Class Action Defense Blog

$2.5 Billion Punitive Damage Award in Class Action Against Exxon Arising out of Valdez Oil Spill Excessive because Considerations of Predictability Warranted 1:1 Ratio Cap on Punitive Damages Awarded under Federal Maritime Law Supreme Court Holds, Resulting in Reduction of Class Action Punitive Damage Award to $500 Million and, as Modified, Class Action Judgment Affirmed Bringing end to 20-year Lawsuit

Almost 20 years ago, in March 1989, Exxon’s supertanker, the Valdez, ran aground off the coast of Alaska and spilled millions of gallons of crude oil into Prince William Sound. Plaintiffs, commercial fishermen and Native Alaskans, filed a class action against Exxon seeking compensatory and punitive damages. Exxon Shipping Co. v. Baker, 554 U.S. ___ (June 25, 2008) [Slip Opn., at 1-2]. (More accurately, various individual civil cases were consolidated into one lawsuit against Exxon and others, and at Exxon’s request the federal court “certified a mandatory class of all plaintiffs seeking punitive damages, whose number topped 32,000.” Id., at 5.) Exxon stipulated to its negligence and a jury trial was held to determine compensatory damages and fix punitive damages, id. The jury awarded plaintiffs $5 billion in punitive damages against Exxon. Id., at 7. The Ninth Circuit affirmed the judgment but reduced the punitive damage award to $2.5 billion, id. The Supreme Court granted certiorari to address three questions of maritime law: “whether a shipowner may be liable for punitive damages without acquiescence in the actions causing harm, whether punitive damages have been barred implicitly by federal statutory law making no provision for them, and whether the award of $2.5 billion in this case is greater than maritime law should allow in the circumstances.” Id., at 1. The High Court held that federal law did not preclude an award of punitive damages against Exxon, but that the award “should be limited to an amount equal to compensatory damages.” Id. The Supreme Court vacated the judgment and remanded the class action. Id., at 7. The Court held that the punitive damages awarded in the class action should not have exceeded the compensatory damage award and, accordingly, must be reduced to $500 million.

We do not here recount the factual history of the Valdez oil spill, or the evidence presented concerning Exxon’s culpability in allowing its employee, Captain Joseph Hazelwood, to serve as captain of the Valdez on the fateful night. That history may be found at pages 2 to 4 of the Court’s opinion. Exxon spent approximately $2.1 billion to clean up the oil spill. Exxon Shipping, at 4. The federal government brought criminal charges against Exxon for violating several federal laws; Exxon pleaded guilty to violating various federal laws and ultimately paid a $25 million fine and $100 million in restitution. Id., at 4-5. The federal government also filed a civil action against Exxon, along with the State of Alaska, and obtained a consent decree requiring Exxon to pay another $900 million toward restoring natural resources. Id., at 5. Exxon additionally paid approximately $300 million to settle claims with fishermen, property owners and others. Id.

Continue reading "Punitive Damages Class Action Defense Cases–Exxon v. Baker: Supreme Court Reduces Class Action Punitive Award In Exxon Valdez Case Holding Punitive Damages Under Federal Maritime Law Should Be Limited To Amount Of Compensatory Damages" »

Posted In: Class Action Court Decisions

To assist class action defense attorneys anticipate the types of class actions 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 June 20 - 26, 2008, during which time 47 new class action lawsuits were filed. With rare exception, labor law class action lawsuits generally top the list of new class action cases by a wide margin. This past week was no exception, as employment-related class actions lawsuits accounted for fully 28 of the new class actions filed during this reporting period (60% of the total number of new class action lawsuits during the past week). Only one other category met the 10% threshold -- class action lawsuits alleging unfair business practice claims, which include false advertising claims, with five (5) new class actions (11%).

Posted In: Class Actions In The News

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

Two class actions – one in New Jersey and one in Pennsylvania – were filed against Orleans Homebuilders and OHB Homes alleging violations of the federal Fair Labor Standards Act; specifically, the class action complaints allege “that defendants avoided paying overtime to employees classified as ‘community sales managers,’ ‘sales assistants,’ or ‘sales associates.’” In re Orleans Homebuilders, Inc., Fair Labor Standards Act Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of Pennsylvania; plaintiffs in both class actions supported the motion. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Eastern District of Pennsylvania was the appropriate transferee court, particularly as it was “supported by all parties.” Id.

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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, but Refuses Request to Transfer to District of Columbia and Selects Instead Western District of Washington as Appropriate Transferee Court

Two class action lawsuits were filed against the United States Postal Service (USPS) – one in Washington and one in Illinois. Each class action complaint purported to be brought on behalf of a nationwide class. In re United States Postal Service Privacy Act Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 9, 2008) [Slip Opn., at 1]. The Judicial Panel explained at page 1 that the class actions each “involve allegations that USPS violated the Privacy Act, 5 U.S.C. § 552a, and was otherwise unjustly enriched when it disclosed employees’ personal information (such as their home addresses) to companies which it authorized to disseminate the targeted solicitations without obtaining prior authorization from each affected employee.” 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 District of Columbia; plaintiffs in the class actions did not oppose the motion, but each requested transfer to the district in which their own class action already was pending. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that centralization “will eliminate duplicative discovery; prevent inconsistent pretrial rulings (particularly with respect to the issue of class certification); and conserve the resources of the parties, their counsel and the judiciary.” Id. The Panel disagreed, however, that the District of Columbia would be the appropriate transferee court, selecting instead the Western District of Washington, which is where the first class action was filed, id. Accordingly, the Judicial Panel transferred the Illinois class action to Washington, id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

United States Supreme Court Sets 1:1 Ratio for Punitive Damage Awards under Federal Maritime Law and Reduces $2.5 Billion Award in Exxon Valdez Class Action to $500 Million, Ending 20-year Class Action Fight

The United States Supreme Court issued a stunning ruling yesterday, holding that a punitive damage to compensatory damage ratio of 1:1 is a "fair upper limit" in federal maritime cases. The opinion brings an end to the class action lawsuit filed in the aftermath of the Exxon Valdez oil spill in Alaska nearly 20 years ago. That class action eventually resulted in a $5 billion punitive damage award, which the Ninth Circuit reduced to $2.5 billion. The Supreme Court reduced that award further, setting it at $500 million in light of the $507 million compensatory damage award. The Class Action Defense Blog will post a summary of the Supreme Court opinion on Monday, June 30. The opinion may be downloaded below.

Posted In: Class Actions In The News

Securities Fraud Class Action Complaint Failed to Plead Fraud or Scienter with Specificity Required under the Private Securities Litigation Reform Act (PSLRA) thus Supporting Defense Motion to Dismiss Class Action Florida Federal Court Holds

Plaintiff filed a putative class action against Micrus Endovascular and two of its officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act). The class action was consolidated with a second class action, and the parties filed a consolidated class action complaint. Abrams v. Micrus Endovascular Corp., ___ F.Supp.2d ___ (S.D. Fla. May 20, 2008) [Slip Opn., at 1]. In essence, the class action plaintiffs alleged that the defendants “overstated the Company’s future prospects and failed to disclose material facts about the Company’s financial condition in violation of Sections 10(b) and 20(a) of the Exchange Act, resulting in artificial inflation of the Company’s stock price.” Id., at 2. Defense attorneys moved to dismiss the class action on the grounds that it failed to plead facts with the specificity required by the Private Securities Litigation Reform Act (PSLRA), and that the challenged statements were “forward-looking” within the meaning of the PSLRA’s “safe harbor” provision. Id., at 4-5. The district court granted the motion.

With respect to the class action’s Section 10(b) claim, the federal court outlined the heightened pleading requirements under the PSLRA, see Abrams, at 5-6, and concluded that the class action complaint failed to meet those requirements. In the district court’s view, the statements challenged by the class action “represent the type of ‘corporate optimism’ or ‘mere puffing’ which is not covered by the Exchange Act.” Id., at 6. This is true because “‘no reasonable investor would make an investment decision based on [such] statement[s].’” Id. (citation omitted). In the court’s view, “none of the challenged statements in this case are material statements of verifiable fact,” id., at 7 n.3. And under the facts of the case, the court also rejected plaintiffs’ suggestion that defendants were under an affirmative duty to disclose the internal challenges the Company was facing, id., at 7.

Continue reading "PSLRA Class Action Defense Cases–Abrams v. Micrus Endovascular: Florida Federal Court Grants Defense Motion To Dismiss Securities Fraud Class Action Complaint For Failure To Plead Specificity Required By PSLRA" »

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

In Connection with Labor Law Class Action Alleging Failure to Pay Managers and Assistant Managers Overtime, Trial Court did not Abuse its Discretion to Manage Class Action Certification when it Granted Defense Motion to Strike Class Action Allegations from Complaint California State Court Holds

Plaintiffs filed a putative class action against AZ3, Inc., doing business as BCBG Maxazria (BCBG), alleging that it had failed to pay its managers and assistant managers for overtime. In re BCBG Overtime Cases, ___ Cal.App.4th ___, 78 Cal.Rptr.3d 257 (Cal.App. June 13, 2008) [Slip Opn., at 2]. A separate class action was filed by a single plaintiff, and then the three plaintiffs filed a coordinated class action complaint against BCBG, id. Defense attorneys moved to strike the class action allegations pursuant to Rule 1857(a)(3) of the California Rules of Court. Id., at 3. The motion was supported by declarations from 25 current or former managers and assistant managers explaining that “managers are not assigned uniform duties and spend more than 50 percent of their time on non-managerial work,” and that each store is different, targeting different customers, and requiring that managers exercise independent judgment in designing and laying out the store. Id. Plaintiffs’ lawyer opposed the motion on the ground that it was improperly sought to circumvent the class action certification process. Id., at 4. At oral argument, after the trial court issued a tentative ruling to grant the motion, plaintiffs asked for leave to depose some of the declarants, and for leave to file an amended class action complaint. The trial court denied plaintiffs’ requests and granted the motion finding that it was “properly before it because ‘class certification issues may be determined at any time during the litigation.’” Id. As the appellate court explained at page 4, “It found that BCBG had met its burden to show that the action is not suitable for class certification by producing ‘substantial evidence which establishes that Plaintiffs cannot prove the elements of typicality or commonality necessary for class certification.’” The Court of Appeal affirmed.

On appeal, plaintiff argued that the trial court should not have considered evidence outside the pleadings in ruling on the defense motion to strike the class action allegations, and that she should have been granted leave to amend. BCBG, at 1-2. In the alternative, plaintiff argued that she should have been allowed to conduct discovery before the court ruled on the motion, id., at 2. With respect to the first issue, the appellate court held that trial courts have considerable “flexibility” in addressing the certification of class actions and, indeed, have been encouraged by the California Supreme Court to be “procedurally innovative” in connection with “determining whether to allow the maintenance of a particular class suit.” Id., at 5 (quoting City of San Jose v. Superior Court, 12 Cal.3d 447, 453 (Cal. 1974)). California law permits either party to file a motion to certify a class action, and provides that “the pleadings be amended to eliminate allegations as to representation of absent persons, and that the action proceed accordingly.” Cal. Rule of Court, Rule 3.767(a)(3).

Continue reading "BCBG Class Action Defense Cases–In re BCBG: California State Court Upholds Court Order Granting Defense Motion To Strike Class Action Allegations In Labor Law Class Action" »

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

Trial Court did not Err in Granting Class Action Treatment to Nationwide Product Defect Class Action Against General Motors because Choice-of-Law Analysis Irrelevant to Class Action Certification Determination Arkansas Supreme Court Holds

In September 2006, plaintiff filed a class action against General Motors in Arkansas state court. The first amended class action complaint alleged that GM sold 4,000,000 pickup trucks and SUVs with defectively designed parking brakes; specifically, the class action alleged that GM discovered the defect in 2000, redesigned the defective part in October 2001, but “withheld from dealers admission of responsibility for the defect until January 28, 2003.” General Motors Corp. d/b/a/ Chevrolet, GMC, Cadillac, Buick, and Oldsmobile v. Bryant, ___ S.W.3d ___ (Ark. June 19, 2008) [Slip Opn., at 1-2]. According to the class action, this scheme permitted GM “to avoid paying millions of dollars in warranty claims.” Id., at 2. Plaintiff alleged further that GM’s 2005 recall involved only about 60,000 of the 4 million vehicles affected, id. Plaintiff filed a motion for class action certification; the trial court granted the motion in a 51-page order. Id., at 2-3. GM sought interlocutory review of the class action certification order, challenging predominance, superiority, and the definition of the class, id., at 3. The Arkansas Supreme Court affirmed.

The primary issue on appeal concerned GM’s challenge to the applicable choice of law. Defense attorneys argued that “the significant variations among the fifty-one motor-vehicles product-defect laws defeat predominance,” and that the trial court was required to perform a choice-of-law analysis before granting class action treatment to the lawsuit. Bryant, at 4. Plaintiff argued that Arkansas law does not require such an analysis prior to class action certification, id. The Arkansas Supreme Court agreed with plaintiff: because if found that a “predominating questions” exists – specifically, “[w]hether or not the class vehicles contain a defectively designed parking-brake system and whether or not General Motors concealed that defect,” id., at 6 – it found that the trial court did not err. In the Court’s words, “That various states’ laws may be required in determining the allegations of breach of express warranty, breach of implied warranty, a violation of Magnuson-Moss Warranty Act, unjust enrichment, fraudulent concealment, damages, and restitution does not defeat predominance in the instant case.” Id., at 7. (The author confesses that he finds this reasoning difficult to follow: legal claims do not exist in a vacuum, and it does not seem “judicially efficient” to try a case on a class-wide basis simply to determine one or two common facts, regardless of how important those facts may be, and then decertifying the case for apparently millions of trials to be held on a case-by-case basis focusing on the various claims of individual class members based on the particular state laws governing those claims.) The Arkansas Supreme Court recognized that other courts have held that choice-of-law “is crucial in making a class-certification decision,” id., at 8 (citation omitted), and indeed cited cases from California, New Jersey and Texas to that effect, see id., at 8-9. Nonetheless, it rejected this approach in favor of the “certify now, decertify later” approach followed in Arkansas, id., at 9-10.

Continue reading "GM Class Action Defense Cases–General Motors v. Bryant: Arkansas Supreme Court Affirms Class Action Certification Of Nationwide Class Action Alleging Product Defect Holding Variations In State Laws May Be Addressed By Decertification of Class Action" »

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

Defense Post-Trial Motion to Decertify FLSA Collective Action Granted because Evidence Revealed Lack of Similarity Among Class Members thereby Precluding Defense from Presenting a Uniform Defense to FLSA Claims Louisiana Federal Court Holds

Plaintiffs filed a labor law class action against Big Lots Stores for violations of the federal Fair Labor Standards Act (FLSA); specifically, the class action complaint alleged that Big Lots had misclassified employees and failed to pay them overtime. Johnson v. Big Lots Stores, Inc., ___ F.Supp.2d ___ (E.D. La. June 20, 2008) [Slip Opn., at 1]. The gravamen of the class action was that Big Lots failed to pay its store managers and assistant store managers for overtime, id., at 3. Over defendant’s objection, the district court certified the litigation as an FLSA collective action and approximately 1,000 people elected to opt-in to the lawsuit, id., at 4-5. Following a one-week bench trial, the federal court decertified the nationwide class, dismissed without prejudice the claims of the individuals who had opted in to the action, and held that plaintiffs could proceed with their individual actions. Id., at 1.

Big Lots is a nationwide retailer with approximately 1,400 stores in 46 states. Johnson, at 2. Typically, each store has store manager and at least one assistant store manager, but the physical size, products available for sale, sales volume, sales history and number of employees all affected the number and nature of managers and assistant managers at any given store. Id. “Significant variations” existed as to the duties performed by assistant store managers, but each one was expected to work at least five 9-hour shifts per week. Id., at 3. All managers and assistant managers were salaried employees, but they were classified as “executive employees” under the FLSA and therefore exempt from overtime pay. Id., at 2. The job description of an assistant store manager supported this classification, see id., at 2-3. The class action complaint, however, filed as a collective action under the FLSA, alleged that Big Lots misclassified its assistant store managers as exempt employees because, in the words of one plaintiff, “a Big Lots ASM is nothing more than a ‘glorified stocker.’” Id., at 3-4.

Continue reading "FLSA Class Action Defense Cases–Johnson v. Big Lots: Louisiana Federal Court Decertifies FLSA Collective Action After Week-Long Bench Trial Because Evidence Revealed Class Members Were Not Similarly Situated" »

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

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 June 13 - 19, 2008, during which time 38 new class action lawsuits were filed. Employment related class action lawsuits generally top the list of new class action cases, often by a wide margin. Last week, however, unfair business practice class actions topped the list. But this variance was short-lived: employment-related class actions lawsuits regained the top spot this week. During the time period covered by this post, 17 new class actions were filed alleging various labor law violations (45% of the total number of new class action lawsuits during the past week). Only one other category met the 10% threshold -- class action lawsuits alleging unfair business practice claims, which include false advertising claims, with five (5) new class actions (13%).

Posted In: Class Actions In The News

As Matter of First Impression, Class Action Complaint Against National Banks must be Dismissed because Class Action Claims Challenging Bank Fees Charged Non-Accountholders to Cash “Official Checks” were Preempted by the National Bank Act which Authorizes Banks to Charge such Fees Michigan Federal Court Holds

Plaintiffs filed a putative class action against National City Bank, Comerica, JPMorgan Chase, and Fifth Thirds Bank for violations of the Uniform Commercial Code (UCC), as enacted by Michigan; specifically, the class action complaint alleged that defendants issued “official checks” – i.e., cashier’s checks or teller’s checks – and then charged fees to non-accountholders to cash them. NNDJ, INC. v. National City Bank, 540 F.Supp.2d 851, 851 (E.D. Mich. 2008). Defense attorneys for National City Bank and JPMorgan Chase, federally chartered banks created under and governed by the National Bank Act (the “National Banks”), moved to dismiss the class action complaint on the grounds that the class action claims were preempted by the National Bank Act, id. The district court granted the motion and dismissed the class action against the National Banks.

The class action complaint alleged that the National Banks issue cashier's checks and teller's checks. NNDJ, at 851. Under the UCC, a cashier's check is “a draft with respect to which the drawer and the drawee are the same bank or branches of the same bank,” and a teller's check is “a draft drawn by a bank (I) on another bank, or (ii) payable at or through a bank.” Id. (citations omitted). The class action alleged that the National Banks charged a non-accountholders a fee to cash the official checks that “the National Banks themselves have issued,” and that this violated the UCC. Id., at 8511-52. Defense attorneys argued that the UCC does not prohibit the National Banks from charging such fees, but further that if the UCC did prohibit such fees then it was preempted by the National Bank Act. Id., at 852. The district court explained that the National Banks’ motion presented two issues of first impression: (1) whether Michigan’s UCC “prohibit[s] banks from issuing official checks and subsequently charging non-accountholders a fee to cash them”; and (2) if so, whether those portions of Michigan’s UCC are preempted by the National Bank Act. Id. The federal court found it necessary to discuss only the preemption issue.

Continue reading "National Bank Act Class Action Defense Cases–NNDJ v. National City Bank: Michigan Federal Court Dismisses Class Action Against National Banks Holding Class Action Claims Challenging Fees Banks Charged To Cash Official Checks Preempted By Federal Law" »

Posted In: Class Action Court Decisions

FLSA Class Action Plaintiff not Entitled to give Notice of Litigation to Other Pharmaceutical Representatives of Bristol-Myers Squibb because Administrative Employee Exemption to Overtime Pay Likely Applies New York Federal Court Holds

Plaintiff filed a putative labor law class action against Bristol-Myers Squibb alleging violations of the federal fair Labor Standards Act (FLSA); specifically, the class action complaint alleged that Bristol-Myers misclassified its pharmaceutical representatives as exempt from overtime pay. Amendola v. Bristol-Myers Squibb Co., ___ F.Supp.2d ___ (S.D.N.Y. June 4, 2008) [Slip Opn., at 2]. As part of her discovery leading up to a motion to certify the litigation as a class action, plaintiff sought the names and addresses of defendant’s other pharmaceutical representatives, and asked the federal court to authorize that notice of the class action complaint be sent to those individuals and that the limitations period for absent class members to file claims be equitably tolled. Id. The district court denied the motion finding that while defendant’s pharmaceutical representatives are not exempt from overtime pay under the “outside salespersons” exemption, the “administrative employees” exemption likely applies. Id.

According to the class action complaint, plaintiff worked for Bristol-Myers from February 1998 through March 2006 and was “often required…to work more than forty hours per week” but never received overtime pay. Amendola, at 3. Plaintiff filed her class action on June 28, 2007 and promptly sought discovery of the names and contact information of all 4500 pharmaceutical representatives. Id. At a status conference, defense attorneys explained that the company’s pharmaceutical representatives “include four levels of seniority and are employed by five distinct business units, each of which is subdivided across several geographic regions”; the defense argued that pharmaceutical representatives are not “similarly situated” as required for the litigation to proceed as an FLSA collective action. Id. The district court responded by ordering defense counsel to provide the names of “two or three” representatives “randomly selected from each business unit, geographic region, and job level”; Bristol-Myers ultimately provided plaintiff with contact information for 350 employees and 6000 documents. Id., at 3-4. It also produced for deposition five witnesses, consisting of the “vice president or manager overseeing each of [the company’s] five business divisions.” Id., at 4. Plaintiff then renewed her request to notify the pharmaceutical representatives of the litigation; defense attorneys opposed the motion, arguing that at least one of four statutory or regulatory exemptions applied. Id., at 4-5.

Continue reading "FLSA Class Action Defense Cases–Amendola v. Bristol-Myers: New York Federal Court Denies Plaintiff’s Request To Give Notice Of FLSA Class Action And To Equitably Toll Claims Period For Employees Who Later Join Class Action Litigation" »

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

Securities Class Action Erroneously Dismissed because Company’s Characterization of “Stop-Work” Orders as “Backlog” could have Misled Investors as to Company’s True Financial Condition Ninth Circuit Holds

Plaintiffs filed a putative class action against Applied Signal Technology (AST) and two of its officers for violations of federal securities laws; specifically, the class action complaint alleged that the company’s “backlog” reports misled investors as to its financial condition. Berson v. Applied Signal Technology, Inc., 527 F.3d 982 (9th Cir. June 5, 2008) [Slip Opn., at 6391-92]. The Ninth Circuit explained that AST’s customers were predominantly government agencies that may, at any time and for any reason, issue “stop-work” orders; once issued, AST immediately stops earning money on those projects, “[a]nd, because stopped work often is eventually cancelled altogether, a stop-work order signals a heightened risk that the company never will earn the money.” Id., at 6391-92. However, AST “continued to count the stopped work as part of its ‘backlog’ – a term the company defines as the dollar value of the work it has contracted to do but hasn’t yet performed.” Id., at 6392. The class action alleged that plaintiffs were misled into believing that it was “likely” the stop-work projects would be completed when “in reality” it was “likely to be lost forever.” Id. Defense attorneys moved to dismiss the class action; the district court granted the motion and plaintiffs appealed. The Ninth Circuit reversed.

The Circuit Court began its analysis by rejecting the defense argument under Rule 9(b) that plaintiffs failed to plead fraud with particularity; we do not discuss that portion of the opinion. See Whiting, at 6392-94. Rather, we begin with the defense argument that the statements regarding the company’s backlog were not misleading. First, AST argued that because its SEC filings clearly revealed that the backlog consisted of “uncompleted portions of existing contracts,” investors would know that this work included stop-work orders. Id., at 6394-95. The Ninth Circuit found this to be a “conceivable interpretation” of the SEC disclosure, but not the “most plausible” one, id., at 6395. In the end, the Court concluded, “we cannot find, as a matter of law, that defendants disclosed that backlog included a significant amount of work that had been halted by the company’s customers.” Id., at 6396. The Ninth Circuit noted that AST was not required to release its backlog report, but once it “chose to tout” the backlog, it was obligated to do so “in a manner that wouldn’t mislead investors as to what that backlog consisted of.” Id., at 6397. The Circuit Court held further that plaintiffs had “state[d] with particularity facts giving rise to a strong inference” of defendants’ intent to deceive by alleging that defendants “were aware that stop-work orders had halted significant amounts of work, yet counted the stopped work as backlog anyway.” Id.

Continue reading "Class Action Defense Cases–Berson v. Applied Signal Technology: Ninth Circuit Reverses Dismissal Of Securities Class Action Holding Class Action Complaint Satisfied Pleading Requirements" »

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

Class Action Judgment in Favor of Plaintiffs Proper because City’s Living Wage Ordinance Covered Work Performed on City Contract Outside the City by Employees who did not Live within the Territorial Boundaries of the City, and because Employees were Intended Beneficiaries of Ordinance and therefore had Standing to Pursue Claims under it California State Court Holds

Plaintiffs filed a class action against Cintas for labor law violations; the class action complaint alleged that because Cintas has a contract with the City of Hayward, California, that required it to comply with Hayward’s Living Wage Ordinance, Cintas was required to pay workers in the City of San Leandro the wages mandated by the Ordinance. Amaral v. Cintas Corp. No. 2, ___ Cal.App.4th ___, 78 Cal.Rptr.3d 572 (Cal.App. 2008) [Slip Opn., at 1]. The class action alleged violations of the Ordinance, as well as California Labor Code § 200 and Business and Professions Code § 17200. Id. Defense attorneys admitted that Cintas did not provide employees located outside of Hayward with “the minimum wages or benefits required by the ordinance,” but argued that the Ordinance was unconstitutional, id. The trial court disagreed and, on cross-motions for summary judgment, found that Cintas for backpay and unpaid benefits, id. The trial court also found, however, that Cintas did not act “willfully” and so limited the amount of plaintiffs’ damages. Id., at 2. Both parties appealed; the California Court of Appeal affirmed the trial court order in all respects.

Briefly, the facts are as follows. From 1999 to 2003, Cintas contracted with the City to provide uniform and linen services; the City would lease linens and garments from Cintas, and contracted further with Cintas to collect, clean and return these items. Amaral, at 2. The City did not lease specific items, and Cintas did not necessarily return to the City the same items that it had picked up from the City; rather, the linens and garments would be collected and cleaned as a group, inspected for damage, sorted, and sent out to customers. Id. Cintas processed items it collected from and delivered to Hayward, at its facilities in Union City and San Leandro, and employees at both locations “worked on items for many different customers each day.” Id. Hayward’s Living Wage Ordinance was enacted in 1999 for the purpose of providing sufficient compensation so employees could “afford a decent standard of living in Hayward,” id., at 3 (italics added), and “requires covered contractors to pay their employees at least $8.00 per hour if health benefits are provided, or $9.25 per hour if no health benefits are provided,” id. Before the Ordinance went into effect, the City advised Cintas of its passage, and after the Ordinance went into effect, the City required Cintas certify that it would comply with the Ordinance. Amaral, at 4. Cintas represented to the City that it agreed to comply with the Ordinance, but never contacted the City to inquire into its applicability to employees outside the City. Id. Cintas terminated its contract with the City in 2003; during the life of the contract, the City’s business accounted for less than 1% of the company’s revenue. Id., at 5.

Continue reading "Class Action Defense Cases–Amaral v. Cintas: California Court Affirms Class Action Judgment In Favor Of Plaintiffs In Labor Law Class Action Holding City’s Living Wage Ordinance Applied To All Work By All Employees" »

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

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

Posted In: Class Actions In The News

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 June 6 – 12, 2008, during which time 51 new class action lawsuits were filed. Employment related class action lawsuits generally top the list of new class action cases by a wide margin. Indeed, the author cannot recall the last time any category toppedDuring the time period covered by this post, however, class action complaints alleging unfair business practices, including false advertising claims, actually topped the list. Twenty (20) new class actions were filed this reporting period, accounting for 39% of the total number of new class actions filed during the period. The only category of class actions to break the 10% threshold alleged, of course, employment-related claims; 19 new labor law class action cases were filed, representing 37% of the total number of new class actions filed.

Posted In: Class Actions In The News

Judicial Panel Grants Defense Motion, Unopposed by Most Class Action Plaintiffs, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Centralizes Class Actions in Western District of Washington

Seven (7) class action lawsuits – five in Washington and two in New York – were filed against defendants Washington Mutual alleging “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., 536 F.Supp.2d 1377, 1377-78 (Jud.Pan.Mult.Lit. 2008). Another dozen potentially related class action lawsuits also were filed, mostly in the Western District of Washington, id., at 1377 n.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 Western District of Washington; no plaintiff in any of the class actions opposed the motion, but the plaintiffs in the New York class actions argued for transfer to the Southern District of New York. Id., at 1377-78. The Judicial Panel granted the motion to centralize the class action lawsuits, explaining that the actions share “common questions of fact” and that centralization will “serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.” Id., at 1378. The Judicial Panel also agreed that the Western District of Washington was the appropriate transferee court “because (1) most of the actions are already pending in that district, and (2) WaMu is headquartered in Seattle, Washington, and relevant documents and witnesses will likely be located there.” Id., at 1378.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Settlement was not a “Coupon” Settlement and Trial Court did not Abuse its Discretion in Approving Class Action Settlement or Awarding Class Counsel $2 Million in Attorney Fees California State Court Holds

Plaintiff filed a class action lawsuit against Netflix, Inc. alleging false advertising in advising customers that, for a flat monthly fee, it would send them “unlimited” DVD rentals with “1 Day Delivery”; the class action alleged that these representations were false. Chavez v. Netflix, Inc., 162 Cal.App.4th 43, 75 Cal.Rptr.3d 413, 418 (Cal.App. 2008). Specifically, the class action charged that “Netflix was employing sophisticated algorithms to prioritize the allocation of its DVD's to its lowest-consuming members with the effect that high-consuming members would receive fewer DVD's per month, reducing the costs Netflix incurred to serve this high-usage group, and increasing its profits.” Id., at 419. Defense attorneys denied the allegations and extensive discovery followed: “Netflix produced approximately 86,000 pages of documents, answered more than 200 interrogatories and 59 requests for admissions, and made five of its employees, including three executives, available for deposition by Chavez. Chavez produced documents and answered interrogatories.” Id. Plaintiff sought class action certification of the lawsuit, but before the court ruled on whether to afford class action treatment, the parties reached a settlement. Id. The original class action settlement was amended to address objections filed in opposition to the proposal; over the challenges of a handful of objectors, the trial court approved the terms of the amended class action settlement and awarded plaintiff’s lawyers $2 million in fees and costs. Id., at 419-21. Some of the objectors appealed, and the California Court of Appeal affirmed.

Under the terms of the original class action settlement, Netflix agreed to modify its advertising, and agreed to provide current members with “a one-level membership upgrade for one month, allowing the current members to receive one additional DVD at a time at no charge,” and all former members with “a free one-month membership at the three-at-a-time level, which would allow the former member to receive a minimum of three and up to 11 or more rentals at no charge.” Chavez, at 419-20. The original proposal also included an “auto-renewal feature.” Id., at 420. The trial court gave preliminary approval to the class action settlement and notice was provided to class members, id. Several objections were filed on behalf of “approximately 450 of the 5.5 million class members”; the Federal Trade Commission (FTC) also filed an objection, challenging the auto-renewal feature of the proposed class action settlement. Id. Ultimately, the parties eliminated the auto-renewal provision, and made certain other modifications to address some of the objectors’ concerns, and a second notice was provided to class members. Id. The amended class action settlement agreement resulted in the withdrawal of the objections by the FTC and by 428 of the original 450 objectors, id. The trial court ultimately gave final approval to the settlement, and awarded plaintiff approximately $2 million in attorney fees. Id., at 420-21. In the end, almost 700,000 people filed claims for benefits under the settlement, id., at 421. Three appeals were filed on behalf of four objectors followed: the appellate court consolidated the appeals and affirmed. Id.

Continue reading "Class Action Defense Cases–Chavez v. Netflix: California Court Upholds Trial Court Approval Of Class Action Settlement Providing Customers With One-Day Free Rental And Awarding $2 Million In Attorney Fees" »

Posted In: Class Action Court Decisions

Class Action’s Failure to Allege Manifest Injury Precludes Medical Monitoring Remedy Sought in Products Liability Class Action based on Use of Vioxx New Jersey Supreme Court Holds

Plaintiffs filed a products liability class action against Merck in New Jersey state court arising out of the use of the prescription drug Vioxx; the class action complaint sought to “recover the costs of medical monitoring despite [plaintiffs’] failure to allege a physical injury.” Sinclair v. Merck & Co., Inc., ___ A.2d ___ (N.J. June 4, 2008) [Slip Opn., at 2]. Defense attorneys moved to dismiss the class action, and the trial court granted the motion “reasoning that medical monitoring is an uncommon remedy that should not be applied to plaintiffs who did not allege any manifest injury.” Id. The appellate court reversed, reinstating the class action and remanding the litigation for discovery. Id. (Our article summarizing that appellate opinion may be found here.) The New Jersey Supreme Court reversed, holding that New Jersey’s Products Liability Act (PLA) “does not include the remedy of medical monitoring when no manifest injury is alleged” and holding further that the PLA is “the sole source of remedy” for the class action’s products liability claim so New Jersey’s Consumer Fraud Act (CFA) “does not provide an alternative remedy.” Id., at 3.

The history of Vioxx is well known and has been recounted in numerous news reports, court opinions and articles by this author. Suffice it to say that Merck voluntarily withdrew Vioxx from the market after the FDA concluded that use of Vioxx increased the risk of heart attacks and strokes. See Sinclair, at 3-4. Dozens of class action lawsuits followed, including the Sinclair class action, which alleged claims for negligence, violations of the PLA and CFA, breach of express and implied warranties, and unjust enrichment, on behalf of individuals “who may suffer from serious silent or latent injury for which they may require medical monitoring.” Id., at 4. Plaintiffs amended the class action complaint in March 2005 to seek as damages “the cost of diagnostic testing designed to determine whether [class members] have suffered unrecognized or serious latent injury as a result of their direct exposure to Vioxx” and “a court-administered screening program to provide medical diagnostic tests for each member of the proposed class and follow-up with an epidemiologist.” Id., at 4-5. The trial court granted Merck’s motion to dismiss the class action in its entirety, reasoning in part that while medical monitoring has been authorized in asbestos cases it has not been approved in “pure products liability action where the PLA applies,” and that only economic damages are recoverable under the CFA so medical monitoring is not authorized under that statute. Id., at 6. The appellate court reversed, concluding that the record required further development through discovery in order to determine whether “harm” under the PLA exists, id., at 6-7.

Continue reading "Vioxx Class Action Defense Cases–Sinclair v. Merck: New Jersey Supreme Court Holds Class Action Seeking Medical Monitoring For Use Of Vioxx Properly Dismissed By Trial Court Because Class Action Plaintiffs Did Not Allege Harm" »

Posted In: Class Action Court Decisions

Class Action Unjust Enrichment Claim Properly Dismissed because even assuming Defendant Violated Insurance Licensing Statute Plaintiffs Received Value for Services Provided by Qwest so Granting Plaintiffs Restitution “would Effect an Injustice” Tenth Circuit Holds

Plaintiffs filed a putative class action against Qwest Wireless, LLC, Qwest Services Corporation, and Qwest Communications International, Inc. (Qwest) alleging that defendants “acted as an unlicensed seller of insurance in violation of the laws of Arizona and 13 other states where it markets and sells handset insurance to its wireless customers.” The class action complaint alleged unjust enrichment in Qwest’s “receipt of sales commissions in violation of the licensing statutes,” and sought recovery of “the portion of the handset-insurance premium that compensates Qwest for its sales efforts.” Van Zanen v. Qwest Wireless, L.L.C., 522 F.3d 1127, 1128-29 (10th Cir. 2008). Specifically, the class action alleged that plaintiffs purchased “handset insurance” from Qwest, and that Qwest sells such insurance to customers even though “[it] is not licensed to sell or solicit insurance in any of the 14 states in which it operates, markets and sells the handset insurance to its customers.” Id., at 1129. Defense attorneys moved to dismiss the class action; the district court granted the motion, holding that no private right of action exists under Arizona law for violations of the insurance licensing statute. Id. The Tenth Circuit affirmed because “violation of a licensing statute, without more, is generally insufficient to support an unjust-enrichment claim against one who has performed as promised.” Id.

Plaintiffs filed their class action complaint in Colorado federal court “alleging that Qwest's sales of the handset insurance violate the licensing laws of Arizona and 13 other states.” Van Zanen, at 1129. The class action advanced “implied statutory causes of action and common-law unjust enrichment,” and sought injunctive and declaratory relief and disgorgement of Qwest’s share of the insurance premiums charged to its customers, id. “The parties agreed that Arizona law governed [plaintiffs’] statutory claim on their own behalf.” However, Arizona law provides only that the director of insurance may issue a cease and desist order, and file suit to enjoin, any violation of the licensing statute. Id. (citations omitted). The district court (1) concluded that no private right of action exists under Arizona’s licensing statute, and (2) plaintiffs failed to state a claim for unjust enrichment because they had not suffered “detriment, expense, or impoverishment” but instead had “obtained a valuable product for which they bargained and which they intend to keep.” The district court dismissed the class action complaint in its entirety because plaintiffs failed to state any claims that they could pursue on their own behalf. Id.

Continue reading "Class Action Defense Cases–Van Zanen v. Qwest: Tenth Circuit Affirms Dismissal Of Class Action Unjust Enrichment Claim Holding Violation Of Insurance Licensing Statute Insufficient To Support Class Action Claim" »

Posted In: Class Action Court Decisions

Class Action Alleging Fraudulent Advertising Erroneously Dismissed Because Consumers not Required to Read Ingredient List to Correct Deceptive Advertising Claims Underlying Class Action Complaint Ninth Circuit Holds

Plaintiffs filed a putative class action against Gerber Products alleging inter alia violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA); specifically, the class action complaint alleged that Gerber’s Fruit Juice Snacks were deceptively marketed because the packaging – which shows images of various fruits “such as oranges, peaches, strawberries, and cherries” – would lead a reasonable consumer to believe that the juices of these fruits were included in the products when in reality “the only juice contained in the product was white grape juice from concentrate.” Williams v. Gerber Products Co., 523 F.3d 934, 936 (9th Cir. 2008). The class action attacked five features of Gerber’s packaging of its fruit juice snacks, including that the product was “nutritious”; defense attorneys moved to dismiss the class action for failure to state a claim, arguing that the packaging, including the ingredient disclosures on the packaging, defeated plaintiffs’ class action claims. Id., at 937. The district court granted the defense motion and dismissed the class action, holding that “Gerber’s statements were not likely to deceive a reasonable consumer, particularly given that the ingredient list was printed on the side of the box and that the ‘nutritious’ claim was non-actionable puffery.” Id. The Ninth Circuit reversed.

The core of the district court’s decision was its finding that Gerber’s packaging was “not likely to deceive a reasonable consumer as a matter of law.” Williams, at 938. It based this decision “solely on its own review of an example of the packaging.” Id., at 939. While California law permits such consideration, as the advertisement itself is “the primary evidence” of its falsity, id. (citation omitted), California courts also hold that “whether a business practice is deceptive will usually be a question of fact not appropriate for decision on demurrer,” id. (citations omitted). Based on its review of the packaging, the Ninth Circuit found “a number of features…which could likely deceive a reasonable consumer.” Id. Most importantly, it held that “reasonable consumers should [not] be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box.” Id., at 939-40. The Circuit Court acknowledged that Gerber’s ingredient list “appears to comply with FDA regulations,” but added that “a busy parent walking through the aisles of a grocery store should [not] be expected to verify that the representations on the front of the box are confirmed in the ingredient list.” Id. As the Ninth Circuit explained at page 940, “We do not think that the FDA requires an ingredient list so that manufacturers can mislead consumers and then rely on the ingredient list to correct those misinterpretations and provide a shield for liability for the deception.”

Continue reading "UCL Class Action Defense Cases–Williams v. Gerber Products: Ninth Circuit Reverses Dismissal Of Class Action Holding False Advertising On Front Of Box Not Cured By Accurate Ingredient List On Side Of Box" »

Posted In: Class Action Court Decisions

Class Action Complaint Failed to Plead Securities Fraud with Specificity Required by Private Securities Litigation Reform Act (PSLRA) thus Subjecting Class Action to Motion to Dismiss without Leave to Amend Missouri Federal Court Holds

Plaintiff filed a class action complaint against NovaStar Financial and three of its directors alleging securities fraud violations. In re 2007 NovaStar Financial, Inc., Securities Litig., ___ F.Supp.2d ___ (W.D. Mo. June 4, 2008) [Slip Opn., at 1]. Defense attorneys moved to dismiss the class action, id.; the class action complaint failed to meet the heightened pleading requirements under the Private Securities Litigation Reform Act (PSLRA), which “is intended to eliminate abusive securities litigation and put an end to the practice of pleading ‘fraud by hindsight,’” id., at 2 (citation omitted). The district court granted the defense motion, holding that the class action “has not – and cannot – satisfy the PSLRA’s pleading requirements.” Id., at 3. The language of the district court’s opinion should prove useful to class action defense attorneys, so we quote it at length.

The federal court began its analysis with a cogent observation, noting at page 3: “One might be tempted to think that a complaint spanning more than 100 pages and consisting of more than 200 paragraphs could not fail to be specific. The temptation is dangerous and must be resisted.” Under the district court’s careful analysis, it found that the class action complaint “has not specified the allegedly misleading statements, nor has he specified why the statements he has referred to are misleading.” Id. Instead, the class action “presents a very broad picture, and Plaintiff discusses his claims in generalities – precisely what the PSLRA counsels against.” Id. In the court’s words, “This has allowed Plaintiff to pick isolated threads and snippets from the Complaint to create an illusion of detail and insinuate the existence of fraud, which in turn has made it exceedingly difficult for the Court to conduct the analysis required by law.” Id. Relying on the Eighth Circuit’s opinion in In re Cerner Corp. Sec. Litig., 425 F.3d 1079 (8th Cir. 2005), the district court held that the class action failed to plead falsity with the required specificity. See id., at 3-6. At bottom, the class action “has not stated a claim because companies…are not expected to be clairvoyant, and bad decisions do not constitute securities fraud.” Id., at 6.

Continue reading "PSLRA Class Action Defense Cases–In re 2007 NovaStar Financial: Missouri Federal Court Grants Defense Motion To Dismiss Class Action Complaint Concluding Class Action Failed To Satisfy PSLRA’s Heightened Pleading Requirements" »

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

In order to assist class action defense attorneys anticipate the types of class actions 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 30 – June 5, 2008, during which time 47 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, 19 new class actions were filed alleging various labor law violations (40% 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 six (6) new class actions (13%), and class actions alleging violations of California's Song-Beverly Act (which, in broad terms, prohibits retailers from requesting that customer provide certain personal information at point of sale in connection with credit card purchases), with five (5) new filings (11%).

Posted In: Class Actions In The News

Class Action Against Sun Microsystems Alleging Misclassification of Technical Writers as Exempt Employees Warrants Class Action Treatment California State Trial Court Holds

On May 13, 2008, the California Superior Court for the County of Santa Clara entered an order granting plaintiff's motion to certify a class action lawsuit against Sun Microsystems and SeeBeyond Technology. Hoenemier v. Sun Microsystems, Inc.,, Santa Clara Superior Court Case No. Case No.: 106CV-071531 (May 13, 2008). The class action had been filed on behalf of “All persons who are or have been employed by Defendant Sun Microsystems Inc., as a Technical Writer 1 through 5, and/or by SeeBeyond Technology Corporation, as a Technical Writer or Senior Technical Writer, in the State of California during the period commencing four years from the filing of this action, September 21, 2002, to final judgment (‘Class Period’).” Several news reports characterize this class action certification action as the first time a class action had been certified on behalf of technical writers. Technical writers are generally understood to be exempt from overtime laws; the class action, however, seeks compensation for “overtime, missed meal periods, and related penalties.” Interestingly, the trial court ordered that an additional class representative be named as a party-plaintiff, “preferably a current employee.” A copy of the court’s order certifying the lawsuit as a class action may be found here.

Posted In: Class Action Court Decisions

Class Action Failed to Adequately Allege Securities Law Violations because Pharmaceutical Company’s Meta-Analyses were Inconclusive and because Class Action Failed to Adequately Plead Scienter New York Federal Court Holds

Plaintiffs filed a putative class action against pharmaceutical company GlaxoSmithKline (GSK) and certain individual officers and directors of GSK for violations of federal securities laws; specifically, the class action complaint alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and of Rule 10b-5 on the grounds that defendants failed to disclose the truth about its meta-analysis in connection with its diabetes drug, Avandia. Borochoff v. GlaxoSmithKline PLC, ___ F.Supp.2d ___ (S.D.N.Y. May 9, 2008) [Slip Opn., at 1-2]. Plaintiffs filed an amended class action complaint 5 months later, and defense attorneys moved to dismiss the class action under Rule 12(b)(6), id., at 9-10. The district court granted the motion and dismissed the class action.

The class action complaint alleged that in September 2005, GSK finalized a meta-analysis that “showed an estimate of…an increased risk of heart attack, associated with the use of Avandia.” Borochoff, at 2. Nonetheless, its October 2005 press release attributed GSK’s “excellent pharmaceutical sales growth” in part to Avandia’s “tremendous success” and “emphasize[d] that we do not expect the growth rate to slow down over the next couple of years.” Id., at 2-3. GSK’s February 2006 press release also referred to Avandia as a “significant growth driver[],” id., at 3. GSK did not disclose the results of its first mea-analysis, which were duplicated by its second meta-analysis, finalized in March 2006. Id. On the contrary, GSK’s 2005 Annual Report, filed on March 3, 2006, stated that “strong growth” from Avandia was expected to continue in 2006. Id., at 4. The class action alleged that GSK’s statements were “materially false and misleading” because it knew, based on its meta-analyses, that use of Avandia carried with it an increased risk of heart attack, id. The class action also cited two additional press releases, from April and July 2006, that called Avandia a “key growth driver[]” and stressed a “32% increase in sales of Avandia.” Id., at 4-5.

Continue reading "Class Action Defense Cases–Borochoff v. GlaxoSmithKline: New York Federal Court Grants Defense Motion To Dismiss Class Action Alleging Securities Law Violations Finding Complaint Failed To Satisfy PSLRA Pleading Requirements" »

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

Shareholder Class Action Against Brocade Communications Systems Arising out of Options Backdating Settled for $160 Million

Mark Maremont and John Hechinger of the Wall Street Journal report today that Brocade Communications Systems has agreed to pay $160 million to settle a class action lawsuit filed by shareholders. The class action sought damages allegedly caused by the backdating of stock options. The settlement followed the San Francisco federal court’s ruling last month that Brocade was liable for the conduct of its former Chief Executive Officer, Gregory Reyes, who was sentenced last January to 21 months in federal prison for his role in the scandal. This ruling, coupled with the district court earlier order granting summary judgment in favor of the class action plaintiffs on Mr. Reyes’s fault in the matters placed at issue by the class action complaint, left Brocade with two choices: settle, or proceed to trial with the only issue being the amount of damages to be awarded.

The article, entitled “Brocade Settles Suit for $160 Million,” may be found on page B4 of the June 3, 2008 edition of The Wall Street Journal.

Posted In: Class Actions In The News

Amendment of Class Action Complaint to Add Party-Defendant Years after Plaintiff Learned Defendant’s Identity Constituted a New Action Under Class Action Fairness Act of 2005 (CAFA) thereby Creating CAFA Removal Jurisdiction over Class Action Seventh Circuit Holds

In July 2003, plaintiff file a putative class action in Illinois state court against AIG Claim Services and Illinois National Insurance Company for violations of state fraud and consumer protection laws; the class action complaint alleged that AIG Claim Services, in processing claims under Illinois National insurance policies, systematically underpaid accident insurance benefits. Springman v. AIG Marketing, Inc., 523 F.3d 685, 686 (7th Cir. 2008). In December 2003, defense attorneys disclosed that AIG had not adjusted plaintiff’s claim; plaintiff did not inquire further until October 2004, at which time he learned that at affiliate, AIG Marketing, had handled the claim underlying the class action. Id. Nonetheless, plaintiff waited another three years before seeking leave to file an amended class action complaint to sue AIG Marketing in place of AIG Claim Services, id. The state court granted the motion, and defense attorney removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Id. AIG Claim Services could not have removed the class action itself because the class action complaint had been filed well before CAFA’s effective date, id. Plaintiff’s lawyer moved to remand the class action to state court, but the motion was denied, id. The Seventh Circuit affirmed.

The question before the Circuit Court was whether the substitution of AIG Marketing for AIG Claim Services constituted “the commencement of a suit against AIG[ Marketing] within the meaning of the Class Action Fairness Act, thus enabling removal of the entire suit.” Springman, at 686-87 (citing 28 U.S.C. § 1453(b)). After reaffirming the Seventh Circuit’s law, adoption by all but one other circuit courts, that post-filing acts may affect whether a class action complaint is removable under CAFA, see id., at 687 (citations omitted), the Court reiterated the federal removal doctrine, which permits removal based on post-filings acts if, inter alia, the amended complaint “adds a new defendant.” Id. (citation omitted).

Continue reading "CAFA Class Action Defense Removal Cases–Springman v. AIG: Seventh Circuit Affirms Denial Of Plaintiff’s Motion To Remand Class Action To State Court Upholding Removal Jurisdiction Under Class Action Fairness Act (CAFA)" »

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

Melvyn Weiss, Noted Class Action Plaintiff Focusing on Securities Class Actions, Sentenced to 30 Months and Ordered to Pay $10 Million

We have written several articles covering the criminal charges against Melvyn Weiss and his former law partners, David Bershad and Steven Schulman, as well as another former Weiss law partner, William Lerach. The final chapter in the criminal charges against Mr. Weiss came to a close on June 2, 2008, when the federal court sentenced the 72-year-old Mr. Weiss to 30 months in federal prison. Rhonda Rundle and Nathan Koppel report on this event in today’s Wall Street Journal, writing that while the federal court referred to the 275 letters in support of Mr. Weiss as “a showing that I don’t think I’ve ever seen,” he nonetheless handed down a prison sentence very near to the 33-month prison term requested by prosecutors. Government filings reportedly place Mr. Weiss’s share of his law firm’s profits at more than $200 million.

The article, entitled “Weiss Gets 30-Month Sentence: Law Firms Ability To Be Lead Counsel Allowed for Big Fees,” may be found on page B4 of the June 3, 2008 edition of The Wall Street Journal.

Posted In: Class Actions In The News

Class Action Alleging False Advertising Claims Improperly Dismissed because Factual Questions Existed as to Whether Statements were Deceptive and because Accuracy of Ingredient List did not Insulate Defendant from Liability Based on Misleading Nature of Statements on Front of Product Box Ninth Circuit Holds

Plaintiffs filed a putative class action against Gerber Products Company alleging, inter alia, violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA); the class action complaint claimed that Gerber “deceptively marketed” its “Fruit Juice Snacks,” which are part of Gerber’s “Graduates for Toddlers” line of products. Williams v. Gerber Products Co., 523 F.3d 934, 936 (9th Cir. 2008). Defense attorneys moved to dismiss the class action, id. The district court granted the defense motion and dismissed the class action complaint; the court reasoned that the challenged statements “were not likely to deceive a reasonable consumer,” id., at 937. The Ninth Circuit reversed.

The Ninth Circuit summarized the class action claims at pages 936 an 937 as follows:

Continue reading "UCL Class Action Defense Cases–Williams v. Gerber: Ninth Circuit Holds Class Action Complaint Improperly Dismissed Because Class Action’s False Advertising Claims May Have Deceived Reasonable Consumer" »

Posted In: Class Action Court Decisions

Potential Conflict Between Labor Organization Financing Class Action Litigation and Individual Named Plaintiffs in Class Action Lawsuits did not Disqualification of Plaintiffs’ Class Action Counsel, Funded by Labor Organization, because Conflict Waivers Signed by Plaintiffs and Labor Group were Effective and Trial Court did not Err in Refusing to Disqualify Named Plaintiffs from Prosecuting Class Actions as Motion was Premature California State Court Holds

The Writers Guild of America is a labor organization that represents film, television, news and other media writers; the Guild held several meetings with writers of reality television programs because it believed that reality TV show employees were not provided breaks or overtime pay as required by California law. Sharp v. Next Entertainment, Inc., ___ Cal.App.4th ___ (Cal.App. May 28, 2008) [Slip Opn., at 4]. The Guild believed that class action litigation “would create economic pressure on those who paid illegal wages” and “could facilitate the Guild’s unionizing campaign.” Id., at 4-5. Ultimately, two class action lawsuits were filed (the Sharp class action against Next Entertainment and others, and the Shriver class action against Rocket Science Laboratories and others); the class action complaints were filed on behalf of 21 individuals, 16 of whom had attended the meetings referenced above, by a law firm that “had represented the Guild in a significant number of matters for many years.” Id., at 5. The class action plaintiffs signed conflict waivers, acknowledging that “the Guild would subsidize the attorney fees for the class action lawsuits and that the firm represented the Guild in other matters”; however, the named plaintiffs demanded, and received the Guild’s assurance, that they control the litigation, not the Guild. Id. Defense attorneys eventually moved to dismiss plaintiffs’ law firm arguing that the Guild’s interests and the law firm’s interests conflicted with the interests of the named plaintiffs, and that the law firm had divided loyalties. Id., at 9. The trial court denied the motion to disqualify plaintiffs’ counsel, but expressed concern about potential conflicts of interest and the possibility that the Guild would seek to control the litigation, and it issued verbal and written orders to plaintiffs and their counsel seeking to address this concern. Id., at 10-11. The trial court also ordered that four of the class action plaintiffs be removed from the litigation based on their deposition testimony that “one of their personal goals was to assist the Guild’s unionizing efforts.” Id., at 11. The trial court refused, however, to dismiss all 21 of the class action plaintiffs, id., at 12. Defense attorneys appealed the denial of the motions to disqualify and to remove all of the named plaintiffs from the class action litigation; plaintiffs cross-appealed, challenging certain of the verbal and written orders by the trial court, id. The appellate court affirmed the orders appealed by the defense, and reversed the orders appealed by the plaintiffs.

The vast majority of the Court of Appeal opinion concerns defendants’ appeal. See Sharp, at 13-32. The appellate court disagreed that the entire law firm representing plaintiffs had to be disqualified because the firm’s “duty of loyalty to the Guild creates actual and potential conflicts of interest because the Guild’s interest in furthering its organizing efforts is antithetical to the sole interests of absent class members, which is to maximize the recovery on the wage and hour claims.” Id., at 13. After providing a detailed summary of the law surrounding motions to disqualify and conflicts of interest, see id., at 13-21, the Court of Appeal’s comprehensive analysis led it to conclude that the conflict waivers signed by the named plaintiffs in the two class action lawsuits were effective, see id., at 21-30. The appellate court stressed, however, that “the class action procedures already include a system by which the court determines if the named class representatives can adequately represent the class,” and that “when plaintiffs seek to have the classes certified, they will have the burden of meeting these requirements.” Id., at 23. The Court of Appeal was also mindful that the motion to disqualify had been filed not by one of the class action plaintiffs, who allegedly suffer as a result of the purported conflict, “but by opposition parties who are not directly touched by the purported conflict.” Id., at 24.

Continue reading "Class Action Defense Cases–Sharp v. Next: California Court Affirms Trial Court Order Refusing To Disqualify Plaintiffs’ Class Action Counsel And Refusing To Remove All Plaintiffs From Serving As Class Action Representatives" »

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