Posted On: August 31, 2009 by Michael J. Hassen Email This Post

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RESPA Class Action Defense Cases–Tubbs v. North American Title: New Jersey Federal Court Dismisses Class Action RESPA Claim And Dismisses Balance Of Class Action After Declining Jurisdiction Over Class Action’s State Law Claims

Class Action Alleging Improper Charges for Settlement Services Failed to State Claim under Real Estate Settlement Practices Act (RESPA) because Class Action Described an “Overcharge” Rather than a “Markup” or a “Fee Split” and Remaining Class Action State Law Claims Dismissed without Prejudice because Court Refused to Exercise Supplemental Jurisdiction over them New Jersey Federal Court Holds

Plaintiffs filed a putative class action against various North American Title entities alleging inter alia violations of the federal Real Estate Settlement Practices Act (RESPA) and the New Jersey Consumer Fraud Act; specifically, the class action complaint alleged that defendants charged improper fees in connection with the refinancing of residential mortgages. Tubbs v. North Am. Title Agency, Inc., 622 F.Supp.2d 207, 207-08 (D.N.J. 2009). According to the allegations underlying the class action complaint, defendants acted as closing agent when plaintiffs refinanced home loans that they had with Wachovia Bank, id., at 208. Among the closing costs charged by defendants was “release recording fee” of $150, but defendants “did not actually record the release of the mortgages”; instead, “Wachovia prepared and recorded the necessary documents…, and passed through to the borrower the $40 per mortgage recording fee charged by the County.” Id. Defense attorneys moved to dismiss the class action, and plaintiffs filed an amended class action complaint that largely tracked the original. Id., at 208-09. Defense attorneys again moved to dismiss the class action, id., at 209. The district court granted the motion.

The federal court explained that the gravamen of the class action’s RESPA claim was that defendants “violated RESPA by charging a settlement fee for which no services were performed.” Tubbs, at 209. Relying on Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384 (3d Cir. 2005), plaintiffs argued that defendants’ charge for recording a release was a “markup” prohibited by Section 8(b) of RESPA. Tubbs, at 209. But the district court explained that Santiago drew a distinction between a “markup” and an “overcharge,” which “occurs when the settlement service provider charges the consumer a fee, of which only one portion is a fee for the reasonable value of ‘services rendered.” Id. (citing Santiago, at 387). The distinction is important because under Santiago “the plain language of Section 8(b) does not provide a cause of action for overcharges.” Id., at 210 (citation omitted). Defendants did not actually engage in “fee splitting” because the fee charged by Wachovia “was not for the same settlement service.” Id. The district court explained at page 210 that the $40 fee charged by Wachovia was “not a fee for any service Wachovia was providing” but represented “the actual cost of recording the discharge with the Camden County Clerk’s office” and Wachovia “was passing on the county recording fee for the mortgage satisfaction as permitted by New Jersey Statute.” Further, the $25 fee charged by Wachovia was “for its work in preparing the mortgage satisfaction and arranging for its recording.” Id.

Continue reading "RESPA Class Action Defense Cases–Tubbs v. North American Title: New Jersey Federal Court Dismisses Class Action RESPA Claim And Dismisses Balance Of Class Action After Declining Jurisdiction Over Class Action’s State Law Claims" »

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

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New Unfair Competition Law (UCL) Class Action Lawsuits Tie Labor Law Class Action Lawsuits In Weekly Class Action Filings In California State And Federal Courts

As a resource to California class action defense attorneys,we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. This report covers the time period from August 21 – August 27, 2009. During that time period, 50 new class action cases were initiated in these California state and federal courts. Generally, class action cases alleging employment law violations top the list, often by a wide margin. This past week, however, there was a significant increase in the number of class actions alleging violations of California's unfair competition law (UCL). There were 21 new labor law class action lawsuit and 21 new UCL class action lawsuits, representing 42% each of the new class actions filed during the reporting period. No other category cracked the 10% threshold of new class action cases.

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

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Class Action Defense Cases—In re Park West Galleries: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Selects Western District Of Washington As Transferee Court

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over the Objections of Class Action Plaintiffs, but Transfers Class Actions to Western District of Washington

Four class actions – two in Florida and one each in Michigan and Washington – were filed against various defendants, including Park West Galleries and Fine Art Sales, alleging “that defendants operated a fraudulent scheme to sell fake, worthless, or low-value artwork at shipboard auctions or in private sales through the use of phony appraisals and/or other sales-related documentation.” In re Park West Galleries, Inc., Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 11, 2008) [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 Michigan; defense attorneys for the Holland America entities – “the only cruise line defendants” – did not oppose the motion, but the Panel noted that they were parties only in the Washington class action. Id. Plaintiffs in one of the Florida class actions and in the Washington class action opposed the motion, or requested transfer to the districts in which their respective class action was pending. Id. The Judicial Panel granted the motion to centralize the class action lawsuits but concluded that the Western District of Washington was the appropriate transferee court because “[that] action is measurably more advanced than the action pending in the Eastern District of Michigan, the forum favored by moving defendants.” Id. Accordingly, the Panel ordered the class actions outside of Washington transferred to the Western District of Washington. Id., at 1-2.

Download PDF file of In re Park West Galleries, Inc., Marketing & Sales Prac. Litigation Transfer Order

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

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Class Action Defense Cases–Martinelli v. Petland: Arizona Federal Court Dismisses RICO Class Action Alleging Sale Of "Mill Bred" Puppies As "Finest Available" But Grants Leave To Amend Class Action Complaint

Class Action Complaint Alleging RICO and State Consumer Protection Law Violations Arising from Sale of “Mill Bred” Puppies to “Unsuspecting Consumers” who Believed they were Acquiring the “Finest Available” Puppies Failed to State Claims Against Defendants Arizona Federal Court Holds

Plaintiffs filed a putative class action against Petland and Hunte Corporation, purportedly on behalf of a class of “residents of various states who bought a Petland puppy, alleging violations of Racketeer Influenced and Corrupt Organizations Act (RICO) [“predicated on alleged violations of the federal mail and wire fraud statutes”], conspiracy, violations of various state consumer protection laws, and violation of Ohio’s Consumer Sales Practices Act.” Martinelli v. Petland, Inc., ___ F.R.D. ___ (D.Ariz. August 7, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, Petland, “a large national retailer of pets,” and Hunte, which “supplies many of the puppies sold at Petland stores,” promised to sell puppies that were “bred under safe and humane conditions by a reputable breeder with proper canine husbandry practices” but were, instead, bred at a “puppy mill,” described by the class action complaint as “a dog breeding operation in which the health of the dogs is disregarded in order to maintain a low overhead and maximize profits.” Id., at 1. The class action alleged that, because of the manner in which they were bred, “their puppies were sick at the time of purchase or became ill shortly thereafter.” Id. The class action alleged a “scheme” to sell mill-bred puppies to “unsuspecting consumers” who believed they were buying “the finest available” puppies from USDA-approved “professional and hobby breeders who have years of experience in raising quality family pets.” Id., at 2. Plaintiffs also claimed that an 8-month investigation by the Humane Society “confirm[ed] Petland’s practice of misrepresenting and concealing the origin of puppy mill puppies.” Id. Defense attorneys moved to dismiss the class action, id., and the district court granted the motion but with leave to amend.

The federal court first addressed Petland’s motion. Petland, at 3. Defense attorneys argued the RICO and state consumer protection claims failed because “ (i) the alleged misrepresentations are mere puffery, rather than actionable statements of material fact, (ii) the allegations of non-disclosure…fail to state a claim for relief, and (iii) the allegations of fraud have not been pled with particularity.” Id. Also, Petland argued that the class action failed to allege injury or causation, and that as a matter of law the unjust enrichment claim failed. Id. The district court agreed. As to the RICO claim, plaintiffs argued that Petland failed to disclose the origins of its puppies, but plaintiffs failed to allege “that Petland has an independent duty to disclose to consumers the origin of Petland puppies.” Id. Similarly, the RICO claims predicated on alleged misrepresentations failed because plaintiffs failed to plead with particularity the manner in which the “finest available” statements were made. Id., at 4-6. The federal court further agreed that plaintiffs failed to adequately allege proximate cause for their alleged damages, id., at 6-8, and because “proximate causation is an essential element of claims brought under state consumer protection statutes,” id., at 8, the district court granted the motion to dismiss those class action claims as well, id., at 9. Finally, because the unjust enrichment claim is also premised on fraud, that claim failed as well, id.

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

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Class Action Defense Cases–DeBlasio v. Merrill Lynch: New York Federal Court Grants Motion To Dismiss Fraud Class Action Against Brokerages Finding Class Action Complaint’s Allegations Failed Under Rules 9(b) and 12(b)(6)

Defense Motions to Dismiss Class Action Granted because Allegations in Class Action Complaint Failed to Meet Rule 9(b)’s Requirements for Pleading Fraud with Specificity and because Class Action’s Allegations Failed under Rule 12(b)(6) New York Federal Court Holds

Plaintiffs filed a putative class action against Merrill Lynch entities, Morgan Stanley entities, Citigroup entities, Charles Schwab entities and Wachovia entities, alleging inter alia violations of the Investment Advisers Act (IAA), the Sherman Antitrust Act, and New York’s General Business Law § 349; the class action complaint alleged that defendants violated state and federal laws by “engaged in ‘deceptive and misleading’ practices relating to a series of ‘Cash Sweep Programs’ that were offered as part of Plaintiffs’ brokerage accounts.” DeBlasio v. Merrill Lynch & Co., Inc., ___ F.Supp.2d ___ (S.D.N.Y. July 27, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action, defendants offered a “Cash Sweep Program” as a feature for brokerage accounts; the program gave customers “the option of having the balance of uninvested funds in their brokerage accounts…placed in — or, ‘swept’ into — other types of investments” so that they could “earn[] interest on the otherwise-uninvested funds in their brokerage accounts.” Id., at 2. While the programs initially swept balances “into money market mutual funds that provided interest rates of approximately five percent” with little profit to defendants, they “subsequently modified their respective Cash Sweep Programs in a deceptive manner in an attempt to capitalize on ‘an immense opportunity for their own profit,’” id., at 2-3. Put simply, the class action alleged that defendants “significantly increased their profits” while “dramatically reduc[ing] the yields paid to their clients on the clients’ uninvested cash,” id., at 3. Defense attorneys for moved to dismiss the class action. Id., at 1. The court granted defendants’ motions and dismissed the class action complaint.

The federal court began by analyzing the sufficiency of the class action’s fraud claims, noting that the case involves “classic fraud allegations” by focusing on defendants’ “deceptive and misleading ‘cash sweep’ programs.” DeBlasio, at 12. Accordingly, plaintiffs were required under Rule 9(b) to plead fraud with specificity, id., at 13, and this applied to each of the claims asserted in the class action save for plaintiffs’ § 349 claim, id., at 15. Plaintiffs’ complaint failed to meet this standard: “Plaintiffs make almost no effort to identify the place and time that the[] alleged misrepresentations were made to them, and Plaintiffs’ allegations regarding why the statements were materially misleading are deficient.” Id., at 16. Accordingly, the district court granted defendants’ motions to dismiss these claims, id., at 17, and dismissed the claims under Rule 12(b)(6) as well, see id., at 17 et seq. Put simply, the allegations in the class action failed to raise the claims against defendants from “conceivable” to “plausible.” Id., at 17-18. We do not here summarize the federal court’s detailed analysis, see id., at 17-46. Finally, the district court rejected plaintiffs’ request for leave to file an amended class action complaint because they failed to identify how any amendment would cure the deficiencies in the complaint. Id., at 46-47. Accordingly, the court granted the motion and dismissed the class action, id., at 47.

Download PDF file of DeBlasio v. Merrill Lynch

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

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Class Action Defense Cases–Greenwich v. Countrywide: New York Federal Court Remands Class Action To State Court Holding Class Action Complaint Fell Within Exception To CAFA (Class Action Fairness Act) Removal

Class Action Complaint Satisfied Amount in Controversy and Minimal Diversity Requirements for Removal under Class Action Fairness Act (CAFA), but Remand Warranted because Plaintiffs Met Burden of Establishing Exception to Removal Jurisdiction in that Class Action Related Solely to Securities New York Federal Court Holds

Plaintiffs, the holders of mortgage-backed securities certificates issued by various trusts, filed a putative class action in New York state court against various Countrywide entities seeking declaratory relief; specifically, the class action complaint alleged inter alia that Countrywide violated the federal Truth-in-Lending Act (TILA). Greenwich Fin. Servs. Distressed Mtg. Fund 3, LLC v. Countrywide Fin. Corp., ___ F.Supp.2d ___ (S.D.N.Y. August 18, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, the Attorneys General for 7 states sued Countrywide in 2008 alleging violations of predatory lending laws; Countrywide settled those lawsuits with “a multistate settlement, requiring it to modify the terms of numerous mortgage loans that it currently services – including at least some of the loans it services on behalf of plaintiffs.” Id., at 2-3. Plaintiffs argued that the loan modifications caused them to suffer monetary damage, and that Countrywide was required to repurchase the loans that it modified “at a price equal to the unpaid principal and accrued interest thereon” in order to make plaintiffs whole. Id., at 2-3. Defense attorneys removed the class action to federal court; Countrywide argued that removal was proper under the Class Action Fairness Act of 2005 (CAFA), and further argued that the class action was removable “because plaintiffs’ claims raise substantial, disputed federal questions under the Truth-in-Lending Act [(TILA)],” id., at 1. Plaintiffs moved to remand the class action to state court. Id. The district court held that neither CAFA nor TILA provided subject-matter jurisdiction over the dispute and remanded the class action as requested.

The district court first examined whether removal jurisdiction existed under CAFA, which authorizes removal of class actions where the amount in controversy exceeds $5 million and where minimal diversity exists. Greenwich, at 4. (A more detailed discussion of CAFA may be found HERE.) Plaintiffs conceded that the requirements for removal had been met, but countered that their class action fell within an exception to removal – viz., a class action that “solely involves a claim…that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security.” Id. (quoting 28 U.S.C. § 1332(d)(9)(C)). The burden of establishing that the exception applied rests with plaintiffs, id. Relying on the Second Circuit decision in Estate of Barbara Pew v. Cardarelli, 527 F.3d 25 (2d Cir. 2008), the district court held that the class action fell squarely within the scope of the exception to CAFA removal jurisdiction, see Greenwich, at 4-8, and rejected Countrywide’s arguments to the contrary, see id., at 8-11.

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

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FLSA Class Action Defense Cases–Boucher v. Shaw: Ninth Circuit Affirms Dismissal Of Labor Law Class Action Claims Against Individual Managers But Reverses As To Class Action's FLSA Claims Against Individuals

Labor Law Class Action Seeking to Hold Individual Managers Liable for Wages due Employees Properly Dismissed as to Class Action Claims under Nevada State Law, but Improperly Dismissed as to Class Action Claims under Federal Fair Labor Standards Act (FLSA) Ninth Circuit Holds

Plaintiffs, former employees and their local union, filed a putative class action in Nevada state court against individual managers of the Castaways Hotel, Casino and Bowling Center alleging violations of state and federal labor laws; specifically, the class action complaint alleged that That the three individual managers – the Chairman and CEO, who had a 70% ownership interest in Castaways, the CFO, who had a 30% ownership interest in the Castaways, and the head of labor and employment matters for the Castaways – were personally liable for the state and federal labor law violations because “each defendant had custody or control over the ‘plaintiffs, their employment, or their place of employment at the time that the wages were due.’” Boucher v. Shaw, ___ F.3d ___ (9th Cir. July 27, 2009) [Slip Opn., at 9731, 9734-36]. According to the allegations underlying the class action, plaintiffs were not paid for their final pay period or were paid late, and were not paid for accrued vacation and holiday time. Id., at 9735. Plaintiffs had filed the lawsuit against the individuals because the Castaways was in Chapter 11 bankruptcy proceedings at the time the plaintiffs were fired, and subsequently went through a Chapter 7 liquidation. Id. Defense attorneys removed the class action to federal court, and moved to dismiss the class action complaint for failure to state a claim. Id., at 9736. The district court dismissed the class action because it found “that the defendants were not ‘employers’ under Nevada law, Local 226 lacks standing to bring a claim under Nevada law and the plaintiffs cannot maintain a cause of action under the Fair Labor Standards Act [(FLSA)] against the defendants.” Id. The Ninth Circuit affirmed in part, but reversed as to the class action’s FLSA claim.

The Ninth Circuit opened its opinion as follows: “This appeal raises three issues: (1) whether the Castaways’ individual managers can be held liable for unpaid wages under Nevada law; (2) whether the union has standing to raise the state law claim; and (3) whether the managers can be held liable under the Fair Labor Standards Act (FLSA).” Boucher, at 9734. Because the question of whether individual managers may be liable under Nevada law for unpaid wages was a matter of first impression, the Circuit Court certified the issue to the Nevada Supreme Court – the Nevada Supreme Court held that “individual managers cannot be held liable as ‘employers,’ and therefore that claim was properly dismissed by the district court.” Id., at 9734, 9737-38. That decision rendered moot the second issue on appeal, as it did not matter whether the local union had standing to raise a state law claim that did not exist. Id., at 9734-35. The issue became, then, whether individual managers may be held liable under the FLSA. Id., at 9735. 9738-39. This was not a matter of first impression in the Ninth Circuit. The Court noted at pages 9739 and 9740 that in Lambert v. Ackerley, 180 F.3d 997, 1011-12 (9th Cir. 1999) (en banc), the Ninth Circuit held:

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

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Class Actions Alleging Employment-Related Claims Maintain Top Spot 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 August 14 - 20, 2009, during which time 41 new class actions were filed. While labor law class actions often top this list by a wide margin, this reporting period saw considerable balance among three separate areas. During this reporting period, only 22 class actions alleging employment-related claims were filed, representing a comparatively low 54% of the total number of new class actions filed. Only two other categories met the 10% threshold: there were 8 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (20%), and 4 new class actions alleging violations of federal securities laws (10%).

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

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

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 Southern District of Texas

Nineteen (19) class actions – seven in the District of New Jersey; two in the Southern District of Texas; and one each in the Middle District of Alabama, the District of Arizona, the Eastern District of California, the Southern District of California, the Northern District of Florida, the Southern District of Florida, the District of Kansas, the Western District of Missouri, the Northern District of Ohio, and the Eastern District of Wisconsin – were filed against Heartland Payments Systems arising from an “electronic intrusion into Heartland’s processing system.” In re Heartland Payment Systems, Inc., Customer Data Security Breach Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of Texas; plaintiffs in four (4) class actions supported the motion, while plaintiffs in two (2) class actions requested centralization in the District of New Jersey, and other plaintiffs “variously support centralization in the aforementioned districts, the District of Kansas, or the Southern District of Florida, in the alternative.” Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Southern District of Texas was the appropriate transferee court, explaining that the parties believe relevant discovery is located in that district and that the district court judge “has the time and experience to steer this litigation on a prudent course.” Id., at 2.

Download PDF file of In re Heartland Payment Systems, Inc., Customer Data Security Breach Litigation Transfer Order

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

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Class Action Defense Cases–Clark v. American Residential: California Appellate Court Reverses Approval Of Class Action Settlement Holding Trial Court Lacked Sufficient Information And Amounts Approved Were Excessive

Approval of Class Action Settlement Required Reversal because (1) Record did not Support Trial Court’s Valuation of Class Claims, (2) Incentive Award of 44 Times Average Recovery of Class Members was Excessive, and (3) Trial Court could not Award Costs in Excess of Amount set forth in Class Notice without Further Notice to Class California Appellate Court Holds

Plaintiffs filed a putative class action in California state court against their employer, American Residential Services alleging labor law violations; the class action complaint alleged that defendant failed to pay minimum wage or overtime, and failed to provide meal and rest periods. Clark v. American Residential Services LLC, ___ Cal.App.4th ___, 96 Cal.Rptr.3d 441, 444 (Cal.App. 2009). Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), but the district court granted plaintiffs’ motion to remand the class action to state court. Id., at 445. Eventually, the parties negotiated a settlement of the class action whereby the two named plaintiffs would receive $25,000 each, and the 2360 class members would receive an average of $560 each. Id., at 444. Additionally, plaintiffs’ attorneys would receive $640,000 in fees and costs as part of the class action settlement, id., at 445. Following notice, 20 members of the putative class objected to the settlement on the grounds that they “worked at least two hours of unpaid overtime every workday, that they would be compensated for only about 1% of the total value of their claims, and that no evidence was presented to the court to justify the settlement.” Id., at 444. According to the objectors, class members would receive only $6 for each week that they had worked for defendant. Id., at 445. Plaintiffs’ counsel responded that the overtime claim had “absolutely no” value, id., at 453. The trial court approved the class action settlement, but the Court of Appeal reversed.

The Court of Appeal noted that its review of class action settlements was “limited in scope.” Clark, at 451. The objectors argued that the trial court apparently relied on plaintiffs’ counsel’s belief that the overtime claim had “‘absolutely no’ value” despite objectors’ counsel’s belief that this evaluation was based on a “staggering mistake of law.” Id., at 444. The appellate court agreed, concluding that the trial court “did not receive and consider sufficient information on a core legal issue, affecting the strength of the case for plaintiffs on the merits, to make the requisite independent assessment of the reasonableness of the terms of the settlement.” Id., at 451 (citation omitted). Additionally, the Court held that “the enhancement or incentive awards were excessive” and that the trial court erred in awarding costs in excess of the maximum amount set forth in the notice to the class, id. The appellate court rejected the argument that the objectors had to prove the settlement was unfair, holding at page 453 that “it is the trial court’s duty, whether or not there are objectors, to employ those factors to evaluate independently the fairness of a proposed settlement.” And in this case, “the record before the trial court…did not contain the information required for ‘an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation.’” Id. (citation omitted). The Court of Appeal held that “the trial court is obligated, at a minimum, to determine whether a legitimate controversy exists on a legal point, if that legal point significantly affects the valuation of the case for settlement purposes.” Id., at 455.

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

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FedEx Class Action Defense Cases–In re FedEx Ground: Indiana Federal Court Grants Class Action Certification Motions As To Certain State Labor Law Class Action Claims And Denies Class Action Treatment As To Five State Lawsuits

Labor Law Class Actions, Coordinated for Pretrial Purposes by Judicial Panel on Multidistrict Litigation, Warranted Class Action Treatment under Certain State Laws but failed to Satisfy Prerequisites for Class Action Treatment under Other State Laws Indiana Federal Court Holds

Numerous class action lawsuits were filed in various states against Federal Express alleging labor law violations in that FedEx allegedly failed to pay certain delivery drivers overtime and other wages; ultimately, the Judicial Panel on Multidistrict Litigation coordinated the class actions for pretrial purposes in the Northern District of Indiana. In re FedEx Ground Package System, Inc., Employment Practices Litig., ___ F.3d ___ (N.D.Ind. July 27, 2009) [Slip Opn., at 1 et seq.]. In October 2007 and March 2008, the district court resolved “the first of three wages” of class action certification motions involving putative class actions that had been filed in 28 states. Id., at 1 (and see Note, below). Plaintiffs in 14 of the remaining class actions, filed in at least 11 different states, moved the district court to certify their lawsuits as class actions (or as collective actions under the Fair Labor Standards Act (FLSA)), id., at 1-2. The district court explained that in considering whether to grant class action treatment with respect to the states at issue, “Analysis focuses primarily on whether the substantive law governing the motion allows resolution, without extrinsic evidence, of whether the Operating Agreement and policies applicable to the entire class create an employment relationship, and whether a would-be employer’s conduct can convert an employment relationship (as defined in the employment contract) into an independent contractor relationship.” Id., at 2.

Given the length of the district court’s opinion, and the detailed analysis involved in considering each state’s laws, we provide here only the court’s conclusions. First, the district court granted the motion by Arizona plaintiffs to certify their lawsuit as a class action, see In re FedEx, at 4-5. Second, the court denied the motion by Colorado plaintiffs to certify their lawsuit as a class action, id., at 7. Third, the court denied the motion by Connecticut plaintiffs to certify their lawsuit as a class action, id., at 9. Fourth, the court denied the motion by certain plaintiffs for conditional certification of a collective action under the FLSA, id., at 16. Fifth, the court granted the motion by Georgia plaintiffs to certify their lawsuit as a class action, id., at 24. Sixth, the court granted the motion by Louisiana plaintiffs to certify their lawsuit as a class action with respect to certain claims for relief, but denied the motion with respect to other claims for relief, id., at 39-40. Seventh, the court denied the motion by certain plaintiffs to certify as a class action their lawsuit under the Motor Carrier Safety Act, id., at 43-44. Eighth, the court granted the motion by Nevada plaintiffs to certify their lawsuit as a class action with respect to a statutory claim brought under Nev. Rev. Stat. Ch. 608, but otherwise denied the motion with respect to all other claims for relief, id., at 50. Ninth, the court granted the motion by North Carolina plaintiffs to certify their lawsuit as a class action, id., at 52. Tenth, the court granted the motion by Ohio plaintiffs to certify their lawsuit as a class action, id., at 56. Eleventh, the court granted the motion by Oregon plaintiffs to certify their lawsuit as a class action with respect to all claims for relief except for the rescission claim, id., at 67. Twelfth, the court denied the motion by Vermont plaintiffs to certify their lawsuit as a class action, id., at 78.

Continue reading "FedEx Class Action Defense Cases–In re FedEx Ground: Indiana Federal Court Grants Class Action Certification Motions As To Certain State Labor Law Class Action Claims And Denies Class Action Treatment As To Five State Lawsuits" »

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

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Class Action Defense Cases–In re CP Ships: Eleventh Circuit Affirms Class Action Settlement Of Securities Fraud Class Action Holding Class Members Of Canadian Class Actions Could Opt Out

District Court did not Abuse its Discretion in Approving Class Action Settlement in Securities Fraud Class Action Filed in United States because Class Members with Claims in Canadian Class Actions were Provided Adequate Notice of the Right to Opt Out of the U.S. Class Action Settlement Eleventh Circuit Holds

Plaintiffs filed a class action against CP Ships, a container shipping company, and others alleging violations federal securities laws; specifically, the class action complaint alleged that Belo – a media company that inter alia published the Dallas Morning News (DMN), which accounted for 30% of Belo’s revenue – “engaged in a fraudulent scheme designed to inflate DMN’s circulation artificially.” In re CP Ships Ltd. Securities Litig., 578 F.3d 1306 (11th Cir. 2009) [Slip Opn., at 1]. Defendant is organized under the laws of Canada, headquartered in England, and operates in several countries; 80% of the company’s stock is traded on the Toronto Stock Exchange (TSX), and 20% is traded on the New York Stock Exchange (NYSE). Id. Additionally, “crucial headquarters activities – including the relevant operations and personnel that were central to the fraud (i.e. the accounting department and executive offices) – were located in Tampa, Florida.” Id. According to the allegations underlying the class action complaint, CP Ships acquired 9 business during a 10-year period, each with its own accounting system: the company eventually transitioned to a single accounting system, but later “announced that the transition had caused it to understate its operational costs” causing the stock price to drop by more than 20% on both the TSX and NYSE. Id. This class action complaint followed, as did lawsuits filed in Canada, id. Defense attorneys successfully moved to dismiss the U.S. class action on the grounds that the complaint failed to adequately plead scienter under the heightened pleading requirements established by the Private Securities Litigation Reform Act (PSLRA), but while plaintiffs’ appeal from that order was pending, the parties negotiated a class action settlement. Id. The district court approved the settlement over various objections, including the objections of an individual who was also a class member in a Canadian class action that “the settlement would prevent some members of the Canadian class from pursuing their action in Canada.” Id., at 1-2. All class members were given notice and an opportunity to opt out of the U.S. class action settlement, id., at 1. One of the objectors appealed, and the Eleventh Circuit affirmed.

The objector leveled a multi-prong attack against the class action settlement: (1) the district court lacked subject-matter jurisdiction over the claims of class members who purchased foreign stock, or at the very least, as a matter of comity, should have declined to exercise jurisdiction over the dispute, (2) that the notice was inadequate, and (3) that the terms of the settlement were not fair, reasonable or adequate. In re CP Ships, at 1. The Circuit Court began by considering de novo whether subject matter jurisdiction was present over the dispute. Id., at 2. The Court found that the objector failed to raise a factual challenge to jurisdiction, see id., at 2-3, and concluded that the facial challenge to jurisdiction failed because jurisdiction exists under the “conduct test,” see id., at 3-6. The Eleventh Circuit then readily rejected the objector’s challenge to the adequacy of the notice, id., at 7, and turned to the adequacy of the class action settlement.

Continue reading "Class Action Defense Cases–In re CP Ships: Eleventh Circuit Affirms Class Action Settlement Of Securities Fraud Class Action Holding Class Members Of Canadian Class Actions Could Opt Out" »

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

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Class Action Defense Cases–Fener v. Belo: Fifth Circuit Court Affirms Denial Of Class Action Treatment In Securities Fraud Class Action Holding Plaintiffs Failed To Establish Loss Causation

Class Action Complaint Alleging Securities Fraud Properly Denied Class Action Treatment because Plaintiffs Failed to Establish that Decline in Stock Price was Connected to Disclosure of Alleged Fraud rather than Long-Term Industry Trends Fifth Circuit Holds

Plaintiffs filed a putative class action against Belo Corporation and others alleging violations of the Securities Exchange Act of 1934; specifically, the class action complaint alleged that Belo – a media company that inter alia published the Dallas Morning News (DMN), which accounted for 30% of Belo’s revenue – “engaged in a fraudulent scheme designed to inflate DMN’s circulation artificially.” Fener v. Belo Corp., ___ F.3d ___ (5th Cir. August 12, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, Belo “allegedly paid bonuses for achieving circulation targets, rigged audits of DMN’s circulation, and implemented a no-return policy that eliminated any incentive for distributors to return unsold newspapers.” Id., at 2. These acts “artificially increased recorded circulation, which led to higher advertising revenues for DMN and larger profits for Belo” because 90% of DMN’s revenue came from advertising. Id. Belo eventually disclosed these facts in a press release, and the company’s stock price dropped substantially, id., at 2-3. The class action complaint followed, and plaintiffs moved the district court to certify the litigation as a class action. Id., at 3. Defense attorneys opposed class action treatment, relying on an expert opinion that “plaintiffs could not show that the fraudulent disclosure in the press release was the primary cause of the stock price decline.” Id., at 3-4. Plaintiffs countered with an expert opinion that the drop in stock price was “entirely or almost entirely attributable to the revelation of the relevant truth in this case.” Id., at 4. The district court denied class action treatment and plaintiffs appealed. Id. The Fifth Circuit affirmed.

After outlining the standard of review and the elements (including loss causation) required to prove a securities fraud case, see Fener, at 4-7, the Circuit Court noted that a district court may properly examine loss causation as part of a class action certification determination, id., at 7. The issue before the Court was “whether these plaintiffs have presented enough information to show loss causation under Rule 23.” Id. While plaintiffs submitted 100 pages in support of their class certification motion, defendants introduced expert testimony that Belo’s press release contained three distinct parts: “DMN’s circulation decrease resulted from (1) fraudulent overstatements; (2) changes in DMN’s methodology; and (3) industry-wide decline in newspaper circulation” and concluded – based on an examination of 132 analyst reports – that Belo’s stock dropped primarily because of “the non-fraudulent disclosures instead of the fraudulent one.” Id., at 8-9. The Fifth Circuit stated that it was important to resolve whether the press release should be viewed as “one complete disclosure or three separate ones,” id., at 9. Based on the “plain language” of the press release, the Circuit Court concluded that it was three separate disclosures. Id., at 10. Accordingly, “the release divides the news into fraudulent and non-fraudulent information related to possible future circulation declines.” Id.

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

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Heavy Week For New Class Action Filings And Labor Law Class Actions Maintain Top Spot Among New Filings In California State And Federal Courts

In order to assist class action defense attorneys anticipate the types of claims 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 August 7 - 13, 2009, during which time a relatively large number of new class actions -- 56 -- were filed. Labor law class actions generally top this list by a wide margin, and this yet again proved to be true. During this reporting period, 33 class actions were filed alleging employment-related claims, representing 59% of the total number of new class actions filed. Only one other category met the 10% threshold: there were 11 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (20%).

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

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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Objection of Class Action Plaintiffs, and Transfers Actions to Southern District of New York

Three class actions – two in New York and one in Pennsylvania – were filed against Citigroup and others alleging that “Citigroup entities and/or its employees made misrepresentations or omissions in the context of the sale of auction rate securities (ARS).” In re Citigroup, Inc., Auction Rate Securities (ARS) Marketing Litig. (No. II), ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of New York, id. Plaintiffs in one New York class action supported pretrial coordination of the class actions but opposed consolidation; plaintiffs in the Pennsylvania class action opposed the motion in its entirety. Id. The Pennsylvania plaintiffs’ argued “(1) the actions do not share sufficient questions of fact; (2) there are only a few actions involved in the litigation, making voluntary coordination among the parties preferable to formal centralization; and (3) centralization will only lead to delay of the actions,” but the Judicial Panel rejected these objections. Id., at 1-2. The Judicial Panel granted the motion to centralize the class action, finding that this will “eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel and the judiciary.” Id., at 1. The Panel also agreed that the Southern District of New York was the appropriate transferee court, as it was “two actions have been pending [there] for over a year” and “Defendants are located in this district, which was the only suggested transferee district, and relevant documents and witnesses may be found there.” Id., at 2. Accordingly, the Judicial Panel ordered the class actions transferred to the Southern District of New York. Id., at 3.

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

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Qualcomm Class Action Defense Cases–Lorenzo v. Qualcomm: California Federal Court Dismisses Antitrust Class Action Complaint Against Qualcomm For Lack Of Standing And Failure To Adequately Plead Damage

Class Action Alleging Antitrust And State Law Violations Against Qualcomm Warranted Dismissal because Plaintiff Lacked Standing to Prosecute Clayton Act/Cartwright Act Antitrust Claims and Failed to Adequately Plead Damage Resulting from Defendant’s Conduct California Federal Court Holds

Plaintiff filed a putative class action against Qualcomm alleging inter alia violations of state and federal antitrust laws, as well as violations of California’s Unfair Competition Law and Unfair Practices Act; specifically, the class action complaint “challenged the lawfulness of Qualcomm’s licensing practices with respect to its intellectual property used for Code Division Multiple Access (‘CDMA’) wireless technology.” Lorenzo v. Qualcomm Inc., ___ F.Supp.2d ___ (S.D.Cal. August 10, 2009) [Slip Opn., at 1-2]. Defense attorneys moved to dismiss the class action; the district court granted the motion, finding in part that plaintiff lacked standing under the Clayton Act because his injury was “too remote from Qualcomm’s alleged antitrust violations” and because “the Complaint fails to allege sufficient facts to support a finding that Plaintiff’s alleged injury is inextricably intertwined with Qualcomm’s unlawful conduct so as to fit within the narrow exception to the market participant requirement.” Id., at 2. But the court gave plaintiff leave to file an amended class action complaint, which he did. Id., at 2-3. Defense attorneys again moved to dismiss the class action, id., at 3; the district court granted the motion without leave to amend but without prejudice.

After setting forth the standard of review, see Lorenzo, at 3-4, the district court turned to the issue of standing under the Clayton Act, id., at 4. Because the amended class action complaint, like the original complaint, alleged that “there are at least three intermediaries – CDMA chipset manufacturers, CDMA device manufacturers, and CDMA device vendors – between Plaintiff’s injury and the alleged antitrust violations,” id., at 5-6, plaintiff’s injury remained too remote to support a Clayton Act claim, id., at 6. The district court granted the motion to dismiss the unfair practice act claims because plaintiff’s allegations in the amended class action complaint were identical to those in the original complaint, id., at 7. And dismissed the unfair competition law claim because plaintiff lacked standing as he had not adequately alleged that he suffered any damage as a result of the alleged representations made by Qualcomm. Id., at 7-10. Accordingly, the district court dismissed the class action complaint without leave to amend. Id., at 11. However, as explained in the Note, it dismissed the action without prejudice, id.

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

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Antitrust Action Defense Cases–Ginsburg v. InBev: Missouri Federal Court Grants Motion For Judgment On The Pleadings Of Antitrust Class Action

Antitrust Class Action Challenging Merger of Anheuser-Busch and InBev Fails as a Matter of Law because InBev could not Reasonably be Viewed as a “Potential Competitor” Prior to the Merger Missouri Federal Court Holds

Plaintiffs, characterizing themselves as “a group of Missouri beer consumers and purchasers,” filed a putative class action against Anheuser-Busch and InBev NV/SA challenging the proposed merger of the companies; the class action complaint alleged that “the merger “violates Section 7 of the Clayton Act because it would eliminate InBev as a ‘perceived’ and ‘actual’ potential competitor” in the United States beer market. Ginsburg v. InBev NV/SA, ___ F.Supp.2d ___ (E.D. Mo. August 3, 2009) [Slip Opn., at 1]. The theory underlying plaintiffs’ class action was that, even though InBev was not yet in the U.S. beer market, its “position on the ‘periphery of the market’ is an important consideration by U.S. brewers in the pricing and marketing of their products” and absent the merger InBev would likely enter the U.S. beer market in competition with Anheuser-Busch. Id., at 3-4. Defense attorneys moved the district court for judgment as a matter of law. Id., at 1-2. The district court granted defendants’ motion, finding the class action’s theory too speculative, id., at 4-5. The district court concluded that, despite InBev’s position as an international industry leader, “no rational actor would have viewed InBev as a perceived potential competitor prior to the merger.” Id., at 6. In fact, “Plaintiffs have not identified any indicators that other U.S. beer brewers believed that InBev was poised to enter the United States beer market.” Id., at 9. Accordingly, the court granted defendants’ motion and entered judgment in favor of defendants on the class action. Id., at 12.

The district court also denied plaintiffs’ request for leave to amend the class action complaint. Ginsberg, at 12. The court denied leave to amend for two reasons. First, because the request was “contained in the conclusion to its Response, not as a separate Motion” and, accordingly, was improper. Id. Second, the district court denied the request “due to the extensive and lengthy briefing of all parties as to the legal basis for the claims asserted,” id.

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

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Blue Cross Class Action Defense Cases–Yeager v. Blue Cross: California Court Affirms Judgment For Insurer In Class Action Challenging Infertility Treatment Coverage Holding Full Coverage Not Required By Statute

Trial Court Properly Granted Insurer’s Motion for Summary Judgment in Class Action Challenging Infertility Treatment Benefits because California Law Requires only that Blue Cross “Offer” such Coverage on Terms Negotiated with Employer, not that the Insurance Benefits Provide “Full” Coverage for Infertility Treatments California Appellate Court Holds

Plaintiff filed a putative class action against Blue Cross of California alleging for violations of California’s Unfair Competition Law (UCL) and false advertising; specifically, the class action complaint alleged that California law required Blue Cross to offer to provide insurance coverage for infertility treatments, but that it only offered “to pay up to $2,000 a year for half the cost of each group member’s treatment for infertility.” Yeager v. Blue Cross of California, 175 Cal.App.4th 1098, 96 Cal.Rptr.3d 723, 723-24 (Cal.App. 2009). According to the allegations underlying the class action, plaintiff “could not become pregnant without medical assistance” and the “limited infertility treatment [covered by the insurance policy] proved ineffective.” Id., at 724. She therefore filed her class action against Blue Cross, id. The theory underlying the class action was that Blue Cross was required to provide “full” coverage for infertility treatments, id., at 725. Defense attorneys moved for summary judgment on the ground that California law does not require full insurance coverage for infertility treatments and that it complied with California law. Id., at 724. The trial court agreed and entered judgment in favor of Blue Cross, id. Plaintiff appealed, and the California Court of Appeal affirmed.

The Court of Appeal explained that the statute at issue – California Health & Safety Code section 1374.55 – requires only that insurers “offer” coverage for infertility treatment “under those terms and conditions as may be agreed upon between the group subscriber and the plan.” Yeager, at 725 (quoting § 1374.55) (italics added). Plaintiff argued that “only about 15 percent of couples suffering infertility can be successfully treated for less than $4,000” – the relevant figure considering the plan’s $2,000 cap and 50% co-pay – so the benefits afforded were essentially illusory, id. The appellate court found, however, that “[plaintiff’s] argument for full coverage finds no support in the statute’s language,” id. The Court of Appeal also rejected plaintiff’s argument that the preamble to § 1374.55 supports her position, id., at 725-26. The appellate court held that “a statute’s preamble can be illuminating if a statute is ambiguous” but “a preamble is not binding” and “many not overturn the statute’s language.” Id. (citation omitted). Put simply, “[t]he Legislature knows how to establish a health plan’s coverage and costs when it chooses,” as evidenced by California law mandating coverage for mental health in contrast to merely offering coverage for infertility treatments. Id., at 726-27. Accordingly, the Court affirmed the judgment of the trial court. Id., at 730.

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

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UPS Class Action Defense Cases–Hohider v. United Parcel Service Express: Third Circuit Reverses Class Action Certification Of ADA Class Action Holding District Court Abused Discretion In Granting Certification

District Court Order Granting Certification Of ADA Class Action under Rule 23(b)(2) Warranted Reversal because District Court Abused Discretion in Overlooking Individualized Inquiries Inherent in Class Action Claims and because Monetary Relief was not Merely Incidental to Class Action Complaint Third Circuit Holds

Plaintiffs filed a putative class action against United Parcel Service “alleging UPS has adopted and implemented companywide employment policies that are unlawfully discriminatory under the [Americans with Disabilities Act] ADA.” Hohider v. United Parcel Service, Inc., ___ F.3d ___ (3d Cir. July 23, 2009) [Slip Opn., at 6]. A separate class action was filed against UPS that was ultimately consolidated for all purposes with the initial action. Id., at 7. In broad terms, “Plaintiffs’ claims of unlawful discrimination focus on UPS’s alleged treatment of employees who attempt to return to work at UPS after having to take leave for medical reasons.” Id. According to the allegations underlying the class action, “UPS, as a matter of companywide policy, refuses to offer any accommodation to employees seeking to return to work with medical restrictions, effectively precluding them from resuming employment at UPS in any capacity because of their impaired condition.” Id., at 8. Plaintiffs moved the district court to certify the litigation as a nationwide class action, id., at 6-7, 10. In analyzing plaintiffs’ motion, the district court concluded that the proper “framework for analyzing a Title VII pattern-or-practice claim” in “a private-party class action brought under the ADA” was that set forth in Franks v. Bowman Transp. Co., 424 U.S. 747 (1976), Int’l Brotherhood of Teamsters v. United States, 431 U.S. 324 (1977), and Cooper v. Federal Reserve Bank of Richmond, 467 U.S. 867 (1984). Id., at 29. The district court concluded that plaintiffs satisfied the requirements for class action certification under Rule 23(b)(2), id., at 11-12. UPS appealed, and in an 86-page opinion the Third Circuit reversed, id.

The Circuit Court noted that the district court recognized the difficulties in allowing the litigation to proceed as a class action. For example, the district court “recognized that, in the present case, some of these ‘individual elements of a reasonable accommodation claim’ are not suitable for class treatment, as their resolution would require inquiries too individualized and divergent with respect to this class to meet the requirements of Rule 23.” Hohider, at 34. The court found, however, that “these individualized inquiries could be delayed until the second, ‘remedial’ stage” and so did not preclude class certification for the “‘liability’ stage,” which required “only proof of the existence of the alleged policies as UPS’s ‘standard operating procedure.’” Id. In the district court’s words, “It is sufficient in order to certify a class pursuant to Rule 23(b)(2) for the court to find that either UPS has acted on grounds generally applicable to the class by engaging in the alleged de facto 100% healed policy or by not engaging in the alleged de facto 100% healed policy; by implementing its formal ADA compliance procedures in violation of the ADA, or by implementing them in compliance with it; or by creating job classifications that are designed without regard to essential job functions to preclude anyone from returning to work who could not lift seventy pounds, or by creating job classifications that are designed with regard to essential job functions.” Id., at 34-35. The Third Circuit found that the district court misconstrued the Teamsters framework, and that “[t]o the extent the District Court relied upon the Teamsters method of proof to reach a certification decision incompatible with the substantive requirements of the ADA, it abused its discretion.” Id., at 42. The Third Circuit held at page 42, “Having reviewed plaintiffs’ claims in light of the substantive requirements of the ADA, we find those claims cannot be adjudicated within the parameters of Rule 23 such that a determination of classwide liability and relief can be reached. Rather, establishing the unlawful discrimination alleged by plaintiffs would require determining whether class members are ‘qualified’ under the ADA, an assessment that encompasses inquiries acknowledged by the District Court to be too individualized and divergent with respect to this class to warrant certification under Rule 23(a) and (b)(2).” Put simply, “the Teamsters framework cannot, by its own force, cure this flaw in the class.” Hohider, at 43. “Accordingly, the court’s grant of class certification was an abuse of discretion.” Id.

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

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Relative Percentage Of Labor Law Class Actions Filed In California State And Federal Courts Soars

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 July 31 - August 6, 2009, during which time 37 new class actions were filed -- a comparatively low number. Class actions alleging employment-related claims generally top this list by a wide margin, but in contrast to the remarkable balance among three separate categories of class actions filed last week, labor law class actions monopolized the new filings during this reporting period. A stunning 28 labor law class actions were filed this past week, representing 76% of the total number of new class actions filed. No other category met the 10% threshold.

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

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Class Action Defense Cases—In re Comcast: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation In Eastern District Of Pennsylvania

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Rejects Request of Overwhelming Majority of Responding Parties for Transfer to Northern District of Illinois, and Transfers Actions to Eastern District of Pennsylvania as Requested by Moving Party

Nine class actions –three each in Illinois and Pennsylvania, and one each in the Eastern and Northern Districts of California, and the Southern District of West Virginia – were filed against Comcast and others alleging antitrust violations; specifically, the class action complaints allege that “Comcast improperly tied and bundled the lease of cable boxes to the ability to obtain premium cable services in violation of Section 1 of the Sherman Antitrust Act.” In re Comcast Corp. Set-Top Cable Television Box Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 17, 2009) [Slip Opn., at 1]. Plaintiffs in one of the Pennsylvania 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 Eastern District of Pennsylvania; defendants and plaintiffs in six of the class actions supported pretrial coordination but argued for transfer to the Northern District of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the moving party that the Eastern District of Pennsylvania was the appropriate transferee court, particularly as it was “Comcast is headquartered there, and relevant documents and witnesses will likely be located in that district.” Id., at 1-2.

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

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Insurance Class Action Defense Cases–Spagnola v. Chubb: Second Circuit Generally Affirms Dismissal Of Class Action Claims For Violations Of New York's Insurance Law And Deceptive Business Practices Act But Reverses As To Breach Of Contract Claim

Class Action Claims Challenging Increases in Homeowner’s Insurance Premiums Properly Dismissed Except for One Aspect of Breach of Contract Claim Second Circuit Holds

Plaintiff filed a putative class action against his homeowner’s insurer, Chubb, alleging inter alia violations of New York’s Insurance Law and deceptive business practices act; the class action complaint alleged that Chubb violated the terms of the policy “by improperly increasing coverage and premiums without his consent and in excess of the [Consumer Price Index].” Spagnola v. Chubb Corp., ___ F.3d ___, 2009 WL 2231635, *1 (2d Cir. July 28, 2009). Defense attorneys moved to dismiss the class action; the district court granted the motion holding that “the coverage adjustments at issues were properly made pursuant to a mechanism established in the policy.” Id., at *2. The district court also dismissed the class action’s deceptive business practices act claim because “there were not sufficient facts to support a finding that the policy was ‘misleading in a material respect’ or that [plaintiff] or any other member of the putative class was injured as a result.” Id. Plaintiff appealed, and the Second Circuit affirmed in part and reversed in part.

Reviewing the district court’s order de novo, the Second Circuit first addressed whether the district court erred in dismissing the class action’s Insurance Law claim and deceptive business practices claim. Spagnola, at *2. *9. We note here only the Circuit Court’s conclusion that the district court did not err in dismissing these claims. See id., at *2-*4, *8-*9. The Court also had no difficulty in concluding that the district court did not err in dismissing plaintiff’s breach of contract claim based on a “failure to obtain consent” theory, see id., at *4-*5. But the Court agreed with plaintiff that the class action’s breach of contract claim should have survived the motion to dismiss to the extent it was based on the allegation that Chubb “increase[ed] his coverage amounts and premiums in a way that did not reflect current costs and values.” Id., at *5. Chubb conceded that the premium increases were not tied to the CPI but argued this fact was irrelevant, id., at *6; the Circuit Court disagreed, holding that for purposes of the motion to dismiss, Chubb’s arguments failed to adequately negate the class action’s allegation “that the annual increases were not based on current costs and values as required by the express terms of the policy.” Id. The voluntary payment doctrine did not aid defendant because it “does not apply…when a plaintiff made payments under a mistake of fact or law regarding the plaintiff's contractual duty to pay,” and for purposes of the motion to dismiss it was “too early in this case to conclusively answer that question.” Id., at *7 (citations omitted). Accordingly, the district court erred in dismissing this aspect of the breach of contract claim, id., at *8. In all other respects, however, the district court order was affirmed, id., at *9.

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

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Class Action Defense Cases–Desai v. Deutsche Bank: Ninth Circuit Affirms Denial Of Class Action Treatment In Securities Fraud Class Action Case Holding Issue Of Reliance Defeated Predominance Prong Of Rule 23(b)(3)

District Court did not Abuse Discretion in Denying Class Action Certification in Securities Fraud Class Action because Reliance Required to Establish Securities Exchange Act § 10(b) Violation could not be Proven on a Class-Wide Basis Ninth Circuit Holds

Numerous putative class action complaints were filed against Deutsche Bank alleging securities fraud in the alleged manipulation of the stock price of GenesisIntermedia, Inc. (“GENI”); the class action lawsuit “followed the collapse of an elaborate stock manipulation scheme.” Desai v. Deutsche Bank Securities Ltd., ___ F.3d ___, 2009 WL 2245223, *1 (9th Cir. July 29, 2009). The class action litigation dragged on for more than 7 years without leaving the class certification stage, id., at *3. We do not here summarize the facts underlying the class action allegations or the tortured history of the class action litigation, including its trip from California to Minnesota and then back to California, see id., at *1-*3. Eventually, the class action complaint alleged violations of § 10(b) and § 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, id., at *2. And eventually, plaintiffs filed a motion for class certification which the district court denied, id., at *3. Plaintiffs then settled with the “last defendant standing” – Deutsche Bank – but reserved the right to appeal the district court order denying class action treatment to the lawsuit. Id. The Ninth Circuit affirmed.

Plaintiffs had sought to certify the lawsuit as a class action under Rule 23(b)(3), which requires a finding of both predominance of common issues of fact or law and superiority of the class action device as a mechanism for resolving the dispute. Desai, at *4. The district court refused to certify the litigation as a class action because it concluded that the predominance test had not been met; specifically, the district court found that the element of reliance – which is required to prove a violation of § 10(b) of the 1923 Act – would have to be proven “on an individual basis because they could not prove [reliance] class-wide.” Id. The Ninth Circuit explained, “A ruling on class certification ‘is subject to a very limited review and will be reversed only upon a strong showing that the district court’s decision was a clear abuse of discretion.’” Id. (citation omitted).

The Circuit Court held that “[r]eliance establishes the causal connection between the alleged fraud and the securities transaction.” Desai, at *6 (citation omitted). “To say that a plaintiff relied on a defendant’s bad act is to say that the defendant’s actions ‘played a substantial part in the plaintiff’s investment decision.’” Id. (citation omitted). The Ninth Circuit explained also that reliance can be presumed in two situations: in omission cases, provided that the information withheld is material, and under a “fraud on the market theory.” Id. The district court concluded that neither presumption applied because, under the facts of the case, plaintiffs could not demonstrate an “efficient market” for the securities. Id., at *7. The Circuit Court agreed, see id., at *7-*8. The district court also refused plaintiffs’ invitation “to create a novel presumption of reliance on ‘the integrity of the market’ in the context of manipulation cases.” Id., at *7. The Ninth Circuit also rejected this invitation, finding that there was no authority to support it, id., at *9. Accordingly, the Circuit Court affirmed the district court order denying class certification, id.

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

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Target Class Action Defense Cases–Loeffler v. Target: California State Court Affirms Dismissal Of Class Action Holding Plaintiffs Lacked Standing To Challenge Sales Taxes Collected By Target

Class Action Alleging Target Improperly Collected Sales Tax on Sale of Hot Coffee “To Go” Properly Dismissed because Plaintiffs do not have Standing under California Statutory Scheme to Seek Reimbursement from Retailer of Sales Taxes Paid to State and Lack Standing to Directly or Indirectly Enjoin the Collection of Sales Taxes California State Court Holds

Plaintiffs filed a putative class action in California state court against Target alleging that it unlawfully collected sales taxes on purchases of coffee; the class action complaint sought reimbursement of the sales taxes paid by class members, and an injunction against the collection of such sales taxes in the future. Loeffler v. Target Corp., 173 Cal.App.4th 1229, 1234 (Cal.App. 2009). According to the allegations underlying the class action, Target “charged and collected sales tax” on purchases of “to go” and “take-out” hot coffee even though California law allegedly exempted these items from sales tax; accordingly, “plaintiffs suffered monetary loss.” Id., at 1237. “In California, retailers are obligated to pay sales taxes to the state on their gross receipts, subject to certain exemptions,” but they “may, however, seek sales tax reimbursement from their customers.” Id., at 1234. The allegations underlying the class action focused on the theory that Target “was not entitled to collect sales tax reimbursement on purchases of hot coffee ‘to go’ because sales tax was allegedly not due on such purchases.” Id. The class action alleged that Target's conduct violated California's Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA), id., at 1237-38. Defense attorneys demurred to the class action: Target argued that Article XIII, section 32 of the California Constitution “prohibits injunctions against the collection of state taxes and provides that refunds of taxes may only be recovered in a manner provided by the Legislature.” Id., at 1234. “The purpose of this constitutional provision is to ensure that governmental entities may engage in fiscal planning so that essential public services are not unnecessarily interrupted.” Id. The trial court agreed, sustained the demurrer without leave to amend, and dismissed the class action complaint. Id. The Court of Appeal affirmed.

The Court of Appeal explained that only a retailer – as the party who paid the tax – has standing to seek a sales tax refund. See Loeffler, at 1234-35. The California Legislature “has created a comprehensive system for sales tax and sales tax reimbursement refunds,” see id., at 1239-41, and under that scheme plaintiffs do not have standing to commence a sales tax refund suit. Id., at 1242. The appellate court rejected plaintiffs’ novel theory that they were not seeking to enjoin the State from collecting of sales taxes, merely to enjoin a retailer from collecting reimbursement of sales taxes. See id., at 1243-45. The Court of Appeal enunciated a bright-line rule that “a court may not directly or indirectly enjoin or prevent the collection of a sales tax.” Id., at 1235. Accordingly, it affirmed the trial court order dismissing the class action complaint, id., at 1250.

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

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FedEx Class Action Defense Cases–Babineau v. Federal Express: Eleventh Circuit Affirms Denial Of Class Action Certification Of Labor Law Class Action Holding District Court Acted Within Its Discretion

District Court did not Err in Denying Class Action Treatment of Labor Law Class Action because Court did not Abuse its Discretion in Concluding that Individualized Factual Issues Concerning Gap and Break Periods Predominate over Common Issues Eleventh Circuit Holds

Plaintiffs filed a putative class action against Federal Express alleging labor law violations in that FedEx allegedly “fail[ed] to pay hourly employees for all time worked”; the lawsuit has been characterized as “Round Two” because “the district court denied certification of a nationwide class of FedEx employees asserting substantially similar claims in Clausnitzer v. Federal Express Corp/, 248 F.R.D. 647 (S.D. Fla. 2008)” and then this class action was filed in an “attempt[] to address the defects identified in Clausnitzer by limiting the scope of the class….” Babineau v. Federal Express Corp., ___ F.3d ___ (11th Cir. July 27, 2009) [Slip Opn., at 1-3]. Plaintiffs moved the district court to certify the litigation as a class action, but the court denied the motion concluding that “individualized factual inquiries into whether and how long each employee worked without compensation would swamp any issues that were common to the class.” Id., at 2. Plaintiff’s appealed the denial of class certification, id. The Eleventh Circuit explained that the issue on appeal was “whether the district court abused its discretion in declining to certify the class.” Id. The Circuit Court held the district court acted within its discretion and affirmed.

We do not here summarize the lengthy summary of facts in the Circuit Court opinion, see Babineau, at 2-14. Nor do we address Rule 23(a)’s requirements for class action treatment, as the district court assumed that they had been satisfied. See id., at 14-15. The Eleventh Circuit immediately began its analysis with Rule 23(b)(3)’s class certification requirements. See id., at 15. The Court noted that “common issues will not predominate over individual questions if, ‘as a practical matter, the resolution of [an] overarching common issue breaks down into an unmanageable variety of individual legal and factual issues.’” Id., at 15-16 (citation omitted). In other words, “[c]ertification is inappropriate if the ‘plaintiffs must still introduce a great deal of individualized proof or argue a number of individualized legal points to establish most or all of the elements of their individual claims.’” Id., at 16 (citation omitted). Using these rules, the district court refused class action treatment because it concluded “adjudication of Plaintiffs’ claims on a class basis would be swamped by individual factual inquiries into the activities of each employee during the gap periods or during breaks.” Id. The Circuit Court addressed each in turn.

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

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Class Actions Alleging Employment-Related Claims Hold Top Spot 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 July 24 - 30, 2009, during which time 47 new class actions were filed. While labor law class actions often top this list by a wide margin, this reporting period saw considerable balance among three separate areas. During this reporting period, only 17 class actions alleging employment-related claims were filed, representing only 36% of the total number of new class actions filed -- well below normal, as labor law class actions often account for more than half of all of the new class actions filed in California state and federal courts during any particular week. Only two other categories met the 10% threshold: there were 11 new class actions alleging violations of the Electronic Fund Transfer Act (23%), and 10 new class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims (21%).