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

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Employment-Related Class Action Lawsuits Continue To Lead List Of Weekly Class Actions Filed In California State And Federal Courts

As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in 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 May 22 - 28, 2009, during which time 43 new class actions were filed. Labor law class actions usually top this list by a wide margin, generally accounting for more than half of the new class actions filed in any given week. During this reporting period, 22 of the new class actions involved labor law claims, representing a surprisingly low 51% 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, accounting for 21% of the new class actions filed.

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

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Class Action Defense Cases—In re Satyam: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation In Southern District Of New York

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Other Class Action Plaintiffs or by Common Defendants, and Transfers Actions to Southern District of New York

Six class actions – one in California and five in New York – were filed against Orleans Homebuilders and OHB Homes alleging violations of federal securities laws; specifically, the class action complaints “arise from a purported massive financial scandal involving common defendant Satyam Computer Services, Ltd. (Satyam), one of India’s largest information technology and outsourcing companies.” In re Satyam Computer Services, Ltd., Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 9, 2009) [Slip Opn., at 1]. According to the allegations underlying the class actions, “defendants deceived the investing public regarding Satyam’s business and finances, and thereby caused plaintiffs to purchase the company’s American Depositary Shares at artificially inflated prices.” Id. Plaintiffs in the California class action filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407; initially, plaintiffs sought centralization in California, but ultimately agreed to centralization in the Southern District of New York, where the other five class actions were pending. Id. Only one class action plaintiff opposed centralization, id. The Judicial Panel granted the motion to centralize the class action lawsuits, id. The Panel also agreed that the Southern District of New York was the appropriate transferee court because “Five of the six constituent actions, including the first-filed action, are already pending there, and the parties suggest that some discovery from accountants and banks may take place in the district.” Id., at 2.

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

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Securities Fraud Class Action Defense Cases–In re Zumiez: Washington Federal Court Dismisses Securities Fraud Class Action Holding Allegations In Class Action Complaint Insufficient Under PSLRA

Allegations in Securities Fraud Class Action Failed to Meet Heightened Pleading Requirements under Private Securities Litigation Reform Act (PSLRA) Warranting Dismissal with Prejudice of Class Action Complaint Washington Federal Court Holds

Plaintiffs filed a class action against Zumiez and three individual defendants alleging violations of federal securities laws; the class action complaint asserted that defendants “engaged in a scheme to defraud shareholders by making materially false and misleading statements by making false and misleading statements and engaging in insider trading.” In re Zumiez Inc. Sec. Litig., ___ F.Supp.2d ___ (W.D. Wash. March 30, 2009) [Slip Opn., at 7]. According to the allegations underlying the class action, defendants made six different statements that were false or misleading, each of which concerned guidance given to investors and expectations for earnings growth. Id., at 7-8. Defense attorneys moved to dismiss the class action on the grounds that it failed to satisfy the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA). Id., at 9. The district court granted defendants’ motion.

The federal court began by noting that “One obvious difficulty with Plaintiffs’ theory is that, from arch until mid-October, Zumiez not only met, but significantly exceeded, its prediction of ‘mid-single digit’ comparable-store sales growth.” In re Zumiez, at 12. The district court explained at page 12, “Therefore, to raise a credible inference that the Company’s predictions during this time period were false or misleading, Plaintiffs must allege facts to suggest not only that Defendants knew of undisclosed problems within the company, but that these known problems (1) would somehow not manifest a negative effect on earnings until the later quarters, and (2) were not taken into account when calculating the Company’s projected earnings. Plaintiffs allege hardly any such facts, much less facts sufficient to raise a strong inference of wrongdoing.” The court considered plaintiffs’ claim that five of Zumiez’s 2007 earnings projections were false or misleading, see id., at 12-20, but ultimately found that the class action complaint “completely failed to raise a ‘strong inference’ that Defendants knowingly made false or misleading earnings projections,” id., at 20. The district court also considered plaintiffs’ challenges to “two statements that could arguably be viewed as assertions regarding current business performance, rather than forward-looking statements”; specifically, an October 18, 2007, statement that “the Company was ‘on track’ to grow earnings by at least 30%,” and a November 29, 2007, statement that “the Company’s month-to-date comparable-store sales growth were in line with its fourth quarter projections.” Id., at 20. To be actionable, these statements required allegations in the class action complaint of “specific facts sufficient to raise a strong inference that Brooks made the statements with deliberate recklessness to investors,” id., at 20-21 (citation omitted), but the court found no evidence to support such an inference, see id., at 21-23. Accordingly, the district court dismissed the class action complaint with prejudice.

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

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Class Action Defense Cases–In re DC Water & Sewer: District Of Columbia Circuit Denies Permission To Appeal Class Action Certification Order As "Blatantly Untimely" And Criticizes Defendant And Defense Counsel For Filing Petition

Petition under Rule 23(f) for Permission to Appeal Class Action Certification Order Untimely and that Defendant and its Counsel “Would File – and Attempt to Justify – such a Blatantly Untimely Petition” is “Troubling” District of Columbia Circuit Holds

Plaintiff filed a class action against DC Water and Sewer Authority (WA SA) alleging violations of the Civil Rights Act of 1964; the class action complaint asserted that WASA engaged in acts of discrimination in the hiring and promotion of employees. In re DC Water & Sewer Auth., 561 F.3d 494, 495 (D.C. Cir. April 3, 2009). The district court granted plaintiff’s motion to certify the litigation as a class action under Rule 23(b)(2), id. The class action was on behalf of “Black employees at WASA who sought and were denied positions, career ladder promotions, or other advancement, or whose advancement was delayed, or whose compensation was otherwise affected by WASA's alleged unlawful discrimination, from October 1996 through December 2000.” Id. The district court granted plaintiff’s motion to certify the litigation as a class action, and on March 27, 2007 WASA filed a motion for reconsideration of the class action certification order. Id. and n.1. The district court denied WASA’s motion for reconsideration on September 13, 2007, id., at n.1. On April 9, 2008, WASA asked the district court to “clarify” its certification order; on July 24, 2008, the district court “summarily denied” WASA’s motion. Id., at 495. Finally, on August 7, 2008, WASA petitioned the Circuit Court of Appeals for the District of Columbia “pursuant to Federal Rule of Civil Procedure 23(f) for permission to appeal the district court's order certifying a class of WASA employees in an employment discrimination class action.” Id., at 494-95. The Circuit Court denied the petition was untimely.

By way of background, Rule 23(f) provides in part: “A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission to appeal is filed with the circuit clerk within 10 days after the order is entered.” Fed.R.Civ.P. 23(f) (italics added). Various circuit courts have held that the 10-day period for seeking permission to appeal must be strictly construed, though some circuits have held that the 10-day period “resets” once a district court rules on a motion for reconsideration. In re DC Water, at 495-96 (citations omitted). Here, defense attorneys filed their petition almost 17 months after the district court entered its class certification order, and almost a year after the district court summarily denied WASA’s motion for reconsideration: “By any measure, then, the petition was far out of time.” Id., at 496. The Circuit Court easily dismissed WASA’s claim that the April 2008 “motion for clarification” somehow restarted the 10-day deadline in Rule 23(f), finding that defendant’s argument “runs counter to the plain language of Rule 23(f).” Id. Put simply, the district court order denying WASA’s motion for clarification was not “an order granting or denying class-action certification” as required by Rule 23(f), and to hold otherwise would allow any party “to restart [the 10-day clock] at any time simply by filing a pleading styled as a ‘motion to clarify.’” Id., at 496-97 (citations and footnotes omitted). The Circuit Court concluded at page 497, “In its dogged pursuit of an interlocutory appeal – based on the most tenuous (if not untenable) grounds – WASA has both disrupted the class action proceeding in the district court and wasted the resources of the parties and the court. We find it troubling that WASA and its lawyers would file – and attempt to justify – such a blatantly untimely petition.” (Citations omitted.) Accordingly, the Court denied defendant’s petition for permission to appeal the class certification order, id.

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

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WaMu Class Action Defense Cases–In re Washington Mutual: Washington Federal Court Dismisses Majority Of Securities Fraud Class Action Claims Finding 400-Page 1000-Paragraph Class Action Complaint Lacked Specificity

Sheer Size of Class Action Complaint for Securities Fraud Violations did not Defeat Motions to Dismiss because Class Action Allegations were “Verbose” but “Disordered” and Required “More Definite Statement” Washington Federal Court Holds

Three class action complaints were filed against dozens of defendants alleging securities fraud in connection with Washington Mutual home lending business; specifically, the class actions alleged violations of §§ 10(b) and 20(a) of the 1934 Securities and Exchange Act and Rule 10b-5 promulgated under § 10(b), and under §§ 11, 12(a)(2) and 15 of the 1933 Securities Act. The class actions were consolidated by the Judicial Panel on Multidistrict Litigation, lead plaintiff appointed, and a consolidated class action complaint filed. Among the more than three dozen defendants named in the consolidated class action were officers and directors, including outside directors, underwriters and investment banks, and accounting firms. In re Washington Mutual, Inc. Securities, Derivative & ERISA Litig., ___ F.Supp.2d ___ (W.D. Wash. May 15, 2009) [Slip Opn., at 1-3, 5]. The consolidated class action complaint was enormous, containing almost 400 pages (without exhibits), more than 1000 paragraphs, and citations to 89 confidential witnesses, id., at 5. The first 300 pages of the complaint consist of factual allegations of improper activity that claimed “(1) deliberate and secret efforts to decrease the efficacy of WaMu’s risk management policies…; (2) corruption of WaMu’s appraisal process…; (3) abandonment of appropriate underwriting standards for WaMu loans…; and (4) misrepresentation of financial results….” Id. Defense attorneys for various defendants filed five motions to dismiss the class action claims, id., at 1-2. And if plaintiffs believed that size alone would be sufficient to defeat a motion to dismiss, then they were mistaken: in the end, the district largely granted the motion to dismiss concluding that Counts One, Two and Three required “a more definite statement of the grounds for their claims,” and that Counts Four, Five and Six should be dismissed with respect to “claims regarding WaMu’s August 2006, September 2006, and December 2007 securities offerings.” Id., at 2. (The federal court denied the motion to dismiss Counts Four, Five and Six to the extent they concerned WaMu’s October 2007 securities offering. Id.)

We summarize only briefly the federal court’s 33-page opinion. It is worth noting that the district court characterized the massive class action complaint as a “verbose and disordered pleading,” and concluded that it “failed to organize and clearly identify allegations in support of each element of the 10(b) claims against each defendant” even though more than 280 page of the complaint were directed toward these claims. In re WaMu, at 8. Relying on the heightened pleading requirements established by the Private Securities Litigation Reform Act (PSLRA) which requires that “a plaintiff alleging securities fraud must ‘plead with particularity both falsity and scienter,’” id., at 15 (citation omitted), the district court found “Remarkably, Plaintiffs make no effort to connect a particular statement made by any defendant with allegations as to why that statement was false or misleading or with allegations of facts giving rise to a strong inference of scienter,” id., at 17. The federal court also observed at page 17, “The first 300 pages of the Complaint fail to organize and identify the allegations supporting securities fraud as to each defendant, contain no useful cross-references or paragraph citations to connect the relevant allegations, and appear to include numerous irrelevant allegations, thereby depriving Defendants of proper notice of the grounds for the 10(b) claims against them.”

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

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Class Action Defense Cases–Baum v. AstraZeneca: Pennsylvania Federal Court Grants Defense Summary Judgment Motion In Labor Law Class Action Holding Plaintiff Properly Classified As Exempt From Overtime Pay

Labor Law Class Action Challenging Defendant’s Classification of Pharmaceutical Sales Representatives as Exempt from Overtime Laws Dismissed on Defense Motion for Summary Judgment because Plaintiff Fell within Outside Sales Exemption Pennsylvania Federal Court Holds

Plaintiff, a pharmaceutical sales representative, filed a class action in Pennsylvania state court against her employer, AstraZeneca, alleging labor law violations; the class action complaint asserted that defendant improperly classified her as “exempt” and failed to pay her overtime required by Pennsylvania law. Baum v. AstraZeneca LP, 605 F.Supp.2d 669, 2009 WL 827920, *1 (W.D.Pa. 2009). Defense attorneys removed the class action to federal court, id. Defense attorneys then moved for summary judgment on the class action claims, id. The facts are quite detailed: in broad terms, plaintiff’s job was to increase defendant’s market share by selling directly to physicians, which required that she build relationships with the doctors and exercise discretion in determining how best to pitch AstraZeneca to doctors. Id., at *2-*3. The defense motion was based on the argument that plaintiff “exercised substantial judgment and discretion while discussing pharmaceutical products with physicians.” Id., at *3. Plaintiff responded that she “gave the same canned speech to each physician.” Id. The district court granted the motion for summary judgment and entered judgment in favor of the defense as to the class action claims.

After summarizing the standard of review and the similarities between the federal Fair Labor Standards Act (FLSA) and Pennsylvania’s Minimum Wage Act (PMWA), see Baum, at *4-*5, as well as the outside sales exemption and administrative exemption, id., at *5-*6, the court turned to an examination of whether either of those exemptions applied. The district court readily concluded that plaintiff had been properly classified. Id., at *6. The federal court’s decision was based on its finding that plaintiff made sales and obtained orders, and had been employed for the purpose of doing so, see id., at *7-*12. Put simply, “where pharmaceutical representatives seek to obtain physician commitments to write prescriptions, these representatives make sales and are engaged in the process of making sales for purposes of Pennsylvania’s outside sales exemption.” Id., at *12. Further, the district court found that plaintiff’s job involved sales activity, confirming she was employed for the purpose of making sales. Id., at *12-*14. Moreover, as noted above, plaintiff spent 90% of her time in the field, id., at *14. Accordingly, the outside sales exemption applied, id., at *14-*15. The court also opined that it would find that the administrative exemption would also apply to plaintiff. Id., at *16. Accordingly, the district court granted defendant’s motion for summary judgment and dismissed the class action complaint. Id., at *16-*17.

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

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Surge In Class Action Complaints Filed In California State And Federal Courts Led By ADA Class Actions But Labor Law Actions Continue To Top List Of New Class Action Lawsuits Filed In Past Week

In order to assist class action defense attorneys anticipate the types of class actions against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in 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 May 15 - 21, 2009, during which time an unusually high number of new class actions were filed -- 59. Generally, labor law class action lawsuits account for more than half of the new class actions filed and top the list by a substantial margin. During this reporting period, only 18 of the new class actions involved labor law claims, representing a surprisingly low 31% of the total number of new class actions filed during the past week. Only two other categories met the 10% threshold. There were 13 new class actions alleging violations of the Americans with Disabilities Act (ADA), accounting for 22% of the new class actions filed, and there were 12 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, accounting for 20% of the new class actions filed.

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

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Class Action Defense Cases—In re Aetna: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In District Of New Jersey

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by Plaintiffs in One of the Class Actions, and Transfers Actions to District of New Jersey

Two class actions – one in Connecticut and one in New Jersey – were filed against Aetna and affiliated entities, and other defendants (including Ingenix and its parent UnitedHealth Group), challenging Aetna’s “policies and practices for reimbursing its plan members’ visits to health care providers that are not part of the Aetna network,” that is, to “nonparticipating” or “out-of-network” providers. In re Aetna, Inc., Out-Of-Network "UCR" Rates Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 8, 2009) [Slip Opn., at 1]. Specifically, the class action complaints, filed by Aetna health plan members, alleged “that (1) the Ingenix database of billing information was flawed leading to lower reimbursement rates; and (2) Aetna improperly calculated the usual, customary and reasonable (‘UCR’) rates of reimbursement for out-of-network services based upon this data.” Id. Defense attorneys for Aetna 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 Connecticut, New Jersey or New York, but at oral argument limited its request to the district where the two class actions were already pending. Id. Plaintiffs in the New Jersey class action supported the motion and agreed on centralization in that district; plaintiffs in the Connecticut class action opposed centralization or, alternatively, argued for transfer to the District of Connecticut. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that “these two actions involve complex common questions of fact, and that centralization under Section 1407…will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.” Id. The Panel transferred the class actions to the District of New Jersey because, while either district court would be appropriate, “(1) Judge Faith S. Hochberg has been presiding over the action before her since July 2007 and she is well-versed with the issues involved in this litigation; and (2) two other related actions with similar claims against Aetna are also pending before her.” Id., at 2.

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

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FDCPA Class Action Defense Cases–Lemire v. Wolpoff & Abramson: Connecticut Federal Court Grants Class Action Treatment To FDCPA Class Action Against Law Firm

Class Action Against Law Firm Alleging Violations of Debt Collection Laws Warranted Class Action Treatment over Defense Challenge to Adequacy of Representation based on Claim that Class Action was Filed by “Professional Plaintiff” and over Challenge to Superiority Prong of Rule 23(b)(3) Class Action Certification Test based on Negative Net Worth of Defendant and FDCPA’s 1% Net Worth Cap on Liability Connecticut Federal Court Holds

Plaintiff filed a class action against the law firm of Wolpoff & Abramson alleging violations of the federal Fair Debt Collection Practices Act (FDCPA). Lemire v. Wolpoff & Abramson, LLP, 256 F.R.D. 321, 2009 WL 827764, *1 (D.Conn. 2009). According to the allegations underlying the class action, Wolpoff’s communication with Connecticut consumers violated state law and therefore a per se violation of the FDCPA, id. Wolpoff argued that a violation of Connecticut debt collection law is not a per se violation of the FDCPA. Id. Plaintiff moved the district court to certify the litigation as a class action, id. The district court granted plaintiff’s motion and granted class action treatment.

After summarizing the well known rules for class action certification under Rule 23, see Lemire, at *2, the court turned to the merits of the motion. Wolpoff conceded that the numerosity test of Rule 23(a)(1) had been met, id., at *3. But as to commonality, Wolpoff argued that each collection letter sent to a Connecticut resident would have to be “analyzed individually to determine whether it contains actionable language” because different letters were sent to consumers who were represented by counsel than those who were unrepresented. Id. The federal court found, however, that the letters were similar in material respects and that the differences go to the merits of the class action claims. Id., at *3-*4. Given the “common content of Wolpoff’s letters” sent directly to consumers, the commonality test had been met. Id., at *4. And the letters to the attorneys were sufficiently similar to warrant class action treatment, and even if different could be addressed by dividing the group into two classes. Id., at *5. And the typicality test was satisfied because Wolpoff “failed to identify any unique ‘claims or defenses,’” id., at *6.

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

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AT&T Class Action Defense Cases--AT&T v. Hulteen: Supreme Court Holds Employer Does Not Violate Pregnancy Discrimination Act By Paying Pension Benefits Calculated Under Pre-PDA Accrual Rule Giving Less Retirement Credit For Pregnancy Than Medical Leave

Class Action Failed to Allege Discrimination Against Employer that Calculated Pension Benefits under Pre-Pregnancy Discrimination Act (PDA) Rules, Lawful at the Time, that Gave Less Retirement Credit to Pregnancy Leave than for Medical Leave Supreme Court Holds

Plaintiffs filed a class action against AT&T alleging violations of Title VII of the Civil Rights Act of 1964; the class action complaint asserted that defendant discriminated against employees on the basis of sex and pregnancy by providing pension and other benefits on a seniority system that treated pregnancy differently from other medical conditions. AT&T Corp. v. Hulteen, 556 U.S. ___ (May 18, 2009) [Slip Opn., at 1-3]. AT&T has provided pension and other benefits to employees since 1914 “based on a seniority system that relies upon an employee’s term of employment, understood as the period of service at the company minus uncredited leave time.” Id., at 1-2 (footnote omitted). According to the allegations underlying the class action, from 1960s until the mid-1970s, AT&T gave employees full service credit for “disability” leave but a maximum of 30 days of credit for “personal” leaves of absence, and the company treated pregnancy leave as “personal” rather than disability. Id., at 2. AT&T modified this program in 1977 “entitling pregnant employees to disability benefits and service credit for up to six weeks of leave”; however, leave beyond 6 weeks was still treated as “personal” leave. Id. Both plans were lawful at the time they were in use, id. But in 1978 Congress enacted the Pregnancy Discrimination Act (PDA), which made it unlawful to “treat pregnancy-related conditions less favorably than other medical conditions.” Id., at 3 (citation omitted). AT&T again modified its procedures to comply with the PDA, but it did not “make any retroactive adjustments to the service credit calculations of women who had been subject to the pre-PDA personnel policies.” Id. In the Ninth Circuit (where plaintiffs’ class action had been filed), case law held that “calculation of service credit excluding time spent on pregnancy leave violates Title VII,” id., at 4(citation omitted); in the Sixth and Seventh Circuits, case law held that “reliance on a pre-PDA differential accrual rule to determine pension benefits does not constitute a current violation of Title VII,” id. (citations omitted). The Supreme Court granted certiorari to resolve this conflict.

The Supreme Court defined the issue presented as “whether an employer necessarily violates the Pregnancy Discrimination Act (PDA), 42 U.S.C. §2000e(k), when it pays pension benefits calculated in part under an accrual rule, applied only prior to the PDA, that gave less retirement credit for pregnancy leave than for medical leave generally.” AT&T, at 1. The Supreme Court held “there is no necessary violation; and the benefit calculation rule in this case is part of a bona fide seniority system under §703(h) of Title VII of the Civil Rights Act of 1964…which insulates it from challenge.” Id. We do not discuss the opinion in greater detail. We note only that Justice Ginsburg filed a dissenting opinion, joined by Justice Breyer, arguing in essence that properly paying women today for service credit that should have been earned pre-PDA, is not a retroactive application of the law. Accordingly, AT&T’s conduct constitutes a “current violation of Title VII when, post-PDA, it did not totally discontinue reliance upon a pension calculation premised on the notion that pregnancy-based classifications display no gender bias.” AT&T, at 4 (Ginsburg, J., dissenting).

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

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Prop 64 Class Action Defense Cases–In re Tobacco II: California Supreme Court “Turns Class Action Law Upside Down” And Holds UCL Class Actions May Be Certified Even If Class Members Lack Standing To File Suit In Own Name

Class Actions Alleging Violations of California’s Unfair Competition Law (UCL) may be Certified as a Class Action even if Putative Class Members Lack Standing to Prosecute UCL Claims in Their Own Name, but Class Representative Alleging Misrepresentation as Basis of UCL Class Action Claim must Demonstrate Actual Reliance on the Defendant’s Allegedly Deceptive or Misleading Statements California Supreme Court Holds

A class action lawsuit was filed in California state court against various tobacco industry defendants alleging violations of California’s Unfair Competition Law (UCL); specifically, the class action complaint asserted that defendants “conduct[ed] a decades-long campaign of deceptive advertising and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease.” In re Tobacco II Cases, ___ Cal.4th ___, 93 Cal.Rptr.3d 559 (Cal. 2009) [Slip Opn., at 1-2]. The class action complaint was amended numerous times; the trial court granted plaintiffs’ motion to certify the litigation as a class action, filed in connection with the seventh amended class action complaint. Id., at 3. At the time the trial court granted class action status to the lawsuit, under California law an individual had standing to file suit alleging UCL violations even if the individual had not suffered any injury; following class certification, Californians passed Proposition 64, which amended the UCL so as to condition standing to file suit to a “person who has suffered injury in fact and has lost money or property as a result of [such] unfair competition.” Id., at 1-2 (quoting Cal. Bus. & Prof. Code, § 17204). Additionally, prior to Prop 64 UCL representative actions did not have to satisfy the requirements for class action treatment under California Code of Civil Procedure section 382, but Prop 64 explicitly requires such compliance, id., at 13. Based on the standing requirement imposed by Prop 64, the trial court granted defendants’ motion to decertify the class “on the grounds that each class member was now required to show an injury in fact, consisting of lost money or property, as a result of the alleged unfair competition.” Id., at 2. The appellate court affirmed, “agreeing with the trial court that, post Proposition 64, individual issues of exposure to the allegedly deceptive statements and reliance upon them, predominated over class issues.” Id., at 9. But the California Supreme Court – in a 4-3 decision – reversed.

The California Supreme Court’s decision is ground-breaking: it represents the first opinion known to this author that allows an individual to be a member of a class even if that person does not have standing to file suit in his or her own name. The Supreme Court addressed two issues: “First, who in a UCL class action must comply with Proposition 64’s standing requirements, the class representatives or all unnamed class members, in order for the class action to proceed?” In re Tobacco II, at 2. This is the question on which we focus here. “Second, what is the causation requirement for purposes of establishing standing under the UCL, and in particular what is the meaning of the phrase ‘as a result of’ in section 17204?” Id. While we do not discuss this aspect of the Court’s opinion, we note its holding: “We conclude that a class representative proceeding on a claim of misrepresentation as a basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions.” Id.

Continue reading "Prop 64 Class Action Defense Cases–In re Tobacco II: California Supreme Court “Turns Class Action Law Upside Down” And Holds UCL Class Actions May Be Certified Even If Class Members Lack Standing To File Suit In Own Name" »

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

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Securities Fraud Class Action Defense Cases–Vladimir v. Bioenvision: New York Federal Court Grants Motion To Dismiss Securities Fraud Class Action Holding Class Action Complaint Failed To Meet Heightened Pleading Requirements Of PSLRA

Defense Motion to Dismiss Securities Fraud Class Action Granted because Defendants had no Duty to Disclose Merger Discussions Prior before Definitive Merger Agreement Reached and because Anonymous Source Insufficient to Satisfy Heightened Pleading Requirements of PSLRA (Private Securities Litigation Reform Act) New York Federal Court Holds

Plaintiffs filed a class action against Bioenvision and certain officers and directors, and Perseus-Soros Biopharmaceutical Fund (Bioenvision’s largest pre-merger shareholder) alleging violations of federal securities laws; the class action complaint alleged violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, against Perseus-Soros under section 13(d) of the Exchange Act, and against the individual defendants and Perseus-Soros under section 20(a). Vladimir v. Bioenvision Inc., ___ F.Supp.2d ___, 2009 WL 857552, *1 (S.D.N.Y. March 31, 2009). According to the allegations underlying the class action, “defendants artificially deflated the value of Bioenvision’s stock by issuing and by failing to correct or update statements that contained material misrepresentations and omissions as to Bioenvision’s plan to enter into a merger with Genzyme.” Id. Defense attorneys moved to dismiss the class action on the grounds that the allegations in the class action complaint failed to meet the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 (PSLRA). Id. Defendants further argued that “they had no duty to disclose the merger discussions until May 29, 2007, the date when the merger was announced publicly.” Id. Plaintiffs countered that defendants’ failure to disclose the plan to sell Bioenvision to Genzyme had the practical effect of artificially suppressing Bioenvision’s stock price, causing damage to plaintiffs because they sold their stock before the merger was officially announced (at which time the stock price skyrocketed). Id., at 4. Essentially, the “false and misleading” statements consisted of disclosing that its “primary focus” was the development of cancer treatments when its real focus was to find a merger partner. Id., at *5. The district court granted the defense motion and dismissed the class action complaint.

Cutting to the heart of the federal court’s analysis, the district court held that under Second Circuit authority “‘a corporation is not required to disclose a fact merely because a reasonable investor would very much like to know that fact.’” Vladimir, at *7 (citation omitted). Put simply, “[t]here is no specific duty to disclose merger negotiations under SEC rules until they become definitive agreements.” Id. (citations omitted). And since there was no duty to disclose, defendants’ silence could not be deemed misleading. Id. (citation omitted). Plaintiffs argued that the parties had reached a “definitive agreement” to merge in January 2007, thus creating the duty to disclose. Id. But as this allegation was supported only by an anonymous source, it failed to satisfy the PSLRA’s heightened pleading requirements. Id., at *7-*8. Further, as the federal court observed, “Under plaintiffs’ proposed rule, any public company that publicly described its core business or strategy – which is to say, every public company – would be required to disclose potential or actual merger negotiations. Statements that do not raise the subject of mergers, even tangentially, cannot impose a duty to disclose all material information concerning merger discussions.” Id., at *10. The district court ultimately concluded that the allegations in the class action complaint did not plead fraud with particularity as required by Rule 9(b), and in any event do not support a duty to disclose. Id., at *12. Accordingly, the court granted the motion to dismiss by the Bioenvision defendants. Id., at *13.

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

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TILA Class Action Defense Cases–Frazier v. Accredited Home Lenders: Alabama Federal Court Grants Lender’s Summary Judgment Motion In TILA Class Action

Lender Motion for Summary Judgment as to Class Action Claims Alleging Lender Violated TILA and HOEPA Properly Granted because Disclosed Finance Charges Fell within TILA’s Tolerance for Accuracy and because HOEPA did not Apply as Transaction was not High-Cost Loan Alabama Federal Court Holds

Plaintiff filed a class action against Accredited Home Lenders, dba Home Funds Direct, alleging violations of the federal Truth in Lending Act (TILA) and Home Ownership and Equity Protection Act (HOEPA), which requires additional disclosures be made in connection with “high cost” loans; the class action complaint asserted that her lender “improperly understated the finance charge on credit it extended to her” and “failed t comply with the additional disclosure requirements” of HOEPA. Frazier v. Accredited Home Lenders, Inc., 607 F.Supp.2d 1254, 2009 WL 931167, *1 (M.D.Ala. 2009). According to the allegations underlying the class action, the lender improperly excluded several charges from its calculation of the finance charge – a claim the lender denied. Id., at *2. The class action sought rescission and damages, id., at *1. Defense attorneys moved summary judgment, id.; the lender argued that its disclosures were “accurate, complete, and in compliance with both TILA and HOEPA.” Id., at *2. The class action complaint alleged that the lender charged an “endorsement fee” for a service that was never provided, and that it charged an excessive fee for “a title search, a title examination, recording, and title insurance,” each of which allegedly should have been included in the finance charge. Id. Defense attorneys countered that the fees in question were “imposed by a third party” and that they were not excessive; further, the lender argued that the finance charge disclosed “falls within TILA’s tolerance for accuracy” (that is, one half of one percent of the loan amount). Id. Alternatively, defense attorneys argued that any errors fell within the safe harbor provision of TILA and fell outside the scope of HOEPA. Id. The district court granted the motion and entered judgment in favor of the lender on the class action complaint.

The federal court observed that the “dispositive question” was “how to calculate properly the finance charge” for the loan extended to plaintiff. Frazier, at *2. The court observed that this task was complicated by “the imprecise language of TILA itself and the maze of federal regulations interpreting the statute.” Id. Turning to the merits, the district court rejected the lender’s claim that it was not responsible for charges imposed by third parties, observing that the relevant inquiry is whether it required the services in question. Id., at *3. But the court agreed with defense attorneys that the lender did not “require” the “endorsement fee” charged by the third party, particularly as no service was ever provided in connection with that third party charge, id. Accordingly, the federal court held that “the endorsement fee must be excluded from the finance charge.” Id. The question then, was whether the remaining fees were “excessive” and whether the lender understated that amount of the finance charge, id.

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

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Labor Law Actions Continue To Top List Among Weekly Class Action Lawsuits Filed In California State And Federal Courts But With Comparatively Low Percentage Of New Class Action Filings

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 May 8 - 14, 2009, during which time 49 new class actions were filed. Labor law class action lawsuits generally top the list, often by a wide margin and often with more than half of the new class action filings. During this reporting period, only 21 of the new class actions involved labor law claims, representing a relatively low 43% of the total number of new class actions filed during the past week (though substantially higher than the 31% showing during the last reporting period). Only two other categories met the 10% threshold. There were 10 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (20%), and 5 new class actions alleging violations of federal securities laws (10%).

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

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3M Class Action Defense Cases–Whitaker v. 3M: Minnesota State Court Grants Class Action Treatment To Labor Law Class Action Against 3M Alleging Age Discrimination

Labor Law Class Action Against 3M Alleging Age Discrimination Warranted Class Action Certification Minnesota State Court Holds

Plaintiff filed a class action against his employer, 3M, alleging labor law violations; the class action complaint asserted that 3M discriminated against employees on the basis of age with respect to leadership development opportunities, promotion decisions, compensation decisions, and job eliminations. Whitaker v. 3M Co., Ramsey County District Court, Second Judicial District, Case No. 62-C4-04-012239 (April 11, 2009) [Slip Opn., at 2-3]. According to the allegations underlying the class action, 3M’s employment practices had a disparate impact on members of the putative class, id., at 3. Plaintiff’s attorneys moved the trial court to certify the litigation as a class action on behalf of “All persons who were 46 or older when employed by 3M in Minnesota in a salaried exempt position below PS grade 180 at any time on or after may 10, 2003, and who did not sign a document on or about their last day of employment purporting to release claims arising out of their employment with 3M.” Id., at 1. The trial court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

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

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Wal-Mart/Netflix Class Action Defense Cases—In re Online DVD Rental: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation In Northern District Of California

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

Twelve class actions – eleven in the Northern District of California and one in the Western District of Washington – were filed against Wal-Mart and Netflix alleging violations of antitrust laws; specifically, the class action complaints allege “defendants conspired to divide the online DVD rental market in violation of federal antitrust laws.” In re Online DVD Rental Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 10, 2009) [Slip Opn., at 1]. (Forty-three (43) additional class action lawsuits were filed in various district courts, and were considered by the Court as potential tag-along class actions. Id. at n.1.) Plaintiffs in one of the California class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of California; plaintiffs in 35 of the class actions supported the motion, as did all defendants in the various class actions. Id. Plaintiffs in 9 of the potentially-related class actions supported centralization, but argued alternatively for coordination in various district courts in Alabama, Illinois, Louisiana, New York, Ohio, Puerto Rico, or West Virginia. Id. The Judicial Panel granted the motion to centralize the class action lawsuits (in part because it would “prevent inconsistent pretrial rulings…with respect to class certification”), and agreed that the Northern District of California was the appropriate transferee court. Id., at 1-2. The Judicial Panel explained in selection of the California district court as follows at page 2, “The vast majority of the actions are already pending in the Northern District of California before Judge Phyllis J. Hamilton. Moreover, two of the defendants are headquartered in that district and, accordingly, relevant documents and witnesses are likely located there.” Accordingly, the Panel granted the motion and ordered all actions outside the district transferred to the Northern District of California, id., at 2.

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

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FACTA Class Action Defense Cases–Leysoto v. Mama Mia: Florida Federal Court Denies Class Action Treatment Of FACTA Class Action Because Potential Liability Vastly Disproportionate To Actual Damages Suffered By Putative Class

FACTA Class Action Seeking $4.6 Million to $46 Million in Statutory Damages from Restaurant with Net Worth of $40,000 did not Warrant Class Action Treatment because Class Action not “Superior” Method of Resolving Dispute Florida Federal Court Holds

Plaintiff filed a putative class action in Florida state court against Mama Mia, “a local restaurant in Hollywood, Florida, with approximately $40,000 in net assets”; the class action alleged that defendant violated the Fair and Accurate Credit Transactions Act (FACTA), which requires that merchants truncate credit card and debit card numbers on electronically-printed customer receipts. Leysoto v. Mama Mia I., Inc., 255 F.R.D. 693, 694 (S.D.Fla. 2009). According to the allegations underlying the class action, the receipts defendant provided to customers “displayed both the expiration date and full number of [the customers’] credit card.” Id. (The district court noted that defendant “ceased this practice, and began truncating customer receipts to merely four (4) card numbers, no later than June 26, 2008.” Id.) The class action complaint sought “statutory and actual damages, as well as attorneys' fees and costs,” id. Defense attorneys removed the class action to federal court, id., and plaintiff moved for class certification, arguing a Rule 23(b)(3) class action should be certified, id., at 694-95. Defense attorneys opposed class action certification on the grounds that class action treatment would expose defendant to statutory damages of $4.6 million - $46 million, even though plaintiff concedes he did not suffer any actual economic injury and even though there was no evidence that any member of the putative class suffered actual economic injury. Id., at 695 and n.5. The district court denied plaintiff’s motion.

The district court explained that the class certification motion “turns on two related questions: (1) whether potential class damages are a proper consideration at the motion to certify stage; and, if so; (2) whether the potential class damages in this matter preclude certification under Fed.R.Civ.P. 23(b)(3).” Leysoto, at 694. Of course, plaintiff bears the burden of establishing that class action treatment was warranted, id., at 695 (citations omitted). FACTA provides for recovery of actual damages or statutory damages of “not less than $100 and not more than $1,000.” Id. (citation omitted). This is important because under Eleventh Circuit authority the district court “may consider potential class damages in adjudicating Plaintiff's Motion, and given the vast disparity between the requested statutory damages and the actual injury caused by Defendant, the class vehicle is not the superior method for fairly and efficiently adjudicating this dispute.” Id., at 694.

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

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Mercedes-Benz Class Action Defense Cases–In re Mercedes-Benz: New Jersey Federal Court Grants Class Action Treatment To Class Action Claims For Unjust Enrichment And Consumer Fraud Based On Analog-Based Tele Aid Sales

Nationwide Class Action Complaint Alleging Unjust Enrichment and Violations of New Jersey’s Consumer Fraud Act Claims Warranted Class Action Treatment because Sale by Mercedes of Analog-Based Tele Aid Systems Involved Common Issues that Predominated over Individual Issues and because Balance of Rule 23’s Requirements for Class Action Certification had been Satisfied New Jersey Federal Court Holds

Ten separate class action lawsuits were filed in six different states against Mercedes-Benz and other defendants arising from vehicles equipped with the “Tele Aid” emergency response system; Mercedes-Benz moved the Judicial Panel on Multidistrict Litigation to consolidate the class action complaints for pretrial purposes, pursuant to 28 U.S.C. § 1407. In re Mercedes-Benz Tele Aid Contract Litig., ___ F.Supp.2d ___ (D.N.J. April 27, 2009) [Slip Opn., at 5]. The Judicial Panel granted the motion, and the various class actions were transferred to New Jersey, id., at 5-6. (The district court observed that the amount in controversy exceeds $5,000,000 and that minimal diversity exists; accordingly, the court had jurisdiction under the Class Action Fairness Act (CAFA). Id., at 2.) Once the class actions were centralized, the district court appointed interim class counsel and directed counsel to file a consolidated amended class action complaint, id., at 6. The putative nationwide class action complaint alleged causes of action for common law unjust enrichment and violations of the New Jersey Consumer Fraud Act “premised on the contention that Mercedes made statements or omissions of material facts that it knew or should have known were false or misleading when promoting vehicles purchased by Plaintiffs that were equipped with ‘Tele Aid,’ an emergency response system which links subscribers to road-side assistance operators by using a combination of global positioning and cellular technology.” Id., at 2-3. At bottom, the class action claims are premised on the theory that Mercedes knew “that the analog network on which the Tele Aid systems contained in their vehicles depended would cease to function in 2008, but continued to market Tele Aid without disclosing that fact.” Id., at 6. Plaintiffs’ attorneys moved the district court to certify the litigation as a class action; defense attorneys argued against class action treatment. Id., at 1. The district court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

The district court explained that plaintiffs’ task at the class action certification stage was to demonstrate that the claims in the class action complaint were susceptible to common proof at trial rather than relying on evidence that is individual to the putative class members. In re Mercedes-Benz, at 4. Plaintiffs’ motion for class action treatment was supported in part by three expert reports; the experts supported plaintiffs’ claim that Mercedes failed to adequately inform customers that analog service would terminate at the end of 2007, even though “discontinuation of analog service in early 2008 was a regulatory certainty at the time the FCC finalized its rule on August 8, 2002.” Id., at 3. “Mercedes began including Tele Aid systems in most of its vehicles in 2000,” id., and “touted its ability to provide subscribers with emergency road-side assistance, remotely unlock doors, and track stolen vehicles,” id., at 7. Certain of these vehicles relied solely on analog signals over wireless telephone networks; the company subsequently sold vehicles that were capable of using both analog and digital signals. Id. We do not discuss the facts in greater detail here, see id., at 7-12. The basis of plaintiffs’ class action certification motion was that “this case is particularly well-suited to class treatment because (1) their claims ‘arise from a single course of conduct that affect[ed] large numbers of consumers,’ and (2) the costs to each class member of pursuing his or her suit would exceed any potential recovery.” Id., at 13. Defense attorneys opposed class action treatment because (1) a nationwide class should not be certified as the claims of each named plaintiff are governed by the laws of their respective home states, which differ in material ways, and (2) common questions of fact do not predominate. Id., at 13-14.

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

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CAFA Class Action Defense Cases–In re Hannaford Bros.: First Circuit Affirms Remand Of Class Action Holding Home State Exception To CAFA (Class Action Fairness Act) Jurisdiction Applies

Class Action on Behalf of Florida Citizens Against Florida Corporation, Removed to Federal Court under Class Action Fairness Act (CAFA), Properly Remanded to State Court because Home State Exception to CAFA Jurisdiction Applies First Circuit Holds

Plaintiff filed a class action in Florida state court against Kash N’ Karry Food Stores (a chain of grocery stores in Florida) alleging “alleging that Kash N' Karry had failed to adopt adequate security measures to protect its customers' credit card information.” In re Hannaford Bros. Co. Customer Data Security Breach Litig., 564 F.3d 75 (1st Cir. 2009) [Slip Opn., at 3]. According to the allegations underlying the class action, a computer hacker stole from defendant the credit and debit card information of approximately 1.6 million Kash N’ Karry customers, and limited the class action’s definition to Florida residents, id., at 3-4. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), and the Judicial Panel on Multidistrict Litigation coordinated plaintiff’s class action for pretrial purposes with two dozen other class actions in the District of Maine. Id., at 4. The other 24 class actions had been filed against entities that were related to Kash N’ Karry; specifically, its sister corporation Hannaford Brothers, and their common parent company, Delhaize America. Id. Plaintiff moved to remand his class action to state court under the home state exception to CAFA jurisdiction; the district court granted plaintiff’s motion and the First Circuit gave defendant leave to appeal. Id. The Circuit Court stated that this case “presents an issue of first impression for this circuit regarding the application of the home state exception to federal jurisdiction under [CAFA].” Id., at 2. Defense attorneys argued that the class action complaint had been drafted to defeat CAFA jurisdiction “in violation of congressional intent”; plaintiff responded that the home state exception to CAFA jurisdiction applied and, accordingly, that the district court order remanding the class action to state court was correct. Id. The Circuit Court affirmed the remand of the class action to state court, holding that the class action complaint fell squarely within the home state exception to CAFA jurisdiction.

CAFA’s home state exception “requires a federal court to decline to exercise jurisdiction if at least two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the state where the action was originally filed.” In re Hannaford, at 2 (citing 28 U.S.C. § 1332(d)(4)(B)). The First Circuit observed that plaintiff’s class action complaint limits the scope of the class to Florida citizens, and is brought against a single corporation, Kash N’ Karry, which also is a Florida citizen. Id. The district court remanded the class action to state court on the basis of the home state exception, and the Circuit Court affirmed, rejecting defense attorney claims that “the application of CAFA's home state exception depends on a broader assessment of the claims brought by others who do not fall within the complaint's class definition or of the claims available to the class against other possible defendants.” Id.

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

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McDonald’s Class Action Defense Cases–In re McDonald’s French Fries: Illinois Federal Court Denies Class Action Treatment Of Consumer Fraud Class Action Complaint Because Individual Issues Predominate Over Common Issues

Class Action Complaint Alleging Consumer Fraud/Deceptive Practices Based on Alleged Misrepresentation by McDonald’s as to Whether its Potato Products Contained Certain Allergens did not Warrant Class Action Treatment because Individual Issues Predominate Illinois Federal Court Holds

Plaintiffs filed a nationwide class action against McDonald’s alleging “violations of all of the fifty states’ and the District of Columbia’s consumer fraud and/or deceptive trade practices acts, breach of express warranty, and unjust enrichment”; the class action complaint asserted that plaintiffs suffer from “certain medical conditions” and were deceived by McDonald’s as to the ingredients contained in its french fries and hash browns. In re McDonald’s French Fries Litig., ___ F.Supp.2d ___ (N.D. Ill. May 6, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action, McDonald’s would par-fry (or blanch) its potato products “in an oil made of 99% vegetable oil and 1% natural beef flavor”; the beef flavor, in turn, contained “hydrolyzed wheat bran and hydrolyzed casein (a dairy product).” Id. McDonald’s would advertise its potato products, however, as “gluten, wheat, and dairy-free,” thus making McDonald’s representations (according to the class action) “at best incorrect, if not intentionally misleading” – claims that McDonald’s denied. Id., at 2. (However, McDonald’s later corrected its disclosures about its potato products.) Plaintiffs disclaimed any physical injury from eating the potato products but alleged economic harm in that they would not have purchased products with allergens (i.e., gluten, wheat or dairy) but for McDonald’s misrepresentations. Id. The class action sought to recover the “actual economic harm” suffered by the putative class – “(i.e., the purchase price of the Potato Products) based on the difference in value between the gluten, wheat, dairy, and allergy-free products plaintiffs wanted and the non-conforming products they actually received.” Id., at 2-3. Plaintiffs’ moved the district court to certify the litigation as a nationwide class action; defense attorneys argued against class action treatment. Id., at 3-4. The district court determined that class action treatment was not warranted and therefore denied plaintiffs’ class action certification motion.

Plaintiffs proposed to define the nationwide class to include “All persons residing in the United States…(i) who purchased Potato Products from McDonald’s restaurants on or after February 27, 2002 through February 7, 2006 and (ii) who at the time of purchase had 3 been medically diagnosed with celiac disease, galactosemia, autism and/or wheat, gluten or dairy allergies.” McDonald’s, at 4. After summarizing the Rule 23 requirements governing class action motions and noting the “broad discretion” afforded district courts in deciding whether to grant such motions, see id., at 3-4, the court noted that plaintiffs sought certification of a Rule 23(b)(3) class, which requires (in addition to the four elements set forth in Rule 23(a) of numerosity, commonality, typicality and adequacy of representation) that plaintiffs demonstrate “(1) common issues of law and fact predominate, and (2) a class action is superior to other forms of adjudication,” id., at 4 (citation omitted). But preliminarily, the district court observed that the proposed class is overly broad, as the definition includes people who never saw or heard anything from McDonald’s concerning whether the potato products were allergen free. Id., at 5. This was important given that none of the named plaintiffs suffered any physical reaction from eating McDonald’s potato products despite allergens, id., at 6. As the federal court concluded at pages 6 and 7, “It is fairly assumable…that many persons in the class as defined by plaintiffs have gone on eating defendant’s Potato Products since defendant corrected its disclosure. By any definition, these people have suffered no injury, not even the economic one claimed in this lawsuit.”

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

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Unusually High Number Of New Class Actions Filed But Labor Law Class Actions Retain 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 May 1 - 7, 2009, during which time an unusually high number of new class actions were filed -- 61. Labor law class action lawsuits generally top the list, often by a wide margin. During this reporting period, only 19 of the new class actions involved labor law claims, representing a relatively low 31% of the total number of new class actions filed during the past week. By comparison, class actions alleging employment-related claims generally account for more than half of the total number of new class actions filed in California during any given week. As one might guess from the large number of class actions filed and the comparatively low number of labor law class actions filed, several other categories met the 10% threshold. There were 14 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (23%). There were also 11 new class actions alleging violations of federal securities laws (18%), though almost all of them (9) were against Sequenom. And finally, there were 7 new class actions alleging violations of the Americans with Disabilities Act (ADA), representing 11% of the total number of new class actions filed during this reporting period.

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

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Class Action Defense Cases—In re Bayer: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs’ Motions To Centralize Class Action Litigation And Transfers Class Action To Eastern District Of New York

Judicial Panel Grants Plaintiffs’ Separate Requests for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Supported by Defendants, and Transfers Class Actions to Eastern District of New York

Eight class actions – four in New Jersey, two in Illinois and one each in California and New York – were filed against various Bayer defendants “arising from Bayer’s marketing and sale of Bayer Aspirin with Heart Advantage or Bayer Women’s Low-Dose Aspirin Plus Calcium, or both.” In re Bayer Corp. Combination Aspirin Products Marketing & Sales Practices Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 14, 2009) [Slip Opn., at 1]. According to the class action complaints, “Bayer marketed these products without approval from the United States Food and Drug Administration and deceived the plaintiffs and putative class members with respect to the safety and efficacy of the products.” Id., at 2. Class action plaintiffs filed three separate motions with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407. Id., at 1. Plaintiffs in the New York class action sought centralization in the Eastern District of New York; plaintiffs in the four New Jersey class actions and the two Illinois class actions originally sought centralization in their respective jurisdictions, but at oral argument they, too, supported centralization in the Eastern District of New York. Id. Plaintiffs in the California class action requested that the Panel defer ruling on the motions until the district court ruled on their motion to remand their class action to state court; alternatively, they requested centralization in the Southern District of California. Id. Defendants Bayer and Bayer Healthcare supported centralization of the class actions (including the California class action), and recommended transfer either to the Southern District of Illinois or Eastern District of New York. Id.

The Judicial Panel granted the motion to centralize the class action lawsuits, agreeing that centralization “will eliminate duplicative discovery; prevent inconsistent pretrial rulings, particularly with respect to class certification issues; and conserve the resources of the parties, their counsel and the judiciary.” In re Bayer, at 1-2. The Panel agreed further that the Eastern District of New York was the appropriate transferee court, particularly given its wide support. Id., at 2. Accordingly, the Judicial Panel ordered the various class actions transferred to the Eastern District of New York, id.

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

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Bankruptcy Class Action Defense Cases–in re Bally Total Fitness: New York Bankruptcy Court Denies Motions By Class Action Plaintiffs To Permit Class Proof Of Claim, To Certify Class Actions Or To Lift Stay

Motions by Plaintiffs in Class Actions Asserting Labor Law Violations Denied because Class Action Device not “Superior” means of Resolving Employees’ Claims given Bankruptcy Proceeding and because Lifting Stay to Allow Class Action Litigation to Proceed would Waste Defendants’ Resources and Distract from Reorganization Efforts New York Bankruptcy Court Holds

Certain putative class action lawsuits were filed against Bally Total Fitness, which subsequently filed a petition for bankruptcy protection. In re Bally Total Fitness of Greater New York, Inc., 402 B.R. 616, 2009 WL 931537, *1 (S.D.N.Y. 2009). Plaintiffs in one of the class action lawsuits, the “Carrera” plaintiffs, “brought…a class action on behalf of thousands of employees” and alleged that Bally made employees work off-the-clock, failed to provide meal and rest periods, failed to provide timely itemized wage statements or final paychecks, and failed to reimburse business expenses. Id. Plaintiffs in another class action lawsuit, the “Flores” plaintiffs, “brought…a class action on behalf of Bally employees…for unpaid wages, failure to provide meal and rest periods mandated by California law and failure to reimburse business expenses.” Id., at *2. The Flores class action was originally filed in California state court, but defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act of 2005), id. Bally’s employees had entered into a written agreement with the company, the “Bally Total Fitness Corporation Employment Dispute Resolution Procedure” (EDRP), which required that employment-related claims be submitted to arbitration and which contained a class action waiver provision such that employment claims were required to be arbitrated individually. Id. In Carrera, Bally lost a motion to compel arbitration of the individual claims, and appellate proceedings were stayed due to the bankruptcy filing; in Flores, Bally’s motion to compel arbitration of individual claims was pending when the company filed bankruptcy, so a decision on that motion was stayed. Id. Plaintiffs in the Carrera class action moved the bankruptcy court to (1) permit them to file a “class proof of claim,” and (2) lifting the automatic stay so the class action could proceed in state court in order to “liquidate” the claims or, alternatively, certifying the litigation as a class action. Id., at *1. Plaintiffs in the Flores class action moved the bankruptcy court to certify the litigation as a class action. Id. The bankruptcy court denied each motion.

With respect to the Carrera plaintiffs’ request for leave to file a class proof of claim, the bankruptcy court noted that there is “no absolute right to file a class proof of claim under the Bankruptcy Code.” In re Bally, at *2 (citations omitted). Rather, in deciding whether to permit the filing of a class proof of claim, bankruptcy courts consider “a) whether the class claimant moved to extend the application of Rule 23 to its proof of claim; b) whether ‘the benefits derived from the use of the class claim device are consistent with the goals of bankruptcy’; and c) whether the claims which the proponent seeks to certify fulfill the requirements of Rule 23.” Id. (citation omitted). The bankruptcy court denied the motion because plaintiffs “failed to demonstrate that the requested relief would both be consistent with the goals of bankruptcy and satisfy the Rule 23 requirements.” Id. In this regard, the Court explained that class proofs of claim are consistent with the goals of bankruptcy “in two principal situations: (i) where a class has been certified pre-petition by a non-bankruptcy court; and (ii) where there has been no actual or constructive notice to the class members of the bankruptcy case and Bar Date.” Id., at *3. As neither situation applied to either the Carrera or Flores class action complaints, the Court denied the motion to permit the filing of a class proof of claim. Id.

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

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FACTA Class Action Defense Cases–Harris v. Mexican Specialty: Eleventh Circuit Reverses Dismissal Of FACTA Class Actions Holding FCRA's Statutory-Damages Provision Not Unconstitutional

District Court Erred in Dismissing FACTA Class Actions based on Conclusion that FCRA’s Statutory-Damages Provision was Unconstitutional Facially and As-Applied, Requiring Reversal of Court Order and Reinstatement of Class Actions Eleventh Circuit Holds

Plaintiffs filed two separate class action complaints against Mexican Specialty Foods and Rave Motion Pictures alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA), which is part of the federal Fair Credit Reporting Act (FCRA); the class action complaints asserted that the defendants willfully violated FACTA by providing customers with “electronically-generated receipt[s] [that] included more than the last five digits of the customer's card number and/or its expiration date.” Harris v. Mexican Specialty Foods, Inc., 564 F.3d 1301, 2009 WL 944201, *1-*2 (11th Cir. 2009). FACTA provides, in pertinent part, that “no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” Id., at *1 (quoting 15 U.S.C. § 1681c(g)(1)). Each class action sought statutory damages, punitive damages and attorney fees and costs, pursuant to 15 U.S.C. § 1681n(a). Id., at *2. Defense attorneys in each class action moved for summary judgment on the grounds that the FCRA’s statutory-damages provision was unconstitutional, id.; the motion was directed toward that provision of the FCRA which authorizes the recovery of statutory damages “of not less than $100 and not more than $1,000.” Id., at *1 (quoting 15 U.S.C. § 1681n(a)(1)(A)). The federal government intervened as a party-plaintiff to argue in favor of the statute’s constitutionality. Id., at *2. The district court issued a single order covering both class actions: the court order “declar[ed] the FCRA's statutory-damages provision 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. The district court therefore dismissed both class actions with prejudice, id. The plaintiffs in each class action appealed; the Eleventh Circuit consolidated the cases for purposes of appeal and reversed.

Reviewing the district court’s order de novo, the Eleventh Circuit first addressed whether the case “is ripe for adjudication,” that is, whether there is an actual case and controversy. Harris, at *3. This analysis required a determination of whether the district court found the statutory-damage provision unconstitutional on its face or as-applied, id. The Circuit Court held that the matter was ripe as to a facial challenge to the statute’s constitutionality, because the district court held that “the statute provides no guidance for juries in determining whether to award damages at the upper or lower end of the $100 to $1,000 statutory-damages range” thus leaving the amount of damages to be awarded “to the whim of the jury” creating the potential of inconsistent “willy nilly” verdicts. Id. However, the Eleventh Circuit held that the matter was not ripe for adjudication as to an as-applied challenge “[b]ecause such a challenge asserts that a statute cannot be constitutionally applied in particular circumstances, it necessarily requires the development of a factual record for the court to consider.” Id. (citation omitted). The district court’s ruling in this regard had been premised on a number of assumptions that the Circuit Court found to be unwarranted “because many of the court's assumptions required the resolution of issues which are directly disputed.” Id., at *4. The Court therefore concluded that an as-applied challenge was not ripe for adjudication, id., at *5.

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

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MetLife Class Action Defense Cases–Beavers v. Metropolitan Life: Fifth Circuit Affirms Dismissal Of Class Action Holding Class Action Complaint’s Claims Were Time-Barred

Class Action Complaint Alleging Breach of Contract Against MetLife Properly Dismissed because Four-Year Statute of Limitations Expired Long Before Plaintiffs Filed Class Action Fifth Circuit Holds

Plaintiffs filed a class action against their life insurer, Metropolitan Life, for breach of contract. Beavers v. Metropolitan Life Ins. Co., 566 F.3d 436, 2009 WL 1067035, *1 (5th Cir. 2009). According to the allegations underlying the class action, the insurance policies issued to plaintiffs, and managed by MetLife’s “Personal Insurance line of business” were investment vehicles as well as insurance policies, and called for MetLife’s policyholders “to receive dividends paid by Personal Insurance from the surplus accruing on their policies.” Id. The class action complaint alleged that MetLife “impermissibly allocate[ed] surplus profits from Personal Insurance to other lines of business.” Id. The class action thus alleged that MetLife “breached their investment contracts and deprived them of dividend income to which they were entitled.” Id. Plaintiffs filed the class action in 1998, and the district court certified the litigation as a class action in 2004. Id. Defense attorneys moved to dismiss the class action on the grounds that the claims were time-barred as they allegedly arose in the 1980s; the district court held that the discovery rule did not toll the statute of limitations and dismissed the class action complaint. Id. The Fifth Circuit affirmed.

Apply de novo review and the substantive law of Texas, see Beavers, at *2, the Fifth Circuit began by noting that a four-year limitations period applies to breach of contract claims in Texas, id. As the statute of limitations plainly ran long before plaintiffs filed the class action complaint, the question was whether the discovery rule or American Pipe doctrine tolled the limitations period. Id. With respect to the discovery rule, the Circuit Court noted that Texas permits only a “very limited exception to statutes of limitations.” Id. (citation omitted). A preliminary inquiry is whether the injury is “inherently undiscoverable.” Id. The Fifth Circuit further noted that “no Texas court has found a breach of contract to qualify as inherently undiscoverable, yet the Texas Supreme Court has not foreclosed the possibility.” Id., at *3 (citation omitted). In rejecting plaintiffs’ effort to bring their case within the scope of the discovery rule, the Circuit Court held that it was insufficient for plaintiffs – who conceded that MetLife did not have a fiduciary relationship with them – to claim to be in a “special relationship of confidence and trust” with MetLife. Id. Under Texas law, in the absence of a fiduciary relationship “contracting parties must verify each other's performance.” Id. As a factual matter, the Court also held that plaintiffs could have discovered their alleged injury within the four-year limitations period, see id., at *3-*5.

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

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Quiznos Class Action Defense Cases–Harlow v. Sprint: Colorado Federal Denies Grants Class Action Treatment Of Class Action Complaint By Prospective Franchisees Against Quiznos Because Of Class Action Bar In Agreement

Class Action Bar in Franchise Agreement Precluded Class Action Certification of Lawsuit by Franchisees Against Quiznos because Class Action Bar was not Unconscionable under Colorado Law Federal Court Holds

Plaintiffs filed a class action against various Quiznos entities and others (collectively “Quiznos”) alleging defendants misled prospective franchisees; the class action complaint asserted that it was only after plaintiffs signed 30-page franchise agreements that defendants revealed the restaurant locations were “not as profitable as Quiznos had promised.” Bonanno v. The Quizno’s Franchising Co., LLC, ___ F.R.D. ___ (D.Colo. April 20, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, Quiznos also failed to provide plaintiffs with “any of the promised expert help,” but nonetheless demanded that they open restaurants within the one-year deadline set forth in the franchise agreements or the agreement would be terminated and Quiznos would keep the franchise fee. Id., at 2. The class action centered, then, on claims on behalf of “sold but not opened franchisees,” id. (Defendants conceded that “not every signed franchise agreement results in a functioning restaurant,” id., at 4.) Plaintiffs moved the district court to certify the litigation as a class action, id., at 3. Defendants opposed class action treatment, primarily on the ground that Section 21.4 of the franchise agreement prohibits class action lawsuits between the franchisor and the franchisee. Id., at 3. The district court held that class action waiver was enforceable and, accordingly, that class action certification was not warranted. The federal court therefore denied the motion. (We do not discuss in detail the 53-page opinion filed by the district court; it is well worth reading and it is available at the link following this article. For our purposes, the important issue is the enforceability of the class action waiver in the franchise agreement.)

Plaintiffs argued that “[t]he most significant issue…is whether, in light of the provision of the franchise agreements that purports to bar class actions, this case can be maintained as a class action in the first instance.” Bonanno, at 3. The district court held a hearing on the validity of the class action bar, and accepted supplemental briefing on the issue. Id., at 3-4. The district court’s order contains a lengthy discussion of the facts that “help elucidate the Court’s decision to enforce the class action bar.” Id., at 4. We do not summarize those facts here, see id., at 4-17, or the federal court’s summary of the standard of review, see id., at 17-19, or the court’s summary of the “history and evolution of class action litigation,” see id., at 20-25, because the district court held that the class action bar was enforceable and therefore did not address the merits of Rule 23, id., at 19.

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

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New Labor Law Class Action Filings Again Seize Top Spot Among Weekly Class Action Lawsuits Filed In California State And Federal

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 24 - 30, 2009, during which time 37 new class actions were filed. Labor law class action lawsuits generally top the list, often by a wide margin. This proved to be true yet again. During this reporting period, 20 of the new class actions involved employment-related claims (representing 54% of the total number of new class actions filed during the past week). The only other category to meet the 10% threshold involved class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, with 7 new class action complaints (19%).

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

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MDL Class Action Defense Cases—In re Staples: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In District Of New Jersey

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 Class Actions to District of New Jersey

Six class actions – two in Massachusetts, and one each in Connecticut, New Jersey, New York and Pennsylvania – were filed against Staples alleging labor law violations; specifically, the class action complaints allege “that Staples assistant, operations and/or sales managers are entitled to overtime pay under the Fair Labor Standards Act and/or various state wage and hour statutes.” In re Staples, Inc., Wage & Hour Employment Practices Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 14, 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 District of New Jersey or, alternatively, in the District of Massachusetts; none of the class action plaintiffs opposed centralization, though plaintiffs in four of the class actions supported transfer to New Jersey while plaintiffs in the remaining class actions supported transfer to Connecticut. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the District of New Jersey was the appropriate transferee court “because (1) this choice is supported by all parties at least in the alternative, and (2) this district is already presiding over a similar action against Staples which is in its final stages.” Id. Accordingly, the Panel ordered all class actions outside of New Jersey transferred as requested by Staples, id., at 1-2.

Download PDF file of In re Staples Transfer Order