Posted On: February 28, 2009 by Michael J. Hassen Email This Post

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New Employment-Related Class Action Lawsuits Retain Top Spot Among Weekly Class Action Lawsuits Filed In California State And Federal Courts

As a resource for California class defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in the California state and federal courts located in 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 the period from February 20 - 26, 2009, during which time 41 class actions were filed. Labor law class actions generally top the list, and this reporting period was no exception. In this reporting period, 19 new labor law class action lawsuits were filed, representing a relatively low 46% of the total number of new class actions filed during the past week. Only two other categories satisfied the 10% threshold: there were 9 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (22%), and there were 4 new class actions alleging violations of federal securities laws (10%).

Posted On: February 27, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases—In re Bank of America Auction Rate Securities (ARS): Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Transfer Class Actions To California

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by Responding Class Action Plaintiffs, but Transfers Actions to Northern District of California

Three class actions – one each in California, Illinois and New York – were filed against Bank of America Investment Services, Inc.; Bank of America Securities, LLC; Bank of America Corp. (collectively “BofA”) alleging “that Bank of America entities and/or its employees made misrepresentations in the context of the sale of auction rate securities (ARS).” In re Bank of America Corp. Auction Rate Securities (ARS) Marketing Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 12, 2009) [Slip Opn., at 1]. Two additional class actions were filed in New York, and treated as potential tag-along matters, id., at 1 n.2. 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 Southern District of New York, id., at 1. Lead plaintiff in the California class action opposed the motion, or alternatively requested that the class actions be centralized in California; lead plaintiff in the Illinois class action also opposed centralization, or alternatively requested centralization of the class actions in Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, id., at 2, but determined that the Northern District of California was the appropriate transferee court, id., at 3.

In opposing centralization of the class actions, plaintiffs’ lawyers argued: “(1) the actions do not share sufficient questions of fact; (2) there are only a few actions involved in the litigation, making voluntary coordination among the parties preferable to formal centralization; and (3) centralization of the actions to which the Private Securities Litigation Reform Act of 1995 (PSLRA) applies with the Independence Tube action (to which, plaintiffs assert, the PSLRA does not apply) will slow the progress of the latter action.” In re BofA, at 1-2. The Judicial Panel disagreed, explaining at page 2, “All actions possess a common factual core regarding Bank of America’s role in selling ARS. In particular, plaintiffs in all actions allege that…Bank of America failed to disclose that (1) ARS were not cash alternatives similar to money market funds, and (2) the ARS sold by Bank of America were only liquid because, at the time of sale, Bank of America and other broker-dealers artificially supported and manipulated the market to maintain the appearance of liquidity and stability. Transfer of these related actions under Section 1407 will foster a pretrial program that: (1) allows pretrial proceedings with respect to any non-common issues to proceed concurrently with pretrial proceedings on common issues, [citation]; and (2) ensures that pretrial proceedings will be conducted in a streamlined manner leading to the just and expeditious resolution of all actions to the overall benefit of the parties.” The Panel selected the Northern District of California without analysis, id., at 2-3.

Download PDF file of In re Bank of America Corp. Auction Rate Securities (ARS) Marketing Litigation Transfer Order

Posted On: February 26, 2009 by Michael J. Hassen Email This Post

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CAFA Class Action Defense Cases–Dennison v. Carolina Payday Loans: Fourth Circuit Affirms Remand Of Class Action To State Court Holding Class Action Fairness Act (CAFA) Minimal Diversity Not Established

Class Action Properly Remanded to State Court because under CAFA (Class Action Fairness Act) Defendant is Citizen of Both State of Incorporation and State of Principal Place of Business, and CAFA does not Permit Defendant to Choose State of Citizenship to Satisfy Minimal Diversity for Removal Jurisdiction Fourth Circuit Holds

Plaintiff filed a class action in South Carolina state court against Carolina Payday Loans alleging violations of state law in “payday loans” that were allegedly unconscionable; plaintiff was a South Carolina citizen, and brought the putative class action complaint on behalf of herself and other South Carolina citizens. Dennison v. Carolina Payday Loans, Inc., 549 F.3d 941, 942 (4th Cir. 2008). Defense attorneys removed the class action to federal court asserting removal jurisdiction under the Class Action Fairness Act (CAFA); the defense argued minimal diversity had been met because Carolina Payday “is a citizen of Georgia, where it claims it has its principal place of business, even though it is also a citizen of South Carolina, where it is incorporated,” or because some members of the putative class may have moved out of state. Id. The district court granted plaintiff’s motion to remand the class action to state court because Carolina Payday and the putative class members were citizens of South Carolina. Id. The district court additionally found that the class action “fell within the ‘home-state exception’ to CAFA jurisdiction set forth in 28 U.S.C. § 1332(d)(4) because in a class limited by definition to ‘citizens of South Carolina,’ at least two-thirds of the class members necessarily are citizens of South Carolina.” Id. The Fourth Circuit granted defendant’s request for permission to appeal the remand order, and affirmed.

The Circuit Court found this case to be “substantively identical” to Johnson v. Advance America, Cash Advance Centers of South Carolina, Inc., 549 F.3d 932 (4th Cir. 2008). Dennison, at 942. Because the class action complaint expressly defined the putative class “to include only citizens of South Carolina,” defense counsel’s speculation that class members may have moved out of state was inaccurate. Id. The Fourth Circuit first held that a class defined as “all citizens of South Carolina” is indistinguishable from a class defined as “citizens of South Carolina who are domiciled in South Carolina” because “an individual must be domiciled in a State in order to be a citizen of that State.” Id., at 942-43 (citations omitted). Accordingly, the class action complaint properly limited the scope of the class to South Carolina residents/citizens. Id., at 943. The Court therefore found irrelevant Carolina Payday’s evidence that some of its South Carolina borrowers were now citizens of other states because class membership was limited to “citizen[s] of South Carolina at the time the complaint was filed.” Id. The Fourth Circuit also found unpersuasive the defense argument that because Carolina Payday has its principal place of business in Georgia, it is allowed to rely on its Georgia citizenship to establish minimal diversity under CAFA. See id., at 943-44. The Circuit Court explained at page 944 that CAFA “does not give greater weight to a corporation's principal place of business than to its place of incorporation” and that, accordingly, for purposes of establishing diversity under CAFA “Carolina Payday is a citizen of both South Carolina, its State of incorporation, and Georgia, assuming it is able to demonstrate that its principal place of business is in Georgia.” The Fourth Circuit therefore affirmed the district court order remanding the class action to state court, id., at 944.

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Posted On: February 25, 2009 by Michael J. Hassen Email This Post

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CAFA Class Action Defense Cases–McLoughlin v. People’s United: Connecticut Federal Court Denies Motion To Remand Class Action To State Court Holding Removal Jurisdiction Exists Under Class Action Fairness Act (CAFA)

Class Action Properly Removed to Federal Court under CAFA (Class Action Fairness Act of 2005) because Defendants Established by Preponderance of the Evidence that Class Action Placed more than $5 Million in Controversy Connecticut Federal Court Holds

Plaintiffs filed a class action in Connecticut state court against Bank of New York Mellon (“Mellon”) and People’s United Bank (“Bank”) alleging negligence, invasion of privacy, breach of fiduciary duty, and violations of Connecticut’s Unfair Trade Practices Act (CUTPA); the class action complaint asserted that Mellon lost electronic data belong to Bank customers. McLoughlin v. People's United Bank, Inc., 586 F.Supp.2d 70, 71 (D.Conn. 2008). According to the allegations underlying the class action, the Bank entered into a contract with Mellon to store customer data and records electronically, and Mellon created backup tapes of this information which were later lost. Id. The class action “alleged damages [that] include ‘improperly charged account fees,’ ‘the costs of remedying the [data] breach through the purchase of identity theft protection and monitoring of accounts to ensure against identity theft,’ damages for ‘unnecessary and illegal intrusion into their privacy rights,’ and ‘mental and emotional distress’ as well as punitive damages and attorney's fees.” Id., at 71-72. Defense attorneys removed the class action to federal court pursuant to the Class Action Fairness Act of 2005 (CAFA); plaintiffs moved to remand the class action to state court. Id., at 72. Plaintiffs argued that the $5 million amount in controversy had not been met because the class may consist of only 450,000 people (whereas defendants asserted up to 10 million people may have been affected). Id. The district court refused to remand the class action to state court.

After summarizing removal jurisdiction under CAFA, the and defendants’ burden of establishing that removal jurisdiction exists, the district court observed that, because the class action complaint failed to specify the amount of damages sought, Mellon and the Bank were required to show by a preponderance of the evidence that the amount in controversy exceeds $5 million. McLoughlin, at 72. The federal court observed that this was “the only point of dispute,” id., at 72, and the parties were entitled to introduce evidence to establish the amount in controversy, id., at 72-73. Defendants introduced the only evidence on this issue, which showed that 556,000 Bank customers and a total of 10 million people were affected. Id., at 73. Also, plaintiffs’ counsel had stated that he was seeking “seeking seven years of credit monitoring, credit insurance, and other damages for his clients.” Id. Defendants also introduced evidence that Experian charges $14.95 per month for credit monitoring services, id. Plaintiffs did not challenge these figures, and the district court explained that “at $14.95 a month, for seven years, the amount in controversy for each class member would be $1,255.80.” Id. The amount in controversy for 10 million class members, then, would be more than $12 billion, id. Accordingly, defendants had adequately established removal jurisdiction under CAFA, and the district court denied plaintiffs’ motion to remand the class action to state court. Id., at 74.

Download PDF file of McLoughlin v. People's United Bank

Posted On: February 24, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases–Moore-Thomas v. Alaska Airlines: Ninth Circuit Reverses Dismissal Of Class Action For Failure To Arbitrate Under RLA And Holds Class Action Improperly Removed To Federal Court

Defendant Improperly Removed Labor Law Class Action to Federal Court and Therefore District Court Erred in Dismissing Class Action for Lack of Subject Matter Jurisdiction Ninth Circuit Holds

Plaintiff filed a class action against Alaska Airlines alleging labor law violations; the class action complaint asserted that defendant willfully failed to pay its former employees all wages due upon termination as required by Oregon law. Moore-Thomas v. Alaska Airlines, Inc., ___ F.3d ___ (9th Cir. January 27, 2009) [Slip Opn., at 979]. Plaintiff, a customer service agent employed by defendant and subject to a collective bargaining agreement (CBA), filed a class action in Oregon state court, seeking “statutory penalties, costs and disbursements, pre- and post-judgment interest, and reasonable attorneys’ fees,” id., at 980. Defense attorneys removed the class action to federal court, and argued that the district court had jurisdiction under 28 U.S.C. § 1331 because the class action was governed by the Railway Labor Act, id. Defense attorneys then moved to dismiss the class action for lack of subject matter jurisdiction, arguing that the RLA preempts the class action’s state law claims, and therefore that the class action must be dismissed because plaintiff had not complied with the mandatory arbitration provisions of the RLA, id., at 980-81. Plaintiff moved to remand her class action to state court on the grounds that the RLA did not preempt her claims and so the federal court lacked subject matter jurisdiction, id., at 981. The district court ruled that the RLA preempts the claim in plaintiff’s class action “because her claim requires interpretation of the CBA”; thus, removal was proper, and the class action was dismissed for lack of subject matter jurisdiction because plaintiff failed to arbitrate her claim pursuant to the RLA. Id. Plaintiff appealed, and the Ninth Circuit reversed.

Relying on the Supreme Court opinion in Hawaiian Airlines, Inc. v. Norris, 512 U.S. 246 (1994), which considered preemption under the Labor Management Relations Act (LMRA), the Ninth Circuit explained that “the RLA similarly ‘pre-empts state law only if a state-law claim is dependent on the interpretation of a CBA.’” Moore-Thomas, at 982-83 (quoting Hawaiian Airlines, 512 U.S. at 262-63 & n.9). The Circuit Court found that “the district court here understandably impliedly interpreted the analogy drawn between LMRA and RLA preemption in Hawaiian Airlines as rendering the two standards fully coequal such that LMRA complete pre-emption applies in the RLA context as well.” Id., at 983. Plaintiff argued that the district court erred because “the RLA is subject to ‘ordinary’ rather than ‘complete’ pre-emption.” Id. The Ninth Circuit explained, “[Plaintiff] asserts that the distinction is crucial because, under the complete pre-emption exception to the well-pleaded complaint rule, ‘federal law displaces a plaintiff’s state-law claim, no matter how carefully pleaded.’” Id. (citation omitted). Based on its analysis, see id., at 984-87, the Court agreed that the RLA “does not provide a basis for finding complete pre-emption in this case and that, as a result, Alaska’s removal on the grounds of the RLA’s governing this action was improper.” Id., at 983. Accordingly, the Ninth Circuit concluded that the district court erred in dismissing the class action, and held that the class action was improperly removed to federal court, id., at 987. The Circuit Court therefore remanded the class action to the district court with orders to deny the motion to dismiss and to remand the class action to state court, id.

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Posted On: February 23, 2009 by Michael J. Hassen Email This Post

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PSLRA Class Action Defense Cases–Public Employees’ Retirement Ass’n v. Deloitte & Touche: Fourth Circuit Affirms Dismissal Of Securities Class Action Without Leave To Amend For Failure To Adequately Plead Scienter

Securities Fraud Class Action Claims Against Accountants Properly Dismissed for Failure to Plead Scienter Required by Private Securities Litigation Reform Act (PSLRA) because Evidence Showed Company Concealed Information from Accountants Fourth Circuit Holds

Plaintiffs filed a class action against various defendants alleging securities fraud violations; the class action complaint alleged that Royal Ahold, N.V., a Dutch corporation, and U.S. Foodservice, Inc. (USF), a Maryland-based Ahold subsidiary, engaged in improper accounting practices. Public Employees' Retirement Ass’n of Colorado v. Deloitte & Touche LLP, 551 F.3d 305, 306 (4th Cir. 2009). The class action also alleged that Ahold’s accountants, Deloitte & Touche LLP (Deloitte U.S.) and Deloitte & Touche Accountants (Deloitte Netherlands) – which are two legally distinct entities, participated in Ahold’s alleged fraud, id. Defense attorneys for the Deloitte defendants moved to dismiss the class action on several grounds, including for failure to satisfy the heightened pleading requirements established by the Private Securities Litigation Reform Act (PSLRA). In pertinent part, the PSLRA requires that plaintiffs plead facts alleging a “strong inference” that the defendant in a securities fraud lawsuit acted with the requisite scienter. Id., at 306. The district court granted the defense motion and dismissed the class action complaint as to the Deloitte defendants without leave to amend, id., at 307-08. The Fourth Circuit affirmed, finding “the inference that the Deloitte defendants lacked the necessary scienter more compelling than any competing inference that they knowingly or recklessly perpetrated a fraud on Ahold's investors” and that the proposed second amended class action complaint was futile. Id., at 306.

We do not here discuss in detail the nature of the improper accounting practices underlying the class action claims. See Deloitte, at 306-08. In brief, the two frauds Ahold alleged perpetrated involved (1) the improper consolidation of revenue from various joint ventures, in violation of GAAP, that resulted in substantial overstatement of earnings, and (2) the premature recognition of income from promotional allowances. Id., at 307. The actions led Ahold to restate earnings for fiscal years 2001 and 2002, and revealed that Ahold’s accounting practices had overstated earnings by more than $500 million. Id. The announcement led to a 60% drop in stock price, and to SEC civil enforcement actions against Ahold and various individual defendants. Id. Moreover, at least 21 private class action lawsuits were filed alleging securities fraud, and the Judicial Panel on Multidistrict Litigation centralized the class actions for pretrial purposes in the District of Maryland, id. The district court appointed Public Employees' Retirement Association of Colorado and Generic Trading of Philadelphia, LLC as Lead Plaintiffs, and a Consolidated Amended Securities Class Action Complaint was filed against Ahold entities, the Deloitte defendants, and others. Id. Lead Plaintiffs settled the class action as to the non-Deloitte defendants, and then filed a motion to amend the class action complaint to assert new claims against the Deloitte defendants. Id., at 308. The district court denied the motion on the basis of futility, and the Fourth Circuit affirmed.

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Posted On: February 21, 2009 by Michael J. Hassen Email This Post

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Labor Law Class Action Lawsuits Regain Dominance Among Weekly Class Action Lawsuits Filed In California State And Federal Courts In Week Of Heavy Class Action Activity

In order to allow class 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 the California state and federal courts located in 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 the period from February 13 - 19, 2009, during which time an unusually high number of class actions were filed; in total, 59 new class action lawsuits were initiated in these courts during this reporting period. Class actions alleging employment-related claims generally top the list of new class action filings by a wide margin, and during this reporting period 23 new labor law class action lawsuits were filed, representing a relatively low 39% of the total number of new class actions filed during the past week. Only two other categories satisfied the 10% threshold: there were 12 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (20%), and there were 11 new class actions alleging violations of the federal Americans with Disabilities Act (ADA) (19%).

Posted On: February 20, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases— In re Text Messaging Antitrust: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs’ Motions To Centralize Class Action Litigation But Chooses Northern District Of Illinois As Transferee Court

Faced with Three Motions for Centralization, Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Responding Class Action Plaintiffs and Defendants, and Transfers Class Actions to Northern District of Illinois

Sixteen (16) class actions – filed in federal courts in the District of Columbia, Arkansas, Illinois, Kansas, Louisiana, Mississippi, New Jersey, Ohio, Pennsylvania, Puerto Rico, and Texas – were filed against various defendants alleging violations of federal antitrust laws; 15 additional and related class actions also were filed, and were treated as potential tag-along class actions. In re Text Messaging Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 3, 2008) [Slip Opn., at 1 and n.1]. According to the class actions, the defendants “conspired to fix, raise, maintain, and stabilize the price of text messaging services sold in the United States in violation of the Sherman Antitrust Act.” Id., at 2. Three separate motions were filed with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407: plaintiffs in two of the Illinois class actions sought centralization there or in New Jersey; plaintiffs in the Louisiana class action sought centralization there or in Ohio; plaintiffs in the District of Columbia class action sought centralization there. Id., at 1. All responding parties agreed that centralization was appropriate, and “variously support[ed] one or more of the suggested transferee districts or the following districts: the Eastern District of Pennsylvania, the District of Puerto Rico, or the Western District of Washington.” Id. The Judicial Panel granted the motion to centralize the class action lawsuits, and decided that the Northern District of Illinois was the appropriate transferee court because (1) 6 class actions were already pending in that district and (2) it “provides a relatively central forum for this nationwide litigation.” Id., at 2.

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Posted On: February 19, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases–Solon v. Midwest Medical: Illinois State Appellate Court Holds Statutory Authorization For Reasonable Expenses Up To $20 Did Not Support Charging $20 Flat Fee In Connection With Copy Services

As Matter of First Impression, in Class Action Challenging $20 Flat Fee for “Handling” Copy Requests for Medical Requests, Statute Only Authorized Reimbursement of “Reasonable Expenses” which, by Definition, would Vary Among Copy Requests Illinois State Court Holds

Plaintiffs filed a class action against Midwest Medical Records Association (MMRA) alleging deceptive and illegal practices in violation of Illinois law; specifically, the class action complaint alleged that MMRA “overcharge[ed] patients for requested copies of medical records.” Solon v. Midwest Medical Records Ass'n, Inc., 898 N.E.2d 207, 208 (Ill.App. 2008). According to the allegations underlying the class action, MMRA is retained by health care facilities and practitioners to handle patient requests for copies of medical records; MMRA employees work on-site at the health care offices where they “receive medical records requests, locate and copy the requested records, and send the records to the patient along with a bill for services.” Id. The class action further alleges that MMRA does not charge the health care provider for its services but, rather, charges the patients a fee for providing the records requested, id. Specifically, MMRA negotiates a “price per page” that it will charge the patients, and adds a “flat $20 handling fee, which defendant refers to as a ‘process fee.’” Id., at 208-09. The class action alleged, inter alia, that this charge violated the Consumer Fraud and Deceptive Business Practices Act and the Uniform Deceptive Trade Practices Act, id., at 209. Defense attorneys moved to strike portions of the class action on the grounds that the flat $20 handling fee did not violate Illinois law, id. at 208. The trial court denied the motion but certified the following question for appellate review: “Is it reasonable per se for a provider of medical record copies under [sections 8-2001 and 8-2003 of the Code] to charge the full amount of the $20 process fee, or is the provider limited to a lesser charge if the evidence shows that the lesser charge is all that is reasonable?” Id., at 209. The appellate court concluded that the $20 fee was not per se reasonable.

In essence, the class action alleged that Illinois law “only permits defendant to charge for the lesser of the ‘reasonable expense of production, Illinois' statutory price limit for copies applicable to the type of copies [defendant] furnished, or a fair price for the copies.’” Solon, at 209. The gravamen of the class action was that it was improper to charge a flat $20 handling fee in connection with the copy requests. Id. The Illinois appellate court recognized that this presented an issue of first impression, and it began its legal analysis by summarizing the rules governing statutory construction. Id. The relevant statute provides, “Every [health care provider] shall, upon the request of any patient * * *, * * * permit copies of [a patient's medical] records to be made by him * * * or his * * * physician * * *…. The [health care provider] shall be reimbursed by the person requesting copies of records at the time of such copying for all reasonable expenses, including the costs of independent copy service companies, incurred by the health care facility in connection with such copying not to exceed a $20 handling charge for processing the request for copies * * *.” Id., at 209-10 (quoting 735 ILCS 5/8-2001 (West 2004)). Additionally, “the patient must reimburse health care providers for the cost of the copies at a maximum per-page rate that varies with the number of pages copied, as well as any shipping costs.” Id., at 210(citing 735 ILCS 5/8-2001, 8-2003 (West 2004)). Defense attorneys argued that a flat $20 fee is reasonable per se “because it is within the maximum amount allowed to be charged under the statute”; plaintiffs countered that the statute permits only “‘reasonable expenses’ incurred in connection with copying the records” in addition to the per page cost of the copies themselves, and that the amount of those expenses may not exceed $20. Id.

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Posted On: February 18, 2009 by Michael J. Hassen Email This Post

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FDCPA Class Action Defense Cases–Herkert v. MRC Receivables: Illinois Federal Court Amends Class Definitions And Certifies Class Action In FDCPA (Fair Debt Collection Practices Act) Class Action

Class Action Challenging Defendants Debt Collection Practices Warranted Class Action Treatment Illinois Federal Court Holds

Plaintiffs filed a class action against MRC Receivables and others alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and the Illinois Collection Agency Act (ICAA). Herkert v. MRC Receivables Corp., 254 F.R.D. 344, 346 (N.D.Ill. 2008). Defendants are engaged in the business of “purchasing and managing charged-off consumer receivables portfolios.” Id. After defendants filed suit against them to collect on credit card debts, plaintiffs filed their class action lawsuit, id. Specifically, the class action complaint alleged that defendants “had a policy and practice of violating Section 1692e and 1692f of the FDCPA, and Section 425/9(a)(20) of the ICAA,” id., at 346-47. The gravamen of the class action is that defendants filed lawsuits to collect credit card debts without attaching a signed contract to the complaints, and after the expiration of the 5-year statute of limitations. Id., at 347. Plaintiffs moved the district court to certify the litigation as a class action, id., at 346. The district court amended the definition of the class and, as amended, granted plaintiffs’ motion for class action treatment.

The motion for class certification proposed three classes, under the FDCPA and one under the ICAA. Heckert, at 347. The district court readily found Rule 23(a)(1)’s numerosity requirement for class actions to be satisfied because defendants “file…thousands of cases each month in Illinois state court.” Id., at 348. The federal court rejected defendants’ claim that they would not be able “to construct an accurate search of their record-keeping system on a searchable, system-wide basis, and that it would thus be impossible to determine the identity of the class members.” Id. However, the court agreed to amend the class definitions “to ensure that the classes are ascertainable based on objectively identifiable criteria, namely, according to the date of the final statement of account as given in the affidavits attached to the state court complaints.” Id. As so amended, the class definition would not require the parties to rely on defendants’ records in order to ascertain class membership, id., at 349.

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Posted On: February 17, 2009 by Michael J. Hassen Email This Post

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FLSA Class Action Defense Cases–Gortat v. Capala Brothers: New York Federal Court Grants Plaintiffs’ Motion To Dismiss Crossclaims Against Named Plaintiffs In Labor Law Class Actions

In FLSA Class Action, Plaintiffs’ Motion to Dismiss Crossclaims by Defendants Granted because Negligence and Breach of Fiduciary Duty Claims could not Survive New York Federal Court Holds, but Conversion Claim not Challenged and Defendants Granted Leave to Amend Tortious Interference Claim

Six plaintiffs filed a class action against their employer, Capala Brothers, a construction company, alleging violations of the federal Fair Labor Standards Act (FLSA) and the New York Minimum Wage Act; in response to the class action complaint, defendants counterclaimed against the plaintiffs for conversion, negligence, tortious interference with contract, and breach of fiduciary duty. Gortat v. Capala Brothers, Inc., 585 F.Supp.2d 372, 374 (E.D.N.Y. 2008). The counterclaims to the class action were premised on the following: (1) the negligence claims alleged that four plaintiffs were negligent in replacing a roof to a building, resulting in $40,000 in rain damage, that three plaintiffs were negligent in failing to secure electrical motors at the site, which were also damaged by rain, that two plaintiffs were negligent in allowing concrete to harden in a concrete mixer, and that two plaintiffs were negligent in failure to secure two certain equipment resulting in their loss; (2) the tortious interference with contract claim alleged that three plaintiffs interfered with the employment contracts of current Capala employees, “caused lower moral[e], dissent and lower productivity” causing $100,000 in damage to Capala, and that one plaintiff, after quitting, “interfered with the employment contracts of the other four plaintiffs” causing $300,000 in damages to Capala, and (3) the breach of fiduciary duty claim alleged that plaintiffs “fail[ed] to provide ‘adequate and timely notice’ before quitting…as required by their employment contracts” causing Capala to default on certain construction contracts and suffer $400,000 in damages. Id., at 374-75. Plaintiffs answer the conversion counterclaim, but moved to dismiss the remaining counterclaims, id., at 374. The district court granted plaintiffs’ motion.

The district court first addressed the negligence claims, explaining that New York law “prohibits employers from making any deduction from employee wages except as required by law or regulation or as authorized by the employee for his or her benefit,” including claims for negligence or lost profits. Gortat, at 375 (citations omitted). The federal court concluded that while defendants’ crossclaims were not “obvious examples of attempted wage deduction,” they served the same function and so could be “treated as such to prevent employers from circumventing the protection of employee wages” provided for by New York law. Id., at 375-76. Accordingly, it granted the motion to dismiss defendants’ negligence claims against the named plaintiffs, id., at 376. With respect to the tortious interference claims, the district court observed that plaintiffs were terminable at will and that plaintiffs could not be liable unless they engaged in “culpable” conduct. Id. The court found that the allegations failed to allege wrongful conduct adequate to support the interference claim, so those claims, too was dismissed. Id. Turning to the breach of fiduciary duty claim against the plaintiffs, the federal court noted that defendants were required to pleading “both the existence of a duty based on a relationship of trust and confidence and breach of that duty.” Id. (citation omitted). Failing to give advance notice of terminating their employment, standing alone, did not constitute a sufficient basis to support the breach of fiduciary duty claim, id., at 376-77.

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Posted On: February 16, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases–Hauk v. JP Morgan Chase: Ninth Circuit Affirms Summary Judgment On Class Action’s TILA Claim But Reverses As To Class Action’s UCL And False Advertising Claims

District Court Properly Granted Summary Judgment in Favor of Bank as to Claim Alleging Violation of Federal Truth In Lending Act (TILA) because Bank’s Disclosures were Accurate, but Genuine Issue of Material Fact Precluded Summary Judgment as to Unfair Competition Law (UCL) and False Advertising Law (FAL) Claims Ninth Circuit Holds

Plaintiff filed a class action against JP Morgan Chase alleging violations of the federal Truth in Lending Act (TILA), the federal Fair Credit Reporting Act (FCRA) and California’s Consumers Legal Remedies Act (CLRA); plaintiff’s amended class action complaint added claims for alleged violations of California’s Unfair Competition Law (UCL) and False Advertising Law (FAL). Hauk v. JP Morgan Chase Bank USA, ___ F.3d ___ (9th Cir. January 23, 2009) [Slip Opn., at 827]. The class action complaint asserted that plaintiff opened a Chase credit card, subject to a Cardmember Agreement (CMA), and later took advantage of a “balance transfer offer” that promised a promotional fixed 4.99% APR by transferring $10,000 to his Chase card. Id., at 825. According to the allegations underlying the class action, the CMA allowed Chase to increase the interest rate if plaintiff made a late payment to Chase or any other creditor, id. The class action centered on the allegation that Chase charged plaintiff an APR of 28.74% because it maintained that “he was no longer eligible to receive the promotional 4.99% APR,” id., at 825-26; specifically, Chase argued that plaintiff had made a late payment to another creditor three months before he accepted the balance transfer offer from Chase, id., at 826. While Chase would have automatically canceled the balance transfer offer to plaintiff had it discovered the late payment as part of its monthly cardmember account review, which includes reviewing Experian credit reports, Chase claimed that it did not discover the late payment until after plaintiff had accepted the offer to transfer a balance to his credit card. Id. Defense attorneys removed the class action to federal court, and moved for summary judgment on the grounds that the class action’s state law claims were preempted by federal law and that plaintiff’s TILA and CLRA claims were defeated by the disclosures in Chase’s CMA. Id., at 827. The district court rejected the preemption argument, but agreed with the defense that plaintiff could not prove Chase knew of the late payment before accepting the balance transfer offer and so plaintiff’s state law claims could not survive. Id. The Ninth Circuit reversed as to the UCL and FAL claims for relief.

The Ninth Circuit noted that plaintiff voluntarily withdrew his FCRA claim and did not appeal from the dismissal of the class action’s CLRA claim; accordingly, the appeal was directed to the grant of summary judgment as to plaintiff’s TILA, UCL and FAL claims. Hauk, at 827. The Circuit Court devoted most of its attention to the TILA claim. The Ninth Circuit summarized TILA and Regulation Z, see id., at 828-29, and the disclosures made by Chase in conjunction with the balance transfer offer, see id., at 830-31. In pertinent part, Chase may waive its right to increase a cardholder’s APR because of a late payment if it knows of, but does not promptly act on, that default, id., at 830-31; however, Chase does not waive its right to increase the APR “based on a late payment it discovered after it mailed the [balance transfer offer], even if that late payment occurred before it mailed the [balance transfer offer],” id., at 831 (citations omitted). The Circuit Court noted further that “TILA is only a ‘disclosure statute’ and ‘does not substantively regulate consumer credit,’” id. In this case, then, the district court properly granted summary judgment on the class action’s TILA claim because “the injury [plaintiff] suffered neither resulted from any lack of TILA disclosures nor gave rise to a claim under TILA.” Id. The Ninth Circuit explained that “while an inaccurate disclosure that itself breaches a credit agreement may also violate TILA…, the breach of a credit agreement based on conduct independent of the disclosures does not necessarily give rise to a TILA claim.” Id., at 832-33 (citation omitted). In affirming the dismissal of the TILA claim, the Ninth Circuit recognized contrary authority out of the Third Circuit, see id., at 833-34 (citing Rossman v. Fleet Bank (R.I.) Nat’l Ass’n, 280 F.3d 384, 399-400 (3d Cir. 2002)), but rejected that circuit’s “expansive reading of Regulation Z,” id., at 833. Rather, the Ninth Circuit concluded at page 835, “We hold that a creditor’s undisclosed intent to act inconsistent with its disclosures is irrelevant in determining the sufficiency of those disclosures under sections 226.5, 226.6, and 226.9 of Regulation Z.” And because defendant’s disclosures complied with TILA and Regulation Z, summary judgment was proper, id.

Continue reading "Class Action Defense Cases–Hauk v. JP Morgan Chase: Ninth Circuit Affirms Summary Judgment On Class Action’s TILA Claim But Reverses As To Class Action’s UCL And False Advertising Claims" »

Posted On: February 15, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases–Dukes v. Wal-Mart: Ninth Grants Rehearing En Banc Of District Court Order Certifying Nationwide Class Action Against Wal-Mart In Labor Law Class Action Alleging Sex Discrimination Covering 1.5 Million Class Members

Wal-Mart’s Petition for Rehearing En Banc of District Court Order Certifying Nationwide Labor Law Class Action Alleging Sex Discrimination Against 1.5 Million Employees Granted by Ninth Circuit

We have previously reported on the Ninth Circuit opinion in Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. 2007), which affirmed a district court order granting plaintiffs’ motion for class action certification in a nationwide labor law class action alleging sex discrimination; the certified class action covered 1.5 million members, but the district court concluded that the action nonetheless would be manageable. Our summary of Dukes may be found here. On February 13, 2009, the Ninth Circuit voted to grant Wal-Mart’s petition for rehearing en banc. Dukes v. Wal-Mart, Inc., Case Nos. 04-16688 and 04-16720 (9th Cir. February 13, 2009) [Slip Opn., at 1-2]. Accordingly, the opinion of the three-judge panel affirming the district court order granting class action certification may no longer be cited as precedent in the Ninth Circuit.

Download PDF file of Order Granting Rehearing En Banc

Posted On: February 14, 2009 by Michael J. Hassen Email This Post

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Rare Balance Among New Class Action Filings But Employment-Related Class Action Lawsuits Maintain Top Spot Of Weekly Class Action Suits Filed In California State And Federal Courts

As a resource for California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in the California state and federal courts located in 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 the period from February 6 - 12, 2009, during which time 35 new class action lawsuits were filed. Generally, labor law class actions top the list of new class action filings by a wide margin, and it is rare that the top two categories have approximately the same number of new filings. This past week, however, there was remarkable balance among the categories of class action lawsuits. Specifically, four categories of class action cases were separated by only 8 filings. Labor law class actions again came in on top, but with only 13 new filings (37% of the total number of new class actions filed during the past week). Three other categories satisfied the 10% threshold: there were 8 class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (23%), there were 6 new class actions alleging violations of federal antitrust (17%), and there were 5 class actions alleging violations of federal securities laws (14%).

Posted On: February 13, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases—In re Processed Eggs: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs’ Motions To Centralize Class Action Litigation And Transfers Class Actions To Eastern District Of Pennsylvania

Faced with Two Motions to Centralize Class Actions, Judicial Panel Grants Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Agrees with Plaintiffs in Pennsylvania Class Actions that Eastern District of Pennsylvania is the Appropriate Forum for the Class Actions

Three class actions –two in Pennsylvania and one in Minnesota – were filed against various defendants alleging federal antitrust violations; 16 related class action lawsuits subsequently were filed (12 in Pennsylvania, 3 in Minnesota and one in New Jersey), which were treated as potential tag-along cases. In re Processed Egg Products Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 2, 2008) [Slip Opn., at 1 and n.1]. Two separate motions were filed with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407; plaintiff in the Minnesota class action sought centralization in that federal court; on the other hand, plaintiff in one of the Pennsylvania class actions, supported by plaintiffs in the remaining Pennsylvania class actions, sought centralization in the Eastern District of Pennsylvania. Id. Defense attorneys for responding parties supported centralization in either the District of Minnesota or, alternatively, the Southern District of Indiana. Id. Finally, plaintiff in a potentially related class action pending in the New Jersey federal court argued that centralization in Minnesota was warranted but only as to those class actions “relating to processed egg products,” not as to class actions concerning “shell eggs,” id. The Judicial Panel agreed to centralize all of the class action lawsuits finding that they “share factual questions relating to allegations that defendants conspired to fix, raise, maintain, and stabilize the price of eggs and/or processed egg products sold in the United States in violation of the Sherman Antitrust Act.” Id. Accordingly, pretrial coordination would serve the purposes of Section 1407 in that it will “eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.” Id., at 1-2. The Panel expressly rejected the claim that class actions related to shell eggs should be handled separately from class actions concerning egg products, id., at 2.

With respect to forum, the Judicial Panel acknowledged that either Minnesota or Pennsylvania would be appropriate transferee forums, but selected the Eastern District of Pennsylvania because 14 actions are already pending there, including the “broadest” of the class actions. Id., at 2. Accordingly, the Panel ordered all of the actions outside of the Eastern District of Pennsylvania transferred to that forum, id.

Download PDF file of In re Processed Egg Products Antitrust Litigation Transfer Order

Posted On: February 12, 2009 by Michael J. Hassen Email This Post

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CAFA Class Action Defense Cases--Ava Acupuncture v. State Farm: New York Federal Court Denies Motion To Remand Class Action To State Court Holding "Reasonably Probable" $5,000,000 Was At Stake And Plaintiffs Failed To Establish Local Controversy Exception

Class Action Properly Removed to Federal Court under CAFA (Class Action Fairness Act) because State Farm Declaration Established “Reasonable Probability” that Amount in Controversy Exceeded $5 Million and Plaintiffs Failed to Establish Relief Sought Against “Significant” Local Defendant New York Federal Court Holds

Plaintiffs, medical providers who had “been assigned No-Fault medical reimbursement claims by eligible injured persons (‘EIPs’),” filed a class action in New York state court against various defendants, including State Farm, alleging “that defendant insurers have fraudulently failed to pay statutorily mandated medical benefits under New York's No-Fault Insurance Law” and that, together with “their legal counsel and special investigation units (‘SIUs’),” violated various New York state laws. Ava Acupuncture P.C. v. State Farm Mutual Auto. Ins. Co., ___ F.Supp.2d ___, 2008 WL 5170186, *1 (S.D.N.Y. December 9, 2008). According to the allegations underlying the class action, the defendants engaged in “harassing, abusive verification and litigation tactics” and used “preset numeric targets to limit claim payouts,” and allegedly bribed individuals at the Suffolk County District Attorney's office. Id. Defense attorneys for State Farm and two other defendants removed the class action to federal court, asserting removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA), id. In response, plaintiffs voluntarily dismissed their class action claims against the two other removing defendants, leaving State Farm as “the only remaining removing defendant,” and then filed a motion to remand the class action back to state court. Id. The district court denied the motion.

Plaintiffs argued that the class action should be remanded to state court for two reasons: (1) because State Farm failed to establish that the amount in controversy exceeded $5,000,000, and (2) because the class action falls within the scope of CAFA’s “local controversy” exception. Ava Acupuncture, at *1. After summarizing New York’s no-fault insurance law and federal subject matter jurisdiction requirements of CAFA, see id., at *2, as well as the general rules for calculating the amount in controversy and summarizing the “local controversy” exception to CAFA removal jurisdiction and the burden of the party opposing removal to establish the applicability of exceptions to CAFA removal, see id., at *3, the district court turned to whether the removing parties had met their burden of establishing federal court jurisdiction within a “reasonable probability,” id., at *2. While the class action complaint outlined damages “in only the most general terms, indicating that the exact number of class members will be ascertained through discovery and review of defendants' records.,” and while the class action failed to “plac[e] a value on the object of the litigation,” the complaint did allege that “thousands” of individuals would be covered by the class action and attacked every denial of insurance coverage by State Farm over a 6-year period. Id., at *4. To meet its burden, State Farm submitted as evidence a declaration stating that “over the last six years State Farm has denied $40,265,558 worth of claims arising out of investigations conducted by its SIU investigators” and that “the amount of unpaid denied claims since 2003 far exceeds $5,000,000.” Id. The district court rejected plaintiffs’ objections to this declaration and concluded that the $5 million threshold was “easily” met. Id., at *4-*5. The federal court therefore turned to the local controversy exception.

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Posted On: February 11, 2009 by Michael J. Hassen Email This Post

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CAFA Class Action Defense Cases–Johnson v. Advance America: Fourth Circuit Affirms Remand Of Class Action Against Payday Lender To State Court Because Minimal Diversity Under Class Action Fairness Act (CAFA) Not Met

District Court Properly Remanded Class Action to State Court because under Class Action Fairness Act (CAFA) a Defendant is Citizen of Both its State of Incorporation and the State where it has its Principal Place of Business Fourth Circuit Holds

Plaintiffs filed a class action against Advance America in South Carolina state court alleging labor law violations; alleging violations of state law in “payday loans” that were allegedly unconscionable and failed to meet the state law requirement for good faith and fair dealing; plaintiffs were South Carolina citizens, and brought the putative class action complaint on behalf of themselves and other South Carolina citizens. Johnson v. Advance America, 549 F.3d 932, 933 (4th Cir. 2008). Advance America removed the class action to federal court asserting removal jurisdiction under the Class Action Fairness Act (CAFA); defense attorneys asserted that minimal diversity existed because, even though it had its principal place of business in South Carolina, it was a Delaware corporation. Id. The defense argued also that minimal diversity existed because some class members may have moved out of state, id. The district court granted plaintiff’s motion to remand the class action to state court because Advance America and the putative class members were citizens of South Carolina. Id. The district court found also that the class action “fell within the ‘home-state exception’ to CAFA jurisdiction set forth in 28 U.S.C. § 1332(d)(4) because in a class limited by definition to ‘citizens of South Carolina,’ at least two-thirds of the class members necessarily are citizens of South Carolina.” Id. The Fourth Circuit granted defendant’s request for permission to appeal the remand order and affirmed.

The Circuit Court explained that despite the fact that Advance America was a citizen of Delaware, it was also a citizen of South Carolina. Johnson, at 934. Because the class action defined the class “to include only citizens of South Carolina, thus excluding persons who may have moved from South Carolina and established citizenship elsewhere at the time the action was commenced,” minimal diversity under CAFA had not been established. Id. Specifically, plaintiffs’ class action defined three proposed subclasses limited to “[a]ll citizens of South Carolina who are domiciled in South Carolina” or “[a]ll citizens of South Carolina,” id. The district court granted plaintiffs’ motion to remand both because minimal diversity had not been satisfied and because of the home-state exception. Id., at 934-35.

In broad terms, the Class Action Fairness Act permits removal of class actions if, inter alia, the citizenship of a single defendant is diverse from the citizenship of a single member of the class, and the defendant, as the removing party, bears the burden of establishing federal court jurisdiction. See Johnson, at 935. The Fourth Circuit first held that the fact Advance America has “dual citizenship” does not mean that it may select the citizenship of a diverse state to establish removal jurisdiction under CAFA: in short, Advance America has dual citizenship, not alternative citizenship, and it may not “rely on only one citizenship where its other citizenship would destroy federal jurisdiction.” Id., at 935-36. Further, the Circuit Court rejected defense efforts to create diversity among the plaintiffs, holding that the definitions of the proposed classes were limited to individuals who resided in South Carolina, not to former South Carolina citizens who had moved out of state. See id., at 936-37. The Court noted, “To be a citizen of a State, a person must be both a citizen of the United States and a domiciliary of that State.” Id., at 937 n.2 (citing Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828 (1989)). The fact certain Advance America customers may indeed have moved out of state was irrelevant for purposes of removal: “as the maters of their complaint, [plaintiffs] can choose to circumscribe their class definition” so as to exclude such persons and preclude removal. Id., at 937 (citations omitted). Accordingly, the defense failed to establish minimal diversity and the district court did not err in remanding the class action to state court. Id., at 937-38. (The Fourth Circuit found it unnecessary to reach the home-state exception argument, but noted “as a matter of logic, that if the class is limited to citizens of South Carolina, it could hardly be claimed that two-thirds of the class members were not citizens of South Carolina.” Id., at 938.)

Continue reading "CAFA Class Action Defense Cases–Johnson v. Advance America: Fourth Circuit Affirms Remand Of Class Action Against Payday Lender To State Court Because Minimal Diversity Under Class Action Fairness Act (CAFA) Not Met" »

Posted On: February 10, 2009 by Michael J. Hassen Email This Post

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Labor Law Class Action Defense Cases–Crab Addison v. Superior Court: California Appellate Court Denies Writ Relief In Labor Law Class Action Holding Plaintiff Entitled To Contact Information Of Members Of Putative Class Action Despite Release Form

Employees’ Execution of Release Forms Requesting Employer not to Disclose their Contact Information in Connection with Litigation did not Prevent Disclosure to Plaintiff in Labor Law Class Action California State Appellate Court Holds

Plaintiff filed a class action against his employer Crab Addison (erroneously sued as Joe’s Crab Shack) alleging labor law violations; the class action complaint asserted that defendant failed to provide meal and rest periods as required by law, and that it misclassified employees as exempt. Crab Addison, Inc. v. Superior Court, 169 Cal.App.4th 958, 87 Cal.Rptr.3d 400, 402 (Cal.App. 2008). Defense attorneys answered the putative class action, asserting in part that class action treatment was not warranted. Id. Prior to seeking class action certification, plaintiff served discovery seeking inter alia the identity of each class member, including their names, addresses and telephone numbers. Id. The discovery also sought all facts supporting the contention that class action certification was not warranted, and the identity of each person with knowledge of those facts, id. Defense attorneys objected to this discovery on numerous grounds, including that the information sought was “confidential and private.” Id. The trial court granted plaintiff’s motion to compel responses to this discovery. Id. The defense opposed the motion in part based on a “release of contact information” form signed by employees; that form stated that defendant may be asked to provide “your contact information, including your home address and telephone number, to third parties” in connection with litigation, and to “indicate whether you consent to the disclosure of your contact information by marking the appropriate box.” Id., at 402-03. One of the options included a “ask me on a case-by-case” basis prior to disclosing or not disclosing this information, id., at 403. Further, at least 19 employees requested that their contact information never be disclosed, while 17 more requested that they be contacted before their contact information is released. Id. After weighing the privacy rights of the employees against the plaintiff’s “need for discovery,” the court ordered the information be provided to plaintiff. Id., at 403-04. Defendant sought extraordinary relief from the appellate court, id., at 405, but the Court of Appeal denied the petition.

In granting plaintiff’s motion to compel, the trial court explained in part that it was permitting plaintiff’s counsel to contact employees “irrespective of any things that might be in their file saying they did not wish to be contacted” because it believed that many employees believed that they were completing the forms to preclude telemarketers from obtaining their contact information. Crab Addison, at 404. The Court of Appeal began its analysis with a detailed discussion of its recent opinion in Puerto v. Superior Court (2008) 158 Cal.App.4th 1242, which may be found at pages 405 through 408. We do not summarize that analysis here; we note only that Puerto concluded that first giving potential class members an opportunity to “opt in” to being contacted “effectively gave more protection to nonparty witnesses’ contact information than the Discovery Act gives to much more sensitive consumer or employment records” and that the Court was “aware of no logic or authority that would justify such disproportionate protection of this private but under these circumstances relatively nonsensitive information.” Crab Addison, at 408 (quoting Puerto, 158 Cal.App.4th at p. 1259). The appellate court found Puerto to control its resolution of the requested petition for writ relief, though it recognized “two significant differences”: “First, in Puerto, the employer voluntarily disclosed the identities of the witnesses but sought to protect addresses and telephone numbers. Here, [defendant] seeks to protect identities as well as addresses and telephone numbers. Second, in Puerto there was no release form like the one utilized by [defendant].” Id., at 408. It found “no great significance” to the first difference, see id., at 408-09. Rather, the “key question” turned on “the effect of the release forms” executed by defendant’s employees, id., at 409.

Continue reading "Labor Law Class Action Defense Cases–Crab Addison v. Superior Court: California Appellate Court Denies Writ Relief In Labor Law Class Action Holding Plaintiff Entitled To Contact Information Of Members Of Putative Class Action Despite Release Form" »

Posted On: February 9, 2009 by Michael J. Hassen Email This Post

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GM Class Action Defense Cases–J & R Marketing v. General Motors: Sixth Circuit Affirms Dismissal Of Securities Class Action Holding Class Action Plaintiff’s Claims Were Meritless

Securities Class Action Claims Meritless because GMAC’s Representations Concerning Its Bonds were not False or Misleading and GMAC was not Required to Learn and Disclose Information Concerning the Financials of its Parent Company GM Sixth Circuit Holds

Plaintiffs, as purchasers of bonds registered by GMAC, filed a class action against GMAC, GM and others alleging violations of federal securities laws; specifically, the class action complaint advanced claims under Sections 11 and 12(a)(2) of the Securities Act of 1933, and that GMAC failed to disclose required information and made material misstatements in its registration statements and prospectuses for various bond offerings. J & R Marketing, SEP v. General Motors Corp., 549 F.3d 384, 387 (6th Cir. 2008). According to the allegations underlying the class action, GMAC's offering materials filed violated Sections 11 and 12(a)(2) of the Securities Act of 1933 because they contained “material omissions and misstatements” by failing to disclose GM’s (in addition to GMAC’s) performance and credit rating, even though matters adversely affecting GM could also adversely affect GMAC’s credit rating. Id., at 388. The class action also alleged that GMAC materially misstated its 2004 financial results, id. Defense attorneys moved to dismiss the class action for failure to state a claim; the district court granted the motion and dismissed the class action, finding that plaintiffs lacked standing to prosecute class action claims on behalf of purchasers of bonds which plaintiffs themselves had not purchased. Id., at 387. Additionally, the district court held that the non-disclosure claim failed because defendants were not required to disclose the information at issue, and because GMAC’s statements were not misleading and were not false, id. Accordingly, the district court dismissed the class action complaint. Id. The Sixth Circuit affirmed because it found “that the named plaintiffs' own claims are without merit,” id.

Briefly, GMAC borrowed money from several sources, including the general public through publicly offer debt securities. J & R Marketing, at 387. “The debt securities had a coupon rate, which is the rate of interest GMAC would pay, as well as a yield, which was the payments GMAC would make over the life of the security not including the return of the principal. At the time the last interest payment was due, GMAC would return the principal to the investor.” Id., at 387-88. The class action plaintiffs had purchased “Second SmartNotes,” which were bonds registered by GMAC in September 2003, but the class action sought to define a class of all investors who purchased GMAC bonds sold from July 2003 through November 2005 “alleg[ing] that GMAC's conduct similarly injured all members of the purported class.” Id., at 388. According to plaintiffs, once GM’s financial risks became known, its credit rating fell, as did GMAC’s credit rating, id. Defense attorneys argued that the named plaintiffs lacked standing to prosecute the class action as to any bonds other than those purchased by them, and that the offering materials concerning the Second SmartNotes did not contain material omissions or misstatements. Id., at 388-89. The district court granted the motion and dismissed the class action, id., at 389. The Sixth Circuit affirmed, but it did not address the standing issue because it found that plaintiffs’ class action claims lacked merit. Id., at 389-90.

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Posted On: February 7, 2009 by Michael J. Hassen Email This Post

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No Surprise...Labor Law Class Action Lawsuits Hold Top Spot Of Weekly Class Action Lawsuits Filed In California State And Federal Courts

In order to allow 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 the California state and federal courts located in 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 the period from January 30 - February 5, 2009, during which time 47 new class action lawsuits were filed. As we regularly remind readers, labor law class actions generally top the list of new class action filings -- often by a wide margin. This trend proved particuarly true this past week, with the filing of 24 new class action lawsuits alleging employment-related claims (51% of the total number of new class actions filed during the past week). While two other categories satisfied the 10% threshold, the numbers pale in comparison: there were 6 new class actions alleging violations of federal antitrust (13%), and there were 5 class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (11%).

Posted On: February 6, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases—In re VistaPrint: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Southern District Of Texas

Faced with Two Motions to Centralize Class Actions, Judicial Panel Grants Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Agrees with Defendants that the Southern District of Texas is the Appropriate Forum for the Class Actions

Seven class actions –two in Massachusetts; and one each in Alabama, Florida, Nevada, New Jersey and Texas – were filed against various defendants including VistaPrint, Vertrue and Adaptive Marketing, alleging violations of the federal Electronic Fund Transfer Act and the federal Electronic Communications Privacy Act. In re VistaPrint Corp. Marketing & Sales Practices Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 11, 2008) [Slip Opn., at 1]. Two separate motions were filed with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407; plaintiffs in one of the Massachusetts class actions, supported by plaintiff in the other Massachusetts class action, sought central in the Massachusetts federal court; at oral argument it was asserted that plaintiffs in the remaining class actions supported this request. Id. Defense attorneys for Vertrue and Adaptive Marketing, on the other hand, argued for centralization of the class actions in the Southern District of Texas, and the VistaPrint defendants supported this request. Id. The Judicial Panel agreed to centralize the class action lawsuits: “All actions share factual questions arising out of allegations that (1) the Adaptive defendants improperly enrolled VistaPrint customers in online membership programs, a practice referred to as “cramming;” and (2) this practice caused unauthorized charges to be made on customers’ credit and debit accounts in violation of the federal Electronic Fund Transfer Act and/or the Electronic Communications Privacy Act.” Id. Centralization of the class actions would thus serve the purposes of Section 1407, “especially on the issue of class certification.” Id. With respect to forum, the Judicial Panel acknowledged that “either of the proposed districts would be an appropriate transferee forum,” but selected the Southern District of Texas, because “(1) the first-filed action is pending there, and (2) Adaptive Marketing has an office in Houston, Texas, and relevant documents and witnesses may be found there.” Id., at 2.

Download PDF file of In re VistaPrint Corp. Marketing & Sales Practices Litigation Transfer Order

Posted On: February 5, 2009 by Michael J. Hassen Email This Post

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MARK YOUR CALENDARS - CLASS ACTION DEFENSE CONFERENCE COMING TO NEW YORK

ACI is sponsoring a conference on Managing Complex Litigation, which will be held at the Helmsley Park Lane in New York on February 25 and 26, 2009. The conference features a faculty of 25 in-house counsel. Details on the conference and its topics may be found at www.americanconference.com/complexlit.htm or by calling (888) 224-2480. The conference promises to be well worthwhile for class action defense attorneys and in-house who manage complex cases.

Posted On: February 5, 2009 by Michael J. Hassen Email This Post

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CAFA Class Action Defense Cases–United Steel Workers v. Shell Oil: Ninth Circuit Reverses District Court Order Remanding Class Action To State Court Holding Timely Removal Of Class Action Under CAFA By One Defendant Is Sufficient

District Court Erred in Remanding Labor Law Class Action Complaint to State Court because Defendants Separately Filed Notices of Removal Pursuant to Class Action Fairness Act (CAFA), and Timely Removal under CAFA by One Defendant was Sufficient to Remove Class Action to Federal Court for All Defendants Ninth Circuit Holds

The United Steel Workers union filed a class action in California state court against Shell Oil, Equilon and Tesoro alleging various labor law violations; the class action complaint asserted that defendants failed to provide employees with meal or rest periods, failed to provide proper wage statements, and failed to timely pay wages on termination. United Steel, etc. v. Shell Oil Co., 549 F.3d 1204, 1206-07 (9th Cir. 2008). Royal Dutch Shell plc is the parent company of both Shell Oil and Equilon (collectively “Shell”); the union served Shell with the class action complaint on May 6, 2008, and served Tesoro on May 7, 2008. Id., at 1207. On the thirtieth day after service, Shell removed the class action to federal court alleging removal jurisdiction under the Class Action Fairness Act (CAFA) and asserting federal question jurisdiction; the following day, Tesoro filed a separate notice of removal on the same grounds. Id. The class actions were assigned to different federal district court judges, id. The district court in Shell’s case remanded the class action to state court because Shell had failed to join Tesoro in its notice of removal; the court rejected Shell’s argument that “CAFA permits one defendant to remove the entire case without the consent of all defendants.” Id. Plaintiff then had the Tesoro case transferred to the same district court judge, and the federal court then remanded that class action on the same grounds. Id. The Ninth Circuit granted Shell’s and Tesoro’s separate petitions for permission to appeal the orders remanding the class actions to state court, and reversed. Id., at 1206.

Defense attorneys argued that because CAFA permits a single defendant to remove an entire class action, the district court erred in remanding the class action to state court because Shell and Tesoro failed to include each other in their separate notices of removal. , at 1207. The union conceded that Shell properly removed the class action under CAFA, but argued that the class action was properly remanded as to Tesoro because its notice of removal was untimely as it was filed more than 30 days after service of the class action on Shell., id. The Ninth Circuit disagreed. The Circuit Court noted the split in authority, still unresolved in the Ninth Circuit, over whether the 30-day period for removal “begins to run on the day of service on the first-served or last-served defendant,” but that federal courts have “traditionally required that all defendants consent to, or join in, removal.” Id., at 1208 (citations omitted). CAFA, however, expanded rights to removal in class actions and expressly states that class actions “may be removed by any defendant without the consent of all defendants.” Id. (citation omitted). The Ninth Circuit cited with approval an Eleventh Circuit opinion that held it “‘need not concern [itself] with the circumstances pertinent to each named defendant’” because any single defendant could, under CAFA, remove the entire class action to federal court. Id. (quoting Lowery v. Alabama Power Co., 483 F.3d 1184, 1194 n.25 (11th Cir. 2007). Thus, the Ninth Circuit concluded at page 1208, “it is undisputed that United Steel Workers's class action is removable under CAFA, and it is undisputed that Shell timely filed its notice of removal,” so Shell’s removal governed the entire class action to the point where “Tesoro could not have prevented removal even if it wished to do so,” id., at 1208-09. Accordingly, the Circuit Court reversed the district court orders remanding the class action to state court, id., at 1209.

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Posted On: February 4, 2009 by Michael J. Hassen Email This Post

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Amex Class Action Defense Cases–In re American Express: Second Circuit Reverses District Court Order Enforcing Class Action Waiver And Compelling Individual Arbitration In Antitrust Class Action

As Matter of First Impression, District Court Erred in Antitrust Class Action in Compelling Arbitration Pursuant to Mandatory Arbitration Clause in Commercial Contract and Enforcing Class Action Waiver because Absent Class Action Relief it was Unlikely Merchants would seek Redress for Alleged Wrong Second Circuit Holds

Several class action lawsuits were filed by various merchants against American Express alleging violations of federal antitrust laws in the form of a “tying arrangement” between its charge cards and credit cards; the first of these class actions was filed in August 2003 in the Northern District of California, but in December 2004 the district court granted a motion filed by defense attorneys to transfer the class actions, pursuant to 28 U.S.C. § 1404(a), to the Southern District of New York, where it was consolidated with several class actions against Amex pending in that district. In re American Express Merchants’ Litig., ___ F.3d ___, 2009 WL 214525, *2, *5-*6 (2d Cir. January 30, 2009). According to the allegations underlying the class action, Amex “is the leading issuer of general purpose and corporate charge cards to consumers and businesses in the United States and throughout the world. It is also the leading provider of charge card services to merchants.” Id., at *3. The class action plaintiffs are “(1) California and New York corporations which operate businesses which have contracted with Amex and (2) the National Supermarkets Association, Inc. (‘NSA’), ‘a voluntary membership-based trade association that represents the interests of independently owned supermarkets.’” Id. The Card Acceptance Agreement entered into by the merchants-plaintiffs provided, in pertinent part, that any dispute was subject to a broad and mandatory arbitration clause, which was governed by the Federal Arbitration Act (FAA) and which contained a class action waiver provision. See id., at *3-*5. Defense attorneys moved to compel arbitration and to enforce the class action waiver provision, id., at *6. The district court granted the motion, finding that the arbitration clause was broad enough to govern the dispute. Id. With respect to whether the matter could proceed as a class action, the district court suggested that enforcement of the class action waiver would not preclude individual merchants from enforcing their rights because the Section 4 of the Clayton Act allows for recovery of treble damages, costs of suit and attorney fees, but deferred the issue of enforceability of the class action waiver to the arbitrator. Id. The Second Circuit reversed.

The Circuit Court explained that it was “consider[ing] here only the narrow question of whether the class action waiver provision contained in the contract between the parties should be enforced,” In re American Express, at *3. The Court began by noting that it “frequently enforces mandatory arbitration clauses contained in commercial contracts,” but that this case presented a case of first impression in the Ninth Circuit as it dealt with the enforceability of a class action waiver in the context of a commercial contract with a mandatory arbitration clause. Id., at *1. And the court summarized the countervailing arguments surrounding the enforceability of class action waivers, see id., at *1-*2. Ultimately, the Ninth Circuit concluded that the class action waiver was unenforceable under the facts of this case “because enforcement of the clause would effectively preclude any action seeking to vindicate the statutory rights asserted by the plaintiffs.” Id., at *2.

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Posted On: February 3, 2009 by Michael J. Hassen Email This Post

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Deloitte Class Action Defense Cases– In re Parmalat Securities: New York Federal Court Denies Defense Summary Judgment Motion In Securities Fraud Class Action

Summary Judgment as to Securities Fraud Claims against Various Deloitte Entities Denied because Genuine Issues of Fact Existed as to Liability for Claims in Class Action Complaint New York Federal Court Holds

Following the collapse of Parmalat Finanziaria, S.p.A., Parmalat S.p.A. and their affiliates because of a multi-billion dollar fraud that understated Parmalat’s debt by $10 billion and overstated Parmalat’s assets by $16 billion, various securities fraud class actions were filed against numerous parties: one such class action was filed against Deloitte Touche Tohmatsu (DTT), Deloitte & Touche LLP (DT-US), and James Copeland (collectively “Deloitte defendants”) on behalf of purchasers of Parmalat stock. In re Parmalat Securities Litig., ___ F.Supp.2d ___ (S.D.N.Y. January 27, 2009) [Slip Opn., at 2]. The class action alleged violations of Section Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and of Rule 10b-5 thereunder, id., at 2-3. Defense attorneys moved for summary judgment as to the class action claims against the Deloitte defendants, id., at 2. Alternatively, the defense argued that the Deloitte defendants were not jointly and severally liable under the Private Securities Litigation Reform Act of 1995 (PSLRA), id., at 8.

We do not here discuss Deloitte’s corporate structure, or the Parmalat scandal and the alleged fraud of Deloitte Italy. See In re Parmalat, at 3-7. In a detailed opinion, the federal district court first rejected the defense challenge to DTT’s vicarious liability, on a respondeat superior theory, for the federal securities class action claims arising out of the acts of its alleged agent, Deloitte Italy. See id., at 9-11. The question was whether DTT had a principal-agent relationship with Deloitte Italy, id., at 12, and the district court found that a triable issue of material fact existed as to whether it did, see id., at 12-19. As the court concluded at page 19, “In all the circumstances, the totality of the evidence…raises a genuine issue of material fact as to whether Deloitte Italy was an agent of DTT with respect to the Parmalat engagement.” It accordingly denied DTT’s motion for summary judgment as to those class action claims premised on respondeat superior liability for Section 10(b) violations. Id., at 19. Turning to the class action’s Section 20(a) claim against DTT, defense attorneys argued that “there is no evidence that would justify a conclusion that it controlled the alleged primary violator, Deloitte Italy,” and that in any event DTT is not liable because it “acted in good faith and did not induce the act or acts constituting the alleged violations.” Id., at 19-20. Again, the federal court found a genuine issue of material fact existed as to whether DTT was a “control person” within the meaning of Section 20(a), id., at 20-21, and that it could not find, as a matter of law, that DTT acted in good faith, see id., at 21-25.

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Posted On: February 2, 2009 by Michael J. Hassen Email This Post

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Sprint Class Action Defense Cases–Meyer v. Sprint: California Supreme Court Affirms Dismissal Of UCL Class Action Holding Plaintiffs Had Not Suffered Any Damage As A Result Of The Acts Underlying The Class Action Complaint

Class Action Challenging Sprint’s Mandatory Arbitration/Class Action Waiver Clause Properly Dismissed because no Dispute Existed between Plaintiffs and Sprint so no Present Controversy, thus Plaintiffs Lacked Standing to Prosecute Class Action’s Claims, and because Claim for Declaratory Relief Within Trial Court’s Discretion to Dismiss California Supreme Court Holds

Plaintiff filed a class action against Sprint Spectrum L.P. alleging violations of California’s Unfair Competition Law (UCL); the class action complaint was amended following the passage of Proposition 64 because the original plaintiff was not a Sprint customer, and the class action complaint went through three more amendments – two following trial court orders sustaining demurrers to the class action with leave to amend – eventually resulting in a fourth amended class action complaint that alleged three causes of action: “violation of the UCL; violation of the CLRA [California’s Consumer Legal Remedies Act]; and for declaratory relief.” Meyer v. Sprint Spectrum L.P., ___ Cal.App.4th ___ (Cal. January 29, 2009) [Slip Opn., at 2]. According to the allegations underlying the class action, portions of Sprint’s customer service agreement were unconscionable and thus unenforceable because they “(1) required that the parties to submit disputes under the customer service agreement to binding arbitration…; (2) waived the right to resolve disputes through a jury trial; (3) waived class action in arbitration; (4) failed to provide for discovery before arbitration; (5) split the cost of arbitration; (6) disclaimed warranties and limited liability; (7) permitted Sprint to unilaterally change the terms of the customer service agreement; (8) imposed a 60-day limitation period for initiating billing disputes; and (9) imposed a $150 early-termination fee.” Id. Defense attorneys again demurred to the class action complaint, arguing that the named plaintiffs lacked standing to prosecute the action, id., at 3. The trial court sustained the demurrer and dismissed the class action, this time without leave to amend; in part, the trial court concluded that “[p]laintiffs have not shown they were personally damaged or that the allegedly unconscionable or illegal provisions have been enforced against them.” Id. Plaintiffs appealed and the California Court of Appeal affirmed: the appellate court held that “(1) plaintiffs could not demonstrate an ‘injury in fact,’ which is a prerequisite to asserting a claim under the UCL; (2) without any showing of damage, plaintiffs had no standing to sue under the CLRA; and (3) plaintiffs had alleged no actual controversy between them and Sprint, and that therefore declaratory relief was not available.” Id. The California Supreme Court granted plaintiffs’ petition for review, and affirmed dismissal of the class action complaint.

The Supreme Court noted that it was faced with two questions: “First, whether under these circumstances, a plaintiff may obtain injunctive relief to compel the removal of the allegedly unconscionable provisions under the [CLRA]. Second, whether a plaintiff may obtain declaratory relief…to declare these provisions unlawful and unenforceable.” Meyer, at 1. The Court first concluded that because plaintiffs did not suffer any damage as a result of Sprint’s allegedly unlawful practice, they lacked standing to prosecute the CLRA class action claims. Id. The premise of the CLRA claim is that Sprint “[r]epresent[ed] that a transaction confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law,” specifically, by “[i]nserting an unconscionable provision in the contract.” Id. As noted above, plaintiffs’ argument was that Sprint included “various unconscionable provisions in the arbitration agreement and various other unlawful restrictions on remedies and penalties” in the customer service agreement. Id., at 3-4. Importantly, plaintiffs admitted that no present dispute existed between them and Sprint; rather, the class action “can be characterized as a preemptive lawsuit to strike these terms should any dispute arise.” Id., at 4. The question before the Supreme Court is whether the CLRA permits such preemptive suits, id. Based on its interpretation of the statute, see id., at 4-10, the Supreme Court agreed with Sprint that plaintiffs had not “suffer[ed] any damage as a result of” the practices challenged by the class action, id., at 5. Put simply, “Sprint had not sought to enforce any unconscionable term against plaintiffs, [and] Sprint has not actually imposed additional transaction costs on plaintiffs.” Id., at 9. The Supreme Court concluded that “it would contort the statutory language to conclude that the preemptive expenditure of fees for this litigation means that Sprint’s alleged unlawful practices had caused ‘damage’ at the time the lawsuit was filed.” Id. The Court held that California’s Legislature “did not want the costs of a lawsuit to be incurred when no damage could yet be demonstrated.” Id., at 14.

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