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

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UCL Class Action Lawsuits Supplant Labor Law Class Action Lawsuits For Top Spot Among New Class Action Filings In California State And Federal Courts

In order to assist class action defense attorneys anticipate the types of class actions against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers August 22 - 28, 2008, during which time 39 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, often by a wide margin. This past week, however, proved an exception to this pattern. During this reporting period, 14 of the new class action lawsuits (36%) alleged violations of California's unfair business practices statute, which include false advertising claims. New labor law class action lawsuits came in a close second, with 13 new filings (33%). The only other category that satisfied the 10% threshold involved class action lawsuits alleging securities-related claims, with 4 new filings (10%).

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

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Class Action Defense Cases—In re Municipal Mortgage: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In District of Maryland

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

Thirteen (13) class actions – 8 in Maryland and 5 in New York – were filed against Municipal Mortgage & Equity and others alleging that defendants “made materially false and misleading statements in press releases, investor conference calls and regulatory filings which ultimately had a negative impact in 2008 on [the company’s] common stock.” In re Municipal Mortgage & Equity, LLC, Securities & Derivative Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 13, 2008) [Slip Opn., at 1]. Defense attorneys for Municipal Mortgage 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 or, alternatively, in the District of Maryland; responding class action plaintiffs supported centralization in Maryland. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, id.; the Panel concluded that the class actions should be transferred to the District of Maryland “because (1) eight of the thirteen actions now before the Panel are pending there, and (2) [Municipal Mortgage] is headquartered in Baltimore, Maryland, and parties, witnesses and documents may be found there.” Id., at 2.

Download PDF file of In re Municipal Mortgage & Equity Transfer Order

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

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Mobil Oil Class Action Defense Cases–Weber v. Mobil Oil: Oklahoma State Court Certifies Class Action Against Mobil Oil Holding Plaintiffs Satisfied Requirements For Class Action Treatment Under Oklahoma Law

Class Action Complaint Against Mobil Oil Alleging Defendants Improperly Deducted Costs and/or Expenses from Mineral Rights Payments to Royalty Owners Satisfies State’s Class Action Requirements Oklahoma State Court Holds

Plaintiffs filed a class action against various Mobil Oil and Exxon Mobil entities; the class action complaint alleged that defendants had represented to the class that oil royalty payments would be free and clear of any operating or investment costs, but that under the “Fiske Formula” utilized by defendants to calculate payments to class members, defendants deducted from payments to the class certain operating or investment costs. Weber v. Mobil Oil Corp., Custer County District Court Case No. CJ-2001-53 (July 31, 2008) [Slip Opn., at 1-3]. The class action complaint contained, inter alia, theories of breach of fiduciary duty, conversion, fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, violation of Oklahoma’s Production Revenue Standards Act, unjust enrichment, accounting, and constructive trust. See id., at 16-21. Plaintiffs’ lawyers moved the court to certify the litigation as a class action, id., at 1-2. The trial court concluded that the requirements for class action certification had been satisfied and granted the motion.

The trial court first concluded that “all royalty owners could be ascertained by a combination of title searches and data from Mobil and other Tract Operator’s records,” and that numerosity was not subject to dispute given that the class consisted of approximately 1600 members. Weber, at 7. The court also had no difficulty in concluding that plaintiffs were adequate representatives of the members of the proposed class action, and noted that defendants did not contest the adequacy of class counsel. See id., at 12-13. With respect to commonality, the trial court found that Mobil’s operations “were conducted as if there was a single lease executed by all royalty interest mineral owners” and that the “plain language” of the agreement required that distributions be paid “free and clear of all [expenses] and free of any liens.” Id., at 8. Further, the evidence presented in support of class action certification established that “Mobil applied the Fiske Formula, reducing the average weighted price…by 14.83% for the entire period of 1968-1998,” id., at 8-9.Accordingly, the court found “common questions regarding accounting and damages exist for the class.” Id., at 9. Moreover, the court found that common representations and omissions were made to members of putative class, see id., at 9-10. Additionally, the trial court found that common questions of law exist, warranting class action treatment. See id., at 10-11. Finally, the trial court found that plaintiffs’ had demonstrated both predominance and superiority, also warranting class action treatment. See id., at 13-15. Because the court found that plaintiffs had satisfied all of the requirements for class action certification under Oklahoma law, it granted plaintiffs’ motion. Id., at 29. The court’s legal analysis may be found at pages 21-29.

>Download PDF file of Weber v. Mobil Oil

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

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Class Action Defense Cases–Fleming v. Newby: Fifth Circuit Affirms Finding That Plaintiffs' Lawyer Engaged In Sanctionable Conduct But Vacates Award Of Sanctions In Light Of Class Action Settlement

Discovery Sanctions Imposed in Securities Fraud Class Action After Parties Entered into Class Action Settlement and Informed District Court that Sanctions should not be Imposed must be Vacated because Parties may "Bargain Away the Right to Receive Compensatory Sanctions" Fifth Circuit Holds

Various individual and class action lawsuits alleging were filed against former outside directors of Enron following its collapse; some of those individual and class actions, alleging securities fraud violations, were consolidated in the Southern District of Texas. Fleming & Associates v. Newby & Tittle., 529 F.3d 631, 635 (5th Cir. 2008). The coordinated, consolidated class action plaintiffs were represented by Fleming & Associates L.L.P. Id. During the course of the litigation, a discovery battle emerged concerning one of plaintiffs’ expert witnesses, Curtis Verschoor, who had prepared a 165-page report that plaintiffs filed timely pursuant to the court’s discovery order; the report, however, was amended the day before the expert’s deposition raising objections both as to its timeliness and plaintiffs’ failure to post notice of the new report. Id., Verschoor’s deposition testimony concerning the report, whether it had been amended, who made the amendments and the nature of the amendments proved to be inconsistent with the document itself. Id., at 635-36. Ultimately, the court sanctioned plaintiffs’ counsel but denied a defense request to exclude the expert’s testimony because it concluded that the changes to the report were not material, id., at 636. Plaintiffs’ counsel sought reconsideration of the order and opposed defendants’ fee request, but the parties settled the litigation before the sanctions issue had been resolved. Id. Defendants notified the court that they were no longer entitled to sanctions against plaintiffs’ counsel because of the class action settlement reached by the parties, id., at 636 n.1. Nonetheless, the court considered the application and awarded defendants $15,000 in attorney fees and costs, id. On appeal, the Fifth Circuit affirmed the initial order awarding sanctions, but vacated the order requiring plaintiffs’ counsel to pay $15,000 on the ground that the class action settlement rendered the application moot.

While plaintiffs raised two arguments on appeal, the Fifth Circuit considered only the claim that sanctions were moot because the class action settlement “stripped the district court of jurisdiction to impose compensatory sanctions, requiring mandatory vacatur.” Fleming, at 637. Plaintiffs argued that the sanctions order was not final and appealable because the magistrate had not yet determined the amount of sanctions, id. The Fifth Circuit recognized that, under its opinion in Williams v. Ezell, 531 F.2d 1261 (5th Cir.1976), a court order granting a party attorney fees is not a final order if the court defers the question of the amount of the fees. Id. As the Circuit Court explained at page 637, “ If the instant case was moot before the district court's final judgment on the sanctions order, that final order is subject to mandatory vacatur.” (Citation omitted.) On the other hand, the Fifth Circuit recognized that a district court has the power to imposed sanctions “designed to enforce its own rules, even after that court no longer has jurisdiction over the substance of a case,” because the purpose of such an award is not to reimburse a party for its fees or costs but, rather, “‘to punish a party who has already violated the court’s rules.’” Id., at 637-38 (citation omitted).

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

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SLUSA Class Action Defense Cases–In re Enron: Fifth Circuit Affirms Dismissal Of Class Action Lawsuits Holding SLUSA Preempts Securities Fraud Class Action Claims Originally Filed In State Court Were Covered Class Actions

Class Action Claims Preempted by SLUSA (Securities Litigation Uniform Standards Act of 1998) because Ten Class Actions had been Litigated as a Single Proceeding by Plaintiffs’ Common Counsel Fifth Circuit Holds

Numerous class action complaints were filed against various defendants following the collapse of Enron; ten of those class action complaints, which filed by former Enron investors against various financial institutions, certain former members of Enron’s management, and Arthur Anderson (Enron’s former accounting firm) and certain Arthur Anderson partners, but not against Enron itself, were consolidated into the action now at issue. In re Enron Corp. Securities, Derivative & ERISA Litig., ___ F.3d ___, 2008 WL 2689248, *1 (5th Cir. 2008). Most of the class actions had been filed in state court, but they were removed to federal court based on Enron’s bankruptcy filing on the ground that they were “‘related to’ bankruptcy jurisdiction,” and the class actions were later consolidated in the Southern District of Texas by order of the Judicial Panel on Multidistrict Litigation. Id., at *3. The class actions “allege virtually identical state law claims for fraud, fraud on the market, civil conspiracy, aiding and abetting, negligent misrepresentation, negligence, violations of the Texas Business and Commerce Code, and violations of the Texas Securities Act.” Id. Defense attorneys moved to dismiss the class action complaints as preempted by SLUSA (Securities Litigation Uniform Standards Act of 1998). Id., at *1. The district court granted the defense motion and dismissed all of the class action claims, id., at *3. In dismissing the class actions, the district court denied class action plaintiffs leave to amend because it found that amendment would be futile. Id. Plaintiffs appealed, arguing that the district court lacked jurisdiction to enter the order dismissing the class action complaints and, alternatively, that the class actions that had been removed to federal court were not “covered class actions” within the meaning of SLUSA; the Fifth Circuit affirmed.

We do not summarize the facts surrounding the rise and fall of Enron. See In re Enron, at *2 and Newby v. Enron Corp., 394 F.3d 296, 299 (5th Cir. 2004). The issues on appeal were (1) whether the district court had jurisdiction over the class actions, and (2) whether the class action claims were preempted by SLUSA. In re Enron, at *3. We do not here discuss the bankruptcy jurisdiction issue; the Fifth Circuit’s analysis, leading to its conclusion that bankruptcy jurisdiction did exist, may be found at pages *3 through *6 of the Circuit Court’s opinion. With respect to the SLUSA preemption issue, plaintiffs’ argued that “for preemption purposes, SLUSA's definition of a ‘covered class action’ should be applied only at the time a state action is removed to federal court, not after a federal court issues a consolidation order.” Id., at *6. As a backdrop to is legal analysis, the Circuit Court provided a summary of the “evolution of federal securities law,” including the Private Securities Litigation Reform Act (PSLRA). See id., at *7-*8. This summary including the language in SLUSA that “[n]o covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party,” see id., at *8 (citation omitted) (italics added by court). The central issue was whether the class actions were “covered class actions” within the meaning of SLUSA.

Continue reading "SLUSA Class Action Defense Cases–In re Enron: Fifth Circuit Affirms Dismissal Of Class Action Lawsuits Holding SLUSA Preempts Securities Fraud Class Action Claims Originally Filed In State Court Were Covered Class Actions" »

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

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Class Action Defense Cases–Fellner v. Tri-Union Seafoods: Third Circuit Reinstates Class Action Holding FDA Regulations Did Not Preempt Class Action’s State Law Claims Alleging Failure To Warn Of Mercury In Tuna

Class Action Claims Against Tri-Union Seafoods (dba Chicken of the Sea) not Preempted by FDA Regulations or Opinions Expressed by FDA Commissioner in Letter to State Attorney General Third Circuit Holds

Plaintiff filed a class action lawsuit in New Jersey state court against Tri-Union Seafoods, doing business as Chicken of the Sea, “seeking damages for harm she allegedly sustained as a result of her consumption of methylmercury and other harmful compounds contained in Tri-Union’s tuna fish products.” Fellner v. Tri-Union Seafoods, LLC, ___ F.3d ___ (3rd Cir. August 19, 2008) [Slip Opn, at 3]. Specifically, the class action complaint alleged that defendant’s tuna products contained chemicals that could cause mercury poisoning and that plaintiff suffered mercury poisoning from consuming defendant’s tuna, and alleged negligence and violations of New Jersey’s Products Liability Act based on defendant’s alleged “failure to warn of the risks incurred in consuming its products.” Id., at 3-4. Defense attorneys removed the class action to federal court and then filed a motion to dismiss the class action complaint on the ground that the regulatory actions of the Food and Drug Administration preempt the class action’s claims. Id., at 3. In part, the defense relied on a letter sent by the FDA Commissioner to California’s Attorney General in connection with a 2004 “Proposition 65” lawsuit (see Cal. Health & Safety Code § 25249.6) that the State of California brought against Tri-Union and other defendants and that sought an injunction and civil penalties based on for defendants’ “failure to warn consumers that their tuna products contain dangerous mercury compounds.” Id., at 4. The Commissioner’s letter opinion that the State’s lawsuit was preempted by prior regulatory actions taken by the FDA. Id. The letter stated in part that the State’s lawsuit would “frustrate the [FDA’s] carefully considered federal approach” to the issue of mercury in fish. Id., at 5 (citing People v. Tri-Union Seafoods, 2006 WL 1544377 (Cal. Super. Ct. May 12, 2006)). The California court ultimately ruled that the State’s lawsuit was preempted. Id., at 5. (citation omitted). The New Jersey district court granted defendant’s motion to dismiss the class action, also ruling that the class action claims “are preempted by the FDA’s ‘regulatory approach’ to the risks posed by mercury compounds in tuna fish.” Id., at 3. The Third Circuit reversed.

The Circuit Court explained that “[t]he sole question presented in this appeal is whether [plaintiff’s] state claim for damages is preempted by federal law.” Fellner, at 6. In support of the district court’s ruling, defense attorneys advanced three preemption arguments: “(1) that the FDA has adopted a ‘pervasive regulatory approach’ – embodied in the FDA’s Advisory, backgrounder and internal enforcement guideline – with which Fellner’s state lawsuit actually conflicts; (2) that the FDA has ‘reject[ed] the use of warning labels’ in favor of a more ‘nuanced’ approach – that is, that the FDA has reached a decision that warnings should not be regulated, a decision which preempts the state from entertaining a claim based on a duty to warn theory; and (3) that the FDA would have rejected any warning as ‘misbranding,’ a determination which preempts Fellner’s failure-to-warn claim.” Id., at 6-7. After reviewing the doctrine of federal preemption, the Third Circuit explained that defendant does not assert either express preemption or field preemption, and that “[i]f preemption exists in this case it must be conflict preemption. Id., at 8-9. This issue, as in all preemption cases, turns on Congressional intent, id., at 9 (citation omitted).

Continue reading "Class Action Defense Cases–Fellner v. Tri-Union Seafoods: Third Circuit Reinstates Class Action Holding FDA Regulations Did Not Preempt Class Action’s State Law Claims Alleging Failure To Warn Of Mercury In Tuna" »

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

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New Class Action Lawsuits Involving Labor Law Claims Again Hold Top Spot Among Class Action Filings In California State And Federal Courts

As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers August 15 - 21, 2008, during which time 36 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. During this reporting period, 18 of the new class action lawsuits (50%) asserted employment-related claims. The only other categories that satisfied the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with 8 new filings (22%), and class action lawsuits alleging securities-related claims, with 4 new filings (11%).

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

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Class Action Defense Cases—In re Countrywide Financial: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs’ Motion To Centralize Class Action Litigation But Transfers Class Actions To Western District of Kentucky

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Objection of Responding Class Action Defendants, but Rejects All Recommended Transferee Courts and Transfers Class Actions to Western District of Kentucky

Three class actions – one each in California, Illinois and Massachusetts – were filed against various defendants, including Countrywide Financial Corp., Countrywide Home Loans and Countrywide Bank, FSB (collectively “Countrywide”); the class action complaints, each purportedly seeking to represent a nationwide class, alleged that Countrywide “engaged in discriminatory residential lending practices, including the imposition of discretionary fees/charges, which increased the cost of financing and resulted in higher loans for minority borrowers than similarly situated non-minority borrowers.” In re Countrywide Financial Corp. Mortgage Lending Practices Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 7, 2008) [Slip Opn., at 1]. Plaintiffs in the Massachusetts 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 District of Massachusetts; plaintiffs in the other class actions supported the motion, but each argued for transfer of the class actions to the districts in which their own class action was pending. Id. Defense attorneys for Countrywide opposed pretrial coordination of the class actions, but alternatively argued for centralization in California. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, noting that the class action complaints involve “common questions of fact” and concluding that centralization “will eliminate duplicative discovery; avoid inconsistent pretrial rulings, especially on the issue of class certification; and conserve the resources of the parties, their counsel and the judiciary.” However, the Panel decided to transfer the class actions to the Western District of Kentucky. Id., at 1-2.

NOTE: This opinion highlights the risk parties run in requesting pretrial coordination from the MDL Judicial Panel; the Panel has the discretion to select any district it chooses, including a district that has not been recommended by any of the parties to the litigation.

Download PDF file of In re Countrywide Financial Corporation

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

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Class Action Defense Cases–In re Nortel Networks: Second Circuit Affirms Attorney Fee Award Of 3% Of Class Action Settlement Value Finding No Abuse Of Discretion In Rejecting Negotiated Fee Following Settlement Of Securities Class Action

District Court Carefully Analyzed Requisite Factors in Determining Reasonable Attorney Fee Award in Securities Class Action and did not Abuse its Discretion in Awarding Class Counsel 3% of the Value of Class Action Settlement Rather than 8.5% Requested by Class Counsel, even though Lead Plaintiffs in Class Action Supported 8.5% Award Second Circuit Holds

Plaintiffs filed a class action against Nortel Networks alleging violations of federal securities laws (Nortel I); specifically, the Nortel I class action complaint alleged that Nortel “knowingly and recklessly issued false and misleading statements and engaged in various accounting manipulations causing its stock price to be inflated between October 24, 2000 and February 15, 2001.” In re Nortel Networks Corp. Securities Litig., ___ F.3d ___ (2d Cir. August 19, 2008) [Slip Opn., at 2]. Plaintiffs in the Nortel I class action were represented by Milberg Weiss & Bershad LLP, id. After several years of litigation, the district court approved a class action settlement of almost $439 million in cash, plus more than 300,000,000 shares of Nortel common stock valued at more than $700 million at the time the class action settled was approved. Id. As part of the “same overall settlement,” Nortel settled a separate action securities class action lawsuit (Nortel II); the terms of that class action settlement involved common stock also valued at more than $700 million plus $370 million in cash (roughly $68.5 million less than the Nortel I class action settlement). Id., at 2-3. The district court in Nortel II awarded class counsel 8% of the settlement value in attorney fees, but the Nortel I court awarded Milberg attorney fees amounting to only 3% of the settlement value. Id., at 3. Milberg Weiss appealed the attorney fee award, and the Second Circuit affirmed.

Milberg argued on appeal that they were entitled to 8.5% of the value of the class action settlement they obtained in prosecuting the private securities class action and that the district court erred in reducing the award to only 3%. In re Nortel, at 2. Milberg argued that it had a “negotiated fee” which, under the terms of the Private Securities Litigation Reform Act of 1995 (PSLRA), should have been deemed “presumptively reasonable.” Id. The Second Circuit held that Milberg waived its PSLRA argument because it failed to raise it in the district court, id. The Circuit Court’s analysis of the waiver issue may be found at pages 5 through 8.

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

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Class Action Defense Cases–In re Parmalat Securities: New York Federal Court Grants Summary Judgment On Class Action Claims Holding Plaintiffs Failed To Establish Reliance To Support Class Action’s Securities Fraud Claims

Defense (Bank of America, Citigroup and Pavia e Ansaldo) Entitled to Summary Judgment on Securities Fraud Claims because Plaintiffs Failed to Establish Reliance on any Deceptive Acts by Moving Defendants New York Federal Court Holds

Plaintiffs filed a class action complaint against various defendants, including various Bank of America entities, various Citigroup entities, and Pavia e Ansaldo, alleging violations of federal securities laws; specifically, the Third Amended Consolidated Class Action Complaint alleged violations of Rule 10b-5 and Section 10(b) “on behalf of purchasers or securities of the international dairy conglomerate Paramalat Finanziaria S.p.A. and its subsidiaries and affiliates.” In re Parmalat Securities Litig., 570 F.Supp.2d 521 (S.D.N.Y. 2008) [Slip Opn., at 1-2]. Some of the defense attorneys moved to dismiss the class action but the district court denied the motion on the ground that “plaintiffs could have prevailed against those defendants under Rule 10b-5(a) and 10b-5(c) with respect to some (but not all) of the challenged transactions, assuming that they proved their allegations notwithstanding their lack of any actionable misrepresentations or omissions by them.” Id., at 1-2 (citing In re Parmalat Sec. Litig., 376 F.Supp.2d 472 (S.D.N.Y. 2005). Subsequently, the United States Supreme Court issued its opinion in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 128 S.Ct. 761 (2008), our summary of which may be found here. Defense attorneys for Bank of America, Citigroup and Pavia moved for summary judgment on the ground that Stoneridge Investment precludes liability in the absence of any actionable misrepresentations or omissions by the named defendants. Id., at 2. The district court agreed and granted judgment in favor of defendants against the class action claims.

Stoneridge Investment held that “‘[r]eliance by the plaintiff upon the defendant’s deceptive acts is an essential element of the § 10(b) private cause of action.’” In re Parmalat, at 2 (quoting Stoneridge Investment, at 769). In opposition to the summary judgment motion, class action plaintiffs argued that they can establish such reliance as to all three defendants. The district court disagreed. We discuss here only one of the arguments – plaintiffs’ claim that “BofA, as a placement agent, breached a duty to disclose” certain facts “to investors who purchased securities from BofA in private placements.” Id., at 2-3. The federal court explained that a “fundamental problem” existed in plaintiffs’ argument against BofA in that “the duty of disclosure that BofA allegedly breached was a duty owed only to purchasers from BofA in private placements” and that, while “some members of the alleged class bought from BofA in private placements,” it was undisputed that “none of the named plaintiffs” had done so. Id., at 3. The district court held, “This is fatal to plaintiffs’ argument.” Id. The court explained at page 3, “Although reliance is presumed where a defendant seller breaches a duty of disclosure, only investors to whom the duty was owed may avail themselves of that presumption.” Put simply, “reliance is not presumed merely because named plaintiffs in a purported class action allege that a duty was owed to other members of the proposed class.” Id. Based on Stoneridge Investment, the district court granted the defense motion for summary judgment, id., at 6.

Download PDF file of In re Parmalat Securities Litigation

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

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Class Action Defense Cases–In re Genetically Modified Rice: Missouri Federal Court Denies Class Action Certification of Class Action Complaint Seeking Damages By Producers For Contamination Of Rice

Class Action Claims by Rice Growers Seeking Damages Arising from Contamination of U.S. Rice Supply by Non-Approved Genetically Modified Strains of Rice not Appropriate for Class Action Treatment because Substantial Differences in Individual Damages and Proof of Damages Defeat Rule 23(b)(3) Requirement for Predominance and Superiority Missouri Federal Court Holds

Various class action lawsuits were filed against Bayer CropScience and others seeking to recover for damages allegedly when “the defendants contaminated the U.S. rice supply with non-approved genetically modified strains of rice, thereby affecting the market price for plaintiffs’ crops.” The class action complaints were filed after the U.S. Department of Agriculture announced, in August 2006, that trace amounts of a rice seed developed by Bayer CropScience and “designed to be resistant to a Bayer herbicide, Liberty Link,” had been found in the U.S. rice supply. In re Genetically Modified Rice Litig., 251F.R.D 392 (E.D. Mo. 2008) [Slip Opn., at 1-2]. (The rice strain at issue in the class actions “is now deregulated by USDA, [but] at the time of the contamination it was not approved for human consumption.” Id., at 2.) The Judicial Panel on Multidistrict Litigation consolidated the class actions for pretrial purposes in the Eastern District of Missouri, and plaintiffs’ filed a master consolidated class action complaint. Id., at 1. “The plaintiffs in the master consolidated class action complaint are rice producers from five U.S. states where rice is grown and harvested: Arkansas, Louisiana, Mississippi, Missouri and Texas.” Id., at 3.Plaintiffs’ lawyers moved for class action certification; defense attorneys opposed class action treatment on the grounds that individual issues predominate over common issues. Id., at 1. The district court agreed that class action treatment was not warranted, concluding that class action certification was “inappropriate…because plaintiffs’ varying claims for damages are not amenable to class-wide adjudication.” Id.

According to the master class action complaint, world-wide reaction to the announcement directly affected the market for U.S. long grain rice: Japan barred further imports of such rice, the European Union required that all U.S. rice be “tested and certified as free of genetically-modified traits,” and several other countries – including Russia, Canada, the Philippines, Taiwan and Iraq – “imposed restrictions on U.S. rice imports.” In re Genetically Modified Rice, at 2-3. The class action alleged that “the U.S. market price for rice dropped dramatically as a result of Bayer’s contamination of the rice supply.” Id., at 3. The U.S. produces 13% of the world’s rice and exports nearly half of its rice, id. The class action relies on the market price for rice as listed on the Chicago Board of Trade (CBOT) for the period of August 18-23, 2006 to support its claim that the “dramatic price drop” is attributable to the announcement concerning the discovery of the contaminated rice. Id., at 4. The class action alleged further that economic harm continued beyond August 2006, id.

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

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Class Action Defense Cases–In re Gilead Sciences: Ninth Circuit Reverses Dismissal Of Securities Fraud Class Action Holding Class Action Complaint Adequately Alleges Loss Causation Under Dura Pharmaceuticals

Securities Fraud Class Action Complaint Adequately Alleged Loss Causation when Facts were Considered as a Whole so District Court Erred in Granting Defense Motion to Dismiss Class Action Complaint Ninth Circuit Holds

Plaintiffs, a group of investors, filed a class action against Gilead Sciences, “a biopharmaceutical company that specializes in developing and marketing treatments for life-threatening diseases,” alleging violations of federal securities law; specifically, the class action complaint alleged that defendants “misled the investing public by representing that demand for its most popular product” – Viread, an antiretroviral agent used to treat HIV – was “strong without disclosing that unlawful marketing was the cause of that strength.” In re Gilead Sciences Securities Litig., ___ F.3d ___ (9th Cir. August 11, 2008) [Slip Opn., at 10322-23]. Viread accounted for almost two-thirds of Gilead’s total revenues, and the fourth amended class action complaint alleged that defendants Gilead and “some of its top officers” violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by aggressively promoting Viread for “off-label” uses, that is, for uses that had not been approved by the FDA, id., at 10323-24. The class action complaint outlined an alleged scheme to promote off-label uses and further alleged that ultimately “75% to 95% of Viread sales resulted from off-label marketing efforts.” Id., at 10324-25. Defense attorneys moved to dismiss the class action under Rule 12(b)(6) for failure to adequately allege loss causation; the district court agreed and dismissed the class action complaint. Id., at 10323. The Ninth Circuit reversed.

As with all securities fraud cases, the specific facts detailed in the class action complaint are central to the Circuit Court’s analysis of the district court order dismissing the class action with prejudice. In this case, those facts span more than 9 pages of the appellate court’s opinion. See In re Gilead Sciences, at 10323-31. We do not summarize those facts here, noting only that, according to “two confidential witnesses who served as Gilead salespeople,” the off-label marketing efforts “took three forms: (1) marketing to HIV patients co-infected with Hepatitis B; (2) marketing Viread as a first-line or initial therapy for HIV infection; and (3) marketing against Viread’s safety profile,” and that, ultimately, “75% to 95% of Viread sales resulted from off-label marketing efforts.” Id., at 10325 (footnote omitted). The FDA sent Gilead a letter in March 2002, accusing the company of off-label marketing, id., and in August 2003 the FDA made public a July 2003 “warning letter,” but the investing public did not yet appreciate the letter’s significance, id., at 10328-29. According to the class action complaint, Gilead also encouraged overstocking of Viread but publicly stated that overstocking was not a basis for Viread’s increased sales, id., at 10326-27. It was not until October 2003 that investors realized the impact of off-label marketing on Viread sales, id., at 10330. The district court dismissed the class action with prejudice on the ground that plaintiffs “failed to adequately plead loss causation” under Dura Pharmaceuticals, Inc.. v. Broudo, 544 U.S. 336 (2005), because the class action complaint failed to “connect the following chain of events…: 1) that [the] alleged failure to disclose the off-label marketing scheme caused a material increase in sales; 2) that practitioners materially decreased their demand for Viread due to the publication of the FDA Warning Letter; and most importantly, 3) that the alleged decrease in sales due to the FDA letter proximately caused Gilead’s stock to decrease three months later,” id., at 10331. The Ninth Circuit explained that the district court order rested entirely on its conclusions concerning loss causation, id.

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

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New Labor Law Class Action Lawsuits Continue Dominance Among Class Action Filings In California State And Federal Courts

As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers August 8 - 14, 2008, during which time 37 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, often by a wide margin, and this again proved to be the case. Twenty-four (24) new labor law class action lawsuits were filed during the past week, representing 65% of the total number of new class action lawsuits filed during the time 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 5 new filings (14%).

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

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Class Action Defense Cases—In re Vytorin/Zetia: Judicial Panel On Multidistrict Litigation (MDL) Grants Class Action Plaintiffs’ Motions To Centralize Class Action Litigation And Transfers Lawsuits To District of New Jersey

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Responding Defendants, and Agrees with Defendants that District of New Jersey is Appropriate Transferee Court

Thirty-three (33) class actions lawsuits were filed in 17 federal district courts against numerous defendants, including various Merck and Schering-Plough entities, arising out of the use and/or marketing of the drugs Vytorin and/or Zetia. In re Vytorin/Zetia Marketing, Sales Practices & Products Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 8, 2008) [Slip Opn., at 1-2]. (An additional 67 class actions were filed, and were treated as tag-along cases by the court. Id., at 1-2 n.3.) Plaintiffs’ lawyers in 11 of the class actions filed 5 separate motions with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407, but they did not agree on the appropriate transferee court; when the recommendations of responding class action plaintiffs also were considered, the plaintiffs in the various class actions had proposed 10 different districts. Id., at 1. Defense attorneys for the responding Merck and Schering-Plough defendants did not oppose centralization, but argued for the District of New Jersey, where 12 of the class actions already were pending, as the appropriate transferee court, id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the District of New Jersey was the appropriate transferee court because Merck and Schering-Plough are headquartered in that district and because transfer of the class actions to that district was supported by the responding defendants and by several of the class action plaintiffs. Id., at 2.

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

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Class Action Defense Cases—In re Trasylol: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Transfers Class Actions To Southern District of Florida

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Certain Class Action Plaintiffs but Opposed by Others, but Concludes Class Actions should be Transferred to Southern District of Florida

Eighteen class actions were filed in 14 different federal district courts against various defendants, including Bayer Corp., Bayer Healthcare Pharmaceuticals, Bayer Healthcare, LLC, Bayer AG, and Bayer Healthcare AG (collectively “Bayer”), alleging product liability claims based on the safety of the Bayer drug Trasylol. In re Trasylol Products Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 7, 2008) [Slip Opn., at 1]. Additionally, another 18 class action lawsuits had been filed and were treated as tag-along cases by the court. Id., at 1 n.2. Defense attorneys for Bayer 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 Connecticut or, alternatively, the Northern District of Georgia. Id., at 1. Plaintiffs in 6 of the class actions before the court and in 2 of the potential tag-along cases supported pre-trial coordination, but argued for various other districts as the appropriate transferee court; plaintiffs in 4 of the class actions before the court an in one of the potential tag-along cases opposed centralization. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, explaining: “All actions share factual questions regarding the safety profile of the drug Trasylol, which is used to reduce blood loss in patients during coronary artery bypass graft surgery, and the warnings given by Bayer about the drug. Centralization under Section 1407 will eliminate duplicative discovery; prevent inconsistent pretrial rulings; and conserve the resources of the parties, their counsel and the judiciary.” Id., at 1-2. However, the Panel rejected defendants’ proposed transferee courts and concluded, instead, that while “any number” of the various proposed forums “could suitably serve as the transferee court,” the class actions should be transferred to the Southern District of Florida because it “currently has a relatively low number of MDL dockets and offers an accessible metropolitan location” and because of the experience of the district court judge to whom the matters were being assigned. Id., at 2.

Download PDF file of In re Trasylol Products Liability Transfer Order

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

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Class Action Defense Cases–Clemens v. DaimlerChrysler: Ninth Circuit Affirms Judgment In Favor Of Defense In Products Liability Class Action Holding Post-Warranty Problems Were Not Actionable And Fraud Claims Were Time-Barred

Class Action Alleging Breach of Warranty and Fraud for Defective Head Gaskets Failed because Class Action Plaintiff did not Experience Problems with Head Gaskets Until After Warranty Expired and Delayed Filing Class Action Complaint Until After Statute of Limitations had Expired on Fraud Claim Ninth Circuit Holds

Plaintiff filed a products liability class action against DaimlerChrysler alleging that the Dodge Neon were built with defective head gaskets; the class action complaint alleged breach of express and implied warranties, and fraud. Clemens v. DaimlerChrysler Corp., ___ F.3d ___ (9th Cir. July 24, 2008) [Slip Opn., at 9127-28]. Defense attorneys moved to dismiss the class action’s warranty claims under Rule 12(b)(6). Id., at 9128. Specifically, the defense argued plaintiff purchased the car in 1998 and that the warranty was expressly limited to the earlier of 36 months or 36,000 miles, but the class action plaintiff did not notice any problem with his vehicle until 2002, more than 3 years after he purchased the vehicle, at which time it had about 50,000 miles on it. Id., at 9128-29. The district court granted the defense motion on the ground that plaintiff’s vehicle was no longer under warranty when it began experiencing problems, id., at 9129. Defense attorneys also moved for summary judgment on the class action’s fraud claim on the ground that the statute of limitations had run as the class action complaint had not been filed until December 2005; the district court agreed and granted the motion for summary judgment. Id. The Ninth Circuit affirmed.

The Circuit Court easily rejected plaintiff’s arguments with respect to the class action complaint’s express warranty claim because “[t]he head gasket functioned throughout the 36,000 miles of three years for which it was warranted.” Clemens, at 9130. Plaintiff’s claim that the warranty covered “any defective item” and that the head gasket was defective when installed proved unavailing. As the Ninth Circuit explained, “Every manufactured item is defective at the time of sale in the sense that it will not last forever; the flip-side of this original sin is the product’s useful life.” Id., at 9131. In affirming dismissal of the class action complaint, the Ninth Circuit joined the Second Circuit and California state appellate courts in rejecting Alberti v. General Motors Corp., 600 F.Supp. 1026 (D.D.C. 1985), which “held that a breach-of-warranty claim for post-warranty component problems could proceed after the warranty period if the defendant knew of the defects at the time of sale.” Clemens, at 9131 (citation omitted). The class action’s implied warranty claim failed because, under California law, plaintiff was not in “vertical contractual privity with the defendant.” Id., at 9132.

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

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NBA Class Action Defense Cases–Johnson v. First Banks: Illinois Appellate Court Affirms Dismissal Of Class Action Holding National Bank Act Preempts Class Action Claims

Class Action Plaintiff Lacked Standing to Pursue “Wrongful Dishonor” Claim and Remaining Class Action Claims were Preempted by the National Bank Act (NBA) Illinois Appellate Court Holds

Plaintiff filed a class action in Illinois state court against First Banks, a state bank incorporated in Missouri; the class action complaint alleged that the Bank wrongfully dishonored a check, violated the state’s Consumer Fraud and Deceptive Business Practices Act, and was unjustly enriched because it “wrongfully charged a $5 fee to payees who did not have accounts with the [Bank] but who presented for payment checks drawn by the [Bank’s] depositors.” Johnson v. First Banks, Inc., 829 N.E.2d 233, 234 (Ill.App. 2008). Defense attorneys moved to dismiss the class action on the grounds that (1) plaintiff lacked standing to prosecute the “wrongful dishonor” claim, and (2) the National Bank Act (NBA) preempted plaintiff’s claims. Id. The trial court granted the motion and dismissed the class action, id., at 235. The Appellate Court of Illinois affirmed.

With respect to the class action’s wrongful-dishonor claim, the trial court held that plaintiff lacked standing because he did not have an account with the Bank. Johnson, at 235. The state statute limits bank liability for wrongful-dishonor claims to bank “customers,” and state law defines a bank “customer” as, inter alia, “a person having an account with a bank.” Id. (citations omitted). Because plaintiff did not have an account with the Bank, he was not a “customer” and therefore lacked standing to prosecute the class action’s wrongful-dishonor claim. Id., at 235-36. With respect to the NBA preemption issue, defense attorneys argued that regulations enacted by the federal Office of the Comptroller of the Currency (OCC) “expressly authorize a national bank to impose check-cashing fees on customers and that, therefore the National Bank Act preempts the plaintiff’s state law causes of action.” Id., at 236. Based on its analysis, see id., at 236-38, the appellate court agreed with the defense and held that “an out-of-state bank…has the same power and authority as a national bank to charge non-account holders a check-cashing fee and is subject to the same treatment with respect to the fee,” id., at 238. The Court further explained at page 238, “Through the federal regulations, the OCC authorized the banks to exercise a power, and a state may not infringe on that authorization.”

In sum, the appellate court agreed that plaintiff lacked standing to pursue the class action’s “wrongful dishonor” claim, and that the remaining class action claims were preempted by the National Bank Act. Johnson, at 238. Accordingly, the Court affirmed the judgment of the trial court.

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

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Class Action Defense Settlement Cases–In re Grand Theft Auto: New York Federal Court Decertifies Class Action Holding Proposed Settlement Class In Nationwide Consumer Protection Law Class Action Lacked "Cohesiveness" Required By Rule 23(b)(3)

Certification of Putative Class Action for Purposes of Settlement Required Satisfaction of Rule 23 Class Action Requirements, and Class Proposed for Settlement of Nationwide Class Action Failed to Meet Rule 23(b)(3)’s Predominance Test Requiring Decertification of Class Action New York Federal Court Holds

In 2005, four class action lawsuits were filed against Take-Two Interactive Software and its wholly-owned subsidiary, Rockstar Games; the complaints sought nationwide class action status and alleged, inter alia, violations of the consumer protection statutes of each state and the District of Columbia based on the “inclusion of an interactive, sexual minigame…in their premier product, Grand Theft Auto: San Andreas.” In re Grand Theft Auto Video Game Consumer Litig. (No. II), ___ F.Supp.2d ___ (S.D.N.Y. July 30, 2008) [Slip Opn., at 1]. The Judicial Panel on Multidistrict Litigation coordinated the various class action lawsuits, together with tag-along class action complaints, in the Southern District of New York. Id., at 2. Soon thereafter, the court appointed lead counsel for the putative class and a consolidated, amended class action complaint was filed. Id., at 2-3. The amended class action alleged that defendants marketed and sold Grand Theft Auto with an improper “content rating,” which they obtained by “withholding pertinent information from the entity charged with assigning content ratings to video games, the Entertainment Software Ratings Board”; specifically, the class action complaint charged that defendants failed to disclose that Grand Theft Auto “contained the Sex Minigame…, a game-within-the-game that allowed players to control the protagonist’s movements as he engaged in various sexual acts” and that purchasers could access the Sex Minigame through what came to be known as the “Hot Coffee Mod.” Id., at 3. Defense attorneys moved to dismiss the class action to the extent it advanced claims “under the laws of states where the named plaintiffs did not purchase” the game; the district court denied the motion, holding that a determination of whether to certify the litigation as a class action “was logically antecedent to the standing issues raised therein.” Id., at 4. Plaintiffs thereafter moved the federal court to certify the litigation as a nationwide class action; defense attorneys opposed class action treatment, “challenging the propriety of a nationwide class action that asserts claims under the disparate laws of the fifty states.” Id., at 4-5. Before the court ruled on that motion, the parties negotiated a settlement of the class action claims, id., at 5. In December 2007, the federal court conditionally certified a nationwide class action for settlement purposes and gave preliminary approval to a settlement of the class action, id., at 1, 5-6. However, in light of the Second Circuit Court of Appeal’s subsequent opinion in McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008), the district court decertified the settlement class. Id. (A summary of the McLaughlin opinion may be found here.)

We cut to the chase of the district court’s 58-page opinion. The district court correctly noted that even for purposes of settlement, the plaintiffs were required to meet the class action criteria set forth in Rule 23(a) – viz., numerosity, commonality, typicality and adequacy of representation – as well as, in this case, Rule 23(b)(3). In re Grand Theft Auto, at 9-10. This latter requirement means that plaintiffs “must show that ‘questions of law or fact common to [Settlement Class] members predominate over any questions affecting only individual members,’ and that the class action ‘is superior to other available methods for fairly and efficiently adjudicating the controversy.’” Id., at 10 (quoting Fed. R. Civ. P. Rule 23(b)(3)). While the proposed settlement is relevant, it goes merely to whether class action treatment would create manageability problems, id. “Trial-manageability issues aside, however, the ‘requirements [of Rule 23(a) and (b)] should not be watered down by virtue of the fact that the settlement is fair or equitable.’” Id. (quoting Denney v. Deutsche Bank AG, 443 F.3d 253, 270 (2d Cir. 2006)).

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

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Class Action Defense Cases–Parra v. Bashas’: Ninth Circuit Reverses Denial Of Class Action Treatment Of Labor Law Class Action’s Pay Discrimination Claim And Remands For Consideration Of Remaining Class Action Factors

District Court Erred in Finding Lack of Commonality Among Proposed Class in Labor Law Class Action Alleging Pay Discrimination Ninth Circuit Holds but Remands Class Action to District Court for Further Consideration because Lower Court had not Addressed Remaining Rule 23 Class Action Requirements

Plaintiffs, current and former Hispanic employees Bashas’, filed a putative class action against Bashas’ alleging violations of Title VII of the 1964 Civil Rights Act; specifically, the class action alleged that Bashas’ discriminated against members of the putative class on the basis of their national origin in that their “pay and working conditions [were] based on their national origin.” Parra v. Bashas’, Inc., ___ F.3d ___ (9th Cir. July 29, 2008) [Slip Opn., at 9636]. According to the class action complaint, Bashas’ operates 150 grocery stores under the trade names of Bashas’, A.J.’s Fine Foods and Food City, id., at 9637. The demographics of both the patrons and the employees differ substantially; for example, 15% of the Bashas’ and A.J.’s workforce is Hispanic, but 75% of the Food City workforce is Hispanic. Id. The class action alleged that, while the clientele differed, the employee job requirements at the three stores were “practically indistinguishable,” and that in 2003 Bashas’ implemented a program to equalize the pay scales at the stores over a period of time. Id. The class action complaint further alleged that the pay discrepancies ranged from $300-$6000 per year, with Hispanic employees generally receiving less pay than employees at Bashas’ and A.J.’s, id. Plaintiffs moved the district court to certify the litigation as a class action; the federal court granted class action treatment with respect to the “working conditions” claim, but ruled that plaintiffs had failed to adequately establish commonality to support class action treatment of the “pay discrimination” claim. Id., at 9636. The Ninth Circuit granted plaintiffs’ request for leave to appeal the district court’s order, id., at 9638, and reversed.

The Circuit Court focused solely on the district court’s conclusion that plaintiffs “failed to establish commonality among the proposed class members for their pay discrimination claim.” Parra, at 9639. To find commonality under Ninth Circuit authority, “‘[t]he existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies.’” Id., at 9640 (citations omitted). The Court noted at page 9641 that “the district court found past pay disparities for similar jobs at Bashas’, Inc.’s three brand stores,” and that it “noted there significant conclusions conceded by Bashas’, Inc.” – (1) that a higher percentage of its employees work for Food City, (2) that during the relevant time period the pay scale at Food City was lower than at Bashas’ and A.J.’s, and (3) that Hispanic employees were paid a lower hourly rate for similar jobs. The district court found these facts insufficient because ”pay disparities no longer existed at the time the order [denying class action certification] was written.” Id., at 9641. This ruling was error, because the court also should have considered “evidence of past pay disparities and discrimination common to the Hispanic workers at Food City.” Id.

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

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Gap Narrows And Percentage Of Labor Law Class Action Lawsuits Filed During Past Week Declines, But Labor Law Class Actions Continue To Top 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 August 1 - 7, 2008, during which time 44 new class action lawsuits were filed. Labor law class action lawsuits generally top the list, often by a wide margin and often accounting for more than 50% of the new class action filings. This past week, 20 new labor law class actions, representing 45% of the total number of new class action lawsuits filed during the reporting period. The only other categories that met the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with 13 new filings (30%), and class action lawsuits alleging violations of federal securities laws, with five (5) new filings (11%).

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

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FDCPA Class Action Defense Cases–Yack v. Washington Mutual: California Federal Court Dismisses Class Action Complaint Because Plaintiffs Lacked Standing To Prosecute Class Action Claims

Plaintiffs Lacked Standing to Prosecute Class Action because Underlying Events Occurred Prior to Filing of Chapter 7 Bankruptcy Proceeding by Plaintiffs and Plaintiffs Failed to Disclose Existence of Class Action Claims in Bankruptcy California Federal Court Holds

Plaintiffs filed a class action against Washington Mutual and other defendants alleging inter alia violations of the federal Fair Debt Collection Practices Act (FDCPA); specifically, the class action complaint alleged that defendants improperly froze plaintiffs’ checking account funds. Yack v. Washington Mutual Inc., 389 B.R. 91, 93 (N.D. Cal. 2008). Plaintiffs each had medical problems, and used a credit card to pay for some of their medical bills, id. When plaintiffs fell behind on their payments, their credit card company hired a debt collector, defendant Sunlan, which obtained a $10,000 judgment against them and then levied on their Washington Mutual bank account. Id., at 93-94. Washington Mutual complied with the levy, forwarding funds from plaintiffs’ account to the County Sheriff and withdrawing a legal processing fee, id., at 94. Plaintiffs alleged that the funds were exempt from levy because they social security and pension benefits; a California Superior Court agreed and ordered the funds released, id. Several months later, plaintiffs filed a voluntary Chapter 7 bankruptcy proceeding, id., at 95. Plaintiffs thereafter filed their putative class action complaint alleging that defendants levied on their bank account despite knowing that the funds were exempt from attachment. Id., at 94. Defense attorneys filed a motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim, id. The district court agreed and dismissed the class action.

The thrust of the defendants’ challenge to the class action complaint was that plaintiffs lacked standing to prosecute the claims because they “failed to list the claims in their bankruptcy proceeding, and because they are judicially estopped from pursuing claims held by the bankruptcy trustee.” Yack, at 95. Defense attorneys argued that plaintiffs filed their Chapter 7 proceeding many months after the events underlying the putative class action complaint, and that they did not disclose in that proceeding the claims they now sought to prosecute: “in doing so, plaintiffs effectively concealed from the bankruptcy their supposed claims against defendants.” Id. According to the district court, plaintiffs conceded “that they lack standing to assert those claims in federal court.” Id. The court found that plaintiffs’ efforts to re-open the bankruptcy and obtain abandonment from the trustee of the claims underlying the class action complaint failed, as the bankruptcy court affirmatively denied them that relief. Id., at 96. Accordingly, plaintiffs lacked standing to prosecute the class action, id. The federal court also agreed with defendants’ alternative argument, that plaintiffs were barred from prosecuting the class action claims by the doctrine of judicial estoppel. See id., at 96-97. Accordingly, the court dismissed with prejudice the class action complaint against defendants. Id., at 97.

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

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ERISA Class Action Defense Cases–Lanfear v. Home Depot: Eleventh Circuit Reverses Dismissal Of ERISA Class Action Holding District Court Had Subject-Matter Jurisdiction Because Class Action Sought Benefits Not Damages

Class Action Complaint for Breach of Fiduciary Duty Regarding the Diminution of Value of a Defined Contribution Retirement Plan States a Claim for Benefits under ERISA Eleventh Circuit Holds, Requiring Reversal of District Court Dismissal of ERISA Class Action

Plaintiffs filed a class action against their former employer, Home Depot, and certain of its officers and directors, alleging breach of fiduciary duty under ERISA (Employee Retirement Income Security Act of 1974); the class action complaint alleged that plaintiffs received benefit payments under a defined contribution retirement plan, but “that the payment were less than they should have been” because defendants had engaged in conduct that “artificially inflated the value of Home Depot stock.” Lanfear v. Home Depot, Inc., ___ F.3d ___ (11th Cir. July 31, 2008) [Slip Opn., at 1, 4]. Defense attorneys moved to dismiss the class action claim for lack of subject-matter jurisdiction because (1) the class action sought “damages,” not “benefits,” and (2) plaintiffs were not “participants” entitled to sue for breach of fiduciary duty. Id., at 1. The district court agreed and dismissed the class action complaint, id. Additionally, none of the class action plaintiffs pursued administrative remedies before filing the complaint, id., at 5; accordingly, the federal court alternatively concluded that plaintiffs failed to exhaust their administrative remedies, id., at 2, but the court did not rule on the impact of that failure on the class action complaint – specifically, “the district court did not decide whether it should dismiss the complaint without prejudice on that ground or stay the action to allow the former employees to pursue their administrative remedies,” id., at 2-3. The Eleventh Circuit affirmed in part, reversed in part, and remanded the class action for further consideration by the district court.

The class action presented an issue of first impression in the Eleventh Circuit: “whether a complaint for breach of fiduciary duty regarding the diminution of value of a defined contribution retirement plan states a claim for benefits under [ERISA].” Lanfear, at 1. The Circuit Court explained that participant payments under a defined benefits plan are not affected by the value of the plan’s assets; however, participant payments under a defined contributions plan are so affected because “[t]he participant is entitled to the value of the assets in his account, whatever that value may be.” Id., at 4. According to the class action complaint, “Home Depot violated its fiduciary duty by allowing the plan to invest in Home Depot stock even though corporate officials were backdating stock options and making fraudulent transactions, which artificially inflated the value of Home Depot stock.” Id. The complaint sought to restore to the plan the losses allegedly suffered as a result of this conduct. Id., at 4-5.

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

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Class Action Defense Cases–In re Apollo: Arizona Federal Court Vacates Jury Verdict In Securities Fraud Class Action And Enters Judgment In Favor Of Defendants Because No Proof Of Loss Causation

Defense Motion for Judgment as a Matter of Law Granted because Plaintiff’s Evidence Failed to Establish Loss Causation so Jury Verdict could not Stand Arizona Federal Court Holds

Plaintiffs filed a class action against Apollo Group and certain of its officers and directors the Bank and other defendants alleging violations of federal securities law; the class action complaint asserted that defendants made false or misleading statements concerning a Department of Education (DOE) program review at Apollo Group’s wholly-owned subsidiary, University of Phoenix (UOP). In re Apollo Group, Inc. Securities Litig., ___ F.R.D. ___ (D.Ariz. August 4, 2008) [Slip Opn., at 1]. The class action claims relied on two analyst reports, published in September 2004 (“the Flynn reports”) that allegedly disclosed the truth to the market, id. The Policemen’s Annuity and Benefit Fund of Chicago represented the class; the district court certified the litigation as a class action and the matter proceeded to a jury trial. Id. The jury ruled in favor of the plaintiff, and defense attorneys moved the court for judgment as a matter of law or, alternatively, for a new trial. Id. The district court granted the motion for judgment as a matter of law.

The district court set forth the entirety of the facts relevant to its determination in a single paragraph: “On February 5, 2004, as part of its ongoing program review at the UOP, the DOE sent Apollo a program review report that preliminarily found that the UOP had violated DOE regulations. Apollo was not required to immediately disclose the report, and it chose not to do so. But on six different occasions thereafter, between February 27, 2004 and September 7, 2004, Apollo misrepresented the actual state of affairs surrounding the program review by making public statements at odds with the existence and contents of the DOE report. On September 14 and 15, 2004, the contents of the DOE report were widely disseminated for the first time through various newspapers articles, including articles in The Wall Street Journal, The Arizona Republic, and the Chicago Tribune. The market did not react to the disclosure of this news in any significant way. Five days later, the Flynn reports were issued. These reports downgraded Apollo’s stock for various reasons, some of which PABF argued at trial were necessary to reveal the truth of Apollo’s prior misrepresentations. Apollo’s stock price fell significantly thereafter.” In re Apollo, at 2.

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

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Class Action Fairness Act Cases–Bullard v. Burlington Northern: Seventh Circuit Affirms Denial Of Remand Motion Holding Suit On Behalf Of 144 Plaintiffs Was A Mass Action Within Meaning Of Class Action Fairness Act

As Matter of First Impression, Class Action Fairness Act Permitted Removal of Suit as a “Mass Action” because Plaintiffs’ Counsel Designed the Lawsuit as a “Class Action Substitute” Seventh Circuit Holds

Plaintiffs filed a complaint in Illinois state court against four defendants alleging that they had “designed, manufactured, transported, or used chemicals that allegedly escaped from a wood-processing plant and injured people living nearby”; defense attorneys removed the complaint to federal court, arguing that federal court jurisdiction existed under the Class Action Fairness Act (CAFA). Bullard v. Burlington Northern Santa Fe R.R. Co., 535 F.3d 759 (7th Cir. 2008) [Slip Opn., at 1-2]. Specifically, defense attorneys argued that the litigation constituted a “mass action” within the meaning of the Class Action Fairness Act, id.¸ at 2. (Under the Class Action Fairness Act, “mass actions” also may be removed to federal court; the Seventh Circuit summarized the definition of “mass actions” under CAFA as cases “involving the claims of 100 or more litigants – if at least one plaintiff demands $75,000, the stakes of the action as a whole exceed $5 million, and minimal diversity of citizenship exists.” Id., at 2 (citing 28 U.S.C. § 1332(d)(11)).) Plaintiffs’ moved the district court to remand the case to state court; they conceded that the diversity and amount-in-controversy tests had been met, but argued that the lawsuit was not a “mass action” under the Class Action Fairness Act. Id. The district court denied the motion, and the Seventh Circuit granted leave to appeal “because the legal issue is novel” and “has not been addressed in this or any other circuit.” Id. The Circuit Court affirmed.

The Class Action Fairness Act permits removal of “mass actions” when “monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that plaintiffs’ claims involve common questions of law or fact.” Bullard, at 2. Plaintiffs argued that this means “defendants may remove a ‘mass action’ only on the eve of trial, once a final pretrial order or equivalent document identifies the number of parties to the trial.” Id. The Circuit Court characterized the lawsuit as “a class-action substitute.” Id., at 3. The Court explained at page 3, “Their complaint alleges that several questions of law and fact are common to all 144 plaintiffs; it provides no more information about each individual plaintiff than an avowed class [action] complaint would do. No one supposes that all 144 plaintiffs will be active; a few of them will take the lead, just as in a class action, and as a practical matter counsel will dominate, just as in a class action. Nonetheless, plaintiffs say, they are entitled to litigate in state court because the Class Action Fairness Act has a loophole.” The loophole envisioned by plaintiffs, however, would prevent the application of the removal of “mass actions” until just before trial. As the Seventh Circuit noted, this reading would eviscerate the statute. “Courts do not read statutes to make entire subsections vanish into the night.” Id., at 3.

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

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Class Action Defense Cases–In re Scrap Metal: Sixth Circuit Affirms $34 Million Class Action Judgment In Antitrust Class Action Case Holding District Court Properly Certified Litigation As A Class Action

Jury Verdict in Antitrust Class Action Affirmed because Plaintiffs Satisfied Rule 23(b)(3) Predominance Requirement for Class Action Certification and because Notice to Absent Class Members was Adequate Sixth Circuit Holds

In 2002, plaintiffs filed a class action against various defendants, including Columbia Iron and Metal Company, alleging violations of federal antitrust laws. The class action complaint sought to represent the interests of plaintiffs and “a class of industrial scrap-generating companies in Northeastern Ohio.” In re Scrap Metal Antitrust Litig., 527 F.3d 517, 523 (6th Cir. 2008). According to the class action, plaintiffs sell unprocessed scrap metal, generated as a byproduct of their manufacturing, to brokers and dealers, “who then haul, clean, sort, and process the scrap before selling it to end users, such as steel mills.” Defendants allegedly violated the Sherman Act by “agreeing not to compete with one another, submitting rigged bids, setting prices for the purchase of unprocessed scrap metal, and imposing financial penalties on co-conspirators for disobeying allocation agreements.” Id. In March 2004, the district court certified the litigation as a class action, id., at 523-24. In 2005, Columbia’s defense attorneys moved to decertify the class on the grounds that notice to the class was inadequate, but the district court denied the motion. Id., at 524. A jury awarded plaintiffs more than $20 million, including $11.5 million against Columbia which the district court trebled, pursuant to 15 U.S.C. § 15(a). Id., at 524. Columbia appealed the jury verdict; the Sixth Circuit affirmed.

The Circuit Court explained at page 523, “The movement of unprocessed scrap from generators to dealers generally works as follows: The dealers submit bids to the generators for the purchase of unprocessed scrap during a specified time period at a set price. In setting their bid price, dealers consult various trade publications, which report the prevailing prices that dealers can expect to charge users for the scrap after they have processed it. To ensure that they turn a profit, dealers set their bid price for the unprocessed scrap below the amount they will ultimately charge the users for the processed scrap. If the bid is accepted by the scrap generator, the generator and the dealer enter into a contract at the bid price for the bid period.” As noted above, the class action complaint alleged that defendants conspired to deflate the prices they paid for scrap metal. Defense attorneys raised several arguments, but we focus only on the claim that the district court should not have permitted the litigation to proceed as a class action. Specifically, Columbia argued that the district court erred in certifying a class action because the “predominance” test of Rule 23(b)(3) had not been satisfied as “damages could not be calculated on a class-wide basis.” Id., at 535. Columbia also challenged the notice given to absent class members on the ground that it failed to adequately inform them of “the binding effect of a class judgment.” Id., at 536.

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

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New Class Action Lawsuits Involving Employment-Related Maintain Top Spot Among Class Action Filings In California State And Federal Courts

As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers July 25 - 31, 2008, during which time 50 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, often by a wide margin, and this again proved to be the case. Twenty-five (25) new labor law class action lawsuits were filed during the past week, representing 50% of the total number of new class action lawsuits filed during the time period. The only other categories that satisfied the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with 8 new filings (16%), and class action lawsuits alleging federal antitrust violations, with 6 new filings (12%).

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

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MDL Class Action Defense Cases—In re Levaquin: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs’ Motion To Centralize Individual And Class Action Lawsuits In District of Minnesota

Over Objection of Defendants in Products Liability Individual and Class Action Lawsuits, Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Individual and Class Action Cases Pursuant to 28 U.S.C. § 1407 and Transfers Actions to District of Minnesota

Fifteen (15) individual and class action lawsuits were filed in seven (7) different federal district courts against Johnson & Johnson, Ortho-McNeil-Janssen Pharmaceuticals, Inc., and Johnson & Johnson Pharmaceutical Research & Development, among others, alleging “that the antibiotic Levaquin causes tendon rupture, and the warnings provided by defendants informing Levaquin users of this risk were inadequate”; an additional six (6) individual and class action lawsuits subsequently were filed and were treated as tag-along actions by the Judicial Panel on Multidistrict Litigation (MDL). In re Levaquin Products Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 13, 2008) [Slip Opn., at 1]. Plaintiffs in 14 of the individual and class action lawsuits 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 Minnesota, where the majority of the lawsuits (8 of the 15 cases before the Panel and 2 of the tag-along actions) already were pending; defense attorneys opposed pretrial coordination of the class action and individual lawsuits, and alternatively argued for transfer to the District of New Jersey. Id. The Judicial Panel granted plaintiffs’ motion, agreeing that the lawsuits raise common questions of fact and that centralization “will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.” Id. The Panel rejected defense arguments that the parties could address common discovery without pretrial coordination, explaining that the 15 actions, presently pending in 7 districts scattered across the country, “are nearly identical in terms of defendants’ alleged conduct, and discovery and other pretrial efforts will undoubtedly overlap. “ Id. The Panel also rejected the defense request for transfer to New Jersey, explaining at page 2: “Eight actions, including the first-filed action, are pending [in Minnesota], and discovery is already underway in those actions.” Accordingly, the Panel ordered the individual and class action lawsuits transferred to the District of Minnesota. Id., at 2.

Download PDF file of In re Levaquin Products Liability Transfer Order