood limited its offer of credit to homeowners “having at least $10,000 in revolving debt and a credit score of 500 or greater.” Sullivan, at 71. Greenwood did not obtain a consumer’s entire credit report; rather, it obtained from the credit reporting agency only contact information for consumers who met these criteria. Id., at 71-72. Greenwood then sent consumers a letter offering them, for a limited time, loans up to 100% of the value of their home at “some of the lowest rates in decades”; however, the letter did not provide the interest rate being offered, nor did it state the duration of the loan. Id., at 72. The letter noted, however, “Limited time offer to customers who qualify based on equity, income, debts, and satisfactory credit. Rates and terms subject to change without notice. Most loan programs require both a satisfactory property appraisal and title exam for final approval.... If at time of offer you no longer meet initial criteria, offer may be revoked.” Id. The letter also informed consumers as to the steps they could take if they wanted to stop receiving prescreened offers of credit. See id. Plaintiff responded to the letter by filing the class action complaint, id. Plaintiff’s theory was that Greenwood had not extended a “firm offer of credit” because the letter “‘is lacking crucial terms for it to be an offer’ and ‘is so vague and lacking in terms as not to constitute an “offer capable of acceptance”.’” Id. The class action complaint sought statutory damages of $1,000 per class member on behalf of approximately 2 million individuals, id.

Continue reading "FCRA Class Action Defense Cases–Sullivan v. Greenwood Credit Union: In Case Of First Impression First Circuit Affirms Summary Judgment In Favor Of Defense In FCRA Class Action Holding Creditor’s Letter Was A “Firm Offer” Under FCRA" »

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

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CAFA Class Action Defense Cases–Korn v. Polo Ralph Lauren: California Federal Court Denies Motion To Remand Class Action To State Court Holding Defense Established Class Action Alleging Song-Beverly Act Violations Involved More Than $5 Million

Defense Evidence in Support of Removal of Class Action to Federal Court Adequately Established Removal Jurisdiction under Class Action Fairness Act (CAFA) California Federal Court Holds

Plaintiff filed a putative class action lawsuit in California state court against Polo Ralph Lauren alleging violations of California’s Song-Beverly Act; specifically, the class action complaint alleged that defendant requested personal information from customers as part of credit card transactions in violation of California Civil Code § 1747.08. Korn v. Polo Ralph Lauren Corp., 536 F.Supp.2d 1199, 1202 (E.D. Cal. 2008). Defense attorneys removed the class action to federal court alleging removal jurisdiction under the Class Action Fairness Act (CAFA); plaintiffs moved to remand the class action to state court on the grounds that defendant failed to establish the requisite diversity or amount in controversy. Id. As the district court explained, “CAFA grants district courts original jurisdiction over civil class actions filed under federal or state law in which any member of a class of plaintiffs is a citizen of a state different from any defendant and the amount in controversy for the putative class members in the aggregate exceeds the sum or value of $5,000,000, exclusive of interest and costs.” Id. (citing 28 U.S.C. § 1332(d)(2)). The district court refused to remand the class action to state court, holding that defendant sufficiently established CAFA removal jurisdiction.

Plaintiff first argued that Polo Ralph Lauren did not establish that it was not a citizen of California, Korn, at 1201; the district court rejected this argument, noting that plaintiff is bound by the judicial admission in his complaint that defendant is a Delaware corporation with its principal place of business in New Jersey, id., at 1203. Accordingly, the federal court held plaintiff “bound by the allegations in his complaint that assert defendant's citizenship, for purposes of diversity jurisdiction, is in Delaware and New Jersey.” Id. Plaintiff next argued that the defense failed to establish the $5,000,000 amount in controversy requirement. Id., at 1201. While the class action complaint did not seek a specific amount of damages, the district court observed that the class action seeks “statutory civil penalties for the alleged violations [of] up to $1000 per violation.” Id., at 1202. Further, as part of the documentation supporting removal of the class action to federal court, defense attorneys had submitted a declaration establishing that Polo Ralph Lauren had “processed more than 5,000 credit card transactions over the last year in the state of California.” Id. The district court held that this was sufficient.

Continue reading "CAFA Class Action Defense Cases–Korn v. Polo Ralph Lauren: California Federal Court Denies Motion To Remand Class Action To State Court Holding Defense Established Class Action Alleging Song-Beverly Act Violations Involved More Than $5 Million" »

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

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Class Action Defense Cases–ChartOne v. Raglon: Arkansas Supreme Court Affirms Class Action Certification Of Lawsuit Alleging Fees Charged For Medical Records Exceeded Amounts Allowable By Statute

Class Action Complaint Challenging as Excessive Fees Charged for Medical Records Properly Certified as Class Action because Defense Challenges to Class Action Treatment Went to Issues of Damages or to the Merits, Neither of Which Defeat Class Action Certification Arkansas Supreme Court Holds

Plaintiff filed a putative class action in Arkansas state court against ChartOne, “a health-information management company that provides copying services of medical records for doctors, hospitals, and other medical-care providers throughout Arkansas,” alleging that the fees it charged for copying medical records exceeded the amount allowed by statute. The class action complaint also alleged that ChartOne charged shipping and postage fees that either were not incurred or were reimbursed by the healthcare provider. ChartOne, Inc. v. Raglon, ___S.W.3d ___ (Ark. April 24, 2008) [Slip Opn., at 1-2]. Plaintiff moved the trial court to certify the litigation as a class action; defense attorneys argued that class action treatment was not appropriate because the proposed definition of the class “was ambiguous and provided no objective criteria by which to ascertain the members of the class,” and because plaintiff failed to satisfy the statutory requirements for class action certification. Id., at 2. A representative of ChartOne testified at the class certification hearing that it was not possible to tell from company records whether a particular individual was charged a notary fee, id., at 2-3. Ultimately, the trial court granted plaintiff’s motion and certified a class action covering those “who requested a copy of medical records from a healthcare provider located in Arkansas and who paid ChartOne (1) base fees, clerical fees, retrieval fees and/or page fees as part of a charge for copying medical records, which resulted in charges being in excess of $5 for the first five pages and 25¢ for each page thereafter; and/or (2) shipping charges.” Id., at 3. The Arkansas Supreme Court affirmed.

The Supreme Court addressed first defense objections to the definition of the class. Defense attorneys argued that membership in the class could not be determined in any “reasonable or feasible manner” because “there is no way of ascertaining the per-page charges without reviewing the actual requests for records that are stored with the patients’ medical files” and that a manual, file-by-file review of more than 120,000 files would be required. ChartOne, at 5. Plaintiff responded that membership in the class was readily determinable from ChartOne’s billing records, and that the objective raised by the defense went to damages rather than whether class action treatment was appropriate, id. The Arkansas Supreme Court agreed that class actions must provide a “precise definition” of the putative class, and explained that such a definition ensures that only “those people who are actually harmed by the defendant’s wrongful conduct will participate in the relief ultimately awarded.” Id., at 6. Nonetheless, it agreed that defendant’s objections went to damages, not the definition of the class itself. Id., at 6-7. In particular, the Court was unimpressed by the argument that ChartOne’s “failure to maintain accurate records” could serve to defeat class certification. Id., at 9.

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

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CAFA Class Action Defense Cases–Pew v. Cardarelli: Second Circuit Holds District Court Erred In Remanding Class Action Because Exception To CAFA Removal Jurisdiction Limited To "Disputes Over The Meaning Of The Terms Of A Security"

District Court Erred in Remanding Class Action to State Court because while Class Action Complaint Involved Sale of Securities it was Premised on Fraudulent Concealment of Company’s Financial Condition so Exception to CAFA (Class Action Fairness Act) Removal Jurisdiction did not Apply Second Circuit Holds

Plaintiffs filed a putative class action in New York state court against various defendants, including Agway (the issuer) and PriceWaterhouseCoopers (its auditor), alleging violations of New York’s consumer fraud statute; specifically, the class action complaint asserted “that officers of an issuer – abetted by the issuer’s auditor – failed to disclose, while marketing certain debt certificates, that the issuer was insolvent.” Estate of Pew v. Cardarelli, 527 F.3d 25 (2d Cir. 2008) [Slip Opn., at 3]. Plaintiffs had filed a prior class action complaint in New York state court alleging Agway failed to disclose in financial statements that it was insolvent, and was discharging its debts through the issuance of new certificates; defense attorneys removed that class action to federal court, so plaintiffs amended the class action “to plead essentially the same acts of concealment under New York’s consumer fraud law.” Id., at 5. The district court subsequently granted a defense motion to dismiss with prejudice the federal securities claims, but dismissed without prejudice the remaining state law claim based on its decision not to exercise supplemental jurisdiction over it. Id., at 6. Plaintiffs then filed another class action in New York state court that sought relief only under New York law, id. Defense attorneys again removed the class action to federal court, asserting removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA), id. The district court granted plaintiffs’ motion to remand the class action to state court on the ground that it “falls within an exception to CAFA’s removal provision for actions ‘that relate[] to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security.” Id., at 6-7. The Second Circuit granted a defense request for permission to appeal, and reversed.

Agway was an agricultural supply and marketing cooperative that sought to raise money by issuing unsecured, fixed-interest debt instruments (money market certificates). Pew, at 4. The question presented was whether the class action’s “state-law consumer fraud claim” falls within the exception to CAFA jurisdiction, as determined by the district court. Id., at 13. Finding that “the imperfect drafting of the status makes it ambiguous,” id., and elsewhere describing CAFA’s text as “cryptic,” see id., at 19, the Circuit Court examined the statute’s wording, context and legislative history. Based on its analysis, the Second Circuit held that even though the Agway Certificates are “securities” and create “obligations” and “rights” in the holders, id., at 18, the exception to CAFA did not apply because the gravamen of the class action complaint “does not ‘relate[] to’ those rights; rather, it is a state-law consumer fraud action alleging that Agway fraudulently concealed its insolvency when it peddled the Certificates.” Id., at 19. In sum, the Court held that Congress intended to reserve the exception to CAFA removal jurisdiction for “‘disputes over the meaning of the terms of a security,’ such as how interest rates are to be calculated, and so on.” Id., at 23. Accordingly, it concluded that the district court erred in remanding the class action to state court and reversed. Id.

Continue reading "CAFA Class Action Defense Cases–Pew v. Cardarelli: Second Circuit Holds District Court Erred In Remanding Class Action Because Exception To CAFA Removal Jurisdiction Limited To "Disputes Over The Meaning Of The Terms Of A Security"" »

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

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Labor Law Class Action Cases Continue To Top List Of Weekly Class Action Lawsuits Filed 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 May 9 – 15, 2008, during which time 54 new class action lawsuits were filed. Employment related class action lawsuits generally top the list of new class action cases by a wide margin. During the time period covered by this post, 28 new class actions were filed alleging various labor law violations (52% of the total number of new class action lawsuits during the past week). Only two other categories of class action lawsuits passed the 10% threshold -- class action lawsuits alleging violations of California's unfair business practice claims, which include false advertising claims, with seven (7) new class actions (13%), and class actions alleging antitrust violations, with six (6) new filings (11%).

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

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Venue Class Action Defense Cases– Totilo v. Herbert: New York Federal Court Grants Defense Motion To Transfer Class Action Lawsuit To Georgia

Deference Afforded Plaintiff’s Choice of Forum “Diminished” in Class Action Cases, and Factors Affecting Convenience of Parties/Witnesses and Interests of Justice Supported Transfer of Class Action to Georgia under 28 U.S.C. § 1404(a) New York Federal Court Holds

Plaintiff filed a class action complaint against former officers of NetBank, FSB, a failed Internet bank that had been taken over by the Office of Thrift Supervision; the class action purported to be on behalf of bank depositors and alleged inter alia fraud, negligence and violations of new York’s consumer protection statute. Totilo v. Herbert, __ F.Supp.2d ___, 2008 WL 613148, *1 (S.D.N.Y. March 5, 2008). Defense attorneys moved to dismiss the class action complaint for failure to state a claim, for lack of jurisdiction and for improper venue, or alternatively moved the district court to transfer venue from New York to Georgia under 28 U.S.C. §§ 1404(a) and 1406(a). Id. The court explained at page 639 that “Section 1404(a) permits the transfer of any action to another district in which it might have been brought if such a transfer would serve the convenience of the parties and witnesses and be in the interest of justice.” The federal court granted the motion under Section 1404(a), and therefore did not analyze the Section 1406(a) claim.

Plaintiff’s lawyer filed the class action in the Southern District of New York on the grounds of diversity jurisdiction. Totilo, at *1. The district court readily resolved the threshold question of whether the class action complaint could have been brought in Georgia, as Netbank’s headquarters and principal place of business are in Georgia, and “a substantial part of the events or omissions giving rise to the claim occurred there,” see id. Accordingly, the federal court turned to whether transfer “would serve the convenience of the parties and witnesses and be in the interest of justice.” In this regard, the court noted that the deference generally afforded a plaintiff’s choice of forum is “diminished” in class action cases, but the relevant inquiry still involves an analysis of “(1) the convenience to the parties, (2) the convenience to the witnesses, (3) the relative ease of access to sources of proof, (4) the availability of process to compel the attendance of unwilling witnesses, (5) the cost of obtaining willing witnesses, (6) the practical problems indicating where the case can be tried more expeditiously and inexpensively, and (7) the interests of justice.” Id. The court easily concluded that transfer was warranted, explaining at page *2:

While plaintiff no doubt would find litigation in Atlanta less convenient than litigation here, it is perfectly plain on this record that the inconvenience to the defendants and non-party witnesses, all or most of whom are far closer to Atlanta than to New York, would dwarf any inconvenience suffered by plaintiff in consequence of litigation in Georgia. The Northern District would have readier access to sources of proof than would this Court. In short, all of the practical problems that attend the handling of litigation would be considerably reduced by litigation in Georgia, where the events occurred. Moreover, it bears mention that there are related cases already before the Northern District.

Accordingly, the district court transferred the class action to the Northern District of Georgia.

Download PDF file of Totilo v. Herbert

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

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Wells Fargo Class Action Defense Cases—In re Wells Fargo Mortgage Lending Practices: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Transfers Class Actions To California

Judicial Panel Grants Defense Request for Pretrial Coordination Pursuant to 28 U.S.C. § 1407 of Class Action Lawsuits Alleging Discriminatory Lending Practices, but Agrees with California Plaintiffs that Northern District of California is Appropriate Transferee Court

Four class action lawsuits (3 in California and 1 in Illinois) were filed against Wells Fargo alleging discriminatory pricing in its mortgage loan products. In re Wells Fargo Mortgage Lending Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 10, 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 Northern District of Illinois or, alternatively, in the Southern District of Iowa; lawyers for the various class action plaintiffs agreed that pretrial coordination was appropriate and the Illinois plaintiffs supported transfer to Illinois, but lawyers in the California class actions argued that the Northern District of California was the appropriate transferee court. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, explaining that “[a]ll actions share factual questions relating to whether Wells Fargo engaged in discriminatory residential lending practices, including the imposition of discretionary fees/charges which increased the cost of financing resulting in higher loans for minority borrowers than similarly situated nonminority borrowers.” Id. Further, centralization “will eliminate duplicative discovery; avoid inconsistent pretrial rulings, especially on the issue of class certification; and conserve the resources of the parties, their counsel and the judiciary.” Id. However, the Judicial Panel agreed with the California class action plaintiffs’ request to transfer the lawsuits to the Northern District of California because three of the actions are pending there and because Wells Fargo is headquartered in San Francisco. Id. Accordingly, the Panel ordered the class actions transferred to California, id., at 2.

Download PDF file of In re Wells Fargo Mortgage Lending Practices Transfer Order

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

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California Supreme Court Issues Widely Watched Decision On Same Sex Marriages And Strikes Down State Voter-Initiated Ban On Gay Marriage As Unconstitutional

In Split Decision, California Supreme Court Holds that State's Ban on Gay Marriage is Unconstitutional; Concurring and Dissenting Opinions Conclude that Legality of Same Sex Marriages is a Legislative rather than Judicial Matter

While the six cases consolidated for argument before the California Supreme Court were not class action lawsuits, the author has received numerous inquiries from attorneys, both from within the State of California and from sister states, inquiring into the status of the California Supreme Court decision in the same sex marriage cases. Accordingly, while the decision does not arise out of a class action, the author notes that today the Supreme Court issued its opinion and, by a 4-3 vote, struck down California's ban on same sex marriages as unconstitutional. In re Marriage Cases, ___ Cal.4th ___ (Cal. May 15, 2008). Chief Justice George wrote the majority opinion, joined by Justices Kennard (who also penned a short concurring opinion), Werdegar and Moreno. Two concurring and dissenting opinions were filed: one by Justice Baxter, joined by Justice Chin, and one by Justice Corrigan. The court's opinions may be found below. The file is large, so please be patient.

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

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ERISA Class Action Defense Cases–Loughman v. Unum: New York Federal Court Grants Defense Summary Judgment Motion In ERISA Class Action Holding Policies Excluded Plainly Coverage During Elimination Period

ERISA Class Action Alleging Failure to Pay Benefits Premised on Strained Reading of Long-Term Disability Insurance Policies and Defense Entitled to Partial Summary Judgment as to certain Class Action Claims New York Federal Court Holds

Plaintiffs filed a putative class action lawsuit against Unum Provident Corporation, Unum Life Insurance Company of America, First Unum Life Insurance Company and Colonial Life and Accident Insurance Company (collectively, “Unum”) alleging violations of ERISA (Employee Retirement Income Security Act). Loughman v. Unum Provident Corp., 530 F.Supp.2d 1121, 2008 WL 515916, *1 (S.D.N.Y. February 25, 2008). The policies underlying the class action are “substantially similar” and “provide for the payment of benefits only in the event that an employee suffers a long-term disability and, consequently, contain language establishing an elimination period.” Id. The second amended class action complaint alleged that Unum improperly terminated long-term disability (LTD) benefits and wrongfully withheld LTD benefits during “the so-called ‘elimination period’”; defense attorneys moved for partially summary judgment with respect certain class action claims on the ground that no LTD benefits are due during the elimination periods in the respective policies. Id. The district court agreed and dismissed the class action with prejudice.

The heart of the class action is as follows: plaintiffs sought disability benefits based on the argument that, while LTD benefits are not payable during the elimination period, the policies require that “once the elimination period has run, a policyholder is entitled to receive retroactive benefits for the prior 180 days of disability.” Loughman, at *2. As a matter of contract interpretation, the district court disagreed. After explaining that ambiguity in a contract may not be premised on a “strained” reading of its terms, see id., at *3, the court rejected plaintiffs’ interpretation of the policies because the class action claims “hinge on their selective reading of a provision of the Policies outside the context of the Policies as a whole,” id., at *4. The federal court explained at page *4 that “plaintiffs construe the phrase ‘[t]he benefit will be paid for the period of disability’ to mean that they are entitled to benefits for the entire period in which they are disabled, regardless of other language in the Policies limiting the period for which benefits must be paid.” But this superficial reading of the policy language ignores the balance of its terms.

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

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GlaxoSmithKline Class Action Defense Cases–In re Wellbutrin: Pennsylvania Federal Court Certifies Class Action Against GlaxoSmithKline In Antitrust Class Action By Direct Purchasers Of Antidepressant Drug

Antitrust Class Action by Assignees of Direct Purchasers of Antidepressant Wellbutrin SR Satisfied Rule 23 Class Action Requirements Pennsylvania Federal Court Holds

Plaintiffs filed a class action complaint against SmithKline Beecham Corporation dba GlaxoSmithKline (GSK) alleging antitrust violations arising out of its manufacture and sale of the antidepressant drug Wellbutrin SR. The class action purports to be filed on behalf of “direct purchasers” of the drug, and the class action complaint alleges “(1) Defendant unlawfully extended its monopoly over Wellbutrin SR by making fraudulent assertions to the United States Patent and Trademark Office and by engaging in ‘sham’ litigation against generic drug manufacturers seeking to market less expensive versions of the drug; (2) Because the litigation delayed the market entry of generic versions of Wellbutrin SR, the class members were forced to pay unnecessarily high prices for the drug because no generic alternatives were available for nearly two years after Defendant’s patent monopoly would have expired; and (3) Defendant filed the baseless infringement suits against the generic manufacturers solely to preserve its monopoly during the pendency of the infringement litigation.” In re Wellbutrin SR Direct Purchaser Antitrust Litig., ___ F.Supp.2d ___ (E.D. Pa. May 2, 2008) [Slip Opn., at 1-2 (footnotes omitted)]. In essence, plaintiffs allege defendant violated Section 2 of the Sherman Act by requiring that they pay inflated prices “from the time Defendant’s monopoly was extended until the time the price of [the drug] reached competitive levels.” Id., at 4. Defense attorneys moved to dismiss claims in the various class action complaints, and the district court dismissed the claims alleging fraudulent prosecution of a patent and the antitrust claims seeking injunctive relief. Id., at 2 n.4. Plaintiffs moved the district court to certify the litigation as a class action, id., at 2; defense attorneys opposed class action treatment on the grounds that plaintiffs were not adequate representatives of the class and that the definition of the class is overly broad. The district court rejected the defense arguments and certified the litigation as a class action.

The district court had no difficulty in concluding that Rule 23(a)’s numerosity, commonality and typicality requirements had been satisfied. See In re Wellbutrin, at 4-8. With respect to the adequacy of representation of Rule 23(a)(4), defense attorneys did not challenge the qualifications of plaintiffs’ counsel, who the court found to be qualified to represent the class. See id., at 8. Rather, the defense argued (1) that plaintiffs could not represent the class because they are assignees of the direct purchasers (not direct purchasers themselves), (2) that a unique defense exists as to one of the named plaintiffs, “rendering it inadequate to represent the class”; and (3) that “significant conflicts” exist among the class members. Id., at 8-9. The district court rejected each argument. First, it noted that circuit case authority permits the assignment of antitrust claims, see id., at 9-10. Second, it rejected the claim that a defense challenge to the validity of the assignment to named-plaintiff SAJ Distributors will consume SAJ’s attention, id., at 10; as the issue is not likely to be a “major focus” of the class action litigation, the district court concluded that “it is not an issue that will distract SAJ to the detriment of the class itself,” id., at 11. Finally, the district court refused to follow Valley Drug Co. v. Geneva Pharmaceuticals, Inc., 350 F.3d 1181 (11th Cir. 2003), cited in support of the defense claim of a conflict between national drug wholesalers and downstream retail distributors such that the challenged activity may have been financially beneficial to the national wholesalers, explaining at page 14 that “the controlling question is whether the class members suffered an overcharge: if an overcharge occurred, all class members are entitled to recover, whether or not some plaintiffs experienced a net benefit while others experienced a net loss.”

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

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Kraft FLSA Class Action Defense Cases–Spoerle v. Kraft: Wisconsin Federal Court Certifies Class Action Of Class Action Complaint Alleging Labor Law Violations For Failure To Compensate Employees For Doffing/Donning Protective Gear

Class Action Complaint Alleging Failure to Pay Employees for Time Incurred Doffing and Donning Protective Gear Satisfied Rule 23 Requirements for Class Action Certification Wisconsin Federal Court Holds

Plaintiffs filed a labor law class action against their employer, Kraft Foods, alleging violations of the Federal Labor Standards Act (FLSA) for failure to pay them for time spent doffing and donning protective gear at a meat processing plant; the class action complaint alleged that employees were required “to put on several items of safety and sanitation equipment and then walk to their work stations” before clocking in for the day, and were required to reverse the process after clocking out at the end of the day. Spoerle v. Kraft Foods Global, Inc., ___ F.Supp.2d ___ (W.D. Wis. May 5, 2008) [Slip Opn., at 1]. As the court explained at page 4, Kraft “requires that all hourly employees wear certain company-provided items in the performance of their jobs: footwear…, hair nets, beard nets…, protective headgear…, polyester frocks, and ear plugs or ear muffs,” and that some employees are required to wear cotton shirts and/or safety glasses. Employees are required to don this gear before swiping in, and to doff the gear after swiping out, id., at 5. The time incurred by employees to comply with this requirement varies, as does the time incurred in walking to/from the employee’s workstations. Id., at 1. The gravamen of the class action is that Kraft’s failure to pay for this “off the clock” time violates federal and state labor laws. Id. Defense attorneys moved for summary judgment on the grounds that the time at issue was not compensable because it fell within the scope of various exceptions under the FLSA; the district court denied the motion. See Spoerle v. Kraft Foods Global, Inc., 527 F.Supp.2d 860 (W.D. Wis. 2007). Plaintiffs moved the court to certify a collective action under the FLSA and a Rule 23(b)(3) class action under Wisconsin state law, Spoerle, at 2; the district court granted plaintiffs’ motion, finding this to be “an easy case” for certification of a class action, id., at 3.

The federal court first addressed the defense argument that the state and federal class action claims could not be prosecuted in the same action, based on the theory that “a plaintiff should not be allowed to maintain a representative action involving both federal and state law wage claims because of the procedural differences between the two types of claims.” Spoerle, at 8. This argument is premised on the fact that employees must affirmatively “opt in” to the FLSA class action to be members of the class, but the same employees are deemed members of the state law class action unless they affirmatively “opt out.” Id. According to defense attorneys, “potential plaintiffs will be hopelessly confused by the differences between the two claims and will be unable to make an intelligent decision regarding whether to opt in or out of the lawsuit,” id.; this confusion is exacerbated by plaintiffs’ unilateral and premature notice to the class, which “contained inaccurate information,” id., at 9. The district court agreed that “plaintiffs made a foolish blunder,” id., at 9, but concluded that any confusion could be addressed through carefully drafted notices, id., at 8-9.

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

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ERISA Class Action Defense Cases–Kirschbaum v. Reliant Energy: Fifth Circuit Affirms Summary Judgment In Favor Of Defense In ERISA Class Action Complaint Holding Class Action Claims

Summary Judgment in Favor of Defense in ERISA Class Action Proper because Class Action Claims that Defendants should not have Invested in Company Stock ran Counter to Terms of Eligible Individual Account Plan (EIAP) and because Negligent Misrepresentations Alleged in Class Action Complaint were not made in Fiduciary Capacity Fifth Circuit Holds

Plaintiff filed a class action against his employer, Reliant Energy, Inc. (REI) and the Benefits Committee of his employer’s savings plan alleging violations of ERISA (Employee Retirement Income Security Act). The Plan is an Eligible Individual Account Plan (EIAP) under ERISA, and the class action complaint alleged that defendants breached fiduciary duties owed to current and former participants in the Plan in that defendants “had a fiduciary duty to liquidate the Common Stock Fund and cease purchasing REI shares, notwithstanding the Plan's express contrary requirements.” Kirschbaum v. Reliant Energy, Inc., ___ F.3d ___, 2008 WL 1838324, *1 (5th Cir. April 25, 2008). The district court granted plaintiff’s motion to certify the litigation as a class action, id. Defense attorneys moved for summary judgment on the ground that defendants satisfied their legal duties to the class: The district court granted summary judgment as to all class action claims, and entered judgment in favor of defendants on the class action complaint. Id. Plaintiff appealed, and the Fifth Circuit affirmed.

Under the Plan participants were permitted to invest up to 16% of their compensation in a number of funds, “ranging from riskier, growth-oriented funds to more stable mutual funds”; one of these options was the REI Common Stock Fund which essentially consisted of REI common stock. Kirschbaum, at *1. Moreover, “REI agreed to match up to the first six percent of an employee's contribution with shares of REI common stock allocated to the employee's Common Stock Fund account,” but the matching contributions had to stay in Common Stock Fund until the employee was 55 years old and had 10 years of service with the company. Id. After the disclosure of certain “sham transactions” by REI employees and another energy trader, the stock dropped 40% causing a substantial loss in the value of the Common Stock Fund, id. REI later admitted that the trades in question inflated REI’s revenue by 10% over a three-year period. Id. Plaintiff filed his class action complaint alleging that defendants were “responsible under ERISA to make good the losses the Plan sustained on REI common stock.” Id., at *2. Specifically, the class action alleged that defendants knew REI stock “was not a prudent investment” and that they owed a fiduciary duty to discontinue purchasing REI stock, to sell the Plan’s holdings of REI stock, and to discontinue the Common Stock Fund. Id. The district court certified the litigation as a class action, but agreed with defense attorneys that summary judgment was appropriate as to each of the class action claims because “the Plan afforded [defendants] no discretion to terminate the fund or halt investments in it” and, accordingly, “defendants had no fiduciary duty to do so.” Id.

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

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HAPPY MOTHER'S DAY FROM THE CLASS ACTION DEFENSE BLOG

The author of the Class Action Defense Blog extends best wishes for a happy Mother's Day. A new class action article will be published tomorrow.

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

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No Surprise: Employment-Related Class Action Cases Top List Of Class Action Lawsuits Filed In California State And Federal Courts Over The Past Week

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 May 2 – 8, 2008, during which time 39 new class action lawsuits were filed. Readers know that labor law class actions almost always top the list of new class action cases, often by a wide margin, and this proved true yet again. During the time period covered by this post, 17 new class actions were filed alleging various labor law violations (44% of the total number of new class action lawsuits during the past week). The only other category of class action lawsuits that even managed to break the 10% threshold involved California unfair business practice claims, which include false advertising claims, with nine (9) new class actions (23%).

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

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PAX Class Action Defense Cases—In re Michelin: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In District Of Maryland

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

Four (4) class action lawsuits were filed in Arizona, Florida, Illinois and New York against various defendants, including Michelin North America and American Honda Motor relating to the PAX “run-flat” tire system manufactured by Michelin and installed in certain Hondas and Acuras sold in the United States. In re Michelin North Am., Inc. PAX Sys. Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 15, 2008) [Slip Opn., at 1]. Defense attorneys for Michelin filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class action litigation pursuant to 28 U.S.C. § 1407 in the District of Maryland; defense attorneys for Honda supported the motion. Id. All plaintiffs agreed that pretrial coordination was appropriate, but they argued for transfer to the Northern District of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, concluding that this “will eliminate duplicative discovery; avoid inconsistent pretrial rulings; and conserve the resources of the parties, their counsel and the judiciary.” Id. The Panel also agreed with defense attorneys that the District of Maryland was the appropriate transferee court, noting that “the wave of putative statewide class action lawsuits relating to the PAX System began with an action removed to the District of Maryland” and that the Maryland district court judge has “had an opportunity to familiarize himself with issues in this litigation.” Id., at 2.

Download PDF file of In re Michelin North America Transfer Order

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

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WaMu Class Action Defense Cases—In re Washington Mutual: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Western District Of Washington

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

Seven (7) class action lawsuits (5 in Washington and 2 in New York) were filed against various defendants, including Washington Mutual, “arising from alleged misrepresentations or omissions concerning WaMu’s financial condition with respect to its subprime home loan portfolio.” In re Washington Mutual, Inc., Securities, Derivative & “ERISA” Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 21, 2008) [Slip Opn., at 1]. Defense attorneys for common defendant Washington Mutual filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class action litigation pursuant to 28 U.S.C. § 1407 in the Western District of Washington, where five class actions already were pending; no party opposed pretrial coordination, but plaintiffs’ lawyers in the New York class actions argued for that district as the transferee court. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the defense that the Western District of Washington was the appropriate transferee court because most of the actions were pending there and because WaMu is headquartered in Seattle. Id., at 1-2.

Download PDF file of In re Washington Mutual Transfer Order

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

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CAFA Class Action Defense Cases–Brooks v. GAF: South Carolina Federal Court Remand Class Action To State Court For Lack Of Requisite Amount In Controversy But Expressly Prohibits Plaintiffs From Recovering Damages In Excess Of Prayer

As Master of Class Action Complaint Plaintiffs Successfully Limited Amount in Controversy so as to Preclude Removal Jurisdiction on Diversity Grounds or under CAFA (Class Action Fairness Act) Necessitating Remand of Class Action to State Court, but South Carolina Federal Court Expressly Limits Plaintiffs’ Individual and Class Action Recovery to Limits Pleaded in Class Action Complaint

Plaintiffs filed a putative class action lawsuit in South Carolina state court against GAF Materials “alleging claims for negligence, negligent representation, breach of warranty, breach of implied warranties, fraud, a violation of the South Carolina Unfair Trade Practices Act (‘SCUPTA’), and unjust enrichment.” Brooks v. GAF Materials Corp., 532 F.Supp.2d 779, 780 (D.S.C. 2008). The class action complaint alleges the class “suffered property damage as a result of the Defendant's defective roofing materials” and seeks compensatory and punitive damages, but in order to avoid removal jurisdiction the class action complaint expressly states that the “amount in controversy for the entire proposed Class does not exceed five million dollars” and that “[t]he Plaintiffs' individual recovery, as well as any putative Class Members individual recovery, exclusive of interest and costs, is not to exceed $74,999.00.” Id. Defense attorneys removed the suit to federal court under the Class Action Fairness Act (CAFA), and plaintiffs’ moved to remand the action to state court. Id. Defense attorneys originally removed the class action in May 2006, but the district court granted plaintiffs’ motion to remand “because the amount in controversy does not exceed $75,000, exclusive of interest and costs, for diversity jurisdiction under 28 U.S.C. § 1332.” Id., at 780. After plaintiffs amended their class action complaint, defense attorneys again removed the action to federal court but the district court remanded the action “for lack of jurisdiction based on the one-year cap on removal set forth in 28 U.S.C. § 1446(b),” id., at 780-81, but the court subsequently rescinded its remand order and requested briefing on whether the amount in controversy exceeded $5 million for purposes of CAFA removal jurisdiction, id., at 781.The district court granted the motion.

In analyzing whether the Class Action Fairness Act authorized removal of this lawsuit, the district court stressed that “Plaintiffs have placed a clear limitation on damages in their complaint.” Brooks, at 782. The Court held at page 782, “the court declines to ‘adopt any approach under which the court will be required to undertake its own independent review of the amount in controversy despite a specific limitation on damages in the plaintiff's complaint.’” As the master of their complaint, plaintiffs are entitled to limit damages sought therein in order to avoid removal jurisdiction, and they effectively did so here. Id. Accordingly, the district court granted plaintiffs’ motion to remand the class action to state court, finding that the amount in controversy requirement had not been met. Id., at 782-83. However, the federal court expressly barred plaintiffs from playing games with removal. The court’s remand order expressly states, “with respect to all claims, the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney's fees, exceeding five million dollars ($5,000,000), exclusive of interest and costs for the putative class action, and the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney's fees, exceeding seventy-four thousand nine hundred ninety-nine dollars ($74,999.00), exclusive of interest and costs, for any individual claims.” Id., at 783.

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

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PSLRA Class Action Defense Cases--Cornelia I. Crowell GST Trust v. Possis Medical: Eighth Circuit Affirms Dismissal Of Securities Fraud Class Action Holding Allegations In Class Action Complaint Failed To Meet PSLRA's Heightened Pleading Requirements

District Court Properly Dismissed Securities Fraud Class Action Without Leave to Amend because Class Action Complaint Failed to Satisfy Private Securities Litigation Reform Act (PSLRA) Pleading Requirements Eighth Circuit Holds

Plaintiff filed a class action complaint against Possis Medical and two individuals alleging securities fraud violations. The class action alleged that after Possis Medical decided in 2001 to study whether its non-surgical catheter system, designed to remove blood clots, could be used for other medical procedures, it “made several public statements regarding the study's potentially favorable impact on company revenues”; however, in August 2004, Possis Medical released the results of its study “which did not support expanded…usage.” The precipitous drop in stock value led plaintiff to file her putative class action. Cornelia I. Crowell GST Trust v. Possis Medical, Inc., 519 F.3d 778, 781 (8th Cir. 2008). Defense attorneys moved to dismiss the class action on the ground that the class action complaint “failed to meet the heightened pleading standards” required by the Private Securities Litigation Reform Act (PSLRA), id. The district court granted the motion and dismissed the class action complaint, without granting leave to amend, on the ground that the pleadings were insufficient under the PSLRA. Id. Plaintiff appealed, arguing that the class action adequately alleged securities fraud or, alternatively, that the district court erred in failing to grant leave to file an amended class action complaint, id. The Eighth Circuit affirmed.

With respect to the motion to dismiss the class action, the district court found that the complaint “failed to establish that Possis Medical had misrepresented a material fact or acted with the required scienter.” Crowell Trust, at 782. The Eighth Circuit agreed. First, the class action failed to “provide the level of detail” required to support the misrepresentation element: “‘[R]ote allegations that the defendants knowingly made false statements of material fact’ alone are insufficient.” Id. (quoting In re Navarre Corp. Sec. Litig., 299 F.3d 735, 745 (8th Cir. 2002)). The Circuit Court held that the anonymous statements relied on by plaintiff failed to provide the necessary “who, what, when, where and how” of the allegedly actionable statements. Id., at 782. Moreover, the scienter element was missing because the court cannot focus on isolated acts but rather must consider “‘whether all the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any allegation, scrutinized in isolation meets that standard.’” Id. (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., ___ U.S. ___, 127 S.Ct. 2499, 2502 (2007)). The mere fact that the study was important was insufficient to establish scienter, id., at 783.

With respect to the denial of leave to amend, the Circuit Court noted that plaintiff “failed to demonstrate any meaningful basis upon which it could amend its complaint to comply with the heightened securities pleading standards”; accordingly, the trial court did not err in refusing to grant leave to amend. Crowell Trust, at 784. The Eighth Circuit therefore affirmed the district court order, id.

Download PDF file of Cornelia I. Crowell GST Trust v. Possis Medical

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

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Class Action Defense Cases–Negrete v. Allianz Life: Ninth Circuit Reverses District Court Order Enjoining Class Action Defendant From Settling Class Actions Pending In Other State And Federal Courts

All Writs Act did not Permit District Court to Issue Injunction Prohibiting Class Action Defendant from Negotiating Settlements of Class Actions Pending in Other Federal Courts, and Anti-Injunction Act Barred District Court from Issuing Injunction Prohibiting Class Action Defendant from Negotiating Settlements of Class Actions Pending in State Court Ninth Circuit Holds

Plaintiff filed a class action complaint against Allianz Life Insurance Company of North America alleging inter alia violations of RICO (Racketeer Influenced and Corrupt Organizations Act) and breach of fiduciary duty arising out of defendant’s sale of fixed deferred annuities which, the class action alleged, was “‘an unsuitable financial product’ because the maturity date exceeded his life expectancy and restricted his access to principal without surrender charges.” Negrete v. Allianz Life Ins. Co. of North Am., 523 F.3d 1091, 2008 WL 1868993, *1 (9th Cir. 2008). The district court certified the litigation as a nationwide class action with respect to the RICO claims, and as a state-wide class action with respect to certain other claims, id. This class action was but one of several class actions filed against Allianz regarding the sales of annuities, including: Iorio v. Asset Marketing Inc., No. 05-CV-00633 (S.D.Cal.), filed in March 2005, in the United States District Court for the Southern District of California, and certified as a state-wide class action (covering a class that “partially overlaps the Negrete class”) in July 2006; Mooney v. Allianz Life Ins. Co. of North Am., No. 06-CV-00545, filed February 9, 2006, in the United States District Court for the District of Minnesota, and certified as a nationwide class action (covering a class that, according to defense attorneys, includes annuity transactions that “overlap those in Negrete”); and Castello v. Allianz Life Ins. Co. of North Am., Civ. No. MC03-20405, filed December 22, 2003, in a Minnesota state court and certified as a nationwide class action. Id. (The nationwide class action certification order in Negrete expressly excludes members of the nationwide class action certified in Castello, id., at *1 n.3.) In addition to these class actions, the Minnesota Attorney General filed State of Minnesota v. Allianz Life Ins. Co. of North Am., Civ. No. 07-581, on January 7, 2007, in a Minnesota state court (“the AG Action”), seeking “relief under Minnesota law on behalf of Minnesota residents who purchased Allianz's fixed deferred annuity products” (covering a class that, according to defense attorneys, also may partially overlap the class certified in Negrete). Id., at *2. The district court entered an order “that effectively prevents [Allianz] from proceeding with any settlement negotiations on similar class action claims raised in any federal or state court without first obtaining permission from Negrete's Co-Lead Counsel, and from finalizing a settlement in any other court ‘that resolves, in whole or in part, the claims brought in [the Negrete] action,’ without first obtaining the district court's approval.” Id., at *1. The Ninth Circuit reversed.

The district court order arose as follows. Allianz entered into settlement discussions with the parties in Mooney, Castello, and the AG Action. Negrete, at *2. Plaintiffs’ lawyers in Negrete learned of these negotiations from a third party and requested that defense attorneys assure them that the settlement negotiations would not cover any of the claims addressed in or class members covered by the Negrete action; defense attorneys refused to provide such assurances so Negrete filed an ex parte application seeking an order that would prohibit Allianz from “settling, attempting to settle, negotiating, compromising, or releasing any claims, causes of action, or damages relating to any Allianz deferred annuity purchased by any Class Member in the Negrete/Healey matter during the relevant Class Period, in any other forum, including but not limited to, the Mooney matter, without the express approval of this Court and participation of Court appointed Co-Lead Counsel in the Negrete/Healey matter.” Id. While the district court order, issued without a hearing, “nominally” denied the application as “not authorized by the All Writs Act,” the court nonetheless ordered, “Any discussions of a settlement that would affect any claims brought in this litigation, other than claims of an individual plaintiff or class member, must be conducted or authorized by plaintiffs' Co-Lead Counsel. Any proposed settlement that resolves, in whole or in part, the claims brought in this action shall first be subject to review and approval by the Court in this litigation.” Id. Defense attorneys appealed that order, id., at *3.

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

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Punitive Damages Class Action Defense Issues–City of Hope v. Genentech: California Supreme Court Affirms $300 Million Compensatory Award For Breach Of Contract But Reverses $200 Million Punitive Damage Award For Breach Of Fiduciary Duty

Punitive Damages for Breach of Fiduciary Duties Improper because Evidence Established Merely Contractual Relationship even though Plaintiff Entrusted Secret Scientific Discoveries to Defendant for Commercial Exploitation California Supreme Court Holds

Plaintiff City of Hope filed suit (not a class action) against Genentech alleging breach of contract and breach of fiduciary duties arising out of an agreement whereby “City of Hope, in return for royalties, entrusted a secret scientific discovery to Genentech to develop, to patent, and to commercially exploit.” City of Hope v. Genentech, Inc., ___ Cal.4th ___ (Cal. April 24, 2008) [Slip Opn., at 1]. Plaintiff prevailed at trial, and the jury awarded $300 million in compensatory damages and $200 million in punitive damages. Id. In a case of critical importance to class action and non-class action cases alike, the California Supreme Court addressed “whether, as the jury found, a fiduciary relationship necessarily arose” between City of Hope and Genentech. Id. The High Court held that it did not and, accordingly, reversed the punitive damage award. However, in a portion of the opinion that we do not summarize, the Supreme Court affirmed the $300 million damage award, concluding that “the evidence that City of Hope introduced at trial to prove that Genentech had breached a fiduciary duty [did not] so prejudice[] the jury as to require setting aside the jury’s award of compensatory damages for breach of contract.” Id., at 2. We again stress that this lawsuit was not a class action, but it involves a topic of significant importance to class action litigation.

In brief, scientists employed by City of Hope “developed a groundbreaking process for genetically engineering human proteins,” and filed a confidential application with the National Institutes of Health for a grant. City of Hope, at 2-3. Genentech was formed by a doctor who learned of the discovery and a venture capitalist “to commercially exploit biotechnology.” Id., at 3. Genentech contacted the City and offered to fund additional research and to secure the patents required for commercialization of the products developed; these discussions led to a draft agreement that left open the royalty rate because Genentech had not yet decided whether to accept the City’s proposal of a 2% flat rate. Id. Ultimately, the parties entered into a contract, see id., at 4-6 (summarizing salient terms), and “the rest is history,” so to speak. Genentech obtained various patents and granted various licenses, but it did not inform the City of all of those licenses. Id., at 6. Genentech also filed a lawsuit, which it settled for $20 million, alleging infringement of patents held by the City’s scientists, but it refused to share any of that award with the City. Id., at 8. That refusal precipitated the lawsuit by the City against Genentech for breach of fiduciary duty and breach of contract, id. As noted above, while the first trial ended deadlocked at 7-5 in favor of Genentech, the jury at the second trial ruled in favor of the City, id., at 8-9.

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

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New Labor Law Class Action Lawsuits Again Outstrip Other Categories Of Class Action Filings In Weekly List Of New Class Action Cases Filed In California State And Federal Courts

As a resource for California class action defense attorneys, so that they may anticipate the types of class actions against which they will have to defend, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers April 25 – May 1, 2008, during which time 46 new class action lawsuits were filed. Labor law class actions generally top the list of new class action cases by a wide margin, and it has been some time since any other category has threatened to surpass employment-related class action claims. During the time period covered by this post, 29 new class actions were filed alleging various labor law violations (63% of the total number of new class action lawsuits during the past week). The only other category of class action lawsuits that even managed to break the 10% threshold involved California unfair business practice claims, which include false advertising allegations, with seven (7) new class actions (15%).

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

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Wal-Mart Class Action Defense Cases–Sepulveda v. Wal-Mart: In Unpublished Opinion Ninth Circuit Reverses Denial Of Class Action Treatment In Labor Law Class Action Filed On Behalf Of Assistant Managers

Fifth Circuit’s “Incidental Damages” Approach to Class Action Certification under Rule 23(b)(2) Inapplicable in Ninth Circuit and District Court Erred in Denying Class Action Treatment of Labor Law Class Action based on Conclusion that “Claims for Monetary Relief were Non-Incidental” Ninth Circuit Holds

Plaintiffs filed a class action against Wal-Mart on behalf of assistant managers alleging labor law violations. Plaintiffs filed a motion with the district court for class action certification, arguing that class action treatment was appropriate under Rule 23(b)(2) and 23(b)(3). In an order denying class action certification that may be found here, see Sepulveda v. Wal-Mart Stores, Inc., 237 F.R.D. 229 (C.D.Cal. 2006), the district court refused to certify the litigation as a class action on the grounds that (1) the claims for monetary relief in the class action complaint were not incidental, thus rendering certification under Rule 23(b)(2) inappropriate, and (2) the duties of associate managers “are not susceptible to collective proof,” thus rendering class action treatment under Rule 23(b)(3) inappropriate. Id., at 245-46 and 248-49. Plaintiffs appealed. Sepulveda v. Wal-Mart Stores, Inc., Case No. 06-56090 (9th Cir. April 25, 2008) [Slip Opn., at 1-2]. In an unpublished opinion, the Ninth Circuit reversed. In a single paragraph, the Circuit Court stated that the district court had “misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied certification under [Rule] 23(b)(2),” and cited a Ninth Circuit opinion that “refus[ed] to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998).” Id., at 2 (citing Molski v. Gleich, 318 F.3d 937, 949-50 (9th Cir. 2003)). Rather, the lower court should have “focus[ed] on the intent of the Plaintiffs in bringing suit.” Id. (citation omitted). By failing to do so, the district court abused its discretion in denying class action treatment under Rule 23(b)(2). Id. The Ninth Circuit instructed the district court to reconsider on remand whether class certification was appropriate under Rule 23(b)(2) and, further, to consider “using Rule 23(c)(4) to certify issues under the Rule 23(b)(2) standard.” Id. (citation omitted).

The author notes that the district court opinion contains the following discussion of Rule 23(b)(2):

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