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

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RESPA Class Action Defense Cases–Yeatman v. D.R. Horton: Eleventh Circuit Affirms Dismissal Of Class Action Holding Mere Offering Of Closing Cost Discount For Use Of Affiliated Lender Does Not Violate RESPA Or HUD Regulations

Class Action Alleging RESPA Violations by Home Builder for Offering Discount on Closing Costs for use of Affiliated Lender Properly Dismissed because Mere Offering of such an Option does not Violate RESPA or HUD Regulations Eleventh Circuit Holds

Plaintiffs filed a putative class action against home builder D.R. Horton and its affiliated mortgage lender, DHI Mortgage, alleging violations of the federal Real Estate Settlement Procedures Act (RESPA). Yeatman v. D.R. Horton, Inc., 577 F.3d 1329, 1329 (11th Cir. 2009). According to the allegations underlying the class action complaint, plaintiffs agreed to purchase a home built by D.R. Horton and agreed to finance the home through its affiliate because the purchase agreement gave them “the option of receiving a discount on their closing costs on the house, provided they used DHIM as their mortgage lender.” Id., at 1329-30. The purchase agreement did not require plaintiffs to use DHIM as their lender, id., at 1330. Defense attorneys moved to dismiss the class action on the ground that the offer to discount closing costs if purchasers used an affiliate did not violate RESPA; the district court agreed, concluding that “the mere offering of an option of a discount on closing costs does not violate [RESPA],” and that it also did not violate the regulations promulgated by the Department of Housing and Urban Development (HUD) “prohibiting arrangements where consumers are required to use a specified service in order to buy another service or product.” Id. (citations omitted). Id., at 3-4. Accordingly, the district court granted defendants’ motion and dismissed the class action with prejudice. Id., at 1329. Plaintiffs appealed, and the Eleventh Circuit affirmed. The sum total of the Circuit Court’s analysis was, “We have considered the briefs and the well-reasoned opinion of the district court. We conclude that the district court properly dismissed [plaintiffs’] complaint with prejudice.” Id., at 1330. It therefore affirmed the dismissal of the class action, id.

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

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Class Action Defense Cases–In re Sanofi-Aventis: New York Federal Court Dismisses Securities Fraud Class Action Holding Class Action Complaint Failed To Adequately Plead Fraud Or Scienter

Class Action Complaint Alleging Securities Fraud Violations Arising from Disclosures Concerning Drug under Development Failed to State Claims under Section 10(b) of the Securities Exchange Act of 1934 or Rule 10b-5 New York Federal Court Holds

Plaintiffs filed a putative class action against French pharmaceutical company Sanofi-Aventis and certain individual defendants alleging violations of the Securities Exchange Act of 1934; specifically, the class action complaint alleged that defendants misrepresented facts concerning the company’s “research activities and attempt to market a drug called ‘rimonabant’ used to treat obesity and related illnesses.” In re Sanofi-Aventis Sec. Litig., ___ F.Supp.2d ___ (S.D.N.Y. September 25, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, during the approval process the FDA sent Sanofi an approval letter for the drug’s use in connection with obesity, but a non-approval letter with respect to the drug’s use as a smoking cessation aid.” Id., at 2-3. Additionally, the FDA expressed concern “that use of rimonabant in treating obesity might be associated with higher rates of suicidality and other mood disorders.” Id., at 3. However, defendants’ disclosures allegedly failed to disclose the scope of the FDA’s concerns. Id., at 4. Defense attorneys moved to dismiss the class action complaint. Id., at 1. The district court granted the motion and dismissed the class action complaint.

With respect to the class action’s claims under Section 10(b) and Rule 10b-5, the federal court noted that “the complaint must explain why the allegedly misleading misstatements were fraudulent in order to satisfy the pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure.” In re Sanofi-Aventis, at 5 (citation omitted). Based on the court’s analysis, the class action failed to identify any material misstatements or omissions sufficient to state a securities fraud claim. See id., at 5-10. Moreover, the class action complaint failed to satisfy the scienter requirement. See id., at 10-13. And because plaintiffs failed to “establish a primary violation of the securities laws,” the claims under Section 20(a), seeking to impose liability on the individual defendants, failed as a matter of law. Id., at 13. Accordingly, the district court granted defendants’ motion and dismissed the class action complaint without leave to amend. Id., at 14.

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

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AT&T Class Action Defense Cases–Morgan v. AT&T: California Appellate Court Reinstates Class Action Against AT&T Holding Class Action Complaint Sufficiently Alleged UCL, CLRA and Fraud To Survive Demurrer

Class Action Complaint Alleging AT&T Violated State Consumer Protection Laws Concerning Advertising of Premium Cell Phone Properly Dismissed as to False Advertising and Declaratory Relief Claims but UCL, CLRA and Fraud Claims Improperly Dismissed California Appellate Court Holds

Plaintiffs filed a putative class action against AT&T Wireless alleging violations of various state consumer protection laws; specifically, the class action complaint was “based upon AT&T‟s marketing and sale of premium cell phones that operated on a wireless network that AT&T allegedly modified in a manner that rendered those premium cell phones essentially useless.” Morgan v. AT&T Wireless Services, Inc., 177 Cal.App.4th 1235 (Cal.App. 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, AT&T sold the Sony Ericsson T68i as a premium cell phone that “could make and receive calls around the world and had other advanced technologies”; at the time, however, AT&T knew that “it had no intention to continue to support and service the T68i” and modified its wireless system so as to render the phone “worthless.” Id., at 3. AT&T also allegedly sought to “surreptitiously ‘phase out’ these worthless premium phones without paying any compensation to the purchasers, or providing them with a new phone of equal capabilities and compatible with the changes made to their system,” id. The original class action complaint was 13 pages long and alleged violations of California’s Unfair Competition Law (UCL), False Advertising Law, Consumers Legal Remedies Act (CLRA), fraud and declaratory relief; the third amended class action complaint contained the same claims for relief but had “morphed” into a 47-page long pleading “after the trial court sustained AT&T‟s successive demurrers on the ground that the complaint lacked the requisite specificity.” Id., at 2. The trial court again sustained AT&T’s demurrer to the class action complaint because “plaintiffs’ theory of recovery [was] obscured by extraneous allegations in the third amended complaint” and because “plaintiffs still failed to identify with particularity any actionable misrepresentations made by AT&T.” Id. The Court of Appeals affirmed in part and reversed in part, sending the class action back for further proceedings.

We do not here summarize the allegations in each variation of the class action complaint. See Morgan, at 3-13. Nor do we summarize the theories underlying the class action’s claims for relief. See id., at 13-17. In ruling on AT&T’s demurrer, the trial court observed that the class action complaint “included so much extraneous matter that it was difficult to determine what plaintiffs’ theory was, and which allegations supported that theory.” Id., at 18. The trial court concluded, “In sum, no CLRA damages claim is stated because no CLRA notice was given. Plaintiffs‟ argument that pre-suit notice provided to [AT&T] as required by the CLRA may be provided 2 years into the case, with the filing of an amended complaint, is rejected. No fraud claim is stated because plaintiffs do not allege what specific misrepresentation was made to them that they relied on and were injured by. At most, a UCL or FAL claim might be found amongst the foliage, but plaintiffs have not identified where.” Id., at 19. Because plaintiffs had “failed to identify with particularity any actionable misrepresentation by AT&T” after four attempts to do so, and because plaintiffs had not identified how the class action complaint may be amended to rectify this deficiency, the trial court sustained the demurrer without leave to amend. Id.

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

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New Class Actions Alleging Employment-Related Claims Hold On To Top Spot Among Weekly Class Action Lawsuits Filed In California State And Federal Courts But UCL Claims Run Close Second

As a resource for California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in 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 September 18 - 24, 2009, during which time 40 new class action cases were filed in these California courts. Generally, labor law class actions top the list by a wide margin, and a wide variety of categories complete the mix. This past week, however, only three categories accounted for fully 90% of the new class action lawsuits filed in these California courts. Class actions alleging employment-related claims continued to hold the top spot, with 16 new class actions, accounting for 40% of the total number of new class actions filed. But class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, ran a close second, with 13 new class actions (33%). The only other category to break the 10% threshold involved class actions alleging violations of federal securities laws, with 7 new class action lawsuits (18% of the new class actions filed during the reporting period). Among them, these three groups accounted for 36 of the 40 new class actions filed during this past week.

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

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

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

Ten (10) class actions – eight in New Jersey, one in New York and one in Pennsylvania – were filed against various defendants alleging antitrust violations; specifically, the class action complaints allege “price fixing in a claimed nationwide market for blood reagent products and seek recovery under federal antitrust law” In re Blood Reagents Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 17, 2009) [Slip Opn., at 1, 2]. Twenty (20) related class actions were treated as potential tag-along cases, id., at 1 n.1. Plaintiffs’ lawyers in three of the New Jersey class actions filed two 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 of New Jersey. Id., at 1. The motion for consolidation was not opposed, but the parties proposed various venues for transfer. Responding plaintiffs in other New Jersey class actions supported the motion; responding parties in Pennsylvania class actions, supported the motion but requested transfer to Pennsylvania; responding parties in Texas class actions, together with class actions pending in other states, requested transfer to Texas; still other responding parties requested transfer to Illinois or South Carolina. Id., at 1-2. Certain common defendants requested centralization in Georgia, id., at 2. The Judicial Panel granted the motion to centralize the class action lawsuits and decided on the Eastern District of Pennsylvania as the appropriate transferee court. Id.

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

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Class Action Defense Cases–County of Nassau v. Hotels.Com: Second Circuit Remands Class Action For Consideration In First Instance Of Propriety Of Class Action Treatment Is Appropriate

Class Action Alleging Failure to Online Hotel Room Reseller to Pay Proper Occupancy Taxes, Dismissed by District Court for Failure of County to Comply with Administrative Process for Assessing and Collecting Taxes, Remanded for District Court Consideration of Whether Class Action Certification is Appropriate Second Circuit Holds

Plaintiff County of Nassau filed a putative class action against Hotels.Com alleging failure to pay the proper hotel occupancy taxes. County of Nassau v. Hotels.Com, LP, 577 F.3d 89, 90-91 (2d Cir. 2009). According to the allegations underlying the class action complaint, “defendants are online sellers and/or resellers of hotel rooms who negotiate discounted room rates with hotels and then resell the rooms at higher retail rates.” Id., at 91. The State of New York authorizes counties to impose a tax “upon persons occupying hotel or motel rooms in such county.” Id. (citation omitted). The class action alleged that defendant improperly calculated the tax owed to the County in that defendant calculated the taxes owed “based on the discounted price that it negotiated with the hotels and accordingly remitting too little to the County.” Id. The class action complaint sought to represent a “state-wide class of all New York cities, counties and other local governmental entities that have imposed hotel taxes since March 1, 1995.” Id. The County filed the class action in federal court under the Class Action Fairness Act (CAFA), id. Defense attorneys moved to dismiss the class action on the ground that the County failed to comply “with administrative processes for assessing and collecting taxes, thus exhausting its administrative remedies, prior to commencing its action to recover those taxes”; the district court granted the motion and dismissed the class action. Id., at 90-91. The Second Circuit reversed without addressing the administrative process issue, remanding the matter “for consideration of a different jurisdictional concern, which we raised nostra sponte at oral argument: whether the complaint meets the requirements for class certification under Fed.R.Civ.P. 23, without which both we and the District Court would lack jurisdiction over the suit as presently constituted.” Id., at 91.

The Second Circuit explained, Because the case presents no federal questions, the only statutory jurisdictional grant that might allow us to consider the case with its current parties is CAFA, which grants district courts original jurisdiction over class action suits on certain conditions, among them that ‘the number of members of all proposed plaintiff classes in the aggregate’ be no less than one hundred.” Id., at 91-92 (quoting 28 U.S.C. § 1332(d)(5)(B)). The parties had stipulated that the requirements of CAFA had been met, but as parties cannot stipulate to federal court jurisdiction the Second Circuit, at oral argument, “asked nostra sponte whether they are in fact satisfied, as the District Court lacked jurisdiction to hear the case if they were not.” Id., at 92. The County stated in a post-argument letter brief that there were more than 100 local government entities owed hotel taxes under the theory of the complaint, id. The Second Circuit noted that this would satisfy the numerosity requirement under CAFA, but that “the allegation raises the distinct possibility that questions common to the members of the class do not predominate over those affecting only individual members” because “[a]ssuming that each locality imposes its hotel tax as Nassau does, under its own tax law, the cause of action for each member of the plaintiff class might well arise under a law unique to that class member.” Id. Accordingly, the Circuit Court remanded the class action to the district court to “consider in the first instance” whether class certification is appropriate. Id., at 92-93.

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

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Class Action Defense Cases–Rynearson v. Motricity: Washington Federal Court Again Remands Class Action To State Court Holding CAFA Jurisdiction Not Met And “Other Paper” Does Not Include Pleadings In Unrelated Action

Class Action Improperly Removed to Federal Court under CAFA (Class Action Fairness Act) because Declaration of Plaintiff’s Counsel in Unrelated Lawsuit Against Different Defendant was Insufficient to Establish $5 Million Amount in Controversy and, in Any Event, did not Constitute an “Other Paper” within Meaning of Removal Statute, Warranting Remand of Class Action and Award of Attorney Fees and Costs for Frivolous Removal Washington Federal Court Holds

Plaintiff filed a putative class action in Washington state court against Motricity alleging violations of Washington’s Consumer Protection Act; specifically, the class action complaint alleged that defendant “facilitated placing unauthorized charges for mobile content on customers’ bills.” Rynearson v. Motricity, Inc., 626 F.Supp.2d 1093, 1095 (W.D. Wash. 2009). Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act); plaintiff moved to remand the class action to state court (Rynearson I). Id., at 1094-95. Defense attorneys argued that “the estimate of the cost of injunctive relief was sufficient to establish the amount in controversy requisite for jurisdiction,” and at oral argument added that “removal would also be appropriate based on the damages sought by Plaintiff because of a declaration filed by Plaintiff's counsel in a separate case,” id., at 1095. The district court remanded the class action to state court, id. Defense attorneys then removed the class action to federal court again (Rynearson II), this time arguing that while it had removed the class action previously, it now sought “to remove this action based on new and previously unknown grounds.” Id.¸ at 1096. Specifically, the second removal was based on the declaration of plaintiff’s counsel (Edelson) in a different matter that, according to defense counsel, constituted an “other paper” for removal purposes. Id. Plaintiff’s lawyer moved the district court to reassign Rynearson II to the court that had handled Rynearson I, and sought an OSC re contempt and sanctions, in addition to remand. Id. The district court denied the OSC, but remanded the class action and awarded plaintiff fees and costs. Id., at 1094-95.

In order to establish the $5 million threshold of removal jurisdiction under CAFA, defense attorneys argued that the declaration plaintiff’s counsel in an unrelated case showed that the amount in controversy had been met. Rynearson, at 1096. In explaining why that declaration was “new and previously unknown” when it had been relied on in Rynearson I, defense counsel claimed that this was true because Motricity had been unaware of the declaration at the time it had filed its first notice of removal. Id., at 1096-97. The district court was unimpressed. First, the Court held that the “other paper” may not be a pleading filed in an unrelated case “where the litigants are entirely different.” Id., at 1097. Accordingly, it had no bearing on Rynearson II. Id., at 1098. Second, while it was admittedly “perplexed by Motricity’s description of the Edelson declaration as ‘new and previously unknown,’” it found that defendant’s conduct did not rise to the level of civil contempt. Id. However, the federal court did find that defendant’s conduct warranted an award of attorney fees and costs, as there was no legal authority supporting defendant’s broad use of the phrase “other paper” to include documents filed in other actions. Id., at 1098-99. In the district court’s view, “Defendant's argument in support of removal was frivolous and unsupported by caselaw or a plain reading of the removal statute.” Id., at 1099. Accordingly, the federal court again remanded the class action to state court, and awarded plaintiff attorney fees and costs. Id.

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

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FDCPA Class Action Defense Cases–Hicks v. Client Services: Florida Federal Court Denies Motion To Decertify Class Action Holding De Minimis Recovery Does Not Defeat Rule 23(b)'s Superiority Requirement

Class Action Alleging Violations of Fair Debt Collection Practices Act (FDCPA) Properly Certified as Class Action despite De Minimis Recovery for Class Members Florida Federal Court Holds

Plaintiff filed a class action against Client Services alleging violations of the federal Fair Debt Collection Practices Act (FDCPA); plaintiff moved to certify the litigation as a class action, and the district court agreed that class action treatment was warranted under Rule 23. Hicks v. Client Services, Inc., 257 F.R.D. 699, 700 (S.D.Fla. 2009). Defense attorneys moved to decertify the litigation as a class action, arguing that in light of the statutory cap on damages awardable under FDCPA class actions, the de minimis recovery awaiting class members defeated the “superiority” prong of class certification. Id. Specifically, the FDCPA caps damages in class actions to “the lesser of $500,000 or 1 per centum of the net worth of the debt collector.” 15 U.S.C. § 1692k(a)(2)(B). Defendant asserted that its net worth was only $15 million, and that the putative class contained more than 122,000 members: “Thus, should Plaintiff class prevail, the maximum recovery per class member would be $1.24.” Id. (footnote omitted). Plaintiff countered that “courts have not allowed the prospect of de minimis individual recovery to defeat certification of FDCPA classes.” Id. The district court denied the motion, determining that class action treatment was warranted.

The district court explained that, in analyzing the superiority requirement of Rule 23(b)(3), courts have recognized that [c]lass actions are particularly superior for cases where individual recovery would be small, because class actions ‘overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights.’” Hicks, at 700 (quoting Amchem Prods. v. Windsor, 521 U.S. 591, 617 (1997)). “A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone's (usually an attorney's) labor.” Amchem, at 617. The court considered the cases cited by defendants for the proposition that a de minimis recovery may defeat class certification, see id., at 700-01. The court discussed also the cases cited by plaintiffs hold that de minims recovery does not defeat class certification of FDCPA claims. Id., at 701. The federal court observed, then, that “[t]here is authority supporting both Plaintiff's and Defendant's positions.” Id. It concluded, however, that the cases supporting plaintiff’s view were the more persuasive, id. The district court explained at page 701,

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

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Target Class Action Defense Cases–Muro v. Target: Seventh Circuit Affirms Denial Of Class Action Treatment Of TILA Class Action Holding Plaintiff Lack Standing To Appeal Denial Of Class Certification As She Settled Individual Claim

As Matter of First Impression, because Plaintiff Settled her Individual Claims Following Denial of Class Action Certification Motion of Class Action Alleging Violations of Truth in Lending Act (TILA), Plaintiff Lacked Standing to Appeal Propriety of District Court Order Denying Class Certification Seventh Circuit Holds

Plaintiff filed a putative class action against various Target entities alleging violations of the federal Truth in Lending Act (TILA); the class action complaint alleged that Target sent plaintiff an unsolicited Target Visa card in the mail in violation of TILA’s prohibition against sending credit cards in the absence of a request or application by the consumer. Muro v. Target Corp., ___ F.3d ___ (7th Cir. August 31, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, Target sent unsolicited Visa Cards, which may be used anywhere that accepts Visa cards, to holders of Target Guest Card, which may be used only at Target stores. Id., at 2 and n.2. Guest Card holders were given the option of activating the Visa cards, and if they elected to do so, then the corresponding Guest Card would be deactivated and any balance on the Guest Card would be transferred to the Visa card. Id., at 2-3. Plaintiff had a Guest Card account that she closed in 1999; plaintiff “received no further correspondence from Target for nearly five years” at which time she received the unsolicited Visa card. Id., at 2. Plaintiff did not activate the Visa card and did not incur any charges or fees in connection with the solicitation. Id. Nonetheless, plaintiff filed her class action complaint alleging TILA violations, id. Plaintiff moved the district court to certify the litigation as a class action and defense attorneys moved for summary judgment; the district court “granted summary judgment as to Target and denied class certification.” Id. The Seventh Circuit affirmed.

The Seventh Circuit began its analysis by noting that while TILA states “[n]o credit card shall be issued expect in response to a request or application therefor,” this provision “does not apply to the issuance of a credit card in renewal of, or in substitution for, an accepted credit card.” Muro, at 3-4 (quoting 15 U.S.C. § 1642). According to the district court, any class members that had Guest Card accounts fell within the exception of credit cards issued in “renewal or substitution” thereof, id., at 4. The district court also had denied class action treatment because plaintiff’s claims were not typical of those of the class – “unlike most of the proposed class members, [plaintiff] had alleged that she had closed her Guest Card account.” Id., at 4-5. And while plaintiff could adequately represent a class defined as recipients of the unsolicited Visa cards that previously had closed their Guest Card accounts, the district court found that plaintiff had not demonstrated that such a class would be sufficiently numerous to warrant class action treatment. Id., at 5. Plaintiff then settled her individual claim but claimed to reserve the right to appeal the denial of her class action certification motion, id. The Circuit Court held that plaintiff had “no cognizable interest” in the class action certification issue because she accepted the offer of judgment, so the Court focused on the issue of whether she could nevertheless appeal the district court’s decision not to certify the proposed class. Id., at 5-6.

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

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Labor Law Class Actions Continue To Hold Top Spot Among Weekly Class Action Lawsuits Filed In California State And Federal Courts

In order to allow 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 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 September 11 - 17, 2009, during which time only 34 new class action cases were filed in these California courts. Labor law class actions generally top the list by a wide margin, often accounting for more than half of the new class action lawsuits filed, but class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, ran a close second this week. This past week, only 16 of the new class action filings involved employment-related claims (47% of the total number of new class actions filed). The only other category to break the 10% threshold involved class actions alleging violations of California's UCL, with 10 new class action lawsuits (29% of the new class actions filed during the reporting period).

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

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Madoff-Related Class Action Defense Cases—In re Optimal Strategic: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Southern District Of Florida

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

Three class actions – two in Florida and one in New York – were filed against various defendants, including various Banco Santander entities and HSBC entities, alleging securities laws violations; specifically, the class action complaints allege that “defendants failed to perform adequate due diligence before investing money from their fund, Optimal Multiadvisors, Ltd., and some of its sub-funds with Bernard L. Madoff’s investment firm, Bernard L. Madoff Investment Securities LLC (BLMIS).” In re Optimal Strategic U.S. Equity Fund Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 11, 2009) [Slip Opn., at 1]. Defense attorneys for Banco Santander 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 Florida; plaintiffs in the Florida class actions and attorneys for various HSBC defendants either supported or did not oppose the motion. Id. Plaintiffs in the New York class action opposed centralization, and argued alternatively for transfer to the Southern District of New York. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that “the nature of the due diligence that defendants conducted prior to investing fund assets in BLMIS, all actions will likely focus on a significant number of common events, defendants, and/or witnesses.” Id. The Panel also agreed that the Southern District of Florida was the appropriate transferee court because “[c]ommon defendant Banco Santander International is headquartered in that district and two actions are already pending there, including the first-filed action.” Id. Accordingly, the Judicial Panel ordered the New York class action transferred to the Southern District of Florida, id., at 1-2.

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

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Class Action Defense Cases–Brown v. JEVIC: Third Circuit Reverses Order Remanding Class Action To State Court Holding Class Action Properly Removed Under Class Action Fairness Act Despite Fact Co-Defendant Was In Bankruptcy

Class Action Filed in State Court Against Defendant and Co-Defendant Debtor in Bankruptcy Removable to Federal Court under CAFA (Class Action Fairness Act) because Co-Defendant Sued in Violation of Automatic Stay and because Co-Defendant’s Bankruptcy does not Preclude Defendant from Removing Class Action to Federal Court Third Circuit Holds

Plaintiffs filed a putative class action against JEVIC Transportation and its parent company, Sun Capital Partners, alleging labor law violations; specifically, the class action complaint alleged that defendants violated New Jersey’s WARN Act which, “[l]ike its federal counterpart, …requires advance notice of a plant closing under certain circumstances.” Brown v. JEVIC, 575 F.3d 322, 325 (3d Cir. 2009). JEVIC had filed for bankruptcy protection, and the class action was filed as an adversary proceeding in the United States Bankruptcy Court, id. One week later, and despite the automatic stay afforded by the bankruptcy proceeding, plaintiffs filed a class action in New Jersey state court against JEVIC and Sun Capital Partners. Id. Defense attorneys for JEVIC removed the state court class action to federal court under the Class Action Fairness Act (CAFA); the district court remanded the class action sua sponte on the grounds that the automatic stay precluded the debtor’s petition for removal. Id. Defense attorneys for Sun Capital then removed the state court class action to federal court under CAFA; the district court again remanded the class action, ruling that “[w]hen an action is initiated after the filing of a Chapter 11 petition, in violation of the accompanying stay, removal is not available.” Id., at 325-26. The Third Circuit granted Sun Capital’s petition for leave to appeal the remand order, id., at 326. The Circuit Court explained at page 325, “In this appeal implicating the Class Action Fairness Act of 2005, we consider whether a defendant is precluded from removing a class action to federal court because a co-defendant is in bankruptcy. We hold that it is not.”

The Third Circuit began its analysis by noting that Sun Capital bore the “heavy burden” of establishing federal court jurisdiction. Brown, at 326 (citation omitted). Central to the Circuit Court’s analysis was the fact that Sun Capital was not in bankruptcy, so the district court’s reliance “on cases dealing with debtor defendants who attempted to remove actions” were inapplicable. Id. Also central to its analysis was the fact that the state court class action against JEVIC was improper because it was filed in knowing violation of the automatic stay, so plaintiffs had “improperly joined JEVIC in the [state court class action], [and] that joinder cannot prevent Sun from removing the action.” Id. In essence, plaintiffs fraudulently joined JEVIC in the state court class action. Id., at 326-27. The Third Circuit summarized its holding at page 327: “In sum, because [plaintiffs] had no reasonable basis to believe that JEVIC was amenable to suit, we hold that JEVIC was a fraudulently joined party and its status as a Defendant could not be used to defeat otherwise proper federal jurisdiction.” (The Third Circuit also held that the district court erred in remanding the class action to state court because JEVIC had never been served with legal process and therefore was not properly before the district court. See id., at 327. We do not here analyze that aspect of the Circuit Court's opinion.) Accordingly, the Circuit Court reversed the district court order remanding the class action to state court, id., at 329.

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

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Class Action Defense Cases–Blough v. Holland Realty: Ninth Circuit Affirms Summary Judgment Of Antitrust Class Action Claims Because There Was No Adverse Effect On Competition In The Tied Product Market

District Court did not Err in Granting Summary Judgment on Class Actions’ Claims Alleging Antitrust Violations in the Form of Unlawful Tying Arrangements in the Sale of Undeveloped Properties because Challenged Conduct did not Adversely Affect Competition in the Market Ninth Circuit Holds

Plaintiffs filed four separate putative class actions against several defendants alleging “that various realtors representing developers tied the sale of undeveloped lots to services and commissions for developed property in violation of the federal and state anti-trust laws.” Blough v. Holland Realty, Inc., 574 F.3d 1084, 1087 (9th Cir. 2009). According to the class action complaints, “Buyers entered into agreements with homebuilders to purchase developed lots (an undeveloped lot with a newly-constructed home) in different subdivisions in the Boise, Idaho area. Realtors represented the developers of the subdivisions in allocating lots to the homebuilders. The price of the developed lot that Buyers paid to the homebuilders included a commission (or referral fee) for Realtors, typically calculated as a percentage of the total price of the developed lot. It is apparently the custom in Idaho for the seller, rather than the buyer, to pay the commission owed to the listing agent and to the selling agent (the agent assisting the buyer's search for a property) when a transaction closes. Buyers claim the Realtors engaged in a per se unlawful tying arrangement when they tied the sale of undeveloped lots (the tying product) to their services and commissions on the sale of developed lots (the tied product).” Id., at 1088. Plaintiffs’ lawyer moved the district court to certify the litigation as a class action: the district court granted class action treatment for purposes of class-wide adjudication of the tying claim. Id. The district court “identified the tying product as sales of undeveloped lots and the tied product as Realtors' services, i.e., commissions, with regard to sale of developed lots.” Id. As the Circuit Court explained, “The class consists of those who: (1) bought undeveloped lots in subdivisions where Realtors had the exclusive right to market lots on behalf of the developer; (2) were required to build a house on the lot in order to buy the lot; and (3) were required to pay Realtors a commission based on the cost of the lot plus the actual or estimated cost of the house in order to buy the lot.” Id. Defense attorneys for the realtors moved for summary judgment, and plaintiffs sought additional discovery “into other members of the class to determine whether any of them wanted to buy the services of a listing agent from someone other than Realtors.” Id. The district court denied plaintiff’s request for further discovery “on the ground that they had shown no plausible reason to believe that other members of the class (unlike themselves) would want to purchase the tied product from anyone else,” and granted defendants’ motion for summary judgment “concluding that Buyers failed to show that the alleged tying practice ‘affects a not insubstantial volume of commerce in the tied product market.’” Id. (citation omitted). The Circuit Court explained at pages 1086-87, “Applying the doctrine of ‘zero foreclosure,’ the district court granted summary judgment to the realtors because there is no market for listing and referral services among potential buyers of newly-constructed houses, thus no competition in the tied market to be harmed.” Plaintiffs appealed, and the Ninth Circuit affirmed.

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Posted On: September 15, 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 Treatment Of Putative Labor Law Class Action Claims Holding Rule 23(b)(3)’s Predominance Requirement Not Met

Labor Law Class Action Complaint did not Warrant Class Action Treatment because Individualized Inquiries would Predominate and because Rule 23(b)(1)(A)’s Requirements for Class Action were not Met given Monetary Relief Sought by Plaintiffs Eleventh Circuit Holds

Plaintiffs filed a putative class action against their employer, Federal Express, alleging labor law violations; specifically, the class action complaint alleged that FedEx “failed to pay employees for ‘all hours worked.’” Babineau v. Federal Express Corp., ___ F.3d ___ (11th Cir. July 27, 2009) [Slip Opn., at 2]. According to the allegations underlying the class action complaint, “FedEx has engaged in a pervasive and long-standing policy of failing to pay hourly employees for all time worked.” Id. The class action claimed “FedEx breached their contracts by failing to pay for three categories of time worked: (1) the interval between an employee’s manual punch in time and his scheduled start time; (2) the interval between an employee’s scheduled end time and his manual punch out time; and (3) the time worked during unpaid breaks.” Id., at 3. Plaintiffs moved the district court to certify the litigation as a class action, id., at 2. Originally a class action was filed on behalf of a nationwide class asserting “substantially similar claims,” but the district court denied class action treatment in that case. See Clausnitzer v. Federal Express Corp., 248 F.R.D. 647 (S.D. Fla. 2008). This class action complaint was filed in “[an] attempt[] to address the defects identified in Clausnitzer by limiting the scope of the class to Florida employees, adding a claim for quantum meruit, and altering the theory of their breach of contract claim.” Babineau, at 2-3. As defined, the class action seeks to represent a class that “includes couriers, courier/handlers, service agents, and any other nonexempt employees who are, or were, required during the class period to punch in and out on a manual time clock, but were paid only from their scheduled start time to their scheduled end time.” Id., at 3. The district court again denied class action treatment, holding class certification “was improper primarily because individualized factual inquiries into whether and how long each employee worked without compensation would swamp any issues that were common to the class.” Id. Plaintiffs appealed. The Eleventh Circuit explained at page 2, “The sole question before this Court is whether the district court abused its discretion in declining to certify the class. We hold that the district court acted within the bounds of its discretion and affirm its decision.”

The resolution of this case is very fact-specific, so the Eleventh Circuit spent considerable time on claims and facts supporting and contradicting those claims. See Babineau, at 3-11. We give only a brief summary. The Circuit Court noted that FedEx provides two manuals to its employees – a “People Manual” and an “Employee Handbook.” Id., at 4. Each manual states, “It is the policy of FedEx [] to compensate for all time worked in accordance with applicable state and federal law,” and the People Manual also provides that “[e]xcept for certain approved preliminary and post-liminary activities, no employee should perform work ‘off the clock’ for any reason, whether on their own initiative or at the request of management.” Id. The Eleventh Circuit also explained that FedEx tracks employee time three ways: “First, employees track their time by entering various codes corresponding to different work activities into a hand-held computerized tracking device (a ‘tracker’). Employees manually enter into the trackers their scheduled start times and end times as well as the times at which they start and finish a break…. Additionally, as a backup for the tracker data, employees manually write on a time card the time codes for each task, as well as the start and end time for that task. [¶] FedEx also requires employees to punch in and out on a manual punch clock before and after their shifts. Until 2007 the trackers did not automatically time stamp the employees’ entries, so an employee who was supposed to commence work at 8:00 a.m. but arrived for work at 8:05 a.m. could hide his tardiness by entering an 8:00 a.m. start time into the tracker. Thus, FedEx claims that the manual punch records were simply used to verify the integrity of time entries that employees entered into the trackers. FedEx paid its employees only for the time between the scheduled start and end times as entered into the trackers, which did not necessarily coincide with employees’ manual punch in and punch out times. The periods of time between the start/end times entered into the tracker and the punch in/out times are referred to as ‘gap periods.’” Id., at 5-6.

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

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FCRA Class Action Defense Cases–Beaudry v. Telecheck: Sixth Circuit Reverses Dismissal Of FCRA Class Action Holding Private Right Of Action Under FCRA Does Not Require Proof Of Actual Damages

District Court Erred in Dismissing Class Action Complaint Alleging Violations of Fair Credit Reporting Act (FCRA) on Ground that Plaintiff had not Suffered any Actual Injury because FCRA Allows for Recovery of Statutory Damages for Willful Violations Without Showing of Actual Injury Sixth Circuit Holds

Plaintiff filed a putative class action against Telecheck Services and others alleging violations of the federal Fair Credit Reporting Act (FCRA); specifically, the class action complaint alleged that defendants – “a group of foreign corporations who provide check-verification services” – “failed to account for a 2002 change in the numbering used by the Tennessee driver’s license system, leading their systems to reflect incorrectly that many Tennessee consumers…were first-time check-writers.” Beaudry v. Telecheck, ___ F.3d ___ (6th Cir. August 28, 2009) [Slip Opn., at 1, 2]. According to the allegations underlying the class action complaint, defendants’ actions constituted a “willful failure to provide accurate information [and] entitled the class members to ‘declaratory relief, injunctive relief, statutory damages, punitive damages, attorneys’ fees, costs and expenses.’” Id., at 2. Defense attorneys moved to dismiss the class action complaint on the grounds that (1) plaintiff “failed to allege that she had been injured by a FCRA violation,” and (2) “that the statute of limitations had run.” Id. The district court dismissed the class action , holding that plaintiff “had not alleged any injury and that the statute does not authorize courts to grant injunctive relief.” Id. Plaintiff appealed. The Sixth Circuit stated at page 1, “Because FCRA’s private right of action does not require proof of actual damages as a prerequisite to the recovery of statutory damages for a willful violation of the Act, we reverse.”

The Circuit Court began by summarizing the FCRA, and the differences between negligent violations of the FCRA and willful violations of the FCRA. See Beaudry, at 2-3. Of particular relevance is the fact that willful violations allow a party to recovery statutory damages without showing actual injury. Id., at 4-5. Defense attorneys nonetheless argued that the FCRA requires a showing of some form of “consequential damages” – in this case, however, plaintiff “‘has not…had a check rejected or any other transaction terminated as a result of a TeleCheck recommendation’; nor has she ‘suffered any harm with respect to the availability of credit.’” Id., at 4. The Sixth Circuit disagreed, noting that the FCRA “imposes no such hurdle on willfulness claimants.” Id. Rather, the FCRA allows for the recovery of either actual damages (in the event the violation was negligent) or statutory damages as fixed by Congress (in the event the violation was willful). Id., at 5-6. Accordingly, the district court erred in dismissing the class action complaint on the ground that plaintiff had not suffered any actual injury, id., at 9. The Circuit Court therefore reversed the district court order and remanded the class action for further proceedings. Id., at 10.

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

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New Labor Law Class Actions Maintain Top Spot Among Weekly Class Action Lawsuits 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 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 September 4 - 10, 2009. During that time period, 38 new class action cases were initiated in these California state and federal courts. Labor law class actions generally top the list by a wide margin, often accounting for more than half of the new class action lawsuits filed, but class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, ran a close second this week. This past week, only 14 of the new class action filings involved employment-related claims (37% of the total number of new class actions filed). The only other category to break the 10% threshold involved class actions alleging violations of California's UCL, with 12 new class action lawsuits (32% of the new class actions filed during the reporting period).

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

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Class Action Defense Cases—In re Citigroup Securities Litigation: 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, Opposed by California Class Action Plaintiffs, and Transfers Class Actions to Southern District of New York

Ten class actions – nine in New York and one in California – were filed against various Citigroup entities alleging securities laws violations “by misleading investors about the nature of Citigroup’s investments and the company’s financial condition.” In re Citigroup Inc. Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 7, 2009) [Slip Opn., at 1]. Specifically, the class action complaints alleged that the Citigroup defendants made “material misstatements or omissions in Citigroup’s disclosures about the company’s holdings in and exposures to subprime-related assets.” Id., at 2. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of New York; attorneys for the California class action plaintiffs opposed the motion. Id., at 1. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Southern District of New York was the appropriate transferee court because Citigroup is headquartered in that federal district and because nine of the ten class actions “are already pending in the Southern District of New York before one judge who is also presiding over related derivative and ERISA litigation.” Id., at 2. Accordingly, the Panel ordered the California class action transferred to the Southern District of New York, id.

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

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CAFA Class Action Defense Cases–Manson v. GMAC Mortgage: Massachusetts Federal Court Denies Motion To Remand Class Action To State Court Holding Class Action Removable Under CAFA

Class Action Properly Removed to Federal Court under Class Action Fairness Act (CAFA) because Defendants Adequately Established $5 Million Amount in Controversy and because Plaintiffs Failed to Establish that Local Controversy Exception or Home-State Controversy Exception Applied Massachusetts Federal Court Holds

Plaintiffs filed a putative class action in Massachusetts state court against GMAC Mortgage and various other defendants challenging defendant’s mortgage foreclosure practices; specifically, the class action complaint alleges GMAC violated Massachusetts state law in connection with its foreclosure proceedings because “the foreclosed mortgages had not been validly assigned to the foreclosing banks at the time the foreclosure actions were undertaken.” Manson v. GMAC Mortgage, LLC, 602 F.Supp.2d 289, 291-92 (D. Mass. 2009). Plaintiffs’ class action seeks to represent some 1000 people, all residents of Massachusetts residents, “whose primary residence was foreclosed by a power of sale...by a defendant that did not contemporaneously possess a written assignment of the underlying mortgage at the time the Notice of Sale was served” or “who face a pending foreclosure initiated by a defendant that did not have a written assignment of the underlying mortgage when the Notice of Sale was served and/or when a Right to Cure notice was sent.” Id., at 292. According to the allegations underlying the class action complaint, “the defendant banks and law firms knew that the foreclosures violated: (i) the Statute of Frauds…; (ii) the statutory notice and sale requirements…; and (iii) the common-law duty of good faith and diligence.” Id. Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act), id. Plaintiffs moved to remand the class action to state court on the grounds that the $5 million amount-in-controversy had not been shown and that CAFA’s “local controversy” or “home-state controversy” exceptions required that the district court “decline jurisdiction.” Id. The district court denied plaintiffs motion, concluding that the class action had been properly removed.

The federal court began by noting that CAFA, inter alia, creates federal jurisdiction over class actions with minimal diversity where the combined amount in controversy exceeds $5 million and the class action involves 100 members or more. GMAC, at 293. Plaintiffs conceded that minimal diversity was present and that the putative class contained more than 100 members, but insisted that it was not “reasonably probable” that the amount in controversy exceeded $5 million at the time of removal. Id. (In this regard, the district court observed that the time of removal was the relevant inquiry because “[e]vents subsequent to removal that reduce the amount in controversy do not divest a federal court of CAFA jurisdiction.” Id., at 293 n.5 (citing Coventry Sewage Assocs. v. Dworkin Realty Co., 71 F.3d 1, 6 (1st Cir. 1995)).) Under plaintiffs’ analysis, the class action seeks primarily injunctive and declaratory relief, and each class members’ monetary damage is approximately $1200; thus, the amount in controversy is only $1.2 million. GMAC, at 293. Defense attorneys countered that a total of 3,934 loans were “referred for foreclosure” during the putative class period, with 1,048 of these loans proceeding to foreclosure and 48 foreclosed properties being sold to third parties for more than $15 million. Id., at 293-94. GMAC argued that this fact went directly to “plaintiffs’ contingent claim that defendants may be liable for the collective replacement value of the homes that were foreclosed.” Id., at 294 n.8. In the alternative, defense attorneys argued that “the actual amount assessed foreclosed borrowers in costs and fees was approximately $8,000 per transaction,” not the $1200 figure provided by plaintiffs, which would make the amount in controversy approximately $8 million. Id., at 294. The district court found defendant’s evidence sufficient to meet the amount in controversy test, id.

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

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Class Action Defense Cases–Walker v. Motricity: California Federal Court Remands Class Action To State Court Holding CAFA’s Amount In Controversy Requirement Not Met And Sanctions Defendant For Removal

Class Action Improperly Removed to Federal Court (Twice) because Defendant Failed to Establish $5 Million Amount in Controversy Required by Class Action Fairness Act (CAFA) and Basis for Defendant’s Removal of Class Action Warrants Sanctions Sua Sponte California Federal Court Holds

Plaintiff filed a putative class action in California state court against Motricity alleging violations of every conceivable statute, including the kitchen sink (see NOTE), arising from Motricity’s alleged act of billing for unwanted mobile content. Walker v. Motricity Inc., 627 F.Supp.2d 1137, 1139-40 (N.D. Cal. 2009). According to the allegations underlying the class action complaint, Motricity “allegedly operates mobile transaction networks to help companies develop, deliver and bill for ‘mobile content’ services to compatible mobile devices in California and the nation,” including such services as “customized ring tones, premium text messages, and sports score reports,” and is purportedly “able to reach and bill millions of wireless subscribers nationwide and has registered thousands of transactions and processed thousands of dollars in California over recent years.” Id., at 1139. Plaintiff alleges that Motricity billed her for “unwanted mobile content services on her cellular telephone bill in the form of premium text messages” that she did not authorize, leading to the filing of her class action. Id., at 1139-40. But plaintiff’s act of excessive pleading was more than matched by defendant’s act in response. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), but the district court granted plaintiff’s motion to remand the class action on the ground that Motricity failed to show the requisite $5 million amount in controversy. Id., at 1139, 1140. Defense attorneys again removed the class action to federal court under CAFA “just fifteen days later,” based on a declaration filed by plaintiff’s counsel in an unrelated action which (Motricity alleged) set forth a ratio for revenue that would (if applied in this case) meet the $5 million threshold for removing class actions under CAFA. Id., at 1140. Plaintiff again moved to remand it to state court. Id. The district court granted plaintiff’s motion, and awarded sanctions for frivolous removal of the class action.

After summarizing CAFA and noting the removing party’s burden of demonstrating that removal jurisdiction exists, see Walker , at 1140-41, the federal court observed that Ninth Circuit authority establishes “different burdens of proof for establishing removal jurisdiction in the CAFA context, depending on what has been pled in the complaint,” id., at 1141. If the class action complaint specifically alleges the amount of damages at issue, then it must appear to a “legal certainty” that the amount prayed for is incorrect; in other words, “If the complaint alleges specific damages in excess of the jurisdictional minimum, then the amount in controversy is presumptively satisfied unless it appears to a ‘legal certainty’ that the claim is actually for less than the jurisdictional minimum, whereas if the specific damages are less than the statutory minimum, it must be shown to a legal certainty that the amount in controversy exceeds that minimum for removal.” Id., at 1141 (citation omitted). But if the complaint does not specify the amount in controversy, then “then the court must look beyond the facts of the complaint and apply the preponderance of the evidence standard.” Id. (citations omitted). In its initial order granting plaintiff’s motion to remand the class action to state court, the district court noted that the class action complaint is silent as to the amount in controversy so Motricity was required to show that the amount in controversy exceeded $5 million. Id., at 1141-42. Because it failed to meet that burden, the court remanded the class action to state court. Id.

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

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Class Action Defense Cases–Garza v. Swift: Arizona Supreme Court Holds Court Of Appeals Lacked Jurisdiction To Hear Appeal From Trial Court Order Denying Class Action Certification Motion

Trial Court Order Denying Class Action Treatment not Appealable because not “Final Judgment” so Court of Appeals Erred in Exercising Appellate Jurisdiction to Review Order Denying Class Action Certification Arizona Supreme Court Holds

Plaintiff filed a putative class action in Arizona state court against his former employer, Swift Transportation, a trucking company, alleging labor law violations; specifically, the class action complaint alleged that Swift paid its truck drivers per “dispatched mile” but “systematically underestimated mileage and, by doing so, routinely underpaid its drivers.” Garza v. Swift Transportation Co., Inc., ___ P.3d ___, 2009 WL 2579527 (Ariz. August 24, 2009) [Slip Opn., at 2-3]. The class action complaint defined the putative class as “[a]ll persons who contracted with Swift Transportation [through the form contract].” Id. Plaintiff’s counsel moved the trial court to certify the litigation as a class action; the trial court denied class action treatment “finding that (1) [plaintiff] did not have a claim under his proposed definition of the class, (2) the class was not adequately defined, and (3) the dispute over the meaning of the contract term ‘dispatched miles’ would require inquiry into extrinsic evidence for each class member.” Id., at 3. Plaintiff appealed, and the Court of Appeals found “without discussion” that it had appellate jurisdiction over the denial class action certification. Id. The appellate court then vacated the trial court order, “determining that [plaintiff] has a claim typical of other potential class members’ claims” and “holding that the term ‘dispatched mile’ should be interpreted uniformly for all class members.” Id. Defense attorneys sought review by the Arizona Supreme Court without reference to the appellate jurisdiction issue, id. The Supreme Court “granted review and d ordered the parties to submit supplemental briefs on the jurisdictional issue.” Id., at 3-4. The Arizona Supreme Court reversed: “In this case, we address whether the court of appeals properly exercised jurisdiction over an appeal from a superior court order denying a motion for class certification. We hold that the court of appeals lacked appellate jurisdiction.” Id., at 2.

In considering whether a trial court order denying class action certification was appealable, the Arizona Supreme Court explained that “federal courts of appeal long struggled with whether a district court’s order denying class certification was an appealable order.” Garza, at 4-5 (citations omitted). Further, “Even those federal courts finding orders denying class certification appealable acknowledged that such decisions were not technically final judgments…because they did not finally dispose of the underlying action,” but they “applied the so-called ‘death knell’ doctrine to find finality when, because of the small size of the claim, ‘a plaintiff simply [could not] continue his law suit alone.’” Id., at 5 (citations omitted). The Arizona Supreme Court noted, however, that “[t]he United States Supreme Court ultimately rejected the federal death knell doctrine in Coopers & Lybrand v. Livesay, 437 U.S. 463, 465 (1978).” Id., at 6-7. The Court then reversed Arizona appellate cases applying the death knell doctrine to find appellate jurisdiction over denials of class action certification motions. See id., at 7-16. The Court emphasized, however, that interlocutory review was still available “in an extraordinary case,” id., at 17. But because appellate jurisdiction does not exist over denials of class action certification orders, the Arizona Supreme Court reversed the Court of Appeals’ decision. Id., at 18.

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

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HAPPY LABOR DAY FROM THE CLASS ACTION DEFENSE BLOG

The author of the Class Action Defense Blog wishes all of you a very happy Labor Day. A new class action article will be published tomorrow.

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

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Labor Law Class Action Lawsuits Regain Top Spot Among New Class Action Lawsuits Filed In California State And Federal Courts

In order to allow 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 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 28 – September 3, 2009. During that time period, 44 new class action cases were initiated in these California state and federal courts. As a general rule, labor law class actions top the list by a wide margin, and often account for more than half of the new class action lawsuits filed. This past week, however, only 20 of the new class action filings involved employment-related claims (45% of the total number of new class actions filed). The only other category to break the 10% threshold involved class actions alleging violations of California's unfair competition law (UCL), with 14 new class action lawsuits, representing 32% of the new class actions filed during the reporting period.

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

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Class Action Defense Cases—In re Celexa & Lexapro: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Transfers Class Actions To Massachusetts

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, but Transfers Class Actions to District not Mentioned by Any of the Parties, the District of Massachusetts

Two class actions – one in Missouri and one in New York – were filed against various defendants, including Forest Laboratories and Forest Pharmaceuticals alleging that defendants “engaged in false and misleading promotion of Celexa and Lexapro for pediatric or adolescent use and sought to induce physicians and others to prescribe Celexa or Lexapro by providing them with various forms of illegal remuneration.” In re Celexa & Lexapro Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 19, 2009) [Slip Opn., at 1-2]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of New York; plaintiffs in the New York class action supported the motion, and plaintiffs in the Missouri class action ultimately did not object to transfer to the Eastern District of New York. Id., at 1. Plaintiffs in a potential tag-along class action pending in the Southern District of New York requested transfer to that district, id. The Judicial Panel granted the motion to centralize the class action lawsuits but selected the District of Massachusetts as the appropriate transferee court. Id. The Panel explained at page 2, “The two qui tam actions that apparently spawned the actions now before the Panel are pending in the District of Massachusetts. Also, centralization in this district permits the Panel to assign the litigation to an experienced judge who is not presently overseeing another multidistrict litigation docket and who has a caseload relatively favorable for this assignment.”

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

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Class Action Defense Cases–Proctor v. Metropolitan Money Store: Maryland Federal Court Denies Defense Motion To Dismiss Class Action Claims But Grants Plaintiffs’ Motion To Dismiss Counterclaims And Certifies Class Action

Class Action Complaint Adequately Pleaded Claims Against Individual Defendants Arising out of Alleged “Mortgage Foreclosure Rescue Scam” but Defendants’ Counterclaims for Fraud were Barred by Doctrine of Res Judicata Maryland Federal Court Holds

Plaintiffs filed a putative class action against Metropolitan Money Store and others alleging that they were “involved in a mortgage foreclosure rescue scam”; specifically, the class action complaint alleged that plaintiffs were “homeowners with substantial equity in their homes, but who were nevertheless facing foreclosure” which “made them targets of Defendants’ promise of credit repair and foreclosure avoidance, which, in actuality, involved fraudulent representations and transactions designed to siphon off the equity in the homeowners’ homes, thus leaving them in a far worse position than before.” Proctor v. Metropolitan Money Store, 645 F.Supp.2d 464 (D.Md. 2009) [Slip Opn., at 1]. Eventually, plaintiffs filed a second amended class action complaint and renewed their motion for class action certification. Id., at 1-2. The class action complaint at issue alleged fraud, RICO, RESPA, Maryland’s PHIFA, and gross negligence. Id., at 2-3. Defendants opposed class action treatment, and defense attorneys for two of the individual defendants again moved to dismiss the class action complaint and filed counterclaims against plaintiffs for “fraud, fraudulent concealment, negligent misrepresentation, fraudulent misrepresentation, and civil conspiracy to commit mortgage fraud.” Id., at 2. Plaintiffs moved to dismiss the counterclaims against them. Id. The district court denied class action treatment and plaintiffs appealed. Id. The district court granted plaintiffs’ motion for class certification but did not discuss its reasoning in the order discussed by this article. See id., at 37. With respect to the motions to dismiss, the federal court denied defendants’ motion to dismiss the class action claims against them, but granted plaintiffs’ motion to strike defendants’ counterclaims.

We do not here focus on the district court’s analysis of the class action claims against the individual defendants. See Proctor, at 4-. For our purposes, it is sufficient to note that the federal court found the class action complaint pleaded fraud with the requisite particularity, see id., at 4-10, that it adequately pleaded causes of action for RICO violations, see id., at 11-23, that it adequately pleaded violations of RESPA, see id., at 24-28, and the PHIFA, see id., at 28-32, and that it adequately pleaded a claim for gross negligence, see id., at 32-34. We focus instead on defendants’ counterclaims against plaintiffs. It is important to note that the federal court dismissed the counterclaims on the ground that they were barred by the doctrine of res judicata. See id., at 35-37. Specifically, defendants had “filed a lawsuit against [plaintiffs’] attorneys arising from the transactions that form the basis of this litigation in the Circuit Court for Montgomery County on June 18, 2008 for the same or substantially similar claim[s] they now assert against the Plaintiffs.” Id., at 35. And while plaintiffs technically were not parties to that action, they were in privity with their attorneys and defendants “received a full and fair opportunity in state court to present their claims,” id., at 35-36. Defendants were now seeking to relitigate those claims, id., at 36-37, which resulted in a final judgment on the merits adverse to defendants, id., at 37. Accordingly, the district court granted plaintiffs’ motion to dismiss the counterclaims, finding them barred by the doctrine of res judicata. Id., at 37.

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

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Class Action Defense Cases–Holk v. Snapple: Third Circuit Reverses Dismissal Of Class Action Holding Class Action’s State Law Claims Regarding "All Natural" Label Not Preempted By Federal Nutrition Labeling And Education Act

District Court Erred in Dismissing Class Action because Class Action’s State Law Claims Alleging Snapple’s Use of Term “All Natural” was Deceptive were not Impliedly Preempted by Federal Nutrition Labeling and Education Act Third Circuit Holds

Plaintiff filed a putative class action in New Jersey state court against Snapple Beverage Corporation alleging inter alia violations of the state’s Consumer Fraud Act; specifically, the class action complaint alleged that plaintiff purchased a Snapple beverage advertised as “All Natural” when in truth the beverage “contained high fructose corn syrup (‘HFCS’), an ingredient manufactured from processed cornstarch.” Holk v. Snapple Beverage Corp., 575 F.3d 329 (3rd Cir. 2009) [Slip Opn., at 1, 5-6]. According to the allegations underlying the class action complaint, “the FDA has acknowledged[] ‘[t]he word “natural” is often used to convey that a food is composed only of substances that are not manmade and is, therefore, somehow more wholesome.’” Id., at 5. The class action therefore alleged that use of the phrase “All Natural” was deceptive because the beverages contain HFCS. Id., at 6, 7. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id., at 7. Eventually, defense attorneys moved to dismiss the class action’s claims on the grounds that they were preempted by federal law, id. Ultimately, the only issue before the district court was “the claim that Snapple products containing HFCS were deceptively labeled ‘All Natural.’” Id. The district court agreed that plaintiff’s claims were preempted and dismissed the class action, id., at 7-8. The district court rejected the express preemption argument, but concluded that plaintiff’s claims were “impliedly preempted by the detailed and extensive regulatory scheme established by the [FDCA] and the FDA’s implementing regulations.” Id., at 8. The Third Circuit reversed.

The Third Circuit noted that Congress has regulated food and beverage labeling for more than 100 years.” Holk, at 3. The statute implicated by this class action is the Nutrition Labeling and Education Act (NLEA), enacted in 1990. Id., at 5. The Circuit Court also noted that there is “a presumption against preemption.” Id., at 11 (citation omitted). Additionally, health and safety issues, including the labeling and branding of food and beverage, has “traditionally fallen within the province of state regulation.” Id. (citation omitted). The federal government became involved in this field only 100 years ago, id., at 11-12. And finally, the Third Circuit held that Snapple’s arguments in the district court waived the express preemption ground as a basis for affirming the judgment on appeal, id., at 12-15, and that “field preemption” did not apply, id., at 15-22. So the Court turned to the issue of implied preemption.

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

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Class Action Defense Cases–Vasilas v. Subaru: New York Federal Court Denies Motion To Dismiss Class Action For Violation Of Federal Odometer Act Holding Class Action Complaint Adequately Alleged Fraud

Class Action Complaint Alleging Violation of Federal Odometer Act Survives Defense Motion to Dismiss because Class Action’s Claim under the Act Pleaded Fraud with Requisite Particularity New York Federal Court Holds

Plaintiffs filed a putative class action against Subaru of America alleging violations of the Federal Odometer Act and related state laws; specifically, the class action complaint alleged that Subaru manufactured vehicles “with defective odometers that deliberately overstated the vehicles’ mileage.” Vasilas v. Subaru of America, Inc., ___ F.Supp.2d ___ (S.D.N.Y. August 5, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, Subaru’s conduct resulted in “shortening the life span of the vehicles’ warranty coverage, decreasing the resale value of their automobiles, and penalizing plaintiffs with unwarranted ‘excessive mileage’ charges on leased automobiles.” Id. Defense attorneys moved to dismiss the class action on the grounds that the Odometer Act “is inapplicable to original factory-installed odometers which, regardless of their inaccuracy, are performing consistent with the manner that they were designed and manufactured to operate.” Id. The district court denied the motion, ruling that a claim for relief may be pursued for alleged violations of the Odometer Act.

The district court noted that the class action complaint did not allege that the odometers installed by Subaru were defective; rather, the gravamen of the class action was that “Subaru knowingly and purposefully (a) used, (b) installed or (c) had installed into the vehicle a device that biased, altered and inflated the mileage recorded on the vehicle’s odometer from the actual mileage traveled by the vehicle.” Vasilas, at 2. Further, when customers began complaining about possible inaccuracies in the mileage reported, “Subaru expressly, but falsely, represented to its customers that its odometers accurately recorded the actual mileage,” id. In considering Subaru’s motion to dismiss, the federal court noted that “a private plaintiff suing for violations of the Odometer Act must adequately plead that defendant acted with an intent to defraud,” id., at 3-4 (citation omitted), and that fraud must be pleaded with particularity under Rule 9(b), id., at 4.

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