Posted On: April 30, 2009 by Michael J. Hassen Email This Post

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Class Action Settlement Cases–In re Touch America: Ninth Circuit Dismisses Appeal Seeking Review Of District Court Order Rejecting Proposed Class Action Settlement Holding Circuit Court Lacked Jurisdiction Over Appeal

District Court Order Rejecting Proposed Class Action Settlement of ERISA Class Action as Unfair not Appealable Ninth Circuit Holds

Plaintiffs, employees of Montana Power and participants in the company’s retirement plan (the “Plan”), filed a class action against the Plan’s trustee and against directors of Montana Power alleging violations of ERISA; the class action complaint asserted that defendants breached fiduciary duties owed to Plan participants and mismanaged the Plan. In re Touch America Holdings, Inc. ERISA Litig., 563 F.3d 903 (9th Cir. 2009) [Slip Opn., at 4713, 4717]. The defendant-directors entered into a proposed class action settlement with plaintiffs; under the terms of the class action settlement the directors would make a payment “of nearly all the funds remaining in the directors’ fiduciary liability insurance policy.” Id., at 4717. The proposed class action settlement also contained two conditions – (1) directors cooperation in the class action claims against the Plan trustee, and (2) obtaining a district court order that “bar[red] suits for contribution or indemnity against the directors.” Id. The district court rejected the proposed class action settlement, id.; in part, the court found the settlement was not fair to the class because the monetary contribution represented only “three cents on the dollar” which it found was “not good in terms of recovery” and characterized as “a pittance…of the total amount of loss,” id., at 4719. The parties appealed, id., at 4717. The Ninth Circuit dismissed the appeal.

The Ninth Circuit noted that the parties did not dispute that the order rejecting the proposed class action settlement was not a “final decision.” In re Touch America, at 4718. The Circuit Court noted also the general rule that, in order to avoid “piecemeal appeals,” only final decisions are reviewable on appeal, id. The parties, therefore, sought interlocutory review of the district court’s order, id. The Ninth Circuit explained that “some disapprovals of class settlements are appealable under the section as orders refusing an injunction.” Id. (citation omitted). And the Court set forth the rule at page 4718 as follows: “To be immediately appealable, orders disapproving class settlements must satisfy three requirements: ‘First, the interlocutory order must have the practical effect of denying an injunction. Second, the order must have “serious, perhaps irreparable, consequence[s].” Finally, the order must be one that can be “effectively challenged” only by immediate appeal.’” (Citation omitted). The Circuit Court dismissed the appeal because it found that the second requirement had not been satisfied – that is, the Court concluded that the district court order would not cause “serious, perhaps irreparable, consequences.”

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Posted On: April 29, 2009 by Michael J. Hassen Email This Post

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Ford Class Action Defense Cases–Cuesta v. Ford Motor: Oklahoma Supreme Court Reinstates Class Action Certification Order Holding Trial Court Did Not Abuse Discretion In Certifying Class Action

Products Liability Class Action Properly Certified as Class Action with Respect to Breach of Warranty Claim and Appellate Court Erred in Reversing Class Action Certification Order Oklahoma Supreme Court Holds

Plaintiffs filed a class action against Ford Motor and Williams Control for product liability; the class action complaint asserted claims based on “design and/or manufacturing defects in the fixed, non-adjustable accelerator pedal, i.e., the ‘electronic throttle control’, or ‘ETC’, which is designed and manufactured by Williams and installed in certain trucks manufactured by Ford.” Cuesta v. Ford Motor Co., ___ P.3d ___, 2009 OK 24, ¶ 2 (Okla. April 21, 2009) (footnotes omitted). According to the allegations underlying the class action, “the pedals, which were modified twice, failed Ford's ‘overload’ tests and engineering specifications.” Id. Specifically, “when forcible pressure is applied to the pedals that they cause the vehicles to shift to idle instead of accelerating and, therefore, are defective and unreasonably dangerous.” Id. The class action complaint alleged causes of action for breach of express and implied warranties, negligence and strict products liability. Plaintiffs filed a motion with the trial court to certify the litigation as a class action; the trial court granted the motion, agreeing with plaintiffs that the following questions of law and fact are common: “(1) whether the accelerator pedals at issue are defective; (2) whether the pedals are unreasonably dangerous; (3) whether the pedals reduce the value of the vehicles; and (4) whether the sale of the vehicles containing these pedals to members of the class constitutes a breach of any express or implied warranty by Defendants Ford and WCI?” Id. The Oklahoma Court of Civil Appeals reversed the class action certification order, id., at ¶ 1. The Oklahoma Supreme Court granted plaintiffs’ petition for writ of certiorari and vacated the appellate court’s opinion, holding that the trial court did not abuse its discretion in granting class action treatment.

The Oklahoma Supreme Court began by noting that it was determining “only whether class certification is appropriate to determine a breach of warranty theory under the facts presented.” Cuesta, at ¶ 2. The Court noted also that “[a] trial court's order certifying a class action is reviewed for an abuse of discretion.” Id., at ¶ 7 (citation omitted). It began its legal analysis by discussing the applicable choice of law, see id., at ¶¶ 8 et seq. We do not summarize the Oklahoma Supreme Court’s analysis of this issue, noting simply that the Court concluded that the law of Michigan governed the class action’s breach of warranty claims, id., at ¶¶ 15-16.

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

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Starbucks Class Action Defense Cases–Reed v. Starbucks: Florida Federal Court Grants Conditional Class Action Treatment To Labor Law Class Action Against Starbucks Alleging Misclassification Of Store Managers And Failure To Pay Overtime

Class Action Complaint Alleging Violations of FLSA (Fair Labor Standards Act) based on Misclassification of Store Managers and Consequent Failure to Pay Overtime Satisfied First-Tier’s “Lenient Standard” for Conditional Class Action Certification Florida Federal Court Holds

Plaintiff filed a class action against Starbucks alleging violations of the federal Fair Labor Standards Act (FLSA); the class action complaint asserted that Starbucks misclassified him (and other store managers) as exempt and failed to pay him overtime. Reed v. Starbucks Coffee Co., ___ F.R.D. ___ (S.D.Fla. April 23, 2009) [Slip Opn., at 1]. According to plaintiff, a similar class action was filed over this issue in 2004 entitled Pendlebury v. Starbucks, which was settled in August 2008. Id., at 1-2. The present class action seeks overtime pay for store managers who worked for Starbucks on or after January 15, 2006, id., at 2. Plaintiff filed a motion with the district court for conditional certification of the litigation as a class action, id., at 1, and provided notices from five other individuals who consented to joining in the action since the class action complaint had been filed, id., at 2. The district court determined that conditional class action treatment was warranted and therefore granted plaintiffs’ conditional class action certification motion.

The district court explained that the Eleventh Circuit “has endorsed a two-tiered approach to certification of collective actions” under the FLSA. Reed, at 3 (citation omitted). The first stage employs “a fairly lenient standard” that requires the district court to determine whether the lawsuit is “suitable” for class action treatment. Id. This requires “some evidence that there are other employees of the defendant-employer who wish to opt-in the action.” Id. (citation omitted). The federal court found persuasive not only the five notices of consent to join filed in the present case, but “the fact that a previous suit resulted in 900 opt-in plaintiffs.” Id. The first stage requires also a showing that the members of the proposed class are “similarly situated,” id. In this regard, the district court found adequate plaintiff’s allegation “that there is a company-wide pay policy that results in all store managers being improperly classified as exempt and thus denied overtime compensation.” Id., at 4. The federal court therefore found that plaintiff had adequately established a basis for granting conditional class action certification to the lawsuit, id., at 4-5. Accordingly, the district court granted plaintiff’s motion and authorized the sending of notification to potential class members, id., at 5.

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

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Class Action Defense Settlement Cases–Rodriguez v. West Publishing: Ninth Circuit Affirms Approval Of Class Action Settlement Of Antitrust Class Action But Remands For Further Consideration Of Incentive And Attorney Fee Awards

District Court Approval of Antitrust Class Action Settlement did not Require Reversal due to Conflict of Interest with Certain Class Representatives because Other Class Representatives did not Share Conflict so Error was Harmless Ninth Circuit Holds

Plaintiffs filed a class action against West Publishing and Kaplan alleging antitrust violations; the class action complaint asserted that individuals who purchased BAR/BRI courses from defendants to prepare for bar examinations paid more than they should have because of defendants’ anticompetitive conduct. Rodriguez v. West Publishing Corp., 563 F.3d 948 (9th Cir. 2009) [Slip Opn., at 4743, 4752-53]. An amended class action complaint was filed adding additional named plaintiffs, who had been plaintiffs in a related class action entitled Brewer v. West Publishing. Id., at 4752. The class action sought more than $300 million in damages, id., at 4753-54. Eventually, the district court certified the litigation as a class action, id., at 4754. The court appointed all of the named plaintiffs as class representatives, and appointed class counsel, id., at 4752. The parties entered into settlement discussions and signed an agreement that called for defendants to pay $49 million in settlement; three of the class representatives (“the Class Representative Objectors”) objected to the proposed class action settlement and refused to sign it. Id., at 4755. The district court gave preliminary approval of the settlement over the objection of the Class Representative Objectors, id., at 4755-56. The Class Representatives were to receive $25,000 as incentive awards, but the Class Representative Objectors were to receive $75,000 as incentive awards. Id., at 4756. In the end, 54 objections were filed to the proposed class action settlement, id. The plaintiffs in the original Rodriguez class action complaint had a fee agreement with a prior law firm that contained a graduated incentive award, and some of those plaintiffs agreed to reduce their incentive award to $25,000, but the Class Representative Objectors did not. Id., at 4756-57. Ultimately, the district court approved the class action settlement (though it denied incentive awards in their entirety), and six groups of objectors appealed. Id., at 4757. “Their principal objection relates to incentive agreements that were entered into at the onset of litigation between class counsel and five named plaintiffs who became class representatives.” Id., at 4750. They objected also to the district court’s reliance on an estimate of single damages, rather than treble damages, in finding the $49 million payment to be fair, reasonable and adequate. Id. The Ninth Circuit affirmed the settlement.

The Ninth Circuit noted that “Much of the appeal turns on the presence — and nondisclosure to the class — of the incentive agreements.” Rodriguez, at 4758. The Court explained that while such awards are “fairly typical in class action cases,” id., providing for incentives in a fee agreement is “quite different” because only the district court can determine the appropriate award, but the fee agreements in this case “tied the promised request to the ultimate recovery and in so doing, put class counsel and the contracting class representatives into a conflict position from day one,” id., at 4758-59. The Circuit Court held that this conflict should have been disclosed at the class action certification stage, not at the time for approval of a proposed class action settlement. Id., at 4759. If the potential conflict had been disclosed timely, then “the district court would certainly have considered its effect in determining whether the conflicted plaintiffs…could adequately represent the class. “ Id. As the Ninth Circuit explained at page 4759, “An absence of material conflicts of interest between the named plaintiffs and their counsel with other class members is central to adequacy and, in turn, to due process for absent members of the class.” (Citation omitted.)

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

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Slow Week For Class Action Filings But Labor Law Class Actions Maintain Top Spot Among Weekly Class Action Lawsuits Filed In California State And Federal Courts

In order 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 the 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 April 17 - 23, 2009, during which time only 30, a relatively low number of new class actions, were filed. Labor law class action lawsuits generally top the list by a wide margin. During this reporting period, 16 of the new class actions involved labor law claims (representing 53% of the total number of new class actions filed during the past week). Only two other category met the 10% threshold: there were 5 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (17%), and there were 3 new class actions alleging violations of federal securities laws (10%).

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

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Song-Beverly Class Action Defense Cases—In re Payless ShoeSource: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Eastern District Of California

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

Two class actions were filed in the Central and Eastern Districts of California against Payless ShoeSource alleging violations of California’s Song-Beverly Credit Card Act; specifically, the class action complaints allege that “Payless requests and records customers’ personal identification information in violation of California Civil Code § 1747.08.” In re Payless ShoeSource, Inc., California Song-Beverly Credit Card Act Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 9, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of Pennsylvania; plaintiffs in both class actions reportedly supported the motion, though they did not respond to it. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that centralization of the class actions “will eliminate duplicative discovery; prevent inconsistent pretrial rulings, including with respect to class certification; and conserve the resources of the parties, their counsel, and the judiciary.” Id. The Judicial Panel further agreed that the Eastern District of California was the appropriate transferee court, particularly as no party opposed centralization in that district. Id.

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

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FDCPA Class Action Defense Cases–Asset Acceptance v. Hanson: California State Court Affirms Dismissal Of FDCPA Class Action Claims Holding Debt Collector Not Obligated To Inform Debtors That Debts Were Time-Barred

As a Matter of First Impression, Credit Card Debtor’s Class Action Cross-Complaint Alleging Violations of California’s Fair Debt Collection Practices Act (Rosenthal Act) Properly Dismissed on Demurrer for Failure to Define an Ascertainable Class and because Debt Collector was not Obligated to Disclose to Debtors that Debts Sought to be Collected were Time-Barred California State Court Holds

Plaintiff Asset Acceptance filed a lawsuit against debtor Lilia Hanson to collect on a $1300 credit card debt; the debtor filed a putative class action cross-complaint against Asset alleging that it violated California’s Fair Debt Collection Practices Act (“the Rosenthal Act”), which incorporates the federal Fair Debt Collection Practices Act (FDCPA), and Unfair Competition Law (UCL). Asset Acceptance, LLC v. Hanson, (Cal.App., Case No. B208548, April 1, 2009) (unpublished) [Slip Opn., at 1]. The class action claims were premised on the allegation that Asset systematically and fraudulently sought to collect on debts that were time-barred. Id. The central allegation underlying the class action cross-complaint is that Asset purchased credit card debts “for pennies on the dollar and tricks debtors into making payments, which has the legal effect of reviving the debt.” This is because, under California law, “If a debtor acknowledges a debt in writing after the statute of limitations has run, ‘a new obligation is created, for which the original barred debt is said to be “consideration.” The cause of action is on the new obligation, and a new statutory period starts running as on any other written promise.’” Id., at 2 (citations omitted). Asset demurred to the third amended class action cross-complaint; the trial court sustained the demurrer on the ground that the class action sought to represent a class that lacked a “well-defined community of interest.” Id., at 1. In an unpublished opinion, the California Court of Appeal affirmed.

The Rosenthal Act “prohibits debt collectors from using threats, physical force, obscene language, annoying telephone calls, false representations, or falsely simulating a legal action.” Asset Acceptance, at 2 (citations omitted). In part, the statute prohibits a debt collector from obtaining “an affirmation from a debtor who has been adjudicated a bankrupt of a consumer debt which has been discharged in such bankruptcy, without clearly and conspicuously disclosing to the debtor, in writing, at the time such affirmation is sought, the fact that the debtor is not legally obligated to make such affirmation,” id. (citation omitted). The appellate court observed, however, that “The Rosenthal Act is silent on whether a debt collector must give a similar warning when attempting to collect a time-barred debt that has not been discharged in bankruptcy.” Id. This was the central issue on appeal, because the class action alleged that Asset failed to disclose to the putative class members that the debts it was seeking to collect were time barred when it contacted them demanding about payment on the credit card debts. Id., at 3. Further, not only was this a matter of first impression under California case law, but federal courts considering the issue under the FDCPA have reached different conclusions. Id., at 2-3.

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Posted On: April 22, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases–Budrow v. Dave & Buster's: California State Court Affirms Defense Judgment In Labor Law Class Action Holding California Law Does Not Prohibit Sharing Tip Pools With Employees That Do Not "Directly Serve" Tables

Trial Court Properly Granted Defense Motion for Summary Judgment in Class Action Alleging Violation of California Labor Code by Sharing Tip Pools with Non-Managerial Employees that only "Indirectly Service" Tables because California Law does not Impose "Direct Table Service" Requirement on Participation in Tip Pools California State Court Holds

Plaintiff filed a class action in California state court against, their employer, Dave & Buster’s, alleging labor law violations; the class action complaint was premised “on the theory that distributions from the ‘tip pool’ to persons who did not provide direct table service violated [California] Labor Code section 351.” Budrow v. Dave & Buster’s of California, Inc., ___ Cal.App.4th ___ (Cal.App. March 2, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, defendant – an owner and operator of restaurants – “requires that servers contribute one percent of their gross sales to bartenders and other employees.” Id., at 2. (The class action did not allege that any manager participated in the tip pool, id., at 3.) The theory underlying the class action claims was that this policy violates Section 351, which plaintiff interpreted as limiting tip pools to those persons who “provide ‘direct’ table service.” Id., at 2. Defense attorneys successfully demurred to two of the three causes of action in the class action, and then moved for summary judgment on the last class action claim, which asserted an unfair business practice violation of Business & Professions Code section 17200 (“the UCL claim”). Id. The parties “disputed whether bartenders serve food and drink to patrons sitting at tables,” but the trial court found no triable issue of fact existed sufficient to preclude summary judgment in favor of the defense. Id., at 3. The trial court granted summary judgment on the UCL claim and entered judgment in favor of defendant on the class action. Id., at 2. The Court of Appeal affirmed.

Plaintiff’s class action was premised, in part, on the argument that California law imposed a “direct table service requirement” that excluded employees from sharing in tip pools unless they “directly serve the table.” Budrow, at 3. The Court of Appeal held that California law does not distinguish between “direct” and “indirect” table service, see id., at 3-5, and that the case relied on by plaintiff, Leighton v. Old Heidelberg, Ltd., 219 Cal.App.3d 1062 (Cal.App. 1990), did not impose such a requirement, see id., at 5-10. Accordingly, the appellate court affirmed judgment for the defense in the class action, id., at 11.

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

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Countrywide Class Action Defense Cases–In re Countrywide: California Federal Court Grants In Part Motion To Dismiss Securities Fraud Class Action Claims And Holds SEC Rule 430B Not Retroactive

Amended Securities Fraud Class Action Complaint Against Countrywide and Various other Defendants Largely Survives Motion to Dismiss because Allegations in Class Action Complaint Generally Satisfied Heightened Pleading Requirements of Private Securities Litigation Reform Act (PSLRA) and, as Matter of First Impression, SEC Rule 430B is not Retroactive California Federal Court Holds

Plaintiff filed a putative class action against Countrywide and certain individual defendants alleging violations of federal securities laws; the class action was one of “several related securities actions” in the district court involving Countrywide, underwriter defendants and outside directors. In re Countrywide Fin. Corp. Sec. Litig., ___ F.Supp.2d ___ (C.D.Cal. April 6, 2009) [Slip Opn., at 1-2]. Plaintiff’s class action was consolidated with several other class action lawsuits “involving publicly traded Countrywide securities.” Id., at 2. The district court appointed lead plaintiffs, and a consolidated amended class action complaint was filed, id. By prior court order, dated December 1, 2008, the amended class action complaint was dismissed in part, but the district court granted leave to amend and a second consolidated amended class action complaint was filed. Id. Defense attorneys for various defendants again moved to dismiss, id. The district court granted the motions in part, but largely denied the motions.

We do not discuss in detail the intensively detailed and fact-driven opinion. In broad terms, after summarizing recent Ninth Circuit authority, see In re Countrywide, at 3-5, and addressing certain evidentiary matters, see id., at 5-6, the district court turned to the merits, following the Ninth Circuit opinion in Glazer Capital Mgmt., LP v. Magistri, 549 F.3d 736 (9th Cir. 2008), which held that a securities fraud complaint must plead facts that constitute strong circumstantial evidence of scienter. The federal court summarily found that the accounting-related allegations against Countrywide, KPMG, and the Individual Defendants, as well as those against the Underwriters, in the second amended class action complaint were sufficient to satisfy the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA). Id., at 6. However, the same could not be said for the insider trading-related allegations: the district dismissed these claims in the original class action complaint, with leave, because of the “weak support” of scienter; the second amended class action complaint “does nothing to alter the insider trading-based scienter analysis” in the prior order, so the federal court dismissed the Section 20A claims with prejudice (except for the claims against Mozilo that post-date October 26, 2006). Id., at 6-7.

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

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Class Action Defense Cases–Lorenzo v. Qualcomm: California Federal Court Dismisses Class Action Finding Plaintiff Lacked Standing To Prosecute Class Action’s Antitrust Claims But Gives Plaintiff Leave To Amend

Class Action Challenging Qualcomm’s Licensing Practices as Anticompetitive Dismissed for Lack of Standing because Plaintiff’s Injury was Too Remote and because California does not Recognize Claim for Common Law Monopoly or for Unjust Enrichment California Federal Court Holds

Plaintiff filed a putative class action against Qualcomm alleging labor law violations; the class action complaint asserted that Qualcomm “is the second-biggest maker of mobile-phone chips and holds more than 1,400 patents which it licenses to more than 130 companies, including chip makers and cell phone manufacturers,” that Qualcomm exercises “monopoly power” over cell phones using CDMA technology, and that Qualcomm engages in various acts that decrease competition and increase costs to consumers. Lorenzo v. Qualcomm Inc., ___ F.Supp.2d ___ (S.D.Cal. March 3, 2009) [Slip Opn., at 1-3]. According to the allegations underlying the class action, plaintiff was harmed by Qualcomm’s “anticompetitive CDMA licensing practices” because he purchased a Palm Treo and a Blackberry Curve from Verizon, and receives cellular service from Verizon. Id., at 3-4. The class action also alleged that “CDMA chipset manufacturers suffer direct anticompetitive harm from Qualcomm’s CDMA licensing practices,” including “‘supracompetitive prices and impaired non-price competition in innovation of CDMA functionality.’” Id., at 4. The higher costs encountered by the manufacturers are passed along to consumers, id. The class action asserted causes of action for violations of (1) California’s Cartwright Act (the state counterpart of the federal Sherman Antitrust Act), (2) California’s Unfair Competition Law (UCL), (3) violations of the Clayton Act (the vehicle for private enforcement of alleged Sherman Act violations), (4) common law monopoly, and (5) unjust enrichment. Id., at 4-6. Defense attorneys moved to dismiss the class action, id., at 6; primarily Qualcomm argued that plaintiff lacked status to pursue the antitrust claims in the class action complaint, see, e.g., id., at 7-8. The district court granted Qualcomm’s motion, but gave plaintiff 30 days leave to amend.

Plaintiff argued that he had standing to prosecute the class action’s antitrust claims because “Plaintiff contends that he need not be a direct consumer or competitor to bring these claims because indirect purchasers have standing to bring an injunctive antitrust claim under both the federal and state antitrust laws” and further “that difficulties in tracing ‘overcharges for components through a distribution chain’ does not preclude standing.” Lorenzo, at 8. According to plaintiff, increased consumer prices for CDMA-capable cellular handset devices were “a direct and foreseeable result of Qualcomm’s anticompetitive licensing practices.” Id., at 8-9. In other words, “even though he was not a participant in the CDMA patent technology market or the CDMA chipset market,” plaintiff claims he suffered an antitrust injury because “the impact on the prices of cellular handsets paid for by the ultimate consumers is clearly foreseeable” and “injury in the form of higher prices to consumers is within the type of injury that the antitrust laws are designed to prevent.” Id., at 9. The district court disagreed, noting that the class action complaint centered on Qualcomm’s alleged anticompetitive CDMA licensing practices. Id., at 10. The district court held that plaintiff’s status as an indirect purchaser, impacted by tracing his alleged injury “through three levels of the supply chain - chipset manufacturers, device manufactures, and vendors,” was “too remote from Qualcomm’s alleged antitrust violations to support standing under the Clayton Act.” Id., at 11. Accordingly, plaintiff lacked standing under the Clayton Act, id., at 12. And while standing under California’s Cartwright Act is broader than under the Clayton Act, see id., at 12-13, the federal court concluded that plaintiff lacked standing under the Cartwright Act as well, id., at 13. And the court further concluded that plaintiff lacked standing to prosecute the class action’s UCL claim, see id., at 14-15.

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

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Class Actions Involving Labor Law Claims GainTop Spot Among Weekly Class Action Lawsuits Filed In California State And Federal Courts

In order 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 the 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 April 10 - 16, 2009, during which time 39 new class actions were filed. Labor law class action lawsuits generally top the list by a wide margin and often account for more than half of the new class actions filed during the week. During this reporting period, only 17 of the new class actions involved labor law claims, which were sufficient to top the list of new class action filings in California courts but which represent a relatively low 44% of the total number of new class actions filed during the past week. Only one other category met the 10% threshold: there were 10 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, representing 26% of the new class actions filed.

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

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Class Action Defense Cases—In re Lawnmower Engine: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Transfers Class Actions To Eastern District Of Wisconsin

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, but Orders Class Actions Transferred to Eastern District of Wisconsin, Where none of the Class Actions had been Filed

Twenty-three (23) class actions were filed in 18 federal district courts against numerous defendants, including inter alia Sears, Roebuck and Co., Deere & Co., Kawasaki Motors, and The Kohler Co.; the class action complaints alleged “manufacturers of lawnmowers and/or lawnmower engines conspired to materially overstate and/or fraudulently advertise the horsepower produced by their lawnmower products.” In re Lawnmower Engine Horsepower Marketing & Sales Prac. Litig. (No. II), ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 5, 2008) [Slip Opn., at 1, 2]. An additional 16 class action lawsuits were filed that were treated as potential tag-along actions, id., at 1 n.2. Ten of the defendants filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in either the Southern or Northern District of Illinois; all responding parties supported centralization of the class actions, but variously sought transfer to Florida, Louisiana, New Jersey, Ohio, or Texas. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, id., at 1-2. However, the Panel not only rejected the transferee courts proposed by the moving or responding parties, but ordered all of the class action lawsuits transferred to the Eastern District of Wisconsin. Id., at 2. None of the class actions had been filed in that district, or even in that State, but the Judicial Panel concluded that, given the number of different districts in which the lawsuits were pending, “many districts would be an appropriate transferee forum” and that the Eastern District of Wisconsin had the capacity to oversee the litigation and was centrally located given that “[the] parties and witnesses are clustered in various Midwestern states.” Id.

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

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Class Action Defense Cases–Martis v. Grinnell Mutual: Illinois State Court Reverses Class Action Certification And Orders Class Action Complaint Dismissed Because Medical Provider Not Third Party Beneficiary Of Insurance Policy

As Matter of First Impression, Class Action Complaint Against Insurance Company Alleging Breach of Contract for Paying Discounted PPO Rate to Medical Providers Without a PPO Contract with Insurer did not Warrant Class Action Treatment because Class Action Failed as a Matter of Law as Medical Providers are not Third Party Beneficiaries of Workers’ Compensation Policies and no Exception Applied Illinois State Appellate Court Holds

Plaintiff, a chiropractor, filed a class action in Illinois state court against Grinnell Mutual Reinsurance Company alleging violation of the Illinois Consumer Fraud Act, conspiracy, unjust enrichment and breach of contract; the class action complaint arose out of defendant’s decision to pay plaintiff a discounted amount for his treatment of a patient. Martis v. Grinnell Mut. Reins. Co., ___ N.E.2d ___ (Ill.App. March 27, 2009) [Slip Opn., at 1-2]. The class action sought to represent “a class of Illinois health care providers who submitted bills to defendant under workers’ compensation insurance and had bills reduced because of a PPO discount even though the providers did not have a PPO contract with defendant.” Id., at 2. The class action complaint originally contained seven causes of action, but the trial court granted defendant’s motion to dismiss all claims except the breach of contract claim, id., at 2-3. Plaintiff’s moved the trial court to certify the litigation as a class action, and the court granted plaintiff’s motion. Id., at 3. Defense attorneys sought and received leave to appeal the class action certification order, id., at 3-4. The appellate court reversed, concluding that plaintiff could not state a claim for breach of contract.

Defense attorneys argued that the trial court erred in certifying the litigation as a class action because “plaintiff’s class action [is] based on his breach of contract claim … [but] plaintiff is not an intended third-party beneficiary of the workers’ compensation policy.” Martis, at 4. The Court of Appeal noted that the legal effect of a contract is a question of law, id., and then discussed at length Illinois law governing enforcement of contracts by third parties, see id., at 4-6. The appellate court explained at page 6, “The issue we must decide in this case, whether a medical provider is a third-party beneficiary of a workers’ compensation policy, is one of first impression in this state.” The Court therefore examined the law of sister jurisdictions, see id., at 6-9, and summarized those cases as holding that “medical providers are generally not third party beneficiaries of insurance policies, particularly workers’ compensation policies,” id., at 9. The issue became, then, whether an exception to this general rule applied.

Continue reading "Class Action Defense Cases–Martis v. Grinnell Mutual: Illinois State Court Reverses Class Action Certification And Orders Class Action Complaint Dismissed Because Medical Provider Not Third Party Beneficiary Of Insurance Policy" »

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

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Class Action Defense Cases–Beer v. XTO Energy: Oklahoma Federal Court Grants Class Action Treatment To Class Action Against Defendant Improperly Calculated Royalty Payments

Class Action Complaint Challenging Defendant’s Calculation of Royalty Payments based on Inter-Company Sale of Gas to Wholly-Owned Subsidiary Warranted Class Action Treatment Oklahoma Federal Court Holds

Plaintiffs, royalty owners, filed a class action in state court against XTO Energy seeking an accounting of gas produced by certain wells in Texas County, Oklahoma; the class action complaint requested “the legal right to receive a royalty calculated by [XTO]…regarding production from a well in Colorado, Kansas, New Mexico, Oklahoma or Texas.” Beer v. XTO Energy, Inc., ___ F.Supp.2d ___ (W.D. Okla. March 20, 2009) [Slip Opn., at 1]. According to the class action, defendant systematically underpaid royalty owners, id., at 2. After defense attorneys learned that plaintiffs were seeking more than $27 million in damages, they removed the class action to federal court. Id. Plaintiffs moved the district court to certify the litigation as a class action, id. The class action certification motion defined two subclasses: a Kansas subclass consisting of individuals “who receive royalties from at least one well located in Kansas,” and an Oklahoma subclass consisting of individuals “who receive royalties from at least one well located in Oklahoma.” Id., at 2-3. Defendant operates the wells at issue in the class action, and “sells the gas produced from the individual wells to its wholly-owned subsidiary, Timberland Gathering and Processing,” id., at 3. Defense attorneys opposed class action treatment. The district court determined that class action certification was warranted and granted plaintiffs’ motion.

The district court explained that whether class action treatment is warranted “is an intensely fact-based question that is fraught with practical considerations.” XTO Energy, at 4 (citation omitted). After summarizing the well settled rules governing class action certification under Rule 23, see id., at 4-6, the court stated that it was originally concerned with whether plaintiffs were adequate class representatives, id., at 6. Plaintiffs responded by filing supplemental materials, and the district court turned to the merits of the motion, id. The numerosity prong was not at issue, as defendant conceded that plaintiffs could establish it. Id., at 7. The commonality test also was satisfied because defendant’s own employees conceded that differences in lease language did not affect the royalty payments, id., at 9; the federal court therefore agreed that a common question existed as to whether defendant was permitted to base its royalty payments on an inter-company sale, id., at 8-9. And the typicality test was met because plaintiffs had standing to assert claims on behalf of the class; “defendant’s officers and its expert witness conceded that all royalty owners, regardless of well location, are treated identically by defendant for purposes of royalty payments.” Id., at 10. And finally, the court found that plaintiffs and their counsel would adequately represent the interests of the class, id., at 11-12.

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

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Settlement of Class Actions–Chindarah v. Pick Up Stix: California State Court Affirms Dismissal Of Labor Law Class Action Holding Settlements Accepted By Individual Employees Covered By Putative Class Action Complaint Were Enforceable

As Matter of First Impression, Class Action Complaint Alleging Labor Law Violations and Challenging Releases Signed by Employees within Putative Class Action under Direct Settlements Offered by Employer Following Failure to Settle with Named Plaintiffs in Class Action Properly Subject to Summary Judgment because Releases Executed by Members of Class Action were Enforceable California State Court Holds

Plaintiffs filed a class action against their former employer, Pick Up Stix, alleging labor law violations; the class action complaint alleged that defendant failed to pay its employees overtime and misclassified employees as exempt from overtime pay. Chindarah v. Pick Up Stix, Inc., ___ Cal.App.4th ___ (Cal.App. February 26, 2009) [Slip Opn., at 2]. According to the allegations underlying the class action, defendant misclassified general managers, assistant managers and lead cooks, id. Defense attorneys sought to settle the class action and, when that failed, offered settlements directly to members of the putative class. Id. These individual settlement offers were based on the same formula offered at the mediation, and more than 200 people covered by the class action accepted the offers, id. As a condition of these settlements, the class members executed a general release and “acknowledged that he or she had spent more than 50% of the time performing managerial duties.” Id. Plaintiffs then amended their class action complaint to include a new party-plaintiff (one who had accepted the settlement offer) and a claim that the settlements reached with members of the putative class violated California labor laws, id., at 2-3. Defense attorneys filed a cross-complaint alleging breach of contract and of the settlement agreement, and seeking declaratory relief, id., at 3. Defense attorneys then moved for summary judgment, and the trial court upheld the releases concluding that they were “valid as a matter of law.” Id. Plaintiffs appealed, and the California Court of Appeal affirmed.

Plaintiffs argued that each release obtained by defendant were “void as a matter of law to the extent it releases claims for any wages actually due and unpaid and to the extent it constitutes an agreement to work for less than the overtime compensation actually due and unpaid. “ Chindarah, at 4. The Court of Appeal found no case directly on point, id., but after summarizing the relevant provisions of California’s Labor Code and of various state and federal cases addressing releases of disputed wage claims, see id., at 3-9, the appellate court ultimately relied on the fact that “there is no statute providing that an employee cannot release his claim to past overtime wages as part of a settlement of a bona fide dispute over those wages,” id., at 9. The Court further held that “public policy is not violated by a settlement of a bona fide dispute over wages already earned.” Id., at 9. Accordingly, the trial court properly found that the releases executed by members of the putative class who had accepted defendant’s settlement offers were valid and barred the claims in the amended class action complaint challenging those releases, id., at 9-10. The Court of Appeal therefore affirmed the judgment of the trial court and awarded defendant costs on appeal. Id., at 10.

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

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FCRA Class Action Defense Cases–Harris v. Mexican Specialty Foods: Eleventh Circuit Reverses Dismissal Of FACTA Class Actions Holding FCRA’s Statutory Damage Provision Not Unconstitutional On Its Face

District Court Erred in Dismissing FACTA Class Action Complaints on Grounds that Statutory Damages Awardable under FCRA were Unconstitutional Facially and As-Applied because As-Applied Challenge not Ripe and because Statute not Unconstitutional on its Face in part because Members of Class Actions may have Suffered Actual Damages Eleventh Circuit Holds

Two separate class action lawsuits were filed, one against Mexican Specialty Foods and one against Rave Motion Pictures, alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA), which is part of the Fair Credit Reporting Act (FCRA); specifically, the class action complaints asserted that defendants willfully violated FACTA by including more than the last 5 digits of a customer’s credit or debit card number and/or its expiration date on customer receipts, and sought both statutory damages and punitive damages. Harris v. Mexican Specialty Foods, Inc., ___ F.3d ___ (11th Cir. April 9, 2009) [Slip Opn., at 5-6]. Defense attorneys in each class action moved for summary judgment on the ground that the statutory damages provision of the FCRA is unconstitutional; the federal government intervened as a party-plaintiff “to defend the constitutionality of the statute.” Id., at 6. By way of background, and in overly broad terms, the FCRA seeks in part to protect consumer privacy by requiring that merchants safeguard credit information. Id., at 3. Toward that end, Congress enacted FACTA, “which is aimed at protecting consumers from identity theft” and which requires that merchants truncate credit/debit numbers on receipts provided to customers at point of sale, id., at 3-4 (citing 15 U.S.C. § 1681c(g)(1)). The statutory scheme authorizes private rights of actions for willful violations of the FCRA, including statutory damages of “not less than $100 and not more than $1,000.” Id., at 4 (quoting 15 U.S.C. § 1681n(a)(1)(A)). In a single order covering both class actions, the district court held that the statutory damage provision of the FCRA was “unconstitutionally vague on its face and unconstitutionally excessive on its face and as applied to the defendants, in violation of the Fifth Amendment Due Process Clause.” Id., at 6. Accordingly, it dismissed the class action complaints with prejudice, id. The plaintiffs in each class action appealed and the Eleventh Circuit consolidated the class actions, id., at 6-7. The Circuit Court reversed the dismissal of the class action complaints and remanded the class actions to the district court.

After noting that the district court’s ruling on the constitutionality of the FCRA’s statutory damage provision is subject to de novo review, see id., at 7, the Eleventh Circuit turned to whether the case was ripe for adjudication, and it noted that analysis of this issue in facial challenges is different than in as-applied challenges, id., at 8. The Circuit Court readily found that “defendants’ facial challenges to the FCRA are sufficiently ripe for adjudication.” Id., at 9. However, it found the question of whether the as-applied challenge was ripe to be “more problematic.” Id. In connection with its as-applied analysis, the district court assumed that if the class actions succeeded on the merits, then “the plaintiffs would be entitled to monetary awards that would be grossly disproportionate to the harm caused, and that the award would likely bankrupt the defendants.” Id., at 10-11. In the district court’s view, the FCRA mandated a statutory award of $100-$1000 “thus stripping courts of discretion to reduce the verdict below $100 per violation”; as applied, then, the court found that the statutory damage provision of the FCRA would “impose an unconstitutionally excessive penalty” as applied against defendants. Id., at 11. In reversing this finding, the Eleventh Circuit found that the district court assumptions were unwarranted. First, the Court found a dispute existed as to whether defendants would contest class action treatment of the actions. Id. Second, “at this early stage in the proceedings” it was unclear whether putative class members had suffered actual damages, id., at 11-12. And third, it was unclear whether defendants’ violation of FACTA was “willful” within the meaning of the FCRA, which is a prerequisite to an award of statutory damages, id., at 12-13. Accordingly, contrary to the district court’s conclusion, the as-applied challenge to the FCRA was not ripe for adjudication, id., at 13. The Eleventh Circuit therefore limited its review of the district court order to whether the statute was facially unconstitutional. Id.

Continue reading "FCRA Class Action Defense Cases–Harris v. Mexican Specialty Foods: Eleventh Circuit Reverses Dismissal Of FACTA Class Actions Holding FCRA’s Statutory Damage Provision Not Unconstitutional On Its Face" »

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

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Labor Law And Unfair Competition Law (UCL) Class Actions Monopolize Categories Of New Class Action Lawsuits Filed In California State And Federal Courts During Past Week

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 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 April 3 - 9, 2009, during which time only 31 new class actions were filed. While class action lawsuits alleging employment-related claims generally top the list by a wide margin, this past week was dominated by class actions alleging labor law violations or violations of California's Unfair Competition Law (UCL), which includes false advertising claims. During this reporting period, 16 of the new class actions involved labor law claims (representing 52% of the total number of new class actions filed during the past week). And class actions alleging UCL violations made up the only other category that met the 10% threshold, with 11 new class action filings (35%). Thus, almost 90% of the new class action lawsuits filed during the past week involved either labor law claims or UCL claims.

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

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Class Action Defense Cases—In re The Reserve Fund: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Eastern District of Pennsylvania

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

Sixteen (16) class actions – 13 in New York, and one each in California, Massachusetts and Minnesota – were filed against Primary Fund, The Reserve and various related Reserve entities, and other defendants, alleging “relief under various federal securities laws and/or common law or a shareholder suing derivatively on behalf of the Primary Fund.” In re The Reserve Fund Securities & Derivative Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 10, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of New York; plaintiff in the Minnesota class action opposed the motion, and plaintiff in the Massachusetts class action also opposed the motion and alternatively asked the Judicial Panel to delay ruling on the motion until after the district court had ruled on a pending motion to remand the class action to state court. Id. The Judicial Panel rejected plaintiffs’ objections and granted the motion to centralize the class action lawsuits, explaining that (1) even if the Minnesota and Massachusetts class actions are “narrower” than the other class actions, pretrial coordination will serve the salutary purposes of Section 1407, and (2) plaintiff in the Massachusetts class action can file a motion for remand in the transferee court. Id., at 2. The Panel concluded that the actions involve common questions of fact and that centralization would “eliminate duplicative discovery; avoid inconsistent pretrial rulings, including on the issue of class certification; and conserve the resources of the parties, their counsel and the judiciary.” Id., at 1-2. The Panel also agreed that the Southern District of New York was the appropriate transferee court, id., at 1; 13 of the class actions were already there, and The Reserve is headquartered in New York, id., at 2. Accordingly, the Judicial Panel ordered the class actions outside of that district transferred there, id., at 2.

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

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PSLRA Class Action Defense Cases–In re Authentidate Holding: New York Federal Court Grants Motion To Dismiss Securities Class Action Holding Class Action Allegations Failed To Satisfy PSLRA

Securities Class Action Warranted Dismissal with Prejudice because Allegations in Second Amended Class Action Complaint Failed to Establish Duty to Disclose New York Federal Court Holds

Plaintiffs filed a class action against Authentidate Holding Corporation and individual defendants (collectively “Authentidate”) alleging violations of federal securities laws; the class action complaint asserted that defendants “failed to make proper disclosures regarding performance metrics in an agreement (‘the Agreement’) the Company had with the United States Postal Service to serve as the preferred provider of the Postal Service’s electronic postmark (‘EPM’), thereby artificially inflating the price of Authentidate common stock in order to, inter alia, attract capital and avoid insolvency.” In re Authentidate Holding Corp. Sec. Litig., ___ F.Supp.2d ___ (S.D.N.Y. March 23, 2009) [Slip Opn., at 1]. The class action alleged that defendants’ misconduct violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, id. Defense attorneys moved to dismiss the Consolidated Second Amended Securities Class Action Complaint for failure to meet the heightened pleading requirements established by the Private Securities Litigation Reform Act (PSLRA). Id. The district court determined that allegations in the class action complaint failed to satisfy the PSLRA and dismissed the class action with prejudice.

After summarizing the well established law governing Rule 12(b)(6) motions to dismiss securities class action complaints, see In re Authentidate, at 2-3, including Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007), the district court turned first to the duty to disclose and noted that for purposes of Section 10(b) “‘[s]ilence, absent a duty to disclose, is not misleading,’ Basic Inc. v. Levinson, 485 U.S. 224, 239 n.17 (1988), and an omission is actionable under the securities laws only when the Defendant was subject to a duty to disclose.” Id., at 3 (additional citation omitted). The class action complaint alleged that defendants were under a duty to disclose Authentidate’s “low level of EPM sales and their continuing or likely failure to meet the revenue metrics.” Id. The federal court disagreed. First, it rejected the claim that Item 303 of SEC Regulation S-K (17 C.F.R. § 229.303) created a duty to disclose. See id., at 4-5. Item 303, entitled “Management's Discussion and Analysis of Financial Condition and Results of Operations,” requires, inter alia, that a registrant “describe any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.” 17 C.F.R. § 229.303(a)(3)(ii). Id., at 4. Plaintiffs’ allegations that “virtually nonexistent EPM sales and the likely failure to meet upcoming revenue metrics were ‘known trends or uncertainties’” were not supported by “any particularized factual allegations making it plausible that these omissions caused any piece of existing ‘reported financial information’ to misleadingly indicate a specific future result or financial condition.” Id., at 5. This was particularly true since EPM sales were not “a significant percentage of the reported monthly revenues.” Id. (citation omitted).

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Posted On: April 8, 2009 by Michael J. Hassen Email This Post

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PSLRA Class Action Defense Cases–Akerman v. Arotech: New York Federal Court Denies Motion To Dismiss Securities Fraud Class Action Finding Class Action Complaint Adequately Alleged Materiality, Scienter And Particularity

Securities Fraud Class Action Survives Motion to Dismiss because Class Action Complaint Adequately Alleged that Defendants Failed to Timely Discover and/or Disclose Material Adverse Information New York Federal Court Holds

Plaintiffs filed a class action against Arotech Corporation, a defense contractor, and three of its officers alleging violations of federal securities laws; the class action complaint violations Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and seeking to hold the individual defendants liable as “control persons” under Section 20(a) of the Act. Akerman v. Arotech Corp., ___ F.Supp.2d ___ (E.D.N.Y. March 30, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action, defendants made materially false statements and withheld materials facts concerning Arotech’s financial condition, id. The class action centered on Arotech’s acquisition of Armour of America (AofA) in August 2004 for $19 million in cash “with additional possible earn-outs if AofA is awarded certain material contracts” up to a maximum of $40 million. Id., at 2-3. Arotech’s total revenue in 2003 was only $17.3 million, but its revenue in 2004 increased to $50.4 million, id., at 3-4. Defense attorneys moved to dismiss the class action complaint “principally on the grounds of materiality, scienter and particularity” as required by the Private Securities Litigation Reform Act (PSLRA). Id., at 1. The district court concluded that the class action complaint adequately alleged securities fraud.

The class action complaint cited various confidential witnesses who alleged that “Arotech’s pre-acquisition due diligence did not reveal all material information about AofA before the acquisition.” Akerman, at 4. In particular, the confidential witnesses cited the federal government’s cancellation of a substantial helicopter contract with AofA based on a “termination for default” (T4D), that is, the government’s belief that AofA had overstated the armor weight of the helicopters. Id., at 4-5. The T4D, together with stigma accompanying the T4D, created a “domino effect” at AofA that seriously impacted sales, id., at 5. The class action alleged that defendants had access to this information, despite the fact that AofA did not disclose it, id., at 5-6. Additionally details may be found in the district court opinion at pages 6 through 11.

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

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Cintas Class Action Defense Cases–Serrano v. Cintas: Michigan Federal Court Denies Class Action Treatment Of Labor Law Class Action Against Cintas Holding Commonality, Typicality And Adequacy Of Representation Elements Not Met

Labor Law Class Actions did not Warrant Class Action Treatment because Hiring Process Involved too many Individual Questions to Meet Requirements for Class Action Certification under Rule 23 Michigan Federal Court Holds

Plaintiffs filed two separate class actions against Cintas Corporation, a company that provides uniforms and other supplies to various businesses across the United States, alleging labor law violations; the class action complaints asserted that Cintas discriminated against employees in violation of Title VII of the Civil Rights Act. Serrano v. Cintas Corp., ___ F.Supp.2d ___ (E.D. Mich. March 31, 2009) [Slip Opn., at 1-2]. According to the allegations underlying one class action (Serrano), Cintas discriminated against Michigan employees who applied for position of Service Sales Representative (SSR) on the basis of gender; according to the other class action (Avalos), Cintas discriminated against employees nationwide on the basis of race. Id., at 2. The two class actions were consolidated for pretrial purposes, id., at 1. Plaintiffs in the companion cases filed motions with the district court to certify each lawsuit as a class action. Id. The district court determined that class action treatment was not warranted in either lawsuit and therefore denied both plaintiffs’ class action certification motions.

Cintas SSRs perform a wide range of duties, and are used by the company as entry-level sales and customer service representatives. Serrano, at 2. Each SSR reports to a Service Manager, who in turn reports to a General Manager; and in addition to a “common corporate structure,” Cintas also “uses common orientation manuals and policy statements throughout its facilities” and “has standard courses and training sessions for managers and SSRs.” Id. Importantly, the class action complaints allege further that Cintas “has a standard system for hiring SSRs.” Id. The district court summarized the hiring process as including “an initial screening of the application, a series of interviews, a route ride with another SSR, standardized tests, an exchange of information among hiring managers, and a final hiring decision made by the General Manager of the Cintas facility.” Id., at 2-3. Finally, the federal court explained that “[t]he hiring process has both objective and subjective components,” and that some criteria are required while others are preferred. Id., at 3.

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

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Class Action Defense Cases–Cole v. Asarco: Oklahoma Federal Court Denies Class Action Treatment Of Class Action Seeking Medical Monitoring And Finds Proposed Property Owner Class Did Not Define A Cognizable Class

Class Action Certification not Warranted where Putative Class Action Complaint Prayed for Medical Monitoring of Individuals who had “Disavowed” any Present Injury and where Proposed Definition of Property Owner Class was not Administratively Feasible Oklahoma Federal Court Holds

Plaintiffs filed a putative class action against various defendants, including Asarco Incorporated and Gold Fields Mining, alleging nuisance and praying for medical monitoring of individuals covered by the class action; the class action complaint asserted that defendants mined lead and zinc along a 40-square mile stretch of Tar Creek in Oklahoma, and that the byproducts caused by that mining activity “caused air, surface and ground water and soil contamination of [plaintiffs’] property, exposing residents to unsafe levels of lead, heavy metals and other toxins.” Cole v. Asarco Inc., ___ F.Supp.2d ___ (N.D. Okla. April 2, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, these contaminants present “a risk of neurological damage, including cognitive and verbal function deficits, decreased educational performance, learning difficulties, aggression, anti-social behavior and attention deficits,” and that young children, under age 6, are particularly at risk. Id., at 2. Plaintiffs filed a motion to have the litigation certified as a class action, id., at 3. Asarco filed for bankruptcy protection, and plaintiffs dismissed Asarco with prejudice, id., at 3-4. The remaining defendants opposed class action treatment, and the district court agreed with defense attorneys that class action certification was not warranted.

After summarizing the well settled rules governing class action certification under Rule 23, see Cole, at 5-7, the district court began its analysis with plaintiffs’ medical monitoring class, which was “based on Oklahoma’s common law of nuisance,” id., at 7. While neither the parties nor the court could find any state law authority on the issue of medical monitoring, the federal court observed that “Oklahoma law requires plaintiffs to demonstrate an existing disease or physical injury before they can recover the costs of future medical treatment that is deemed medically necessary,” and in this case the named plaintiffs specifically “disavowed any injury.” Id., at 8. Further, Tenth Circuit authority “casts doubt” on the medical monitoring as a permissible remedy, id. (citations omitted). Accordingly, the district court denied class action certification of the medical monitoring class. Id., at 9. And with respect to the proposed “property owner” class, the district court concluded that “identification of members would not be administratively feasible.” Id., at 9. Specifically, the court found that “the proposed class is untenable with respect to [the proposed class definition] of persons who ‘owned or had an interest in real property.’” Id., at 10-11. Because class action certification requires that there be a “cognizable class,” the federal court found that Rule 23’s prerequisites for class action treatment had not been met. Id., at 11. Accordingly, the court denied plaintiffs’ motion for class certification. Id., at 15.

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

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Labor Law Class Actions Maintain Grip On Top Spot Among Weekly Class Action Lawsuits Filed In California State And Federal Courts

In order 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 the 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 March 26 - April 2, 2009, during which time 46 new class actions were filed. Labor law class action lawsuits generally top the list by a wide margin. During this reporting period, 27 of the new class actions involved labor law claims (representing 59% of the total number of new class actions filed during the past week). Only one other category met the 10% threshold: there were 9 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (20%).

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

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Class Action Defense Cases—In re Regions Morgan Keegan: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Western District of Tennessee

Over Objection of Three Class Action Plaintiffs, Judicial Panel Grants Defense Request for Pretrial Coordination of 20 Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 (Excepting One Class Action from Centralization Order) and Transfers Class Actions to Western District of Tennessee

Twenty-one (21) class actions – 18 in the Western District of Tennessee, and one class action each in the Northern District of Alabama, the Southern District of Indiana and the Middle District of Tennessee – were filed against Regions Financial Corp. and various subsidiaries, and other defendants. In re Regions Morgan Keegan Securities, Derivative & Employee Retirement Income Security Act (ERISA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 12, 2009) [Slip Opn., at 1 & n.1]. An additional 6 class actions (4 in the Western District of Tennessee and 2 in the Northern District of Alabama) were treated by the Judicial panel as potential tag-along class actions, id., at 1-2 n.2. Generally, the class actions were premised on the following set of common facts: Beginning in mid-2007, various Morgan Keegan proprietary investment funds suffered steep declines in value, which the class action complaints attribute to “the funds being overly concentrated in certain types of securities…and being heavily invested in thinly traded, illiquid and complex securities or securities for which there was no readily available market pricing.” Id., at 2. The class action complaints alleged that “defendants mismanaged, misrepresented, and omitted material facts regarding the nature, value, risk profile and investment practices concerning one or more of the funds.” Id.

Defense attorneys for several of the defendants filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Western District of Tennessee; plaintiffs in six of the class actions pending in that district supported the motion, as did PricewaterhouseCoopers. In re Regions, at 1. Further, plaintiffs in an additional 5 of the Western District of Tennessee class actions did not oppose the motion, id. Plaintiffs in three class actions opposed centralization, id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that “all actions except the Southern District of Indiana Eilenberg action involve sufficient common questions of fact, and that centralization of twenty actions under Section 1407 in the Western District of Tennessee will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.” Id., at 2. The Eilenberg action, however, was excluded from the centralization order because, unlike the other class actions, it “alleges a single claim under the Indiana Securities Act, focusing on specific facts concerning the unsuitability of particular investment product for the particular purchaser – an 89 year old infirm and unsophisticated investor – and the potential fraudulent inducements made to her at the time of the sale.” Id. Accordingly, with the exception of Eilenberg, the class actions were ordered centralized in the Western District of Tennessee, id., at 3.

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

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Arbitration Class Action Defense Cases–Vaden v. Discover Bank: Supreme Court Reverses District Court Order Under Federal Arbitration Act (FAA) Compelling Arbitration Of Class Action Counterclaims On Individual Basis

FAA does not Enlarge Federal Court Jurisdiction but Simply Permits District Court to Entertain Petition to Compel Arbitration where Jurisdiction Exists but for Arbitration Clause, and while District Courts may “Look Through” Pleadings to Decide Petition under FAA Section 4, Counterclaims are not Removable if Complaint is not Subject to Federal Court Jurisdiction Supreme Court Holds

Discover Card filed a “garden-variety, state-law-based contract action” against a cardholder in Maryland state court to collect $10,610.74, plus interest and attorney fees; the cardholder agreement provided for arbitration of “any claim or dispute” between Discover and the cardholder, and included a class action waiver in that it prohibited “any claims as a representative or member of a class.” Vaden v. Discover Bank, 129 S.Ct. 1262, 1268-69 and n.2 (2009). The cardholder answered and filed a putative class action counterclaim that also asserted only state law claims, id., at 1268. According to the allegations underlying the class action counterclaim, “Discover's demands for finance charges, interest, and late fees violated Maryland's credit laws.” Id. Neither Discover nor the cardholder invoked the arbitration clause in the cardholder agreement. Id., at 1268-69. In response to the class action counterclaim, Discover petitioned the federal court for an order compelling arbitration under § 4 of the Federal Arbitration Act (FAA), id., at 1269 (9 U.S.C. § 4). Though the class action claims were brought under state law, Discover argued that the counterclaims were governed by § 27(a) of the Federal Deposit Insurance Act (FDIA), which “prescribes the interest rates state-chartered, federally insured banks like Discover can charge, ‘notwithstanding any State constitution or statute which is hereby preempted.’” Id. Discover’s argument was that the cardholder’s state law claims were preempted by the FDIA and, accordingly, the federal court had jurisdiction to rule on Discover’s petition under the FAA. Id. The district court granted Discover’s petition and ordered arbitration of the cardholder’s individual claims. Id. The cardholder appealed: the Fourth Circuit questioned whether the district court had federal question jurisdiction over Discover’s FAA petition; the Circuit Court remanded the case to the district court with instructions to “‘look through’ the § 4 petition to the substantive controversy between the parties” and to make “an express determination whether that controversy presented ‘a properly invoked federal question.’” Id. (citations omitted). On remand, the cardholder conceded that his state law claims were completely preempted by the FDIA because Discover was a federally insured bank; based on this concession, the district court held it had federal-question jurisdiction and again granted the petition compelling arbitration. Id. This time, the Fourth Circuit affirmed. Id. The Supreme Court reversed.

Under Section 4 of the FAA, a district court may consider a petition to compel arbitration “if the court would have jurisdiction, ‘save for [the arbitration] agreement,’ over ‘a suit arising out of the controversy between the parties.’” Vaden, at 1267-68. The petition for certiorari presented the Supreme Court with two questions “concerning a district court’s subject-matter jurisdiction over a § 4 petition”: First, “Should a district court, if asked to compel arbitration pursuant to § 4, ‘look through’ the petition and grant the requested relief if the court would have federal-question jurisdiction over the underlying controversy?” And second, “[I]f the answer to that question is yes, may a district court exercise jurisdiction over a § 4 petition when the petitioner's complaint rests on state law but an actual or potential counterclaim rests on federal law?” Id., at 1268. The High Court summarized its holding at page 1268 as follows, “A federal court may ‘look through’ a § 4 petition and order arbitration if, ‘save for [the arbitration] agreement,’ the court would have jurisdiction over ‘the [substantive] controversy between the parties.’” But the Supreme Court reversed the Fourth Circuit’s decision because it had “misidentified the dimensions of ‘the controversy between the parties’ by ignoring that the lawsuit originated with “Discover's claim for the balance due on Vaden's account” – “Given that entirely state-based plea and the established rule that federal-court jurisdiction cannot be invoked on the basis of a defense or counterclaim, the whole ‘controversy between the parties’ does not qualify for federal-court adjudication.” Id. Accordingly, the Supreme Court reversed.

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

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Class Action Defense Cases–Love v. Blue Cross: Florida Federal Court Grants Defense Motion To Dismiss RICO Class Action Holding Class Action Complaint Failed To Satisfy Rule 9(b)’s Pleading Requirements

Class Action Complaint Alleging Violations of RICO Failed to Satisfy Heightened Pleading Requirements of Rule 9(b) Thus Warranting Dismissal Florida Federal Court Holds

Plaintiffs, a group of doctors, filed a putative class action against certain health insurance companies alleging that defendants violated RICO in that they “conspired to inflate profits by systematically denying, delaying, and diminishing payments due to them as physicians.” Love v. Blue Cross & Blue Shield Ass’n, ___ F.Supp.2d ___ (S.D.Fla. March 26, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action, the alleged scheme “involved the manipulation of computerized billing programs.” Id. Many of the defendants entered into a settlement agreement; the remaining class action defendants moved to dismiss the seventh version of the class action complaint. Id. The magistrate recommended granting the motion to dismiss because the allegations in the class action complaint failed to plead conspiracy and the predicate RICO claims with specificity. Id. In part, the defense motion to dismiss argued that the class action allegations failed to meet the heightened pleading requirements of Rule 9(b); plaintiffs argued that Rule 9(b) does not apply to mail and wire fraud claims. Id., at 1-2. The district court followed the magistrate’s recommendation because “Rule 9(b) most assuredly applies to claims for mail and wire fraud,” id., at 2.

The federal court explained that the class action complaint “‘must contain factual allegations which are ‘enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true.’” Love, at 2 (quoting Bell Atlantic v. Twombly, 127 S.Ct. 1955 (2007)). The court concluded, however, that the sixth amended class action complaint “fails to aver sufficient facts to indicate the existence of a conspiracy under prevailing precedent, because it only describes parallel conduct that can easily be explained by a theory of rational independent action.” Id. Accordingly, the district court adopted the recommendation of the magistrate and dismissed the class action complaint. Id., at 3.

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Posted On: April 1, 2009 by Michael J. Hassen Email This Post

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PSLRA Class Action Defense Cases–In re Downey: California Federal Court Dismisses Securities Class Action Holding Class Action Complaint Failed To Adequately Plead Actionable Misrepresentations By Individual Defendants

Class Action Complaint Alleging Securities Laws Violations Failed to Satisfy Heightened Pleading Requirements of Private Securities Litigation Reform Act (PSLRA) California Federal Court Holds

Plaintiffs filed a class action against Downey Financial and certain current and former officers and directors alleging violations of federal securities laws; the class action complaint asserted that defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10(b)-5, and of Section 20(a) of the Act. In re Downey Securities Litig., ___ F.Supp.2d ___ (C.D.Cal. March 18, 2009) [Slip Opn., at 1-2]. The class action was consolidated with a similar class, and lead plaintiff filed a first amended consolidated class action complaint. Id., at 2. According to the allegations underlying the class action, “the decline in Downey’s shareholder value resulted from alleged misrepresentations made to the investing public by Downey’s current and former officers and/or directors, and not from the current economic climate,” id. Defense attorneys for the individual defendants moved to dismiss the class action, id., at 1-2; defendants argued that the complaint failed to meet the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA), id., at 4. The district court agreed and dismissed the class action.

After discussing the PSLRA, the district court turned to the misstatements or omissions attributed to the individual defendants. See In re Downey, at 4-5. The federal court noted that generally “only those defendants who actually make a false or misleading statement will be liable under section 10(b) or Rule 10(b)-5,” id., at 5 (citation omitted), but under Ninth Circuit authority “‘an individual may become a primary violator through “substantial participation or intricate involvement in the preparation of fraudulent statements” even if he did not actually make the statements,’” id., at 5-6 (citation omitted). And based on the Supreme Court opinion in Stoneridge Investment Partners, LLC v. Scientific-Atlantic, Inc., 128 S.Ct. 761 (2008), courts “dismiss actors (including insiders) who have not made any misleading statements, either explicitly or implicitly because plaintiffs could not prove reliance on their actions.” Id., at 6 (citation omitted). The district court found that the complaint failed to state claims against the individual defendants because “there is not a single actionable misrepresentation or omission in the 161 pages of the [class action complaint] attributed to the Individual Defendants.” Id. The district court further concluded that the class action complaint failed to adequately plead scienter. See id., at 8-15. And finally, the court found that plaintiff failed to adequately plead loss causation. See id., at 15-16.

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