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

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Heavy Week For California Class Action Lawsuits But Labor Law Class Actions Maintain Dominance Among Weekly Class Action Lawsuits Filed In California State And Federal Courts

To assist class action defense attorneys anticipate the types of cases against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in 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 June 19 - 25, 2009, during which time an unusually high number of new class actions -- 62 -- were filed. As a general rule, class actions alleging employment-related claims top this list by a wide margin. During this reporting period, 29 of the new class actions involved labor law claims, representing only 47% of the total number of new class actions filed during the past week. Despite the high number of class actions filed, only two other categories met the 10% threshold: there were 15 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, accounting for 24% of the new class actions filed, and 7 new class actions alleging violations of the Americans with Disabilities Act (ADA), representing 11% each.

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

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Class Action Defense Cases–Walker v. Calumet City: Seventh Circuit Reverses Attorney Fee Award To Class Action Plaintiff Holding Dismissal Of Class Action As Moot Did Not Make Plaintiff Prevailing Party

Class Action Plaintiff not Entitled to Attorney Fee Award under 42 U.S.C. § 1988 Following District Court Dismissal of Class Action as Moot because Plaintiff was not “Prevailing Party” within the Meaning of Supreme Court Authority Seventh Circuit Holds

Plaintiff filed a putative class action against Calumet City, Illinois, alleging that she suffered damage because the enforcement of a local ordinance interfered with her ability to sell real property that she owned in the City; the class action complaint alleged that “the ordinance violated her right to procedural due process and unreasonably restrained the alienability of her property.” Walker v. Calumet City, Illinois, 565 F.3d 1031, 1032 (7th Cir. 2009). Specifically, the class action complaint challenged the City’s Point of Sale (POS) ordinance, which provides that real property within the city limits “cannot be sold until it is inspected and deemed in compliance with city codes, a fee is paid, and transfer stamps are issued.” Id. In the normal course of events, while the class action complaint was pending, plaintiff’s property was inspected under the City’s Rental Dwelling Inspection (RDI) ordinance, which requires annual inspections of rental properties to ensure compliance with city health, zoning and building codes. Id., at 1033. The inspection of plaintiff’s property revealed “multiple areas…where repair was necessary”; plaintiff completed the required repairs, and the City “pronounced her property compliant with the City’s building and zoning codes.” Id. Defense attorneys then moved to dismiss the class action as moot because, since plaintiff’s property passed the RDI, “an inspection under the POS ordinance to check for the same violations would be redundant.” Id. Over plaintiff’s objection, the district court dismissed the class action as moot based on the City’s representations that it would not enforce the POS ordinance against plaintiff, id., at 1032, 1033. Plaintiff then moved for an award of attorney fees, arguing that she was the “prevailing party” 42 U.S.C. § 1988; defense attorneys countered that the class action had been dismissed as moot “prior to any judicial determination on the merits.” Id., at 1033. The district court agreed with plaintiff and awarded her $189,000 in attorney fees, id. The Seventh Circuit reversed.

The Circuit Court did not find this to be a difficult case because, while the “catalyst rule” for evaluating attorney fee awards had been used in the Seventh Circuit prior to 2001, the Supreme Court rejected that rule in Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, 532 U.S. 598 (2001), holding at page 606 that a party was not a prevailing party unless there was a “material alteration in the legal relationship of the parties.” Walker, at 1033-34 (citations omitted). This “alteration” in the relationship of the parties “must arise from a court order.” Id., at 1034 (citation omitted). The Seventh Circuit explained at page 1034, “In Buckhannon, the Supreme Court gave two examples of when a party should be considered prevailing: first, when ‘the plaintiff has received a judgment on the merits’; second, when the plaintiff has ‘obtained a court-ordered consent decree.’ [Citation.] In general, we have stated that ‘[i]t could not be clearer that a voluntary settlement by the defendant ... does not entitle a plaintiff to attorneys' fees.’ [Citation.]”

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

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Labor Law Class Action Defense Cases–D'Este v. Bayer: Ninth Circuit On Class Action Appeal Certifies Two Questions To California Supreme Court As Central Issues In Numerous Federal Court Class Action Appeals

Summary Judgment in Labor Law Class Action Turned on Issues of First Impression Recurrent in Federal Court Class Action Appeals, Warranting Referral of Questions Underlying Class Action to California Supreme Court for Resolution Ninth Circuit Holds

Plaintiff filed a putative class action against her employer, Bayer Pharmaceuticals, in California state court alleging labor law violations; specifically, the class action complaint asserted that Bayer misclassified pharmaceutical sales representatives (PSRs) as exempt employees, and accordingly failed to pay them overtime or provide them with meal breaks to which they would be entitled as non-exempt employees. D'Este v. Bayer Corp., 565 F.3d 1119, 1121-22 (9th Cir. 2009). Defense attorneys removed the class action to federal court, and the district court granted Bayer’s motion for summary judgment “finding that [plaintiff] was exempt under California's outside sales exemption”’ and based on that finding, the district court did not address whether Bayer also was correct in relying on the “administrative exemption” in its classification of PSRs. Id., at 1122. Plaintiff appealed, id., at 1122. The Ninth Circuit observed that “The question whether PSRs are exempt under California's outside salesperson and administrative exemptions is the central issue in multiple class action lawsuits in the Ninth Circuit as well as in other circuits.” Id. Accordingly, the Circuit Court – pursuant to Rule 8.548 of the California Rules of Court – certified two questions to the California Supreme Court, id., at 1120.

The Ninth Circuit summarized the relevant facts as follows. Bayer gave plaintiff a list of doctors and hospitals, as well as a list of products, for which she was responsible: “[Plaintiff’s] job was to communicate information about her Bayer products to her roster of doctors and seek their non-binding commitment to write prescriptions for those products. She was also responsible for communicating with hospitals in her territory to influence them to add the Bayer products for which she was responsible to their formularies.” D’Este, at 1121. Plaintiff was “trained on a message” and was required to “adhere closely to the information provided by Bayer about its products”; beyond this, however, “she had the freedom to develop her own strategy for communicating with and influencing doctors.” Id. Additionally, she “had flexibility regarding how she spent her day,” id., at 1122. Specifically, “[Plaintiff] developed her own schedule for meeting with the doctors on her list. She received little or no daily supervision, and saw her manager once every six to eight weeks.” Id. According to the class action complaint, plaintiff regularly worked more than 8 hours per day and more than 40 hours per week, id. For this, she received between $81,000 and $103,000 per year in compensation, id., at 1121. And plaintiff was “not required to keep or maintain set hours.” Id., at 1122.

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

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CAFA Class Action Defense Cases–Thomas v. Bank of America: Eleventh Circuit Affirms Remand Of Class Action To State Court Holding Evidence Insufficient Of Amount In Controversy Under Class Action Fairness Act

Class Action Improperly Removed to Federal Court under Class Action Fairness Act (CAFA) because Defendant Failed to Adequately Establish that the $5 Million Amount in Controversy Requirement Eleventh Circuit Holds

Plaintiff filed a class action in Georgia state court against Bank of America and its wholly-owned subsidiary FIA Card Services (collectively “BofA”) alleging insurance fraud, unfair and deceptive acts, bad faith, and violations of the state’s Racketeer Influenced and Corrupt Organizations Act (RICO); the class action complaint was premised on the allegation that BofA “[sold] a bundled insurance product, known as Credit Protection Plus, to ineligible individuals.” Thomas v. Bank of America Corp., 570 F.3d 1280, 2009 WL 1636535, *1 (11th Cir. 2009). According to the class action, BofA’s credit protection plan provides benefits for various contingencies, including “credit life insurance, credit accident and sickness insurance, involuntary unemployment insurance, hospitalization, and unpaid family leave of absence.” Id. However, the class action complaint alleged that most benefits were conditioned on the customer being gainfully employed for at least 30 hours per week, and that BofA sold the product to individuals (such as plaintiff) who were not so employed. Id. Among the damages prayed for by the class action were treble damages and attorneys’ fees under RICO, id. The class action complaint did not identify the number of individuals in the proposed class or the amount of money sought as damages. Id. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id. However, because the class action complaint was silent on the amount of damages sought to be recovered, it fell to BofA to establish that the amount in controversy exceeded $5 million; it sought to meet this burden by presenting evidence that it collected more than $4.8 million from almost 78,000 customers during the class period, and that because plaintiff sought treble damages and attorney fees “the amount in controversy clearly exceeded $5,000,000.” Id. Plaintiff moved to remand the class action to state court on the grounds that the $5 million threshold had not been satisfied; the district court agreed, finding the $4.8 million inaccurate because the class action “did not allege that all of the Georgia Credit Protection Plus customers were entitled to relief for the entire amount of their Credit Production Plus fees.” Id. BofA appealed, and the Eleventh Circuit affirmed.

The Eleventh Circuit explained that under CAFA a class action is not removable until the defendant receives a document from the plaintiff “be it the initial complaint or a later received paper ... [that] unambiguously establish[es] federal jurisdiction.” Thomas, at *2 (citation omitted). The defendant then has 30 days to file a notice of removal, id. Here, however, the class action complaint does not unambiguously establish federal court jurisdiction under CAFA because it “provided no information indicating the amount in controversy or the number of individuals in the alternative classes.” Id. The Circuit Court concluded, therefore, that remand of the class action to state court was proper “because defendant has not shown the amount in controversy and the sizes of the alternative classes by a preponderance of the evidence,” id. Accordingly, it affirmed the judgment of the district court. Id.

Download PDF file of Thomas v. Bank of America

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

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Merck Class Action Defense Cases–In re Vioxx: California Trial Court Denies Class Action Certification Of Putative Class Action Complaint Against Merck Arising From Sale Of Vioxx

Class Action Complaint Alleging Deceptive Marketing Practices in Sale of Vioxx not Entitled to Class Action Treatment because Individual Issues will Predominate over Common Questions of Law or Fact California State Trial Court Holds

Various class action lawsuits against Merck were consolidated in the Los Angeles Superior Court under the title In re Vioxx Consolidated Cases; the class action lawsuits alleged that Merck knew of the cardiovascular dangers associated with Vioxx long before it voluntarily pulled it from the market. In re Vioxx Conxolidated Cases, Los Angeles Superior Court Case No. JCCP4247 (April 30, 2009) [Slip Opn., at 1-2]. The consolidated class action complaint alleged that “Merck’s deceptive marketing practices violate the unfair competition law [(UCL)]…and false advertising law…, constitute deceptive trade practices under the Consumers Legal Remedies Act [(CLRA)]…, and resulted in unjust enrichment.” Id., at 2. Interestingly, the class action “[did] not allege that Vioxx itself harmed anyone or was ineffective, only that consumers lost money in purchasing it because it was more expensive than, but not better than less expensive [alternatives].” Id. Plaintiffs’ lawyers moved the trial court to certify the litigation as a class action; defense attorneys opposed class action treatment, arguing that “individual issues of causation and reliance predominate over any common issues because Merck knew different things about Vioxx at different times and class members, physicians and TPPs [third party payors] were exposed to different representations at different times and were influenced by representations to varying extents.” Id., at 3. Additionally, defense attorneys argued that individual issues will predominate as to economic injury, and that the named representatives’ claims are not typical of the claims of the class. Id. The trial court denied the motion for class action certification.

After summarizing the standards governing class action certification of UCL and CLRA claims, see In re Vioxx, at 3-4, and after readily determining that the numerosity and ascertainability requirements for class action treatment had been met, id., at 5, the trial court turned its attention to the question of typicality – that is, “whether a sufficient relationship exists between the injury to the named plaintiff and the conduct affecting the class.” Id., at 5 (citation omitted). The trial court found that the claims of the individual plaintiffs were not typical of the TPPs based on Merck’s evidence that “the decisionmaking that goes into purchasing Vioxx on an individual basis is entirely distinct from the process of putting it into a group formulary.” Id. The trial court found further that plaintiffs failed to meet their burden of providing “substantial evidence” that common questions of law or fact will predominate over individual issues affecting the various class members. Id., at 6. The court did agree with plaintiffs that Merck engaged in a “uniform marketing scheme that was likely to deceive patients and physicians,” id., at 6-7, and that the information available to physicians was susceptible to common proof, id., at 8, but plaintiffs must additionally prove “damage suffered ‘as a result of’ a deceptive practice,” and this element was not subject to common proof, id., at 8-11. As the trial court explained at page 9, “Under all of plaintiffs’ causes of action, a central issue will be whether defendant’s alleged misrepresentations or nondisclosures were material to those who purchased Vioxx.” This means that plaintiffs will have to prove reliance, id., at 10, and the evidence presented in opposition to the motion for class certification demonstrates that class-wide proof of reliance will not exist. Id., at 10-11. And under the circumstances of this case, the necessary proof of reliance cannot be inferred. Id., at 11-12. Nor are the claims of the TPPs subject to common proof, id., at 11.

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

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Relatively Low Number Of New Employment-Related Class Action Lawsuits Filed But Labor Law Class Actions Maintain Hold On Top Spot Among Weekly Class Actions Filed In California State And Federal Courts

In order to assist class action defense attorneys anticipate the types of class actions against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in 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 June 12 - 18, 2009, during which time 53 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, 25 of the new class actions involved labor law claims, representing only 47% of the total number of new class actions filed during the past week. Only one other category met the 10% threshold: there were 13 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, accounting for 25% of the new class actions filed.

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

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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 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 violations of state and federal labor laws; specifically, the class action complaints allege that Staples failed to pay its assistant, operations and/or sales managers overtime pay under the federal Fair Labor Standards Act (FLSA) 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 Massachusetts, id. No one opposed the motion; four groups of class action plaintiffs supported the selection of New Jersey, while plaintiffs in the other two class actions favored Connecticut. Id. In the end, all parties agreed on New Jersey as the appropriate transferee court, id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the District of New Jersey was the appropriate transferee court because “(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.

Download PDF file of In re Staples Transfer Order

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

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T-Mobile Class Action Defense Cases–Vega v. T-Mobile: Eleventh Circuit Reverses Class Action Certification Order And Orders Lawsuit To Proceed On Individual Rather Than Class Action Basis

Class Action Certification Order of Labor Law Class Action must be Reversed because District Court Failed to Conduct “Rigorous Analysis” of Rule 23’s Requirements for Class Action Treatment Eleventh Circuit Holds

Plaintiff filed a putative nationwide class action against his former employer, T-Mobile, after it fired him for poor attendance; the class action complaint alleged labor law violations. Vega v. T-Mobile USA, Inc., ___ F.3d ___, 1260-61 (11th Cir. 2009). Specifically, the class action alleged that “by charging back commissions advanced on sales of ‘deactivated’ prepaid service plans, T-Mobile violated the terms of the compensation program, failed to pay commissions earned by the sales representatives, and was unjustly enriched by retaining the benefit of its employees' services without fully compensating them for such services.” Id., at 1262. T-Mobile’s compensation package for retail sales representatives consisted of an hourly wage plus commissions. Id., at 1261. The commissions were incentive-based, paid on the employee’s “net activations” – if a customer canceled service within 180 days of activation then T-Mobile would “charge-back” the commission previously paid “in order to reclaim that amount from the sales representative.” Id. Under T-Mobile’s plan, commissions paid within the 180-day window are “paid as an advance against commissions anticipated to be earned in the future” and “[c]ommissions are not earned until the expiration of the 180-day commission charge back window.” Id. Additionally, T-Mobile, in its sole discretion, determined whether sales qualified for commission payments, id. The class action complaint was filed in Florida state court, id., at 1262, but defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id., at 1263. Plaintiff moved the district court to certify the litigation as a class action; defense attorneys opposed class action treatment and moved for summary judgment. Id. The district court denied T-Mobile’s summary judgment motion, and granted class action certification on behalf of a Florida class only. Id., at 1263-64. Pursuant to Federal Rule of Civil Procedure 23(f), the Eleventh Circuit granted interlocutory review of the class action certification order and reversed. Id., at 1264.

The class action complaint did not impress the Circuit Court, which it characterized as “incomplete and ambiguous.” Vega, at 1263. The vague complaint “simply alleges: (1) that, because prepaid customers paid up-front for their service, T-Mobile ‘bore no risk of non-payment’; (2) that when T-Mobile charged its employees back for commissions on prepaid plans, ‘even though T-MOBILE received the full benefit of its agreement with the prepaid plan customers, T-MOBILE's commission based employees lost the benefits of those sales and the resulting commissions’; and (3) that ‘T-MOBILE has unfair [sic] and unjustly profited from its internal systems error by unduly charging back its employees on the prepaid plans and retaining its employee's [sic] wages for its own use and benefit.’” Id., at 1262. The class action asserted two claims – one for “unpaid wages” and one for “unjust enrichment” – arising out of the central allegation that “T-Mobile improperly withheld or charged back from its employees.” Id. The class action did not allege that employees nationwide were subject to the same compensation structure, id. The Eleventh Circuit noted that the district court certified the litigation as a class action despite two concerns: first, that a nationwide class “lacked commonality due to variations in the contract and employment laws of the fifty states,” and second, that the class action complaint’s allegations “focused on charge backs of commissions already paid, but indicated nothing about any failure to pay commissions in the first instance, the inclusion in the class of T-Mobile ‘employees ... who ... were entitled to receive[ ] commissions ... who did not receive their commissions’ would implicate claims falling outside the scope of the complaint, as pled, and, thus, failed the typicality requirement.” Id., at 1263-64.

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

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Class Action Defense Cases–Ojo v. Farmers: Ninth Circuit Reverses Dismissal Of FHA Class Action Holding Class Action Claims Not Reverse-Preempted And Class Action Did Not Challenge Credit Scoring Per Se

Class Action Alleging Violations of Federal Fair Housing Act (FHA) Claiming Insurer used “Undisclosed Factors” to Compute Credit Scores and, Based on those Scores, Increase Insurance Premiums of Minorities should not have been Dismissed because Class Action did not Challenge Credit Scoring Per Se and because Class Action Claims were not “Reverse-Preempted” by McCarran-Ferguson Ninth Circuit Holds

Plaintiff filed a putative class action against various Farmers Group entities alleging violations of the federal Fair Housing Act (FHA); specifically, the class action complaint alleged disparate impact race discrimination in that Farmers “used ‘a number of undisclosed factors’ to compute credit scores and price homeowners’ insurance policies.” Ojo v. Farmers Group, Inc., 565 F.3d 1175 (9th Cir. 2009) [Slip Opn., at 5700-01]. According to the class action, “Farmers charged minorities higher premiums for homeowners’ property and casualty insurance than the premiums charged to similarly situated Caucasians.” Id., at 5701. Defense attorneys moved to dismiss the class action under Rule 12(b)(1) for lack of subject matter jurisdiction and under Rule 12(b)(6) for failure to state a claim. Id. The district court granted the 12(b)(1) motion on the grounds that the class action claims were “reverse-preempted” by federal law. Id. The Ninth Circuit reversed finding two errors in the district court’s ruling: “First, the district court erroneously read [plaintiff’s] claim as challenging the practice of credit scoring per se. Second, the district court erroneously interpreted Texas state insurance law as permitting disparate impact race discrimination that results from credit scoring, thereby triggering McCarran-Ferguson reverse-preemption.” Id.

Plaintiff, an African-American resident Texas, filed suit after Farmers increased the insurance premium on his homeowner’s policy by 9% on the basis of “unfavorable credit information” revealed by Farmers’ automated credit scoring system. Ojo, at 5703. The class action complaint alleged that Farmers used various factors to target minorities for higher premiums than those charged to “similarly situated Caucasians.” Id. After discussing the McCarran-Ferguson Act which leaves the business of insurance to state law, see id., at 5704-06, and the federal Fair Housing Act (FHA) and Texas state law, see id., at 5706-08, the Ninth Circuit noted that Farmers sought to use Texas state law “as a shield against any scrutiny of its credit scoring practices,” id., at 5709. The Circuit Court rejected this attempt, explaining at page 5709 that the class action “does not challenge Farmers’ use of credit scoring per se”; rather, the class action complaint challenges only Farmers’ use of certain “undisclosed factors” as part of its credit scoring system. The Ninth Circuit agreed with plaintiff that he should have been given an opportunity to conduct discovery in an effort to learn the specific factors used by Farmers’ as part of its credit scoring system. Id.

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

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Class Action Defense Cases–Olvera v. El Pollo Loco: California Court Affirms Denial Of Motion To Compel Individual Arbitration Of Labor Law Class Action Holding Class Action Arbitration Waiver Unenforceable

Class Action Waiver in Arbitration Clause Unconscionable thereby Warranting Denial of Motion to Compel Plaintiff to Arbitrate Individual Claims rather than Pursue Labor Law Class Action Complaint California State Court Holds

Plaintiff, the general manager of an El Pollo Loco restaurant, filed a putative class action against El Pollo Loco alleging violations of California’s labor code; the class action complaint alleged inter alia that defendant misclassified its general managers as exempt when they “spent the majority of their time performing nonmanagerial tasks” and that it wrongfully denied its general managers overtime compensation and meal breaks. Olvera v. El Pollo Loco, Inc., 173 Cal.App.4th 447, 451 (Cal.App. 2009). As part of his employment, plaintiff received written materials that, in part, required that all work-related disputes be resolved through binding arbitration, governed by the Federal Arbitration Act (FAA). Id., 449-50. Class action litigation was prohibited, but the parties were permitted “to conduct discovery and bring motions in an arbitration as provided by the Federal Rules of Civil Procedure,” id., at 450. Defense attorneys moved to compel arbitration of the class action complaint as to plaintiff’s individual claims only, id., at 451. Plaintiff opposed the motion to compel arbitration, arguing that the arbitration clause was unconscionable; defense attorneys argued that the clause was not unconscionable because employees were not required to sign the acknowledgement form by which they were bound to the arbitration clause. Id., at 452. The trial court denied the motion to compel arbitration, concluding that the clause was both procedurally and substantively unconscionable. Id., at 453. Under California law, an order denying a motion t compel arbitration is an appealable order. Cal. Code Civ. Proc., § 1294. Defendant appealed, and the Court of Appeal affirmed.

After summarizing the relevant law regarding arbitration agreements, see Olvera, at 453-54, the appellate court turned first to the issue of procedural unconscionability. The Court of Appeal explained at page 454, “Procedural unconscionability focuses on oppression or unfair surprise, while substantive unconscionability focuses on overly harsh or one-sided terms.” (Citations omitted.) California courts view these two factors on a sliding scale: “The more procedural unconscionability is present, the less substantive unconscionability is required to justify a determination that a contract or clause is unenforceable. Conversely, the less procedural unconscionability is present, the more substantive unconscionability is required to justify such a determination.” Id., at 454 (citations omitted). The appellate court found that the arbitration clause was procedurally unconscionable because of (1) the unequal bargaining power between the employees and the employer, which “makes it likely that the employees felt at least some pressure to sign the acknowledgment and agree to the new dispute resolution policy” even if the company insists that they were not required to do so, and (2) agreement to the dispute resolution procedure was “not an informed decision” because the description of the dispute resolution policy “was totally inaccurate.” Id., at 455-56.

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

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Starbucks Class Action Defense Cases–Chau v. Starbucks: California Appellate Court Reverses $86 Million Class Action Judgment Against Starbucks Holding Labor Law Class Action Claims Failed

Trial Court Judgment in Class Action Alleging Starbucks Violated Labor Code by Sharing Tips with Shift Supervisors Required Reversal because California Law does not Prohibit Starbucks’ Shift Supervisors from Sharing in Tips California State Court Holds

Plaintiff filed a class action against Starbucks alleging violations of California’s Unfair Competition Law (UCL) and Labor Code; the class action complaint alleged that Starbucks alleged shift supervisors to participate in tip pools in violation of California law, specifically Labor Code section 351. Chau v. Starbucks Corp., 174 Cal.App.4th 688 (Cal.App. 2009) [Slip Opn., at 1-2]. The trial court certified the litigation as a class action, id., at 2. Starbucks moved to decertify the class, but the motion was denied. Id., at 6. Prior to trial, the court granted plaintiff’s in limine motion to exclude evidence that shift supervisors serve customers, finding that such evidence was “irrelevant” (though it did allow some evidence on the matter). Id., at 7. Ultimately, the trial court awarded the class $86 million as restitution based on its finding at the conclusion of a bench trial that plaintiff had proved the UCL claim. Id., at 2. Starbucks appealed. The Court of Appeal reversed, holding that Starbucks’ tip sharing policy did not violate California law: “The applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes.” Id. The Court explained that the tip-pooling practice challenged by the class action “concern[ed] an employer's authority to require equitable allocation of tips placed in a collective tip box for those employees providing service to the customer.” Id., at 2-3. The appellate court held at page 3, “There is no decisional or statutory authority prohibiting an employer from allowing a service employee to keep a portion of the collective tip, in proportion to the amount of hours worked, merely because the employee also has limited supervisory duties.” Accordingly, it reversed the trial court judgment.

Starbucks’ thousands of stores are staffed by baristas, shift supervisors, assistant store managers, and store managers. Chau, at 3. The Court of Appeal explained the differences between the store employees as follows: “Baristas are entry-level, part-time hourly employees responsible for customer service related tasks, such as working the cash register and making coffee drinks. Shift supervisors are also part-time hourly employees who perform all the duties of a barista, but are also responsible for some additional tasks, including supervising and coordinating employees within the store, opening and closing the store, and depositing money into the safe. A barista is eligible for promotion to shift supervisor after six months on the job. A store manager is a full-time salaried employee, and has the authority to recruit, hire, promote, transfer, schedule, discipline, and terminate baristas and shift supervisors. In some stores, a store manager is assisted by an assistant store manager, who is also a fulltime salaried employee.” Id., at 3-4. At trial, Starbucks introduced evidence that shift supervisors spend 90-95% of their time “performing the same jobs as baristas,” and that they had “no authority to hire, discipline, or terminate baristas.” Id., at 8. Moreover, shift supervisors are not considered “management” by the company, id. The trial court ruled against Starbucks because it found that shift supervisors “‘supervise’ and ‘direct’ the acts of other employees,” and that they were barred by California law to share in tip pools. Id., at 8-9.

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

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New Labor Law Class Action Lawsuits Maintain Top Spot Among 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 June 5 - 11, 2009, during which time 40 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, only 16 of the new class actions involved labor law claims, representing a surprisingly low 40% 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 23% of the new class actions filed.

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

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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 – one in Central District of California and one in the Eastern District of California – were filed against Payless ShoeSource alleging violations of California’s Song-Beverly 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 California; plaintiffs in the class actions did not respond to the motion, and defense attorneys represented that they supported the request. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Eastern District of California was the appropriate transferee court because no party objects to that district and the first-filed class action is pending there. Id.

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

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CAFA Class Action Defense Cases–Marshall v. H & R Block: Seventh Circuit Reverses Remand Of Class Action To State Court Holding Potential Increase In Liability Rendered Class Action Removable Under CAFA

District Court Erred in Remanding Class Action to State Court because Decertification Order and Dismissal of Co-Defendants Substantially Increased Remaining Defendant’s Liability such that Amended Class Action Complaint did not “Relate Back” to Original Class Action Complaint, Rendering Class Action Removable under Class Action Fairness Act of 2005 (CAFA) Seventh Circuit Holds

Plaintiff filed a putative class action in Illinois state court against various H & R Block companies alleging violations of the state’s Consumer Fraud Act; the class action complaint alleged that defendants “had used deceptive practices to sell ‘Peace of Mind’ insurance against mistakes by H & R Block that increased customers’ tax liabilities.” Marshall v. H & R Block Tax Services, Inc., 564 F.3d 826, 827 (7th Cir. 2009). The state court granted plaintiff’s motion to certify the litigation as a nationwide class action, identifying three classes and defining the defendant class (which it also certified) as “any entity with the names ‘H & R Block’ or ‘HRB’ in its name, or otherwise affiliated or associated with [TSI], and which sold or sells the [Peace of Mind] product.” Id. Eventually all of the defendants were dismissed from the class action except H & R Block Tax Services (TSI), id. “Subsequently, however, the court decertified the defendant class at TSI's request, leaving TSI, which already was the only defendant, with no class-representative status since there was no longer a defendant class. TSI had asked the court to decertify the plaintiff classes as well, and while the court refused to do so, it did narrow the classes to residents of 13 states.” Id. Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act of 2005), id. TSI argued that “decertification of the defendant class had made the case removable under the Class Action Fairness Act because the decertification occurred after the Act's effective date, and had increased TSI's potential liability notwithstanding the elimination of claims by residents of 37 states.” Id., at 828. Plaintiff argued that TSI’s liability had not increased because it had been jointly and severally liable for the misconduct of the other H & R Block defendants, id. The district court found that CAFA did not apply and remanded the class action to state court. Id. TSI sought and received leave to appeal the remand order, and the Seventh Circuit reversed.

The Seventh Circuit explained that TSI is the franchisor of the H & R Block retail tax offices – it does not operate them. Marshall, at 828. TSI claimed that, based on the decertification order, its potential liability has increased by $60 million, and argued that “a ruling that increases a defendant's potential liability may make a case originally filed before the effective date of the Class Action Fairness Act removable if the ruling comes after that date, unless the alteration in the scope of the plaintiff's claim ‘relates back’ to the original claim.” Id. (citations omitted). The district court remanded the class action to state court because it believed that “only a formal amendment of the complaint could commence a new action for CAFA purposes”; the Circuit Court disagreed, noting that such an interpretation would elevate form over substance. Id. Turning to whether the class action complaint adequately alleged joint and several liability, the Circuit Court concluded that the class action did not meet this test and that plaintiff now sought to “pin the entire liability of all the former members of the defendant class on TSI.” Id., at 829. The Seventh Circuit concluded at page 829, “They may, for all we know, be able to do so, but that will, so far as appears, enlarge TSI's liability; the plaintiffs have presented no evidence to the contrary.” This significant change in potential liability did not “relate back” to the original class action complaint – “the expansion of potential liability was a surprise.” Id. Accordingly, the district court erred in remanding the class action to state court, id.

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

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TILA Class Action Defense Cases–Barrer v. Chase: Ninth Circuit Reverses Dismissal Of TILA Class Action Holding “Buried” Disclosures Did Not As A Matter Of Law Comply With TILA

Lender’s Disclosures that APR may Increase based on Information in Credit Report not Clear and Conspicuous Within Meaning of TILA so District Court Erred in Dismissing Class Action Complaint Ninth Circuit Holds

Plaintiffs filed a class action against Chase Bank alleging violations of the federal Truth in Lending Act (TILA), and Regulation Z promulgated thereunder; the class action complaint alleged that plaintiffs “have been the victims of a practice they now call ‘adverse action repricing,’ which apparently means ‘raising . . . a preferred rate to an essentially non-preferred rate based upon information in a customer’s credit report.’” Barber v. Chase Bank USA, N.A., 566 F.3d 883 (9th Cir. 2009) [Slip Opn., at 5996 ]. Specifically, Chase increased plaintiffs’ annual percentage rate (APR) on their outstanding credit card balance from 8.99% to 24.24% based on information obtained from a consumer credit reporting agency; Chase stated that it increased the interest rate “‘outstanding credit loan(s) on revolving accounts . . . [were] too high’ and there were ‘too many recently opened installment/revolving accounts.’” Id., at 5995-96. The class action did not allege that Chase’s practice of increasing the APR based on information in a consumer’s credit report was illegal, but rather that Chase violated federal law by failing to fully disclose it to them. Id. Defense attorneys moved to dismiss the class action complaint for failure to state a claim; the district court agreed with Chase and dismissed the class action. Id., at 5997. Plaintiffs appealed, and the Ninth Circuit reversed.

The Ninth Circuit explained, “We must decide whether a credit card company violates the Truth in Lending Act when it fails to disclose potential risk factors that allow it to raise a cardholder’s Annual Percentage Rate.” Barber, at 5994. Given the purpose of TILA – viz., “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit,” 15 U.S.C. § 1601(a) – the Ninth Circuit reversed. The Circuit Court explained that TILA requires disclosure of “[t]he conditions under which a finance charge may be imposed,” “[t]he method of determining the amount of the finance charge,” and, “[w]here one or more periodic rates may be used to compute the finance charge, each such rate . . . and the corresponding nominal annual percentage rate.” Barber, at 5998 (quoting § 1637(a)(1), (a)(3) & (a)(4)). And under Reg. Z, “creditors must make the required disclosures ‘clearly and conspicuously in writing.’” Id., at 5999 (quoting 12 C.F.R. § 226.5(a)(1)). According to the class action, “Chase failed to disclose completely under the Act why it would change the APRs of its cardholders, in violation of subsection 226.6(a)(2) of Regulation Z.” Id., at 6000.

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

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BofA Class Action Defense Cases–Miller v. Bank of America: California Supreme Court Upholds Reversal Of Class Action Judgment Holding Banks May Offset Overdraft/NSF Fees Against Public Benefit Deposits

$360 Million-Plus Class Action Judgment Against Bank of America Properly Reversed by Court of Appeal because Offsetting Overdraft and Insufficient Funds Fees Against Public Benefit Deposits (such as SSI Benefits) does not Violate State Law California Supreme Court Holds

Plaintiff filed a putative class action against Bank of America alleging, inter alia, violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA); the class action complained that BofA improperly offset Supplemental Security Income (SSI) from bank accounts to cover sums owed the bank. Miller v. Bank of America, NT & SA, ___ Cal.4th ___, 94 Cal.Rptr.3d 31 (Cal. 2009) [Slip Opn., at 4, 5]. Plaintiff opened an account with BofA in 1975; he began receiving SSI benefits in 1992, and in 1994 he began having those benefits deposited directly into his BofA checking account. Id., at 2. BofA erroneously placed $1800 in plaintiff’s account in January 1998, and a few months later it reversed the credit without notice to plaintiff or his consent. Id., at 2-3. In so doing, BofA created a negative balance in plaintiff’s account and, as soon as they were deposited into plaintiff’s account, BofA withdrew the entirety of his May, June and July 1998 SSI payments. Id., at 3. Each month, plaintiff complained that BofA’s conduct meant that he would not have the funds to live, and each month BofA returned the funds to his account, id. BofA also charged plaintiff insufficient funds fees that ranged from $14 to $32 each, up to a maximum of $160 per day. Id., at 3-4. Defense attorneys moved for summary judgment on the class action claims, but the trial court largely denied the motion on the grounds that triable issues of material fact exist, id., at 4-5. The trial court also granted plaintiff’s motion for class action certification; “the class consisted of all Bank customers who received directly deposited public benefit funds without regard to whether those class members had available alternate sources of income to cover their basic living expenses.” Id., at 5. At issue was the $284 million in NSF that BofA debited from customer accounts between January 1994 and May 2003. Id. In a bifurcated trial, a jury found against the bank, awarding $75 million in compensatory damages, plus $1000 in statutory damages to each class member. Id., at 5-6. After the bench trial, the trial court also found against the bank and awarded more than $284 million in damages as well as $1000 to each class member. Id., at 6. In so ruling, the trial court relied on Kruger v. Wells Fargo Bank (1974) 11 Cal.3d 352, 356, which held that “a bank may not satisfy a credit card debt by deducting the amount owed from a separate checking account containing deposits that ‘derived from unemployment and disability benefits’ and, thus, were ‘protected from the claims of creditors.’” Id., at 1. Immediately after Kruger, the California legislature enacted Financial Code section 864, which “comprehensively governs the manner in which banks may exercise the right to set off debts” and “expressly excludes overdrafts and bank charges from the statute’s definition of debt.” Id. The Court of Appeal reversed the judgments, “holding that Kruger did not apply to the Bank’s practice of debiting overdrafts and charging NSF fees to account holders who deposited public benefit funds.” Id., at 6. The California Supreme Court affirmed.

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

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Labor Law Class Actions Maintain Dominance Among Weekly Class Action Lawsuits Filed In California State And Federal Courts

To assist class action defense attorneys anticipate the types of cases against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in 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 29 - June 4, 2009, during which time 50 new class actions were filed. As a general rule, class actions alleging employment-related claims top this list by a wide margin. During this reporting period, 23 of the new class actions involved labor law claims, representing only 46% of the total number of new class actions filed during the past week. Three other categories met the 10% threshold: there were 11 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, accounting for 22% of the new class actions filed, and 5 new class actions each for federal securities violations and Americans with Disabilities Act (ADA) violations, representing 10% each.

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

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

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by Only One Group Class Action Plaintiffs, and Transfers 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 Bayer and various other defendants challenging “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]. Specifically, the class actions alleged “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. Plaintiffs’ lawyers in three of the class actions filed motions with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the district courts in which their own class action lawsuits were pending; plaintiffs in the California class action opposed centralization until the district court had ruled on their motion to remand their class action to state court. Id., at 1. Defense attorneys for two Bayer entities supported centralization of all of the class actions, including the California class action, in either Illinois or New York, id. At oral argument, the moving parties supported centralization in the Eastern District of New York, id. The Judicial Panel granted the motion to centralize the class action lawsuits, id. The Panel further agreed that the Eastern District of New York was the appropriate transferee court, as it was supported by all parties and as Bayer is headquartered in New York “albeit in another federal district.” Id., at 2.

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

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CAFA Class Action Defense Cases–Rynearson v. Motricity: Washington Federal Court Remands Class Action Complaint To State Court Holding Defense Failed To Establish Amount In Controversy Under CAFA

Motion to Remand Class Action to State Court Granted because $5 Million Amount in Controversy Required by Class Action Fairness Act (CAFA) not Established because “Cost” of Complying with Possible Injunction not Sufficient to Support Removal Jurisdiction Washington Federal Court Holds

Plaintiff, a citizen of Florida, filed a class action in Washington state court against Motricity, a Delaware corporation with its principle place of business in Washington; the class action complaint alleged that Motricity, which “represents providers of mobile content in dealing with wireless carriers whose networks and billing services the providers use” and “receives a fee per content transaction billed to cellular telephone users,” violated the Washington Consumer Protection Act by “placing unauthorized charges for mobile content on customers' bills.” Rynearson v. Motricity, Inc., 601 F.Supp.2d 1238, 1239 (W.D.Wash. 2009). The class action sought damages, treble damages, restitution, interest, attorney fees and costs, as well as injunctive and declaratory relief. Id., at 1239-40. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), id., at 1240. Plaintiff moved to remand the class action to state court, arguing that the amount in controversy did not exceed $5 million. Id. The district court granted plaintiff’s motion

The district court noted that plaintiff did not contest that numerosity and minimal diversity existed under CAFA; rather, plaintiff focused on the CAFA requirement that the amount in controversy exceed $5 million. Rynearson, at 1240. The federal court explained at page 1240, “The burden of proving the amount in controversy depends on what the plaintiff has pleaded: (1) when the complaint does not specify an amount of damages, the party seeking removal must prove the amount in controversy by a preponderance of the evidence; (2) when the complaint alleges damages in excess of the jurisdictional requirement, the requirement is presumptively satisfied unless it appears to a ‘legal certainty’ that the claim is actually for less than the amount in controversy requirement; and, (3) when the complaint alleges damages less than the jurisdictional requirement, the party seeking removal must prove the amount in controversy with legal certainty.” (Citation omitted.) In this case, the class action complaint did not seek a specific amount of damages so defendant was required to prove that the amount in controversy had been met, id. The thrust of the defense argument was that the cost of developing an “access code” system to comply with a possible injunction the district court may issue would exceed $5 million, thereby satisfying the amount in controversy requirement. Id. The district court disagreed, holding that the defendant’s interpretation of the class action complaint was flawed because “[t]he plain language of the complaint does not request Defendant to implement its own access code system.” Id. Accordingly, the federal court lacked subject matter jurisdiction over the class action warranting remand of the class action to state court. Id., at 1240-41.

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

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Class Action Defense Cases–Williams v. Mohawk Industries: Eleventh Circuit Reverses Denial Of Class Action Treatment Of RICO Complaint And Remands For Further Consideration Of Class Action Certification

Class Action Complaint Alleging Violations of State and Federal RICO laws based on Employer’s Conspiracy to Hire Illegal Workers and Depress Wages of Legal Workers Satisfied Rule 23(a)’s Commonality and Typicality Class Action Requirements, and Requires Further Analysis by District Court as to Whether Rule 23(b)(3)’s Class Action Requirements had been Met Eleventh Circuit Holds

Plaintiffs filed a class action against their employer, Mohawk Industries, alleging labor law violations; specifically, the class action complaint asserted that defendant conspired with various temporary employment agencies to hire illegal aliens and depress wages. Williams v. Mohawk Industries, Inc., ___ F.3d ___ (11th Cir. May 28, 2009) [Slip Opn., at 2-3]. According to the allegations underlying the class action, defendant’s activities violated state and federal racketeering laws, and defendant was “unjustly enriched by its criminal activities,” id., at 3. Defense attorneys moved to dismiss the class action, ultimately resulting in a circuit court opinion that held the class action’s unjust enrichment claims failed but the class actions state and federal racketeering claims survived. Id., at 3-4. Plaintiffs’ lawyers moved to certify the litigation as a class action, id., at 5; the district court denied class action treatment because it found that the commonality and typicality requirements for class action certification had not been met, id., at 7. The district court also denied plaintiffs’ motion because it found that Rule 23(b)’s requirements for class action certification had not been met. See id., at 8-9. Plaintiffs’ appealed and the Eleventh Circuit reversed.

In denying class action certification, the district court found that commonality did not exist because defendant’s operations were “extremely decentralized,” contradicting the idea of “one grand conspiracy to employ illegal workers.” Williams, at 8. Also, plaintiffs claims were not typical because one of them never worked at a facility that used with temporary workers and because each of them “worked at only a handful” of defendant’s locations. Id. As for Rule 23(b)(2), the federal court found that the prayer for monetary relief was not merely incidental to their demand for injunctive relief, id., and that Rule 23(b)(3) had not been met because common issues did not predominate and because a class action was not the superior means of redress, in part because class action treatment would present an “unmanageable number of individual legal and factual issues,” id., at 8-9.

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

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CAFA Class Action Defense Cases–Tanoh v. Dow Chemical: Ninth Circuit Holds State Lawsuits With Less Than 100 People Not Removable Under Class Action Fairness Act (CAFA) Because Total Number Of Plaintiffs Cannot Be Combined

Class Action Fairness Act (CAFA), which Authorizes Removal of Class Actions and Treats Certain “Mass Actions” as Class Actions for Purposes of Removal, does not Allow Defendant to Combine Plaintiffs from Separate State Court Lawsuits in Order to Satisfy Numerosity Requirement for Removal Ninth Circuit Holds

Seven lawsuits were filed in California state court by 664 plaintiffs against Dow Chemical and others alleging that they were exposed to a Dow chemical product “while working on banana and pineapple plantations” in villages on the Ivory Coast; the lawsuits alleged the chemical exposure caused “a host of serious and permanent injuries…, including sterility and infertility.” Tanoh v. Dow Chemical Co., 561 F.3d 945, 950-51 (9thh Cir. 2009). Each of the lawsuits named fewer than 100 plaintiffs, id., at 951. Dow removed the lawsuits to federal court on the grounds of federal diversity, claiming that the California defendants “had been fraudulently joined to defeat removal to federal court,” and federal jurisdiction under the Class Action Fairness Act (CAFA). Id. CAFA provides for removal not only of class actions but also of “mass actions,” defined as civil lawsuits seeking monetary relief on behalf of 100 or more people. See 28 U.S.C. § 1332(d)(11)(B)(i). CAFA specifically provides that a mass action does not include “any civil action in which ... (II) the claims are joined upon motion of a defendant; ... or (IV) the claims have been consolidated or coordinated solely for pretrial proceedings.” Tanoh, at 951 (quoting 28 U.S.C. § 1332(d)(11)(B)(ii)). The district court remanded the lawsuits to state court sua sponte, “holding that defendants had failed to show that the California companies were fraudulently joined and that removal under CAFA was not proper because each of the actions involved fewer than the one hundred plaintiff statutory minimum for a ‘mass action’ under CAFA.” Id. In so holding, the federal court rejected defense arguments that plaintiffs “had ‘strategically sought to avoid federal jurisdiction’ by filing several separate state court actions in groups fewer than one hundred” because “CAFA specifically excludes actions in which claims have been ‘joined upon motion of a defendant’ from the definition of a ‘mass action,’” id. The Ninth Circuit reversed on the grounds that the lower court “exceeded its authority by ordering a remand sua sponte.” Id. On remand, plaintiffs’ moved for remand and the district court granted the motion on the same grounds as before, id. Dow again sought and received leave to appeal, id., at 952, and the Ninth Circuit consolidated all seven appeals sua sponte, id., at 952 n.3. The Ninth Circuit then affirmed.

The Ninth Circuit concisely defined the issue and summarized its holding at page 950 as follows: “We are asked to decide whether seven individual state court actions, each with fewer than one hundred plaintiffs, should be treated as one ‘mass action’ eligible for removal to federal court under the Class Action Fairness Act of 2005…. CAFA extends federal removal jurisdiction only to civil actions ‘in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact.’ 28 U.S.C. § 1332(d)(11)(B)(i). As neither the parties nor the trial court has proposed jointly trying the claims of one hundred or more plaintiffs in this case, we affirm the district court's order remanding each of the seven individual actions to state court.” The Circuit Court recognized that, “Although plaintiffs in a mass action, unlike in a class action, do not seek to represent the interests of parties not before the court, CAFA provides that a qualifying mass action ‘shall be deemed to be a class action’ removable to federal court under the Act, so long as the rest of CAFA's jurisdictional requirements are met.” Tanoh, at 952. But while CAFA “extends federal diversity jurisdiction to both class actions and certain mass actions, the latter provision is fairly narrow,” id., at 953; specifically, the civil action must involve monetary relief on behalf of at least 100 people, 28 U.S.C. § 1332(d)(11)(B)(i). The Ninth Circuit held at page 953, “By its plain terms, § 1332(d)(11) therefore does not apply to plaintiffs' claims in this case, as none of the seven state court actions involves the claims of one hundred or more plaintiffs, and neither the parties nor the trial court has proposed consolidating the actions for trial.”

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

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Class Action Defense Cases–Simon-Whelan v. The Andy Warhol Foundation: New York Federal Court Denies Motion To Dismiss Class Action Alleging Antitrust Violations In Authentication Of Warhol Works Of Art

Class Action Complaint Alleging Various Defendants Conspired to Wrongfully Deny Authenticity of Warhol Paintings Survives Defense Motion to Dismiss New York Federal Court Holds

Plaintiff filed a class action against the Andy Warhol Foundation for the Visual Arts (a not-for-profit charitable trust), the Estate of Andy Warhol (which was valued at $400 million and which originally owned 100,000 Warhol works of art), Vincent Fremont (the exclusive sales agent for the Foundation’s Warhol paintings) individually and in his capacity as Successor Executor of the Estate, Vincent Fremont Enterprises and the Andy Warhol Authentication Board (a not-for profit corporation responsible for authenticating the works of Andy Warhol) alleging inter alia violations of state and federal antitrust laws; the class action complaint asserted that defendants conspired to control the market for Warhol works. Simon-Whelan v. The Andy Warhol Foundation for the Visual Arts, Inc., ___ F.Supp.2d ___ (S.D.N.Y. May 26, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the amended class action complaint, The Foundation and the Board (the “central actors in the conspiracy”) have “complete control over the authentication of Warhol artwork by virtue of the Board’s status as sole recognized authentication authority for Warhol works and the Foundation’s publication of an official catalogue of Warhol works,” and “the Board has denied the authenticity of works that were previously owned by the Estate and stamped with serial numbers from the Estate…, routinely denies the authenticity of a certain percentage of Warhols, particularly when several from the same series are submitted…, has denied authentication as a means of retaliation…, has approached owners of Warhols to ‘lure’ them into submitting their works for authentication…, and changes its authentication policies when the change suits the Board’s financial interests….” Id., at 3. In essence, the class action alleges that defendants “use their control over the authentication methods to create a scarcity in the market for Warhol artwork and inflate the value of the Warhol works in the Foundation’s possession.” Id., at 3-4. Defense attorneys moved to dismiss the class action complaint. Id., at 2. The district court granted the motion in part and denied the motion in part.

The class action complaint alleged that in 1989, plaintiff purchased a Warhol painting (later entitled “Double Denied”) for $195,000. Simon-Whelan, at 4. Plaintiff claims Warhol created the work in 1965, and that the Foundation and the Estate previously had authenticated the work. Id., at 4-5. In July 2001, plaintiff offered to sell the painting, id., at 5. Defendants “repeatedly urged” him to submit the painting to the Board, and represented to a prospective buyer that it “would not stand by the prior authentications” unless the painting was first submitted to the Board. Id. Plaintiff submitted the painting to the Board in December 2001; the Board denied that it was authenticate but plaintiff was told he could “resubmit the painting with additional documentation.” Id. “Plaintiff spent more than a year documenting the painting’s origin and history and resubmitted the painting with additional documentation in February 2003.” Id. The painting was again denied, id. Plaintiff alleges that the Board “fraudulently denied the authenticity” of the painting, id., at 5-6. The class action complaint alleged that, because of the denials,” Plaintiff was unable to sell any of the Warhols that he owned without first submitting them to the Board and that he was ultimately forced to sell his Warhols through third-parties at a fraction of the price.” Id., at 6.

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