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

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QVC Class Action Defense Cases–Mulligan v. QVC: Illinois State Court Affirms Denial Of Class Action Treatment And Summary Judgment In Favor Of Defense In Unfair Business Practice Class Action

Class Action Plaintiff Failed to Establish Proximate Cause Underlying Consumer Fraud Claim based on QVC’s “Retail Value” Comparisons of Retail Products, and Trial Court Properly Denied Plaintiff’s Motion for Class Action Certification and Properly Granted QVC’s Motion for Summary Judgment Illinois State Court Holds

Plaintiff filed a class action complaint in Illinois state court against QVC – a retailer of consumer products on television and on an Internet website – alleging violations of the state’s Consumer Fraud and Deceptive business Practices Act. Mulligan v. QVC, Inc., 888 N.E.2d 1190, 1192 (Ill.App. 2008). QVC generally lists a “comparative price” for its products; QVC airs on television “viewer education spots” that advise prospective customers that when it lists a “retail value” for a product, “that figure represents either an actual comparison-shopped price or the price QVC believes that the same or a comparable product would be offered by department stores or other retailers using a customary markup for that product category.” Id., at 1192-93. QVC also explains that the “retail value” listed “does not necessarily represent the prevailing retail price in every community, or the price at which the item was previously sold by QVC.” Id., at 1193. The class action complaint “alleged that QVC’s listed ‘retail value’ overstated the prevailing market price for certain products it sold and falsely created the impression that consumers were receiving a bargain by purchasing at lower QVC prices.” Plaintiff’s lawyer moved the trial court to certify the litigation as a class action, but the court denied the motion because “individual issues of law and fact predominated.” Id., at 1192. Defense attorneys then moved the court for summary judgment as to plaintiff’s individual claims; the trial court granted the defense motion, thereby terminating all individual and class claims in the putative class action. Id. Plaintiff appealed, arguing that the trial court erred in granting summary judgment and further erred in denying her motion for class action treatment. Id. The appellate court affirmed.

An understanding of the facts foretells the appellate court’s holdings. Plaintiff purchased more than 200 items from QVC, and specifies in her class action complaint four products that she purchased for substantially less than QVC’s listed “retail value”; the retail values ranged from $39-$60, and plaintiff paid from $26.75-$38.12. Mulligan, at 1193. Plaintiff’s expert testified that “she determined comparable prices for the products [plaintiff] purchased from QVC by using a cost and a market approach to valuation,” and that in so doing the retail value for some items was actually less than the amount paid by plaintiff, though she “did not factor in ay applicable sales tax, shipping and handling, or other additional costs.” Id., at 1194. The expert also admitted that the “margin of error on her appraisal” could be $5, and that there were “other factors” that QVC properly could have considered but that she did not incorporate into her appraisals. Id. Plaintiff’s purchased these items for many reasons, “including whether the product was appealing, affordable, an impulse purchase, on sale, and whether she was searching for a particular product.” Id., at 1193. She found it convenient to shop from home, and felt like she was part of the QVC “family.” Id. She had seen QVC’s education spots, and admitted that at times she believed the retail value listed by QVC “seemed…awfully high,” but she would make the purchase because she still believed that she was paying a fair price for the item. Id. Additionally, plaintiff purchased items from QVC even if it did not list a retail value, and plaintiff continued to make purchases from QVC even after she filed her class action complaint. Id. As the appellate court explained at page 1193, “[plaintiff] acknowledges that a consumer could not legitimately claim to be actually deceived by QVC’s retail values if the consumer continued to purchase the products after suing QVC.”

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

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Labor Law Class Action Defense Cases–Advanced-Tech v. Superior Court: California State Court Reverses Denial Of Defense Summary Judgment Motion Holding Class Action’s Failure To Pay Overtime Claim Failed As A Matter Of Law

Defense Entitled to Summary Judgment on Class Action Claim Seeking Triple Time for Overtime Hours Worked on Holidays because Employer Only Obligated to Pay Time-and-a-Half for Overtime, including Hours Worked on Holidays, California State Court Holds

Plaintiff, a security guard, filed a putative class action against her employer, Advanced-Tech Security Services, for failure to pay overtime. Advanced-Tech Security Services, Inc. v. Superior Court, 77 Cal.Rptr.3d 757, 759 (Cal.App. 2008). Defendant’s employee handbook explained the company’s policies for overtime and holiday pay, and provided that all hours worked in excess of 40 hours per week would be paid at 1½ times normal rate and that all hours worked on any of six specified holidays will be paid at the regular rate for employees who do not work on those holidays and at 1½ times normal rate for employees who do work on those holidays. Id. The named class action plaintiff worked 12 hours on Labor Day (a specified holiday) and 60 hours during the week, for which she was paid 40 hours at straight time and 20 hours at time-and-a-half; however, the class action alleged that “the time and one-half she was paid for working on Labor Day was her regular rate of pay pursuant to the Employee's Handbook, and she was entitled to be paid one and one-half times the premium rate for the hours she worked on Labor Day.” Id., at 759-60. Similarly, the class action plaintiff worked 8 hours on Memorial Day (a specified holiday) and 8 hours of overtime during that week; the class action alleged she was entitled to receive 23½ hours at straight time, 8 hours of overtime, and 24 hours (triple time) for the 8 hours worked on Memorial Day. Id., at 760. In essence, then, the issue presented by the class action was whether, under California Labor Code section 520(a), an employee is “entitled to time and one-half of the premium holiday pay as overtime if the employee works more than 8 hours in a day or 40 hours in a week.” Id., at 759. The trial court denied defendant’s motion for summary judgment on this issue, but the Court of Appeal granted interlocutory review and reversed.

Defense attorneys moved for summary judgment on the “failure to pay overtime” cause of action in the class action complaint on the ground that plaintiff “would never be able to prove that she was not paid one and one-half times her regular rate of pay for the days she worked in excess of 8 hours per day and/or in excess of 40 hours in one week.” Advanced-Tech, at 760. Plaintiff countered that she was entitled to triple time for holiday hours that were also overtime hours, id. The trial court denied the motion for summary judgment because it believed defendant had not “address[ed] the issue of the propriety of its practice of crediting a contractual holiday premium payment toward overtime pay for work in excess of 40 hours in the same week.” Id., at 761. Reviewing that holding de novo, id., the appellate court reversed. The appellate court summarized its holding at page 759 as follows: “We hold that the plain language of section 510 does not require an employer to compensate an employee at a rate higher than one and one-half times the regular rate of pay under the circumstances presented here. The employer is entitled to credit the time and one-half premium pay on holidays against otherwise earned overtime.” Accordingly, it reversed the trial court order and directed the lower court to grant defendant’s motion for summary judgment as to the “failure to pay overtime” cause of action, see id., at 765. The court’s analysis may be found at pages 761-65.

Download PDF file of Advanced-Tech Security Services v. Superior Court

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

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ERISA Class Action Defense Cases-Nichols v. Alcatel: Fifth Circuit Affirms Denial Of Class Action Plaintiffs' Motion For Preliminary Injunction Holding Plan Was A Welfare Plan Rather Than A Benefit Plan And Plaintiffs Not Likely To Prevail On Class Action

Class Action Plaintiffs Failed to Establish Likelihood of Success on the Merits of ERISA Violations Alleged in Class Action Complaint so District Court Properly Denied Request for Preliminary Injunction that Sought to Enjoin Employer from Implementing Changes to Benefit Plan Fifth Circuit Holds

Plaintiffs, retired employees of Alcatel USA, filed a putative class action against Alcatel alleging violations of ERISA (Employee Retirement Income Security Act); according to the class action complaint, Alcatel improperly eliminated retirement medical benefits of the putative class members and breached fiduciary duties owed to the class. Nichols v. Alcatel USA, Inc., ___ F.3d ___, 2008 WL 2469407, *1 (5th Cir. June 20, 2008). The class action divided the retirees into two groups – Salaried Retirees and Union Retirees: Alcatel provided Salaried Retires with a Salaried Retirees Benefit program and, under a collective bargaining agreement, agreed to provide medical benefits to Union Retirees. Id. The Fifth Circuit summarized the claims of the class action plaintiffs as follows: “The Salaried Retirees contend that the Benefit program is a pension plan and consequently subject to vesting under [ERISA]…. The Union Retirees contend that [Alcatel] does not have the right to increase the cost of retiree health benefits because they are fixed lifetime benefits which individually vested at the time of each retiree's retirement based upon the agreement and course of action between the parties.” Id. Plaintiffs’ lawyers moved the district court for a preliminary injunction, which the district court denied. Id. Plaintiffs filed an interlocutory appeal and the Fifth Circuit affirmed.

The class action was precipitated by Alcatel’s announcement “that it planned to implement changes to certain of its retiree medical welfare benefit plans, including a gradual reduction over a three-year period in the amount of its contribution to the costs of medical benefits.” Nichols, at *1. Class action plaintiffs challenged the proposed changes to the plan and sought a preliminary injunction to prohibit Alcatel from implementing the changes. Id. We do not here discuss the case in further detail, as the Fifth Circuit opinion focuses on well-settled rules concerning preliminary injunctions. We note that in broad terms the Circuit Court agreed that plaintiffs were not likely to prevail on the merits and that the plan at issue was not a “pension” plan but, rather, a “welfare” plan. The full text of the opinion may be found here.

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

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ERISA Class Action Defense Cases–Nauman v. Abbott Laboratories: Illinois Federal Court Denies Defense Motion For Summary Judgment On ERISA Class Action Complaint Holding Conduct “As A Whole” Warranted Trial

Defense Summary Judgment in ERISA Class Action Complaint Erroneously Attacked Class Action Claims as Separate and Distinct, but when Defendants’ Conduct was Considered as a Whole, Genuine Issues of Material Fact Existed Sufficient to Defeat Summary Judgment Illinois Federal Holds

Plaintiffs filed a class action lawsuit against their former employer, Abbott Laboratories, and their new employer, Hospira, a newly-created corporate entity, after Abbott spun off its Hospital Products Division (HPD) to Hospira. The class action complaint alleged that the manner in which defendants spun off HPD violated sections 510 and 404 of ERISA. Nauman v. Abbott Labs., ___ F.Supp.2d ___ (N.D.Ill. July 10, 2008) [Slip Opn., at 1]. The four-count class action alleged that, in order to save money associated with the costs of its pension and retiree medical benefits plans for older workers, (1) Abbott terminated HPD employees with the specific intent of denying them retirement benefits, (2) as part of that scheme, Abbott refused to rehire employees transferred to Hospira within two years of the transfer, (3) as part of that scheme, Hospira refused to hire Abbott employees who retired and collected benefits from Abbott, and (4) Abbott breached fiduciary duties owed under § 404 “by making deliberate misrepresentations about the benefits that post-spin-off employees could expect at Hospira.” Id., at 1-2. Defense attorneys moved for summary judgment on the class action claims on the grounds that Abbott argued that it had legitimate business reasons for spinning off HPD. Id., at 2, 16. The district court held that while the claims may be subject to attack if viewed individually, when the course of conduct are viewed as whole the class action adequately presented genuine issues of material fact as to whether defendants acted with a specific intent to deny benefits to retirees in violation of ERISA.

After providing a lengthy discussion of the material facts, see Nauman, at 5-12, and the legal standard governing § 510 claims under ERISA, see id., at 12-15, and § 404 claims under ERISA, see id., at 16, the district court turned to the merits of the defense motion. The federal court admitted that by “dissecting” the claims in the class action and “examining each in isolation,” the summary judgment motions were “generally persuasive” and “convincing[],” id., at 16. But the district court explained that the motions were “premised on the assumption that the several counts of plaintiffs’ complaint arise out of independent and unrelated events,” id., at 17. The defense motions thus overlook the thrust of the class action – viz., “that the termination alleged in Count I, coupled with the policies challenged in Counts II and III, constitute a ‘scheme’ that Abbott conceived, and that the defendants jointly adopted, with the specific intent of avoiding the payment of projected benefits.” Id., at 18. The court considered defendants’ conduct “as a whole,” id., at 20, and concluded that genuine issues of material fact existed sufficient to warrant a trial on the § 510 class action claims, id., at 21-22.

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

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Labor Law Class Action Lawsuits Continue To Dominate New Class Action Filings In California State And Federal Courts

In order to assist class action defense attorneys anticipate the types of class action lawsuits against which they will have to defend in California state and federal courts, 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 July 18 - 24, 2008, during which time 46 new class action lawsuits were filed. Labor law class action lawsuits generally top the list of new class action filings in California state and federal courts, and this past week was not an exception. Twenty (20) new class actions asserting employment-related claims were filed during the past week, representing 43% of the total number of new class action lawsuits filed during this reporting period. (We note that while this figure far outnumbers the nearest category, it is well below the level that labor law class actions often hit.) The only other category that satisfied the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with 6 new filings (13%).

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

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Class Action Defense Cases—In re Packaged Ice: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs’ Motions To Centralize Class Action Litigation And Selects Eastern District of Michigan As Transferee Court

Judicial Panel Grants Plaintiffs’ Requests for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by other Class Action Plaintiffs and Unopposed by any Class Action Defendants, but Among Various Options Selects Eastern District of Michigan as Transferee Court

Thirty-seven (37) class actions – twelve actions in the Eastern District of Michigan, ten actions in the District of Minnesota, seven actions in the Northern District of Texas, four actions in the Northern District of Ohio, and one action each in the Northern District of California, the Southern District of California, the District of Kansas and the Southern District of Ohio – were filed against various defendants, including Reddy Ice Holdings, Reddy Ice, Arctic Glacier Income Fund, Arctic Glacier, Inc., Arctic Glacier International, and Home City Ice, alleging antitrust violations. In re Packaged Ice Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2008) [Slip Opn., at 1]. Specifically, the 37 class actions, and 28 related class actions that were treated as tag-along cases, see id. n.3, “conspired to allocate markets and to fix, raise, maintain and/or stabilize the price of packaged ice in the United States, in violation of state and federal antitrust laws.” Id., at 1-2. Plaintiffs in 9 of the class actions separately filed 5 motions with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407, but the moving parties did not agree among themselves on the proper venue for transfer. Id., at 1. The Judicial Panel explained at page 1, “Moving and responding plaintiffs variously support centralization in the following districts: the Southern District of California, the Eastern District of Michigan, the District of Minnesota, the Northern District of Ohio, or the Northern District of Texas. Responding defendants support centralization in the District of Minnesota.” (Footnote omitted.)

The Judicial Panel granted the motion to centralize the class action lawsuits, finding that they involved common questions of act and that centralization “will eliminate duplicative discovery, prevent inconsistent pretrial rulings (especially with respect to the issue of class certification), and conserve the resources of the parties, their counsel and the judiciary.” Id., at 1-2. With respect to selecting the proper transferee court, the Panel recognized that “any number of the proposed transferee forums would be acceptable,” but it selected the Eastern District of Michigan because it “offers a relatively geographically central district with favorable caseload conditions” and because more of the pending and tag-along class action cases had been filed in that district than in any other. Id., at 2. Moreover, “the grand jury investigating the packaged ice industry is based in this district.” Id.

Download PDF file of In re Packaged Ice Antitrust Litigation Transfer Order

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

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California Governor Weighs In On Appellate Court Opinion In Brinker Restaurant Class Action

This morning we posted an article on yesterday's California Court of Appeal opinion in Brinker Restaurant Corp. v. Superior Court, ___Cal.App.4th ___ (Cal.App. July 22, 2008). We failed to mention that yesterday California's Governor, Arnold Schwarzenegger, issued a press release on the opinion, and on the topic of employee meal and rest breaks. The Governor's press release states:

We are pleased that the California Court of Appeal issued today a decision squarely addressing many of the central issues in dispute concerning meal and rest periods. The confusing and conflicting interpretations of the meal and rest period requirements have harmed both employees and employers. Today's decision promotes the public interest by providing employers, employees, the courts and the labor commissioner the clarity and precedent needed to apply meal and rest period requirements consistently.

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

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Labor Law Class Action Defense Cases–Brinker v. Superior Court: California Appellate Court Reverses Trial Court Order Certifying Labor Law Class Action Holding Employers Need Not “Ensure” Employees Take Meal And Rest Breaks

Trial Court Erred in Granting Class Action Treatment to Complaint Alleging Labor Law Violations because Employer need only “Provide” Meal and Rest Periods to Employees but need not “Ensure” that Meal and Rest Breaks are Taken California State Court Holds

Plaintiffs filed a class action in California state court against Brinker Restaurant, Brinker International and Brinker International Payroll alleging labor law violations; specifically, the class action complaint alleged that Brinker failed to provide its employees with meal and rest breaks. Brinker Restaurant Corp. v. Superior Court, ___Cal.App.4th ___ (Cal.App. July 22, 2008) [Slip Opn., at 3]. Plaintiffs moved the trial court to certify the litigation as a class action, and the court granted the motion. Id. The central issue in the class action was whether an employer must ensure that employees take meal and rest breaks in order to comply with California law, or whether it is sufficient to make available meal and rest breaks; the Court of Appeal held that an employer is not responsible for ensuring that employees take meal and rest breaks to which they are entitled. Id., at 3-4. Accordingly, the appellate court granted defendants’ petition for writ of mandate and reversed the trial court’s class action certification order.

Defendants have a written policy, on a form signed by each employee, that sets forth the statutory meal and rest periods and acknowledging that the employee may be disciplined or terminated for failing to take those breaks. Brinker, at 5. Employees also are required to clock in and out so that defendants may maintain accurate records for payroll purposes, id., at 5-6. Plaintiffs’ class action complaint alleged that defendants failed to provide meal and rest breaks, id., at 7-8. The class action alleged further that defendants required employees to take “early lunches” and then required that they work upwards of 9 hours without any additional meal period, id., at 8. Finally, the class action alleged that defendants required employees to work “off the clock,” id., at 8-9. Plaintiffs argued that employers “must ‘ensure’ that the employee takes meal periods,” id., at 9. The trial court an employer must give employees a meal break “before [an] employee’s work period exceeds five hours,” and that the purpose of the statute is “to provide employees with break periods and meal periods toward the middle of an employee[']s work period in order to break up that employee’s ‘shift.’” Id., at 10.

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

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T-Mobile Class Action Defense Cases–Zaldivar v. T-Mobile: Washington Federal Court Denies Defense Motion to Dismiss Class Action Finding Class Action Complaint Adequately Pleaded Claims For Relief

Class Action Complaint Adequately Pleaded Claims Against T-Mobile because Claims were not Premised on Fraud, so Rule 9(b) did not Apply, and because Claims Sufficiently Pleaded Breach of Contract, Unjust Enrichment and Violation of Consumer Protection Act Washington Federal Court Holds

Plaintiff filed a class action complaint T-Mobile USA alleging unfair business practices in connection with cellular telephone text messaging; specifically, the class action alleged that “T-Mobile charges customers for the receipt of unsolicited text messages, and does not adequately disclose the practice in its contract with customers.” Zaldivar v. T-Mobile USA, Inc., ___ F.Supp.2d ___ (W.D. Wash. July 15, 2008) [Slip Opn., at 1]. The class action complaint alleged breach of contract, unjust enrichment, and violations of Washington’s Consumer Protection Act. Id., at 2. Defense attorneys moved to dismiss the class action complaint under Rule 9(b) for failure to plead fraud with specificity. Id., at 1-2. They argued that the gravamen of the class action was the allegation that T-Mobile defrauded its customers, and therefore Rule 9(b)’s heightened pleading requirements for fraud should apply, id., at 2. The district court disagreed and denied the motion to dismiss the class action.

The federal court distinguished Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003), which held that a plaintiff who “‘rel[ies] entirely’ on a ‘unified course of fraudulent conduct’ to support a claim in which fraud is not a necessary element must nonetheless satisfy Rule 9(b) in ‘pleading the claim as a whole.’” Zaldivar, at 2 (quoting Vess, at 1103-04). Here, the class action does not “‘rely entirely’ on a uniform course of fraudulent conduct”; on the contrary, even if the court assumed that the allegations against T-Mobile were “grounded in fraud” and stripped them from the complaint, the complaint would still state claims for relief against T-Mobile. Id., at 3. For example, the breach of contract claim relies on the allegation the T-Mobile failed to charges customers only for charges ‘contractually agreed upon,” and the Consumer Protection Act class action claim was premised on T-Mobile’s failure to “properly notify or advise” customers that “they were not contractually liable to pay certain fees for text messaging.” Id. Accordingly, the district court denied T-Mobile’s motion to dismiss the class action complaint, id., at 5.

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

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TILA Class Action Defense Cases–Megitt v. IndyMac: Massachusetts Federal Court Dismisses Class Action Holding Technical Deficiencies In TILA 3-Day Notice Of Right To Cancel Underlying Class Action Claims Were Not Actionable

Defense Motion to Dismiss Truth in Lending Act (TILA) Class Action Granted because Failure to Specify Date by which Right to Cancel must be Exercised was merely a Technical TILA Violation and, Viewed Objectively, a Reasonably Alert Borrower would have Understood her Rights Massachusetts Federal Holds

Plaintiffs filed a putative class action against IndyMac for violations of the federal Truth in Lending Act (TILA); the class action complaint alleged that IndyMac failed to provide the requisite notice of a borrower’s three-day right to cancel because the disclosure “[left] blank the specific date by which the notice of cancellation had to be sent.” Megitt v. IndyMac Bank, F.S.B., 547 F.Supp.2d 56, 56 (D.Mass. 2008). More specifically, the class action complaint revealed that IndyMac provided plaintiffs with a Notice of Right to Cancel, which stated in part that the borrower had “a legal right under federal law to cancel this transaction, without cost, within three (3) business days from whichever of the following events occurs last: (1) the date of the transaction, which is: June 16, 2006; or (2) the date you received your Truth in Lending disclosures; or (3) the date you received this notice of your right to cancel.” Id., at 57-58. However, the class action further alleged that IndyMac’s notices provided, “If you cancel by mail or telegram, you must send notice no later than midnight of, __________, (or midnight of the third business day following the latest of the three events listed above).” Id., at 58. Thus, the notices from IndyMac left the date blank, id. Defense attorneys moved to dismiss the class action: The chief magistrate issued and report and recommendation that the motion to dismiss should be granted, relying in part on Palmer v. Champion Mortgage, 465 F.3d 24 (1st Cir. 2006), and the district court adopted the recommendation. Id., at 57. The federal court explained at page 57, “The import of the First Circuit's Palmer decision with regard to the purely technical omission in the document embodying the notice makes the ruling here compelling and inevitable.” Accordingly, the court dismissed the class action.

Defense attorneys argued that, under the First Circuit’s decision in Palmer, the “technical” deficiency underlying the class action is not actionable under TILA, Regulation Z or Massachusetts state law. Megitt, at 58. Palmer, from which the district court quoted at length, essentially holds that if a lender’s 3-day notice of a borrower’s right to cancel tracks the model form for such disclosures is “at the very least, prima facie evidence of the adequacy of the disclosure.” Id., at 59 (quoting Palmer, at 29). As the district court noted, “The court went so far as to recognize that there was both statutory and case law support for the proposition that adherence to a model form bars a TILA non-disclosure claim entirely” but “it left ‘for another day the question of whether such adherence invariably brings a creditor within a safe harbor.’” Id. n.2 (citations omitted). Palmer also explained that courts should rely on “the text of the disclosures themselves rather than on plaintiffs' descriptions of their subjective understandings,” and base their decisions on objectively reasonable factors rather than the plaintiff’s subjective understanding, id., at 59 (citations omitted).

Continue reading "TILA Class Action Defense Cases–Megitt v. IndyMac: Massachusetts Federal Court Dismisses Class Action Holding Technical Deficiencies In TILA 3-Day Notice Of Right To Cancel Underlying Class Action Claims Were Not Actionable" »

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

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Class Action Defense Issues–Silvercreek v. Bank of America: Fifth Circuit Affirms Order Denying Leave To Extend Time To Opt Out Of Class Action Settlement Against BofA Because Notice Of Class Action Settlement Properly Served On Party

Class Member Failed to Timely Opt Out of Class Action Settlement, and District Court did not Err in Refusing to Extend Opt-Out Deadline because Party Received Notices of Class Action Settlement and Evidence did not Establish Excusable Neglect in Failing to Timely Opt Out Fifth Circuit Holds

Two class action lawsuits were filed against Bank of America and Banc of America Securities (collectively BofA) based on the collapse of Enron; each class action was consolidated with In re Enron Corp. Sec. Litig, Newby v. Enron Corp., No. H-01-3624, and the Regents of the University of California were designated as Lead Plaintiffs. Silvercreek Management, Inc. v. Banc of America Securities, LLC, 534 F.3d 469, 2008 WL 2640097, *1 (5th Cir. 2008). BofA eventually agreed to a $69 million class action settlement with the Regents, and notices, motions and orders were served on members of the class, including Silvercreek Management. Id. Silvercreek did not attend the hearing on preliminary approval of the class action settlement, at which the district court certified the litigation as a Rule 23(b)(3) class action and gave preliminary approval to the proposed settlement. Id. The court order set March 28 as the opt-out date; Silvercreek received the order but did not timely opt out. Id., at 1-2. The federal court gave final approval to the class action settlement on April 11, 2005, id., at 2. On April 27, Silvercreek filed a request to opt out of the class action settlement and filed a motion with the district court to extend the opt-out deadline. Id. The district court denied the motion, finding that Silvercreek “had not shown excusable neglect.” Id. Silvercreek appealed, and the Fifth Circuit affirmed.

The Fifth Circuit explained that the standard for establishing excusable neglect is set forth in Pioneer Investment Servs. Co. v. Brunswick Assocs. LP, 507 U.S. 380, 395 (1993), which instructs courts to consider “prejudice to the opposing party, length of the delay, and reason for the delay in determining whether the claimant’s neglect was excusable and the delay was made in good faith.” Silvercreek, at 2. The Circuit Court rejected Silvercreek’s claim that these factors must be applied “rigorously” in each case; rather, the court may “hold a party accountable for the acts and omissions of its counsel,” and the district court’s determination of excusable neglect will not lightly be disturbed. Id., at 2 (citations omitted). The Court concluded that Silvercreek’s counsel should have inquired into the deadline for opting out of the class action settlement, and that its failure to do so was not excusable. Id., at 3. This is particularly true in light of the fact that filings available on the relevant website “explicitly mention the opt-out date.” Id. The Fifth Circuit concluded at page *3, “The district court did not abuse its discretion in refusing to extend the opt-out date, because it considered Silvercreek’s proffered evidence and determined that counsel’s performance fell below the threshold required for neglect to be excusable.” Accordingly, the Circuit Court affirmed the district court’s ruling.

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

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Employment Law Class Action Lawsuits Maintain Grip On Top Of List Of New Class Actions 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 July 11 - 17, 2008, during which time 43 new class action lawsuits were filed. Class actions involving employment-related claims almost always top this list. This proved true once again. Twenty-one (21) new labor law class actions were filed during the past week, representing 49% of the total number of new class action lawsuits filed during this reporting period. The only other category that satisfied the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with 11 new filings (26%).

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

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FACTA Class Action Defense Cases—In re Make-Up Art Cosmetics: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Central District of California

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Rejects Transferee Court Proposed by Class Action Plaintiffs, and Transfers Class Actions to Central District of California

Three class actions – two in California and one in Illinois – were filed against Make-Up-Art Cosmetics (MAC) alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA); specifically, the class action complaints alleged that MAC printed “certain credit and debit card information on customer receipts” in violation of FACTA. In re Make-Up Art Cosmetics (M.A.C.) Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 9, 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 Central District of California; plaintiffs in the class actions supported the motion but argued for transfer to the Northern District of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that centralization will eliminate duplicative discovery and prevent inconsistent pretrial rulings, particularly with respect to class action certification. Id. The Panel agreed also that the Central District of California was the appropriate transferee court because two of the three class actions were pending in that district, “including the first-filed and broadest actions.” Id.

Download PDF file of In re Make-Up Art Cosmetics (M.A.C.) Fair & Accurate Credit Transactions Act (FACTA) Litigation Transfer Order

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

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Dell FLSA Class Action Defense Cases–Norman v. Dell: Oregon Federal Court Certifies FLSA Class Action Against Dell But Denies Without Prejudice Request To Certify Class Action Of State Law Claims

Class Action Complaint Alleging Violations of Federal Fair Standards Labor Act (FLSA) and of Oregon State Labor Laws Conditionally Certified as a Class Action as to FLSA Claims but Denied Without Prejudice as to State Law Claims Oregon Federal Court Holds

Plaintiffs filed a class action complaint against Dell Inc. and other defendants alleging violations of the federal Fair Labor Standards Act (FLSA) and Oregon’s state labor laws; the class action alleged that plaintiffs are “consumer sales representatives” (CSRs) who sell Dell computers via telephone, and that Dell (1) misclassified CSRs as exempt from overtime pay, failed to properly pay incentive compensation, and required CSRs to work “off the clock.” Norman v. Dell Inc., ___ F.R.D.___ (D.Or. July 14, 2008) [Slip Opn., at 1, 3]. Plaintiffs’ lawyer moved the district court to certify the litigation as a class action, id., at 1; specifically, plaintiffs sought an order conditionally certifying the class action complaint’s FLSA claims, and an order certifying under state law a class action of the complaint’s state labor law claims, id., at 2. Defense attorneys opposed any class action treatment. Id., at 1. The district court granted the motion with respect to the FLSA claims, but denied the motion without prejudice as to the state law claims pending expiration of the opt-in period for the federal claims and briefing as to the impact on the opt-in response on certification of the state class action claims. Id., at 2.

The federal court addressed first the request for certification of the FLSA claims. After noting that federal law does not define “similarly situated” under the FLSA, the court utilized the two-tier approach followed by most federal courts. Norman, at 2-3. The first step considers whether, “based on the pleadings and affidavits submitted by the parties,” notice should be given to the putative class, and employs a “fairly lenient standard” that, in the court’s opinion, usually results in class certification. Id., at 2. The second step involves a motion by defense attorneys to decertify the class action following completion of discovery, id., at 3. At the first stage, however, courts look only to whether there are “substantial allegations that the putative class members were subject to a single illegal policy, plan or decision,” but plaintiffs may not rely solely on the allegations in their class action complaint. Id. Under that standard, the district court concluded that plaintiffs adequately established that Dell policies and practices with respect to compensation of the putative class members is essentially uniform, id.

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

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FCRA Class Action Defense Cases–Cavin v. Home Loan Center: Seventh Circuit Affirms Summary Judgment In Favor Of Defense In FCRA Class Action Holding Letters Sent To Class Action Plaintiffs Constituted Firm Offers Of Credit

District Court Properly Granted Defense Motion for Summary Judgment in Class Action Alleging Violations of Fair Credit Reporting Act (FCRA) because Mailer need not Contain Every Material Loan Term and because Offer may be Conditioned on Additional Information such as Verification of Employment and Income Seventh Circuit Holds

Plaintiffs filed a class action complaint against Home Loan Center, doing business as HomeLoanCenter.com, alleging violations of the federal Fair Credit Reporting Act (FCRA); specifically, the class action alleged that Home Loan Center sent them a mailer for a “SmartLoan mortgage program” but that the mailer was not a “firm offer of credit” and therefore violated the FCRA. Cavin v. Home Loan Center, Inc., ___ F.3d ___ (7th Cir. July 2, 2008) [Slip Opn., at 1]. The letters referenced in the class action were sent “to thousands of Illinois residents” and stated that the recipient had been “pre-approved to receive HomeLoanCenter.com’s exclusive SmartLoan program.” Id., at 2. The mailers contained a box with the figures of 1.00%/4.27%, adjacent to two columns that listed various monthly payments for various loan amounts. Id. The letters stated that no fees would be charged to get the loan process started, and that defendant could “prequalify [the recipient] right over the phone in minutes and provide [the recipient] with a customized loan program that suits [the recipient’s] needs.” Id. The letter also provided, “This offer may not be extended if, after responding to this offer you do not meet the criteria used in the selection process. Further, HomeLoanCenter.com will verify income and employment, review credit, and analyze debt and your equity position in the subject property prior to final loan approval.” Id., at 2-3. The mailers stated that not all applicants would be approved and reiterated that terms and conditions applied to the offer, id., at 3. The parties filed cross-motions for summary judgment; the district court agreed with defense attorneys that the mailers did not violate the FCRA and accordingly entered judgment in favor of defendant. Id., at 1-2. The Seventh Circuit affirmed.

The FCRA permits a finance company to obtain an individual’s credit report, but “the company needs to obtain it with the intent of extending a firm offer of credit to the potential customer.” Cavin, at 4 (citing 15 U.S.C. § 1681b(c)(1)(B)(I)). Under the FCRA, a “firm offer of credit” is “any offer of credit or insurance to a consumer that will be honored if the consumer is determined, based on information in a consumer report on the consumer, to meet the specific criteria used to select the consumer for the offer except that the offer may be further conditioned…” 15 U.S.C. § 1681a(l). In this case, class action plaintiffs argued that defendant accessed their credit information “without a permissible purpose” because the mailers sent to them and other members of the putative class did not constitute a firm offer of credit within the meaning of the FCRA. Id., at 3-4. Specifically, plaintiffs argued that material terms of the loan program were not disclosed and/or were not adequately explained, id., at 5. The Seventh Circuit disagreed, explaining at page 5, “The mailer identified the basis for calculating interest, the length of the loan, the possibility of a rate change after thirty days, the minimum payment option with accompanying deferred interest, and the information needed to obtain the loan.” That is all that was required because the FCRA does not require the initial communication “‘contain all of the important terms that must be agreed on before credit is extended.’” Id., at 5 (citation omitted). On the contrary, requiring a financial institution to disclose all material terms would result in the mailer being more difficult for the consumer to understand. Id., at 5-6 (citation omitted). The Circuit Court explained that “the proper inquiry in ascertaining whether a letter is a firm offer is whether the offer will be honored, not whether all of the material terms are listed.” Id., at 6.

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

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Class Action Defense Cases–Otsuka v. Polo Ralph Lauren: California Federal Court Certifies Class Action Against Polo Ralph Lauren Holding Rule 23 Requirements For Labor Law Class Action Had Been Satisfied

Complaint Alleging Labor Law Violations Granted Class Action Status because Overriding Issues Involved Company Policies and Practices and Class Action Treatment was Superior to Other Means of Resolving Disputes California Federal Court Holds

Plaintiffs filed a putative class action complaint in California state court against their former employer, Polo Ralph Lauren, alleging labor law violations; specifically, the class action complaint alleged that in the 28 stores operated by defendants in California, defendants failed to provide rest breaks or pay for off-the-clock time, failed to pay overtime by misclassifying employees as commissions salespeople exempt from such pay, and improperly reduced earnings on future commissions if salespeople failed to meet certain sales requirements. Otsuka v. Polo Ralph Lauren Corp., 251F.R.D. 439 (N.D.Cal. 2008) [Slip Opn., at 1-2]. The complaint identified not only a main class, but two subclasses – one for misclassification and one for arrearages. The class action alleged further that defendants’ California stores used a single employee handbook, and that “defendants’ policies and practices are standardized throughout California in both retail and outlet stores.” Id., at 2. Defense attorneys removed the class action to federal court, id., at 1-2. Plaintiffs moved the district court to certify the litigation as a class action, id., at 1. Defense attorneys “vigorously” objected to class action treatment, id., at 5. The federal court granted the motion, concluding that “defendants’ arguments primarily dispute the merits of plaintiffs’ claims and raise questions of act that will not be resolved at this juncture,” id.

With respect to numerosity, the main class identified in the class action complaint encompassed more than 5,000 employees; the subclasses, however, consisted of 49 members and 69 members, respectively. Otsuka, at 5. Defendants argued these subclasses failed to satisfy the numerosity requirement, id. The federal court disagreed, noting that under Ninth Circuit authority class actions with “as few as 39 members may be sufficiently numerous under the right circumstances.” Id., at 5-6 (citation omitted). Similarly, the district court found that commonality clearly existed as to the main class identified in the class action complaint, id., at 6, and it rejected defense challenge to the subclasses because it attacked the merits but failed to demonstrate that common questions existed within the subclasses, id., at 6-7. With respect to typicality, defense attorneys argued that the claims on the named plaintiffs were not typical with respect to the misclassification subclass because after the lawsuit had been filed defendants performed a reconciliation and compensated them for overtime not previously paid. Id., at 7-8. The court found that this did not render them unqualified to serve as typical class representatives because (1) they may establish that they are entitled to additional overtime pay, and (2) their claims that defendants acted unlawfully by failing to perform annual reconciliations. Id., at 8. With respect to adequacy of representation, the district court rejected the technical objection made by defendants to one of the named representatives, id., at 8-9. Thus, the federal court found that the Rule 23(a) requirements for class action treatment had been met.

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

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CAFA Class Action Defense Cases–Spivey v. Vertrue: Seventh Circuit Reverses Order Remanding Class Action To State Court And Holds Petition Under CAFA For Leave To Appeal May Be Filed More Than 7 Day After Entry Of Order

District Court erred in Remanding Class Action to State Court because Defense Established Removal Jurisdiction under CAFA (Class Action Fairness Act) Seventh Circuit Holds

Plaintiff filed a class action complaint in state court against Vertrue alleging that it improperly billed its customers for unauthorized charges; specifically, the putative class action “proposed to represent a class of persons whose credit cards had been charged without authorization through 22 of Vertrue's programs.” Spivey v. Vertrue, Inc., 528 F.3d 982, 983 (7th Cir. 2008). Defense attorneys removed the class action to federal court, asserting that federal court jurisdiction existed under the Class Action Fairness Act (CAFA); plaintiff’s lawyer moved to remand the class action to state court, arguing that the amount in controversy did not exceed $5 million. Id. The district court agreed with plaintiff and remanded the class action to state court, id. Defense attorneys petitioned the Seventh Circuit for leave to appeal, as authorized by CAFA. Id. Plaintiff objected on the ground that the petition was untimely – defense attorneys “mailed the petition on the seventh day after the district court's remand order, and the petition reached [the Circuit Court], and so was ‘filed,’ see Fed. R.App. P. 25(a)(2), on April 18, 2008, the tenth day after the district court's order.” Id. The Seventh Circuit granted leave to appeal, held that the petition was timely, and reversed.

The Class Action Fairness Act authorizes an appellate court to review a district court order “granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not less than 7 days after entry of the order.” Spivey, at 983 (quoting § 1453(c)(1)). The Seventh Circuit held at page 983 that “[t]he petition was timely under this language” because it was filed “not less than 7 days” following entry of the order remanding the class action to state court. Id. Plaintiff’s lawyer argued that Congress clearly intended to require a petition for review to be filed “not more than 7 days” after the order is entered, and that “not less than 7 days” is patently erroneous. Id. The Circuit Court noted that several courts have noted this ambiguity and yet Congress has not acted, thus suggesting that CAFA says what Congress intended. Id., at 983-84 (citations omitted). It therefore rejected the arguments of treatises and other courts that reading § 1453(c)(1) literally creates an absurdity, id., at 984. Indeed, the Seventh Circuit noted at page 984, “To the extent that our colleagues in other circuits hold that a petition filed within seven days of the district court's order should be accepted, rather than thrown out with instructions to submit another once a week has passed, we concur. Whether a petition filed within a week after the remand is timely was the question actually presented in those appeals. An affirmative answer tracks Fed. R.App. P. 4(a)(2), which says that a premature notice of appeal remains on file and springs into effect when the decision becomes appealable. It makes sense to use the same approach for a premature permission for leave to appeal.” But on the other hand, no federal court had thrown out a petition as untimely when it complied with the literally language of the statute as that would be fundamentally unfair, id., at 984-85. “Litigants and lawyers always should be safe in relying on a statute's actual language.” Id., at 985. This is particularly true in this case, the Circuit Court explained, because defense attorneys expressly attempted to avoid the ambiguity in the statute “by straddling the deadline.” Id. Accordingly, the Court held that the petition was timely.

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

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Labor Law Class Action Lawsuits Head List Of New Class Actions 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 July 3 - 10, 2008, during which time 40 new class action lawsuits were filed. Labor law class action lawsuits generally top the list, often by a wide margin, and this past week was no exception. Fully half of the new class action lawsuits filed during the past week were new labor law class actions; 20 such class actions were filed, representing 50% of the total number of new class action lawsuits. The only other categories that met the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with six (6) new filings (15%), and class action lawsuits alleging violations of federal antitrust laws, with four (4) new filings (10%).

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

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Class Action Defense Cases—In re Hannaford Bros.: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs Motion To Centralize Class Action Litigation In District of Maine

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

Seventeen (17) class actions were filed against Hannaford Bros. and others “aris[ing] from of an intrusion into defendant Hannaford Brothers Co.’s computer network” and “alleg[ing] that as a result of that intrusion, the credit or debit card numbers and related financial information of a large number of consumers were compromised.” In re Hannaford Bros. Co. Customer Data Security Breach Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 9, 2008) [Slip Opn., at 1]. Lawyers for plaintiffs in two of the class actions 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 District of Maine; all responding parties supported the motion, though some argued for transfer elsewhere. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the District of Maine was the appropriate transferee court, “because the large majority of the seventeen actions are already pending there.” Id. Accordingly, it transferred the class action lawsuits outside Maine to that district, id., at 1-2.

Download PDF file of In re Hannaford Bros. Transfer Order

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

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SLUSA Class Action Defense Cases–Siepel v. Bank of America: Eighth Circuit Affirms Dismissal Of Class Action Holding SLUSA Preempts Class Action Securities Fraud Claims Against BofA

Class Action Claims Against Bank of America Preempted by SLUSA (Securities Litigation Uniform Standards Act of 1998) Eighth Circuit Holds

Plaintiffs, beneficiaries of trust accounts at Bank of America, filed a class action against the Bank and other defendants alleging violations of federal securities law; the class action complaint also asserted state-law claims for unjust enrichment and breach of fiduciary duty, asserting that federal court jurisdiction existed under the Class Action Fairness Act (CAFA). Siepel v. Bank of America, N.A., 526 F.3d 1122, 1124 (8th Cir. 2008). The allegations underlying the class action were that the Bank decided to “implement[] a plan to consolidate the trust management activities of other banks it had acquired” and led class members to believe that “their assets were being managed on an individualized basis, when in fact the assets were being invested in shares of the Nations Funds mutual fund, managed by an investment company substantially owned by the Bank.” Id. The class action alleged further that “higher-yielding and better-managed mutual funds were available in the marketplace,” but the Bank directed customers to Nations Funds for the Bank’s economic benefit and that the Bank accomplished this by sending “misleading letters” to trustees and beneficiaries that, in part, threatened “adverse tax consequences” if they went elsewhere. Id. Defense attorneys moved to dismiss the federal claims on the merits, and moved to dismiss the state-law claims as preempted by SLUSA (Securities Litigation Uniform Standards Act of 1998). Id. In part, the defense argued that the class action should be dismissed on the grounds of judge shopping because plaintiffs’ counsel “had already filed at least five class actions in various jurisdictions seeking redress for the same alleged injuries.” Id., at 1125. The district court granted the defense motion in its entirety, and denied plaintiffs’ request for leave to file an amended class action complaint. Id., at 1125. The Eighth Circuit affirmed.

The class action argued that the Bank failed to disclose “conflicts of interest, higher expenses, and increased tax liability” that would result from using Nations Funds, and plaintiffs argued on appeal that SLUSA did not preempt their class action’s state-law claims that a trustee breaches its fiduciary duty “by failing to disclose conflicts of interest in its selection of nationally-traded investment securities.” Siepel, at 1124. SLUSA “expressly preempts all ‘covered’ state-law class actions that allege: (1) an untrue statement or omission of a material fact, or (2) use of a manipulative or deceptive device or contrivance, ‘in connection with the purchase or sale of a covered security.’” Id., at 1126 (citations omitted). The district court had held that SLUSA preempted the state law claims because the alleged misrepresentations were made “in connection with the purchase or sale of a covered security,” and that the alleged misrepresentations were “central to the Plaintiffs’ state-law claims.” Id., at 1125. The Eighth Circuit easily concluded that the class action was a “covered class action” within the meaning of SLUSA, and that the alleged misrepresentations concern a “covered security” within the meaning of SLUSA. Id., at 1126. The issue on appeal, then, was “whether the alleged misrepresentations and omissions were ‘in connection with’ the purchase or sale of securities.” Id.

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

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FDCPA Class Action Defense Cases--Camacho v. Bridgeport Financial: Ninth Circuit Vacates Fee Awarded FDCPA Class Action Plaintiff Lawyers Due To District Court's Failure To Explain Hourly Rate Utilized And Failure To Use Lodestar To Award Fees-On-Fees

Following Class Action Settlement Providing for Award of Reasonable Attorney Fees to Plaintiff’s Lawyers in FDCPA Class Action, District Court Failed to Explain Why $200 per hour was Reasonable for the Relevant Community and Failed to Determine Lodestar for Fees-on-Fees Request, thus Requiring that Fee Award be Vacated and Matter Remanded for Further Proceedings Ninth Circuit Holds

Plaintiff debtor filed a putative class action against Bridgeport Financial, a debt collector, alleging violations of the federal Fair Debt Collection Practices Act (FDCPA); the class action complaint alleged that defendant “misrepresented the rights of consumers in its initial collection letter by requiring her to dispute her debt in writing.” Camacho v. Bridgeport Financial, Inc., ___F.3d ___ (9th Cir. April 22, 2008) [Slip Opn., at 4242-43]. The district court granted class action certification of a statewide class, and the parties entered into a Class Action Settlement Agreement that the district court ultimately approved. Id., at 4243. The Ninth Circuit opinion identifies but a single benefit provided by the class action settlement for the 7,000 class members – a cy pres award of $341.50; the agreement provided that the named plaintiff receive $1,000 in actual and statutory damages. Id. The Class Action Settlement Agreement provided further that plaintiffs’ three law firms could file a motion for attorney fees and costs if the parties could not agree on the amount of such an award, id. Plaintiff’s lawyers sought almost $170,000 in attorney fees and costs, reflecting hourly rates ranging from $425 to $500 for the attorneys, and $115 to $200 for law clerks, id., at 4243-44. The district court found the hours spent by plaintiff’s lawyers to be reasonable, but reduced the reasonable hourly rate to $200 for all attorneys and awarded a flat fee of $500 for the motion seeking fees and costs, which the court found to be “virtually identical to the materials these attorneys have submitted in other cases.” Id., at 4245-46. In the end, the district court awarded approximately $77,000 in fees and costs, id., at 4246. The lawyers appealed, and the Ninth Circuit reversed and remanded for further proceedings.

The Circuit Court noted that under the terms of the Class Action Settlement Agreement defendant “agreed to pay reasonable and necessary attorneys’ fees and costs.” Camacho, at 4247. The Court stated that the FDCPA “makes an award of fees mandatory.” Id. The Ninth Circuit explained that the district court’s order would be reversed only for clear error, id., at 4246 (citation omitted), and that and that district courts are required to use the “lodestar” method for determining the amount of attorney fees to be awarded, id, at 4247 (citations omitted). The lodestar takes the reasonable hourly rate and multiplies it by the reasonable number of hours incurred by counsel, id.; because the district court found that the hours spent by plaintiff’s lawyers were reasonable, the only issue was whether the district abused its discretion in reducing the hourly rate for plaintiff’s lawyers to $200 per hour. Id., at 4247-48.

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

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FAA Class Action Defense Cases–Kaltwasser v. Cingular Wireless: California Federal Court Refuses To Enforce Class Action Arbitration Wavier Or Arbitration Clause In Wireless Service Agreement Holding It Unconscionable Under California Law

Defense Motion to Compel Individual Arbitration of Class Action Claims under Wireless Service Contract Denied because Arbitration Agreement, which Included Class Action Waiver, was Unconscionable California Federal Court Holds

Plaintiff filed a putative class action against Cingular Wireless alleging violations of the California’s Business and Professions Code and Consumer Legal Remedies Act, and for breach of contract; specifically, the class action complaint alleged that plaintiff signed up for wireless service with Cingular, and renewed his service based “on advertising that identified Cingular as the wireless service with the fewest dropped calls,” but that this representation is untrue. Kaltwasser v. Cingular Wireless LLC, 543 F.Supp.2d 1124, 1126-27 (N.D. Cal. 2008). Defense attorneys moved to compel arbitration pursuant to the Federal Arbitration Act (FAA). Id. The arbitration clause in plaintiff’s wireless service contract provided that the parties “agree to arbitrate all disputes and claims arising out of or relating to this Agreement for Equipment or services between Cingular and you” and contained a class action waiver. Id., at 1127. Cingular modified the arbitration clause so as to state in part, “Cingular and you agree to arbitrate all disputes and claims between us. This agreement to arbitrate is intended to be broadly interpreted. It includes, but is not limited to: claims arising out of or relating to any aspect of the relationship between us ...; claims that arose before this or any prior Agreement (including, but not limited to, claims relating to advertising); claims that are currently the subject of purported class action litigation in which you are not a member of a certified class; and claims that may arise after the termination of this agreement.” Id. The district court denied the motion.

The district court began its analysis by observing that the FAA applies “to all written contracts involving interstate or foreign commerce” and was “enacted to overcome longstanding judicial reluctance to enforce agreements to arbitrate.” Kaltwasser, at 1127. On the other hand, the FAA does not “entirely displace[]” state law. Id., at 1128. The court recognized that the FAA governed the dispute, so the question is whether the contract was enforceable under state law. Id. The first question was one of choice of law. The contract defined the governing law as that of “the state of your billing address”; but plaintiff’s address was in California when he entered into the contract and in Virginia when he filed suit. Id., at 1128. The district court held that California law governed the contract. Id., at 1128-30.

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

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Securities Fraud Class Action Defense Cases–In re Savient Pharmaceuticals: Third Circuit Affirms Dismissal Of Securities Class Action Holding Class Action Complaint Failed To Allege Scienter With Requisite Specificity

District Court did not Err in Dismissing Securities Class Action Without Leave to Amend because Second Amended Class Action Complaint Failed to Adequately Plead Scienter Third Circuit Holds

Plaintiff filed a putative class action against Bio-Technology General Corp. (now known as Savient Pharmaceuticals) and three of its officers and directors for violations of federal securities laws by allegedly “making false and misleading statements about the corporation’s financial performance in 1999, 2000, and 2001.” In re Savient Pharmaceuticals, Inc. Securities Litig., Case No. 06-4864 (3d Cir. July 2, 2008) [Slip Opn., at 2]. The district court had dismissed the original class action complaint on the grounds that it failed to plead scienter with the specificity required under the Private Securities Litigation Reform Act (PSLRA), but granted plaintiff leave to amend; the district then granted a motion by defense attorneys to dismiss the second amended class action complaint on the same grounds, but this time the dismissal was without leave to amend. Id., at 2-3. In an unpublished opinion, the Third Circuit affirmed.

While the opinion is unpublished, we believe it noteworthy for its glowing praise of the district court. The Circuit Court noted that the main issue on appeal was “whether the District Court erred in finding that the Second Amended Complaint failed to adequately plead scienter.” In re Savient, at 3. The Third Circuit noted that it had reviewed the “extensive” record, as well as “the thorough, thoughtful and, in a word, superb opinions of the District Court,” id. The Court noted that “the [district court’s] first opinion comprehensively analyz[ed] the numerous allegations of the initial consolidated class action complaint in light of the applicable law and [laid] out a road map for plaintiff to follow,” id. Despite this guidance, the second amended class action complaint suffered from the same defects. Id. The Court concluded at page 3, “This is a case in which we need do no more than recognize the excellence of the District Court’s opinions; indeed, it would make little or no sense to even attempt to match the quality of that work. And so, substantially for the reasons set forth by the Honorable Harold A. Ackerman, we will affirm.”

A copy of the unpublished Third Circuit opinion in In re Savient Pharmaceuticals may be found here.

A copy of the district court's order may be found here.

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

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Dell Class Action Defense Cases–Fiser v. Dell: New Mexico Supreme Court Reverses Trial Court Order In Class Action Staying Class Action Lawsuit And Compelling Plaintiff To Arbitration His Individual Claim Holding Class Action Waiver Unenforceable

Trial Court Order in Unfair Business Practice Class Action Against Dell Granting Defense Motion to Stay Class Action and Compel Plaintiff to Arbitration his Individual Claim must be Reversed because New Mexico’s “Fundamental Public Policy” Requires use of Class Action Device in Small Claims Matters New Mexico Supreme Court Holds

Plaintiff filed a putative class action lawsuit in New Mexico state court against Dell Computer alleging inter alia violations of the state’s unfair business practices laws and false advertising; the class action alleged that Dell “systematically misrepresents the memory size of its computers.” Fiser v. Dell Computer Corp., ___ P.3d ___ (N.M. June 27, 2008) [Slip Opn., at 3]. The class action further alleged that the monetary damage suffered by each class member was only $10-$20, id. Defense attorneys moved the trial court to stay the class action and to compel arbitration under the Federal Arbitration Act (FAA) of the plaintiff’s individual claim; the defense motion was premised on the fact that plaintiff purchased his computer online and that the “terms and conditions” applicable to such Dell website purchases required purchasers to individually arbitration their claims and precluded them pursuing a class action. Id., at 3-4. The trial court granted the defense motion, ruling that plaintiff was bound by the arbitration clause and the class action waiver. Id., at 4. The Court of Appeals affirmed, and plaintiff petitioned the New Mexico Supreme Court for a writ of certiorari. Id. The Supreme Court reversed, holding that “the class action ban is contrary to fundamental New Mexico public policy,” id.

Preliminarily, the Supreme Court addressed the question of whether New Mexico or Texas law applied. Fiser, at 4. The Court explained at page 4, “The threshold question in determining the validity of the class action ban is which state’s law must be applied to this potentially multi-state class action that was filed in New Mexico by a New Mexico resident against a defendant that maintains its principal place of business in Texas for damages relating to a contract that contains a choice-of-law clause directing that Texas law be applied.” The resolution of this issue was crucial because “[a]pplication of Texas law to the instant matter would likely require enforcing the class action ban.” Id., at 5. New Mexico law would respect the choice-of-law clause, and apply Texas law, “[u]nless enforcement of the class action ban would run afoul of fundamental New Mexico public policy,” id. The Supreme Court held that “[t]he class action device is critical to enforcement of consumer rights in New Mexico.” Id., at 6. The Court recognized that the state’s Uniform Arbitration Act – which “declares that arbitration clauses that require consumers to decline participation in class actions are unenforceable and voidable,” id., at 6 – “may be preempted by the FAA,” id., at 7. However, it also explained that “the class action functions as a gatekeeper to relief when the cost of bringing a single claim is greater than the damages alleged.” Id., at 7-8. Thus, “a contractual provision that purports to ban class actions for small claims implicates not just the opportunity for a class action but the more fundamental right to a meaningful remedy for one’s claims.” Id., at 8. Under the circumstances of this putative class action, the New Mexico Supreme Court found that, because plaintiff’s actual damages were no more than $20, denying class action relief would “essentially foreclose[] the possibility that Plaintiff may obtain any relief.” Fiser, at 8. And because “New Mexico’s fundamental public policy requires that consumers with small claims have a mechanism for dispute resolution via the class action,” applying Texas law would run contrary to this public policy so New Mexico law governed the dispute. Id., at 9.

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

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Class Action Defense Cases—In re Virgin Mobile IPO: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Transfers Class Actions To New Jersey

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Objection of Plaintiff’s Lawyers in New Jersey Class Action, but Transfers Class Actions to the District of New Jersey

Four class actions – one in New Jersey and three in New York – were filed against various defendants arising out of the allegation that “Virgin Mobile distributed a materially false and misleading registration statement and prospectus in connection with Virgin Mobile’s initial public offering.” In re Virgin Mobile Initial Public Offering (IPO) Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 7, 2008) [Slip Opn., at 1]. Defense attorneys for certain defendants 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 Southern District of New York; lawyers for plaintiffs in the New Jersey class action opposed the motion or argued that the class actions should be transferred to New Jersey. Id. The Judicial Panel granted the motion to centralize the class action lawsuits noting that centralization will inter alia “eliminate duplicative discovery[ and] prevent inconsistent pretrial rulings, especially with respect to class certification.” Id. The Panel summarized the opposition to the motion, and the Panel’s response, at pages 1-2 as follows: “Plaintiffs opposing the motion argue, inter alia, that (1) there are only a few actions involved; (2) defendants have not met their burden to show that common questions of fact are so complex and discovery so time-consuming as to overcome the burden to certain parties; (3) alternative means of coordination could be available; and (4) transfer under 28 U.S.C. § 1404 is a superior alternative. Based upon the Panel’s precedents and for the following reasons, we respectfully disagree with these arguments. These actions present overlapping putative classes with overlapping discovery. Centralizing these actions under Section 1407 will ensure streamlined resolution of this litigation to the overall benefit of the parties and the judiciary.” However, the Judicial Panel agreed that New Jersey was the appropriate transferee court, not New York, because an action is already pending there before a judge “who has the time to devote to this litigation” and because “Virgin Mobile is headquartered in New Jersey and provides a likely discovery source.” Id., at 2. Accordingly, the Panel ordered the class actions pending in New York transferred to New Jersey. Id.

Download PDF file of In re Virgin Mobile IPO Transfer Order

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

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Class Action Defense Cases—In re Nissan: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Middle District of Tennessee

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 Agrees to Transfers Class Actions to Middle District of Tennessee

Five class actions were filed in five different federal district courts against Nissan North America and others alleging that defendants “violated the Federal Odometer Act by similarly altering the odometers in Nissan and Infiniti vehicles to inflate the mileage driven.” In re Nissan North America, Inc., Odometer Litig. (No. II), ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 7, 2008) [Slip Opn., at 1-2]. Defense attorneys for common defendant Nissan 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 Middle District of Tennessee; none of the class action plaintiffs opposed pretrial coordination, but lawyers for the Texas class action plaintiffs argued for transfer to the Eastern District of Texas. Id., at 1. The Judicial Panel granted the motion to centralize the class actions, explaining in part that this would “prevent inconsistent pretrial rulings, especially with respect to class certification,” id., at 1-2. The Panel also agreed with defense attorneys that the Middle District of Tennessee is the appropriate transferee court because Nissan’s headquarters are located in that district and “several parties anticipate that relevant discovery will be found there.” Id., at 2.

Download PDF file of In re Nissan North America, Inc., Odometer Litigation Transfer Order

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

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

Judicial Panel Grants Defense Motion for Pretrial Coordination of Individual and Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Individual and Class Action Plaintiffs and Supported by Some Responding Individual and Class Action Plaintiffs, and Transfers Actions to Southern District of New York

Eighteen (18) individual and class action lawsuits were filed (1 in New Jersey and 17 in New York) against Merrill Lynch and other defendants “arising from Merrill Lynch’s conduct and representations regarding its investments in collateralized debt obligations secured by subprime mortgage debt.” In re Merrill Lynch & Co., Inc., Securities, Derivative & "ERISA" Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 7, 2008) [Slip Opn., at 1]. The individual and class action complaints were “brought by securities holders seeking relief under the federal securities laws, shareholders suing derivatively on behalf of Merrill Lynch, [and] participants in retirement savings plans suing for violations of ERISA,” id. Defense attorneys for Merrill Lynch filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the individual and class action cases pursuant to 28 U.S.C. § 1407 in the Southern District of New York; no responding party opposed the motion, and some individual and class action plaintiffs supported the motion. Id. The Judicial Panel granted the motion to centralize the individual and class action lawsuits, finding common questions of fact and law despite the diversity of the types of actions at issue, id. The Panel also agreed with defense attorneys that the Southern District of New York was the appropriate transferee court because “Merrill Lynch is headquartered in New York and, therefore, discovery is likely to take place there” and because “all actions save one are already pending in that district.” Id., at 1.

Download PDF file In re Merrill Lynch & Co., Inc., Securities, Derivative & "ERISA" Litigation Transfer Order

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

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Employment Class Action Lawsuits Again Top List Of New Class Action Cases 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 June 27 - July 2, 2008, during which time 39 new class action lawsuits were filed. Class action lawsuits alleging employment-related claims generally top the list, and this was once again the case. This past week, 21 new labor law class actions lawsuits were filed, representing 54% of the total number of new class action lawsuits. The only other categories that met the 10% threshold involved federal antitrust class actions and class action lawsuits alleging unfair business practice claims, which include false advertising claims, each with four (4) new filings (10%).

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

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Class Action Defense Cases—In re Chocolate Confectionary: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs Motions To Centralize Individual And Class Action Litigation But Selects Middle District of Pennsylvania

Judicial Panel Grants Plaintiffs Motions for Pretrial Coordination of Individual and Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Other Individual and Class Action Plaintiffs and by Responding Defendants, and Transfers Individual and Class Action Lawsuits to Middle District of Pennsylvania

Twenty (20) individual and class action lawsuits were filed in seven (7) different federal district courts against several defendants alleging federal antitrust violations arising out of the allegation that the defendants “conspired to fix, raise, maintain and/or stabilize the price of chocolate confectionary products in the United States at supracompetitive levels.” In re Chocolate Confectionary Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 7, 2008) [Slip Opn., at 1-2]. Lawyers for individual and class action plaintiffs in six (6) of the lawsuits (2 in New Jersey and 4 in Pennsylvania) filed four (4) motions with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the individual and class action cases pursuant to 28 U.S.C. § 1407; no responding party (consisting of other individual and class action plaintiffs, as well as defendants Cadbury Adams U.S.A. LLC, The Hershey Co., ITWAL Ltd., Mars, Inc., Masterfoods USA, and Nestle U.S.A., Inc.) opposed pretrial coordination, but the parties did not agree on the appropriate transferee court. Id., at 1. As the Judicial Panel summarized at page 1, “Moving and responding plaintiffs variously support centralization in the following districts: the Central District of California, the Eastern District of Michigan, the District of New Jersey, the Southern District of New York, the Eastern District of Pennsylvania, the Middle District of Pennsylvania, the Eastern District of Texas, or the Eastern District of Virginia. Responding defendants support centralization in the Southern District of New York.” The Judicial Panel granted the motion to centralize the individual and class action lawsuits, and selected the Middle District of Pennsylvania as the appropriate transferee court “[b]ecause defendant Hershey’s worldwide headquarters are located there, and several of the defendants maintain a presence in or near that district, relevant documents and witnesses are likely located in that area.” Id., at 2.

Download PDF file of In re Chocolate Confectionary Antitrust Litigation Transfer Order

The district court judge to whom the case first was assigned by the Judicial Panel was recused, necessitating reassignment. That court order may be found here.

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

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

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

Two class actions – one in California and one in Pennsylvania – were filed against Oilily and others alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA). In re Oilily Fair & Acc. Cred. Trans. Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 10, 2008) [Slip Opn., at 1]. Both class actions alleged that defendants violated FACTA by printing certain credit and debit card information on customer receipts, id. Plaintiff’s lawyers in the Pennsylvania class action filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of California; plaintiffs in the California class action did not oppose the motion, and the motion was unopposed by any of the class action defendants. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Northern District of California was the appropriate transferee court “because the first-filed action is pending there and this choice is unopposed.” Id. Accordingly, the Panel ordered the Pennsylvania class action be transferred to California, id., at 2.

Download PDF file of In re Oilily FACTA Litigation Transfer Order

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

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Wal-Mart Class Action Defense Cases–Braun v. Wal-Mart: Minnesota Trial Court Rules In Favor Of Class Action Plaintiffs In Labor Law Class Action Against Wal-Mart And Finds Maximum Potential Damages May Approximate $2 Billion

Wal-Mart Willfully Violated Minnesota Labor Laws Entitling Members Covered by Class Action Lawsuit to Millions in Damages and Potentially Billions in Civil Penalties Minnesota Trial Court Holds

Plaintiffs filed a labor law class action against Wal-Mart in Minnesota state court alleging that it required them to work “off the clock” without pay and deprived them of meal and rest breaks, that it violated Minnesota’s Fair Labor Standards Act (MFLSA), and that it failed to maintain accurate time records. Braun v. Wal-Mart, Inc., Case No. 19-CO-01-9790 (Minn. Dakota County, June 30, 2008) [Slip Opn., at 1-2 and 6-7]. The class action sought various relief including civil penalties, liquidated damages, and injunctive relief, id., at 2. The class action complaint alleged further that Wal-Mart’s conduct was “willful” so as to fall within the longer three-year statute of limitations period under Minn. Stat. § 541.07(5), id. The scope of the class action included claims against Sam’s Club, id., at 3 n.1. The trial court certified the litigation as a class action, id., at 7, and the matter proceeded to a bifurcated bench trial, id., at 2. At the liability phase, the trial court limited each side to 60 witnesses and 100 hours of testimony. Id., at 2. The trial court heard about 160 hours of testimony from more than 90 witnesses, and received into evidence almost 1200 exhibits. Id. Forty (40) of the witnesses were Wal-Mart hourly employees, id., at 7. The court then issued a 151-page opinion ruling against Wal-Mart in the class action.

In part, defense attorneys argued that class action treatment was inappropriate because “each individual’s experience is so intrinsically unique that each individual should have to testify about their experience.” Braun, at 11. The trial court found, however, that “[s]ome general patterns and some shared experiences emerged from the testimony at trial” such that it could “decide the factual and legal issues in dispute on a class-wide basis.” Id. In part, the court found that Wal-Mart “should have been on notice of that there was a potential widespread problem of missed rest and meal breaks.” Id., at 18. This problem appears to have been caused by understaffing, and while employee contemporaneous complaints that there were too few employees was not alone sufficient to establish chronic understaffing, see id., at 16-17, an internal audit that revealed tens of thousands of missed meal and rest breaks attributed the problem to “staffing and scheduling not being prepared appropriately,” see id., at 19. The understaffing was particularly problematic in light of Wal-Mart’s written policy to avoid overtime. See id., at 27-29. The trial court found that Wal-Mart “ignored” the internal audits, id., at 20. Subsequent audits revealed that “in November 2003, every audited store in Minnesota scored ‘unsatisfactory’ for the portion of the audit dealing with rest and meal break compliance.” Id., at 21. Moreover, nationally “rest and meal break compliance was the item most frequently rated as ‘unsatisfactory.’” Id., at 22. The court rejected defense efforts to attack the reliability of these audits. Importantly, the court also found that Wal-Mart’s decision to terminate the practice of employee swiping in and out for breaks was directly tied to the problems identified by the audits: “Wal-Mart chose to stop requiring associates to clock in and out for rest breaks, at least in part, to avoid creating what might be construed or used, whether fairly or not, as evidence of missed breaks in litigation.” Id., at 24. The court additionally found that “payroll pressure” contributed to this problem, id., at 25-27.

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

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Song-Beverly Class Action Defense Cases–Absher v. AutoZone: California Court Affirms Defense Judgment In Class Action Under Song-Beverly Act Because Act Applies Only To Personal Information Sought By Merchant At Time Of Sale

Summary Judgment Properly Granted in Class Action under California’s Song-Beverly Act, Concerning Merchant Requests for Personal Information in Connection with Credit Card Transactions, because Class Action Arose from Merchant Request as part of a Return Transaction rather than a Sale California Court Holds

Plaintiff filed a putative class action against AutoZone alleging that it violated California’s Song-Beverly Act, Cal. Civil Code, § 1747.08, by requesting that he provide his name, telephone number and signature in connection with his return of a product. Absher v. AutoZone, Inc., ___ Cal.App.4th ___, 78 Cal.Rptr.3d 817 (Cal.App. 2008) [Slip Opn., at 2-3]. The class action alleged that plaintiff purchased a locking gas cap from AutoZone, took it to the parking lot and, finding that it did not fit, immediately returned it. Id., at 2. The class action complaint further alleged that, in order to return the item, plaintiff was required to provide personal identification information in violation of a California law that prohibits merchants from obtaining personal information in connection with credit card transactions. Id., at 2-3. Plaintiff alleges that he asked the clerk the reason for requiring his telephone number, because he previously had been the victim of identity theft, but the clerk could not provide an answer, id., at 3. Plaintiff filed his class action complaint alleging but a single cause of action under Song-Beverly. Id. Defense attorneys moved for summary judgment on the ground that Song-Beverly did not apply to transactions concerning returns, only at the time of sale; the trial court agreed and dismissed the class action. Id. The appellate court affirmed.

The Court of Appeal noted that three recent decisions have addressed the precise issue presented here, and that each of held that Song-Beverly does not apply to requests for refunds in connection with the return of merchandise but, rather, only at the point of sale. Absher, at 7 (citations omitted). The appellate court’s analysis tracked these prior cases, see id., at 7-10, and the court held that the personal information requested served the merchant’s “stated rationale” of “detect[ing] and prevent[ing] employee fraud,” id., at10. The Court additionally explained at page 15 that transactions involve merchandise returns “arguably are different” from sales transactions because the merchant may need “[c]ertain personal information…to verify that the return transaction was bona fide and to prevent employees from manipulating such transactions for their own benefit.” For example, “if the product returned has been used or damaged prior to the return, the merchant may have a legitimate need to contact the customer who made the return.” Id. Thus, legitimate uses, separate and apart from marketing, exist for the information sought by the merchant in this case. Accordingly, the defense was entitled to summary judgment against the class action claims, id., at 16.

Download PDF file of Absher v. AutoZone

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

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PSLRA Class Action Defense Cases–In re 2007 Novastar Financial: Missouri Federal Court Grants Defense Motion To Dismiss Securities Class Action For Failure To Plead Fraud With Requisite Specificity

Securities Fraud Class Action Complaint, though Extremely Lengthy, Failed to Plead Fraud with Specificity Required by PSLRA (Private Securities Litigation Reform Act) Missouri Federal Court Holds

Plaintiff filed a class action complaint against Novastar Financial and three of its officers alleging securities fraud. 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 for failure to comply with the heightened pleadings requirements of the Private Securities Litigation Reform Act (PSLRA), and requested that the district court take judicial notice of certain documents. Id., at 1-2. The district court granted the motion and dismissed the class action, beginning its analysis with an insightful observation and warning as to a court’s consideration of the alleged falsity of a defendants’ statements: “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.” Id., at 3. Here, the class action merely paints a “broad picture” and consists of “generalities” – which is “precisely what the PSLRA counsels against.” Id. The federal court explained at page 3, “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. The Court does not intend to parse out each and every sentence contained in the Complaint because doing so ignores the real problem: what the Complaint does not say is as critical as what it actually says.”

The fact the class action complaint contains more than 50 paragraphs spanning 35 pages does not serve as a talisman to create the requisite specificity. In re 2007 Novastar Financial, at 4. Neither the complaint nor plaintiff’s opposition to the motion to dismiss explained what was false about the challenged statements, id. Federal law does not require a company “to divulge every ‘fact’ known to everyone in a company”; indeed, “the PSLRA’s effort to combat claims of ‘fraud by hindsight’ demonstrates a reluctance to countenance claims that attach heightened importance to facts only when looking back at the aftermath of misfortune. “ Id. Based on the court’s analysis, the challenged statements failed to satisfy the PSLRA’s pleading requirements, id., at 5-6. In the end, the federal court found that the class action “fails to identify a single false entry in the Company’s financial statements, nor does he identify the ‘truth’ that should have been disclosed.” Id., at 6. In the court’s view, the class action complaint “reads more like a cautionary tale from a treatise on business management than a charge of knowing misstatements and concealments.” Id. At worst, the allegations may constitute negligence, breach of fiduciary duty or mismanagement, but not fraud. Id.

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