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

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Class Action Defense Cases–Barbaroza v. West Coast Digital: California Appellate Court Affirms Trial Court Order Requiring Class Counsel in Certified Class Counsel To Represent Class Through Collection Of Judgment

Trial Court did not Err in Holding that Class Counsel owed Duty to Absent Class Members to Represent them in Collection of Judgment, not merely through Obtaining Judgment, Particularly in Light of Defendant-Employer’s Lack of Assets and Possible Bankruptcy Filing California Appellate Court Holds

Plaintiffs filed a putative class action in California state court against their employer, West Coast Digital GSM, alleging labor law violations; specifically, the class action complaint alleged that West Coast violated California’s Labor Code by “unlawful deductions from wages, failure to pay overtime, and failure to provide meal and rest breaks.” Barbaroza v. West Coast Digital GSM, Inc., 179 Cal.App.4th 540 (Cal.App. 2009) [Slip Opn., at 1-3.] Plaintiffs sought class action certification, but the motion was denied. Id., at 3. While the appeal on the denial of class action treatment was pending, the lawsuit went to trial on plaintiffs’ individual claims. Id. Plaintiffs generally prevailed, losing on only one of their causes of action. Id. The trial court disallowed some of the attorney fees sought by plaintiffs as the prevailing party, and that order was appealed. Id. The California Court of Appeal thereafter issued its opinion concerning class action certification and reversed the trial court’s order, directing the court to certify the litigation as a class action. Id. However, because the named plaintiffs already had litigated their individual claims, the appellate court also directed the trial court to determine whether could adequately represent the class and, if not, to allow plaintiffs’ counsel to find new representatives for the class action. Id. Almost a year later, the same plaintiffs filed a motion for class action certification, which was granted. Id., at 3-4. West Coast sold its assets and ceased operations. Id., at 4. West Coast then permitted plaintiffs to obtain its default, and secured a default judgment in excess of $5.7 million. Id. Plaintiffs’ counsel filed a motion for attorney fees but proposed to give notice to the class that West Coast “had sold its assets and ceased operations, and that it claimed to have no assets and would eventually declare bankruptcy.” Id. The proposed notice also advised the class that counsel had obtained a default judgment but once counsel obtained an award of attorney fees “class counsel no longer had any obligation to pursue the matter on behalf of the class because its obligation was only to pursue the matter on behalf of the class because its obligation was only to represent the class until judgment was obtained.” Id., at 4-5. The trial court denied the proposed notice on the ground that “class counsel had a duty to pursue the class claims ‘until the end (i.e., enforcement of the judgment) and not just until judgment.’” Id., at 5. Plaintiffs and class counsel appealed, id. The appellate court affirmed.

Despite the general rule regarding the duties of an attorney and class counsel’s claim that “enforcement of judgments requires specialized knowledge on the part of the attorney,” the Court of Appeal explained that “there are in fact important reasons to treat class counsel differently[.]” Barbaroza, at 6. Notably, the class action device puts in place “certain safeguards” to protect the interests of absent class members, id., at 7. One such safeguard is the requirement that class counsel demonstrate an ability to “adequately represent the interests of the class as a whole,” id. (citations omitted). Another safeguard is the requirement that the class representatives and their counsel “owe absent class members a fiduciary duty to protect the absentees’ interests throughout the litigation.” Id. (citation omitted). And finally, the trial court itself must safeguard the rights of absent class members, id. (citation omitted). This last protection was implicated by the trial court’s ruling when it concluded that “class counsel’s job did not end with entry of judgment.” Id., at 8. The class claims were too small to be pursued individually for purposes of securing a judgment, and they remained too small to be pursued individually for purposes of collection. Id. The Court of Appeal explained further that “more importantly, since it seems unlikely…that there are sufficient assets to pay each class member what is owed, plus attorney fees, there remains an important class issue – i.e., how the recoverable assets (if any) are to be distributed.” Id. At this stage of the proceedings, and based on this showing, the trial court did not err in requiring class counsel to continue representation of the class. Id., at 8-9. Accordingly, the appellate court affirmed the trial court order, id., at 9.

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

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CLASS ACTION DEFENSE BLOG OFF FOR THANKSGIVING

The author of the Class Action Defense Blog is taking the day off for the Thanksgiving holiday. A new class action article will be published on Monday, November 30. Happy Thanksgiving, everyone!

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

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Class Action Defense Cases–Tasaranta v. Homecomings Financial: California Federal Court Dismisses Class Action Complaint Holding Allegations Insufficient To Support TILA, RESPA, HOEPA Or FDCPA Claims

Class Action Arising out of Home Loan Transaction and Alleging Violations of Various State and Federal Laws Dismissed, without Opposition from Plaintiffs, because Class Action Complaint Failed to Satisfy Pleading Requirements California Federal Court Holds

Plaintiffs filed a putative class action in California state court against Homecomings Financial and American Mortgage Network (which apparently was never served) arising out of a home loan they obtained that was secured by real property in Chula Vista, California. Tasaranta v. Homecomings Financial LLC, ___ F.Supp.2d___ (S.D. Cal. September 9, 2009) [Slip Opn., at 1-2.] Specifically, the class action complaint alleged that defendants violated the federal Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA), Home Ownership and Equity Protection Act (HOEPA) and Fair Debt Collection Practices Act (FDCPA), as well various California-state laws. Id., at 2. The class action prayed for compensatory and punitive damages, and sought “rescission of the contract and loan.” Id. Defense attorneys for Homecomings Financial removed the class action to federal court on the basis of federal question jurisdiction, id., at 1., and then filed a motion to dismiss the class action which plaintiffs did not oppose, id., at 1-2. Id. The district court granted the motion and dismissed the class action complaint without prejudice.

Even though the motion to dismiss the class action was unopposed, the district court reviewed each claim for relief on the merits. With respect to the class action’s TILA claim, the federal court found that the statute of limitations had run on the claim, Tasaranta, at 4-5, and that, separately, the complaint failed to adequately plead a “plausibly suggestive” claim “entitling the plaintiff to relief,” Tasaranta, at 4 (citation omitted). With respect to RESPA, the district court ruled that the class action failed to adequately plead the alleged transfer of the servicing contract in order to support a claim against “Servicers” under RESPA, id., at 5, and that the “yield spread premium” (YSP) claim under RESPA failed because YSPs are not per se illegal under RESPA, id., at 5-6. With respect to HOEPA, the class action complaint failed to allege sufficient details about the loan to support a claim that the interest rate fell within the scope of the statute. See id., at 6-7. And with respect to the FDCPA claim, the federal court observed that the class action did not “include sufficient factual allegations to support the conclusion that Defendants violated the FDCPA, such as how, when and to whom Plaintiffs ‘requested validation,’ and how and when each Defendant responded.” Id., at 7. Accordingly, the district court dismissed the class action complaint against Homecomings Financial without prejudice. Id., at 9.

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

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Class Action Defense Cases--Evans v. Lasco Bathware: California Appellate Court Affirms Denial Of Class Action Treatment Of Products Liability/Negligence Class Action Because Individual Issues Predominate And Plaintiffs Inadequate Class Representatives

Class Action Alleging Defective Shower Pans did not Warrant Class Action Certification because Individual Issues Predominate Over Sole Common Issue (Defective Design) and Plaintiffs Willingness to Sacrifice Substantial Damages Possibly Suffered by Putative Class Members Rendered them Inadequate Representatives of the Class California Appellate Court Holds

Plaintiffs filed a putative class action in California state court against Lasco Bathware alleging that the Lasco shower pans installed in the homes owned by members of the putative class were defective; specifically, the class action complaint alleged that the shower pans “suffered from design defects that resulted in water leakage, and the leakage caused damage to adjacent building components.” Evans v. Lasco Bathware, Inc., ___ Cal.App.4th ___ (Cal.App. November 6, 2009) [Slip Opn., at 1.] The class action complaint alleged strict products liability and negligence, id., at 2. The class action “sought to recover only the costs of removing and replacing the shower pans and expressly excluded any consequential damages to adjacent shower components caused by the water leakage.” Id., at 5. Plaintiffs filed a motion with the trial court to certify the litigation as a class action, id., at 2. Defense attorneys opposed class action treatment on the grounds that the putative class was not readily ascertainable because “(1) the absence of a ready method for determining which consumers presently had Lasco shower pans installed in their bathrooms; (2) the absence of a ready method for determining whether the shower had been used the requisite number of times; and (3) the absence of a ready method for determining whether a specific consumer would be excluded from the class.” Id., at 7. Defense counsel also argued that “common issues did not predominate over individual issues because the only common issue (whether the design was defective) was outweighed by the non-common issues.” Id. Specifically, whether any particular member of the putative class actually suffered water damage would require destructive testing of each individual’s residence. Id., at 7-8. In sum, class action certification was not warranted because a class action trial would devolve into “mini-trials” with respect to each individual class member. Id., at 9. The trial court agreed with defense counsel that class action treatment was not warranted because individual issues predominate over common issues. Id., at 11. The Court of Appeal affirmed.

The California appellate court summarized its holding as follows: “There is substantial evidence from which the court could have concluded the sole common issue (whether the shower pan was defectively or negligently designed) did not predominate over individualized questions of damages, and there is substantial evidence from which the court could have concluded the proposed plaintiffs did not adequately represent the interests of the class.” Evans, at 11. Specifically, the actual costs of replacing defective shower pans “were not amenable to estimation because the costs associated with removing and replacing each individual shower pan could vary widely from one class member to the next.” Id., at 13. Plaintiffs argued that class action treatment should not be denied simply because of differences in the actual damages suffered by putative class members. Id., at 14. The appellate court concluded, however, that “although a trial court has discretion to permit a class action where the damages recoverable by the class must necessarily be based on estimations, the trial court equally has discretion to deny certification when it concludes the fact and extent of each member’s injury requires individualized inquiries that defeat predominance.” Id., at 17-18.

Continue reading "Class Action Defense Cases--Evans v. Lasco Bathware: California Appellate Court Affirms Denial Of Class Action Treatment Of Products Liability/Negligence Class Action Because Individual Issues Predominate And Plaintiffs Inadequate Class Representatives" »

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

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Surge In Securities Class Action Lawsuits But Labor Law Class Actions Hold Top Spot Among Categories Of New 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 November 13 - 19, 2009, during which time 48 new class action cases were filed in these California state and federal courts. Labor law class actions almost always top this list, often by a substantial percentage and often accounting for well over half of the total number of new class actions filed in these California courts. During this reporting period, however, only 16 of the new class action lawsuits involved employment-related claims (representing a comparatively low 33% of the total number of new class actions filed). The only other categories to break the 10% threshold involved class actions involving securities claims, with 13 new lawsuits (27% of the total number of new class actions filed), and class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, with 9 new class action lawsuits (19% of the new class actions filed).

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

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Class Action Defense Cases–Anthony v. AIG: Eleventh Circuit Certifies Questions To Georgia Supreme Court Following Dismissal Of Class Action Complaint Challenging Excessive Notary Fees Charged In Connection With Refinance

Propriety of Dismissal of Class Action Challenging Notary Fees Charged by Lender in Connection with Refinance of Home Loan that were in Excess of Maximum Allowed by Georgia State Law Turned on Issues not yet Clearly Resolved by Georgia Courts Eleventh Circuit Holds, thereby Warranting Certification of Questions to Georgia Supreme Court

Plaintiff filed a putative class action against American General Financial Services, with whom they had refinanced their home loan, alleging violations of various Georgia-state laws; each of the claims in the class action complaint were premised on a charge for notarial fees allegedly “in excess of the statutory maximum established by OCGA § 45-17-11(b).” Anthony v. American General Financial Services, Inc., 583 F.3d 1302, 1304 (11th Cir. 2009). According to the allegations underlying the class action complaint, plaintiffs “executed a standard loan agreement specifying certain fees that they must pay as part of the transaction, including a $350.00 ‘notary fee,’” which the loan documents stated were “reasonable and necessary.” Id. American General did not disclose that under OCGA § 45-17-11, the maximum permissible notarial fee is $4.00. Id. Plaintiffs paid the $350 notary fee, and their class action complaint followed. Id. Defense attorneys moved to dismiss the class action complaint, id. The district court granted the motion finding (1) a private right of action does not exist under OCGA § 45-17-11, (2) Georgia’s “voluntary payment statute,” see OCGA § 13-1-13 (2002), barred the contract claims, and (3) the four-year statute of limitations barred other claims. Id. On appeal, the Eleventh Circuit expressed “doubt [as to] the correct application of state law in this case,” id.; accordingly, the Circuit Court certified those questions to the Georgia Supreme Court.

The Eleventh Circuit explained that “[t]he Supreme Court of Georgia may review a question of law certified by this Court when it is ‘determinative of the case’ and there are ‘no clear controlling precedents in the decisions of the Supreme Court.’” Anthony, at 1305 (citing OCGA § 15-2-9(a)). Because the Circuit Court found “no clear controlling precedent” as to several issues dispositive of the appeal, the Court certified the following questions to the Georgia Supreme Court:

Continue reading "Class Action Defense Cases–Anthony v. AIG: Eleventh Circuit Certifies Questions To Georgia Supreme Court Following Dismissal Of Class Action Complaint Challenging Excessive Notary Fees Charged In Connection With Refinance" »

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

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Class Action Defense Cases–Schachter v. Citigroup: California Supreme Court Affirms Defense Judgment In Labor Law Class Action Holding Forfeiture Of Restricted Stock Shares Upon Termination Did Not Violate California Labor Code

Trial Court Properly Granted Summary Judgment in Favor of Employer in Class Action Alleging Failure to Pay Wages under Labor Code because Prospective, Bilateral Agreement between Employer and Employee to Pay a Portion of Compensation in Restricted Stock Shares that were Forfeited upon Resignation or Termination for Cause Prior to Expiration of Two-Year Vesting Period did not Violate Labor Code California Supreme Court Holds

Plaintiff, a former stockbroker at Smith Barney (a subsidiary of Citigroup), filed a putative class action in California state court against Citigroup and others alleging violations of California’s labor laws; specifically, the class action complaint alleged that Citigroup’s voluntary employee incentive compensation plan, which permitted employees to obtain “shares of restricted company stock at a reduced price in lieu of a portion of that employee’s annual cash compensation,” violated California law because the plan provided that if the employee resigns or is fired then he forfeits any shares of stock that had not yet vested. Schachter v. Citigroup, Inc., 47 Cal.4th 610 (Cal. 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, plaintiff, “along with officers and other key individuals in the company’s employ,” participated in the plan – receiving restricted stock in lieu of a portion of their salary. Id., at 3. The stock would not vest for two years, and if an employee was fired without cause prior to that time then “the employee forfeited his or her restricted stock, but received in return, without interest ‘a cash payment equal to the portion of his or her annual compensation that had been paid in the form of such forfeited [r]estricted [s]tock.’” Id. However, if the employee voluntarily resigned or was terminated for cause prior to that time, then “the employee forfeited his or her restricted stock as well as the percentage of annual income designated by the employee to be paid as shares of restricted stock.” Id. Plaintiff resigned before all of his stock vested, and therefore fell within this latter group, forfeiting his stock and that portion of his income that he directed to be paid as stock. Id., at 4. His class action complaint followed, id. Defense attorneys moved for summary judgment but the motion was denied, id. After several years of litigation, and after the trial court certified the litigation as a class action, the trial court reconsidered its summary judgment ruling sua sponte and concluded that the plan’s forfeiture provision did not violate California law; accordingly, it granted defendants’ motion for summary judgment. Id., at 5. The California Court of Appeal affirmed, see id., at 5-6, and the California Supreme Court granted review, id., at 7. The Supreme Court affirmed, concluding that “the forfeiture provision does not run afoul of the Labor Code because no earned, unpaid wages remain outstanding upon termination according to the terms of the incentive plan.” Id., at 1.

The issue before the Supreme Court was whether employees “would be owed – and therefore would be required to forfeit – any ‘earned and unpaid’ wages upon resigning or being terminated for cause.” Schachter, at 8. Plaintiff argued “the percentage of his annual compensation he directed be paid to him in the form of shares of restricted stock constitutes a wage that remained earned but unpaid following his resignation.” Id., at 9. The Supreme Court disagreed, holding that the shares of restricted stock constituted wages. Id. The controlling factor was that the employer and employees had entered into a bilateral agreement after the employees had been hired: “It cannot be questioned that employers and employees are free to prospectively and bilaterally alter the terms of employment.” Id., at 11. Here, plaintiff specifically requested that he be paid in part in restricted stock shares, and contractually agreed that “his resignation or termination for cause before the end of the two-year vesting period would result in forfeiture of the restricted stock and the percentage of his compensation that he ‘authorized to be paid in the form of such restricted stock.’” Id. The Supreme Court summarized its holding at page 13:

Continue reading "Class Action Defense Cases–Schachter v. Citigroup: California Supreme Court Affirms Defense Judgment In Labor Law Class Action Holding Forfeiture Of Restricted Stock Shares Upon Termination Did Not Violate California Labor Code" »

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

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Class Action Defense Cases–Williams v. Geithner: Minnesota Federal Court Denies Preliminary Injunction In Class Action Based On Home Affordable Modification Program (HAMP) Holding It Unlikely Class Action Claims Will Prevail

Class Action Alleging Denial of Loan Modifications under HAMP (Home Affordable Modification Program) Violate Constitutional Right to Procedural Due Process Unlikely to Succeed on the Merits because Federal Regulations did not Create Property Right in Loan Modifications so Plaintiffs’ Request for Preliminary Injunction Denied Minnesota Federal Court Holds

Plaintiffs filed a putative class action against various defendants – including various banks and federal government agencies – seeking a preliminary injunction. Williams v. Geithner, ___F.Supp.2d ___ (D. Minn. November 9, 2009) [Slip Opn., at 1-2]. The allegations underlying the class action complaint concern the federal Home Affordable Modification Program (HAMP), which “is aimed to financially assist three to four million homeowners who have defaulted on their mortgages or who are in imminent risk of default by reducing monthly payments to sustainable levels.” Id., at 4. The federal government “defin[ed] the class of borrowers who are eligible for a loan modification” and, through HAMP, provides “financial incentives to participating mortgage servicers to modify the terms of eligible loans.” Id. (footnote omitted). (The district court opinion summarizes HAMP in detail. See id., at 4-7.) The gravamen of the class action is that plaintiffs became delinquent on their home loans and sought loan modifications under HAMP, but their requests were denied. They then filed this class action complaint, which alleges that denial of the loan modifications constitutes “a violation of their constitutional right to procedural due process.” Id., at 9. The class action purports to represent (1) “people who are delinquent on their mortgage payments, have applied for and been denied a loan modification, but whose loan servicers have not yet taken foreclosure action,” and “people who are delinquent on their mortgage payments, have applied for and been denied a loan modification, and whose homes have been sold at a foreclosure sale and whose statutory right of redemption period has not yet expired.” Id., at 8-9. Under plaintiffs’ theory, “Congress intended to provide a particular benefit to homeowners facing foreclosure, and, therefore, Defendants are required to provide that benefit in accordance with Plaintiffs’ constitutional rights. Specifically, Plaintiffs contend that Defendants’ failure to provide written notification of an adverse decision and an opportunity for appeal deprives them of due process of law in violation of the United States Constitution. Plaintiffs seek an injunction of all foreclosures by Defendants in Minnesota until the HAMP’s constitutional infirmities are resolved.” Id., at 9. Plaintiffs sought a preliminary injunction in furtherance of their claims, but the district court denied such relief.

In the Eighth Circuit, issuance of a preliminary injunction requires that the district court “balance four factors: (1) the likelihood of the movant’s success on the merits; (2) the threat of irreparable harm to the movant in the absence of relief; (3) the balance between the harm to the movant and the harm that the relief would cause to the other litigants; and (4) the public interest.” Williams, at 9 (citing Dataphase Systems, Inc. v. C L Systems, Inc., 640 F.2d 109, 114 (8th Cir. 1981)). The district court focused on the first test – the likelihood of success on the merits – and concluded that “the regulations at issue here did not intend to create a property interest in loan modifications for mortgages in default.” Id., at 11. We do not summarize the numerous grounds relied upon by the federal court in reaching this conclusion; they are set forth at pages 10 through 14. Central to the court’s reasoning, however, was its determination that loan modifications were not a “right” or an “entitlement,” see id., at 11-12, and that discretion existed in determining whether to grant such modifications,. see id., at 12-13. The district court therefore concluded at page 14, “Plaintiffs do not have a legitimate claim of entitlement to a loan modification. Thus, the HAMP does not provide Plaintiffs with a ‘protected property interest,’ the denial of which must comport with due process protections.” Accordingly, the court denied plaintiffs’ motion for preliminary injunction. Id., at 15.

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

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Labor Law Class Actions Continue To Dominate Categories Of New Class Action Lawsuits Filed In California State And Federal Courts

To assist class action defense attorneys anticipate the types of lawsuits 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 November 6 - 12, 2009, during which time 40 new class action cases were filed in these California state and federal courts. Class actions alleging employment-related claims generally top the list by a wide margin, often accounting for more than half of the total number of new class actions filed in these California courts. During this reporting period, there were 20 new class actions alleging employment-related claims (50% of the total number of new class actions filed). The only other categories to break the 10% threshold involved class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, with 7 new class action lawsuits (18% of the new class actions filed during the reporting period), and class actions alleging violations of federal securities laws, with 5 new class action lawsuits (13% of the new class actions filed during the reporting period).

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

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FSLA Class Action Defense Cases—In re Enterprise: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation But Selects Western District Of Pennsylvania As Transferee Court

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Objection of Common Class Action Defendants, but Transfers Class Actions to Western District of Pennsylvania

Seven class actions – two in the Northern District of Illinois, and one each in the Middle and Southern Districts of Florida, the Northern District of Georgia, the Southern District of New York and the Western District of Pennsylvania, – were filed against various Enterprise Rent-A-Car entities alleging labor law violations. In re Enterprise Rent-A-Car Wage & Hour Employment Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2009) [Slip Opn., at 1]. According to the allegations under the class actions, “defendants violated the Fair Labor Standards Act (FLSA) by misclassifying their assistant managers as salaried and thus not entitled to overtime.” Id. Attorneys for plaintiffs in one of the Illinois class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of Illinois, where their class action was pending. Id. “With the exception of plaintiff in the Western District of Pennsylvania action, who urges that the Panel select that district as transferee district, all responding plaintiffs support selection of the Northern District of Illinois. Responding defendants Enterprise Rent-A-Car Co., Inc., and its affiliates, however, oppose centralization, and, if the Panel orders centralization over their objections, ask that the Eastern District of Missouri be selected as transferee district.” Id. The Judicial Panel granted the motion to centralize the class action lawsuits, rejecting defendants’ claims that the various class actions presented individual issues. The Panel explained:

In opposing centralization, defendants argue, inter alia, that the actions do not share factual issues, because individual Enterprise subsidiaries – unique to each state – employed the assistant branch managers and were responsible for classifying them as exempt and ensuring compliance with the FLSA. We are not persuaded by this argument, however, because the record indicates that the involvement vel non of Missouri-based Enterprise Rent-A-Car Co., Inc., in overseeing its subsidiaries and, in particular, setting policies affecting the employment of assistant managers is, in fact, an open question common to the actions in the litigation. On this and any other common issues, centralization under Section 1407 has the benefit of placing all actions in this docket before a single judge who can structure pretrial proceedings to consider all parties’ legitimate discovery needs, while ensuring that common parties and witnesses are not subjected to discovery demands that duplicate activity that has already occurred or is occurring in other actions.

Id., at 1-2. The Judicial Panel rejected the Northern District of Illinois, however, even though it enjoyed wide support, deciding instead that the Western District of Pennsylvania as the appropriate transferee court because “[t]he first-filed action is pending there, and that action is measurably more advanced than either [class action in Illinois],” id., at 2. Accordingly, the Panel transferred all class actions pending outside of Pennsylvania to that district. Id.

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

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PSLRA Class Action Defense Cases–Zerger v. Midway Games: Illinois Federal Court Dismisses Securities Fraud Class Action Holding Class Action Complaint's Allegations Failed To Meet PSLRA's Pleading Requirements

Class Action Complaint Alleging Securities Fraud Violations Failed to Allege Facts (as Opposed to Conclusions) or Adequately Plead Scienter under Heightened Pleadings Requirements of Private Securities Litigation Reform Act (PSLRA) Illinois Federal Court Holds

Plaintiffs filed a putative class action against various officers and directors of Midway Games alleging violations of federal securities laws; specifically, the class action complaint “alleg[ed] that the executives artificially inflated the market value of Midway stock by deceiving the public about the company’s financial position.” Zerger v. Midway Games, Inc., ___ F.Supp.2d ___ (N.D. Ill. October 19, 2009) [Slip Opn., at 1]. (Plaintiffs also filed a class action against Midway Games, but voluntarily dismissed it after Midway filed for bankruptcy protection. Id., at 2.) According to plaintiffs, the allegations underlying the class action complaint established violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934, and of SEC Rule 10b-5. Id., at 1. Defense attorneys moved to dismiss the class action complaint for failure to meet the heightened pleading requirements established by the PSLRA (Private Securities Litigation Reform Act), id. The district court granted the motion and dismissed the complaint.

Over the course of 20 years, Midway developed more than 400 video games for various platforms, including home-console, handheld, coin-operated and PC. Zerger, at 2. In 2001, the company decided to focus on home-console and handheld devices, such as Xbox, Game Cube, Game Boy and PlayStation. Id. In 2005, the company “announced its first profitable quarter in five years,” id. But in the words of the Circuit Court, “all was not well with Midway’s business model.” Id., at 3. And while the company “repeatedly assured the market that Midway had sufficient working capital to fund day-to-day operations and to continue product development,” in September 2005 it had to borrow money to fund its day-to-day operations. Id. The class action complaint outlined other alleged omissions, see id., at 3-5, concluding that defendants took advantage of the false impression they had given the market to sell 800,000 shares of stock, nearly all of them in a 3-week period, id., at 5. Plaintiffs also blamed Sumner Redstone (chairman of Viacom and controlling shareholder of Midway) for the inflated stock prices because he had announced that he was “evaluating Midway as a potential acquisition target for Viacom” and had purchased millions of shares of stock in the company. Id. Analysts expressed concern that these purchases caused Midway’s stock to be “somewhat overvalued” and warned that if Redstone decided to sell his shares then the stock price would drop. Id. Redstone later announced that Viacom would not acquire Midway, and the stock “immediately began to lose value” ultimately falling more than 50%. Id., at 5-6.

Continue reading "PSLRA Class Action Defense Cases–Zerger v. Midway Games: Illinois Federal Court Dismisses Securities Fraud Class Action Holding Class Action Complaint's Allegations Failed To Meet PSLRA's Pleading Requirements" »

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

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SLUSA Class Action Defense Cases–Segal v. Fifth Third Bank: Sixth Circuit Affirms Dismissal Of Class Action Complaint Holding Class Action Claims Fell Within Scope Of SLUSA

District Court Properly Found Class Action’s State Law Claims Fell within Scope of Securities Litigation Uniform Standards Act (SLUSA) Sixth Circuit Holds

Plaintiff filed a putative class action against Fifth Third Bank and its holding company, Fifth Third Bancorp., alleging breach of fiduciary duty and breach of contract. Segal v. Fifth Third Bank, N.A., 581 F.3d 305, 308 (6th Cir. 2009). According to the allegations underlying the class action complaint, Fifth Third “ breached its fiduciary and contractual duties to the class in three ways: (1) It invested fiduciary assets in proprietary (and often higher-fee) Fifth Third mutual funds rather than superior funds operated by the Bank's competitors; (2) it promised trust beneficiaries that their fiduciary accounts would receive ‘individualized’ management and breached that agreement by providing standardized and largely automated management…, often by ‘relatively inexperienced’ and ‘low-level’ employees…; and (3) it invested too many of the funds' assets in low-yielding investments in order to cover the accounts' near-term tax liabilities.” Id. Defense attorneys moved to dismiss the class action on the grounds that the state law claims were preempted by the Securities Litigation Uniform Standards Act of 1998 (SLUSA); the district court agreed and dismissed the class action complaint. Id. The Sixth Circuit affirmed.

The Sixth Circuit explained that Congress enacted Private Securities Litigation Reform Act (PSRLA) to “curb[] ‘perceived abuses’ of federal class-action securities litigation by imposing special requirements and obstacles on claimants filing such actions.” Segal, at 308 (citations omitted). However, “some claimants responded by ‘avoid[ing] the federal forum altogether,’ bringing ‘class actions under state law, often in state court’ instead.” Id., at 309 (citation omitted). Because this “was not what Congress had in mind,” it enacted SLUSA: its purpose was to “‘prevent certain State private securities class action lawsuits alleging fraud from being used to frustrate the objectives of’ PLSRA…[by] expressly prohibit[ing] certain state law class actions,” id. (citation omitted). The Circuit Court explained that “SLUSA prohibits a claimant from filing a class action when four things are true: (1) the class action is ‘covered,’ which means it involves more than fifty members; (2) the claims are based on state law; (3) the action involves a ‘covered security,’ which means a nationally listed security; and (4) the complaint alleges ‘an untrue statement or omission of a material fact in connection with’ buying or selling a covered security or a ‘manipulative or deceptive device or contrivance in connection with’ buying or selling a covered security.” Id. (citations omitted). The parties agreed that the first three of these requirements were satisfied by the class action – the question on appeal was whether the last requirement had been met. Id.

Continue reading "SLUSA Class Action Defense Cases–Segal v. Fifth Third Bank: Sixth Circuit Affirms Dismissal Of Class Action Complaint Holding Class Action Claims Fell Within Scope Of SLUSA" »

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

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PSLRA Class Action Defense Cases–Indiana State District Counsel v. Omnicare: Sixth Circuit Affirms Dismissal Of Securities Fraud Class Action Noting Bad Corporate News Does Not Automatically Mean Securities Fraud

Class Action Alleging Securities Fraud Properly Dismissed because Class Action Complaint Failed to Meet Heightened Pleading Requirements Established by Private Securities Litigation Reform Act (PSLRA) Sixth Circuit Holds

Plaintiffs filed a putative class action against Omnicare and individual officers and directors of Omnicare alleging violations of federal securities laws; in the words of the Sixth Circuit, “Seizing on a few vague statements from management, the plaintiffs try to turn bad corporate news into a securities class action.” Indiana State Dist. Counsel of Laborers, etc. v. Omnicare, Inc., 583 F.3d 935 (6th Cir. 2009) [Slip Opn., at 1, 2]. We do not here summarize the “sprawling and repetitive” allegations underlying the class action complaint, id., at 3; interested readers may find the Circuit Court’s summary at pages 3 through 7 of the opinion. Defense attorneys moved to dismiss the class action, which the district court granted. See id., at 7-8. Reviewing the district court’s decision de novo, id., at 8, the Sixth Circuit affirmed. The Court summarized its holding at page 2 as follows, “Because the Private Securities Litigation Reform Act (‘PSLRA’) forbids such alchemy, we generally affirm the district court’s dismissal, although we reverse its disposition regarding the claims brought under the Securities Act of 1933.”

The Sixth Circuit began its analysis by explaining that § 10(b) securities fraud claims must be pleaded with the same specificity as fraud claims under FRCP Rule 9(b). Omnicare, at 9. The Court further explained, “Bolstering this rule of specificity, the PSLRA imposes further pleading requirements…. First, the complaint must ‘specify each statement alleged to have been misleading’ along with ‘the reason or reasons why the statement is misleading.’… Second, plaintiffs must ‘state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.’” Id. (citations omitted). Under this standard, the Sixth Circuit affirmed. The Circuit Court concluded that the statements challenged by the class action complaint were not material, see id., at 9-11, or failed to adequately allege loss causation, see id., at 11-12, or failed to establish that defendants knew Omnicare’s claims of “legal compliance” were false when made, see id., at 13-16.

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

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Class Action Defense Cases– Pineda v. Williams-Sonoma: California Appellate Court Affirms Dismissal Of Song-Beverly Class Action Holding Zip Codes Not “Personal Identification Information” Under The Act

Class Action Alleging Violations of California’s Song-Beverly Act Properly Dismissed because Zip Codes are not “Personal Identification Information” Within the Meaning of the Statute California Appellate Court Holds

Plaintiff filed a putative class action against Williams-Sonoma alleging inter alia violations of California’s “Song-Beverly” Act, which “prohibits merchants that accept credit cards in transacting business from requesting and recording ‘personal identification information’ concerning the cardholder.” Pineda v. Williams-Sonoma Stores, Inc., ___ Cal.App.4th ___ (Cal.App. October 23, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, defendant “requested and recorded the customer's zip code for the purpose of using it and the customer's name to obtain the customer's address through the use of a ‘reverse search’ database.” Id., at 1-2. Specifically, as part of plaintiff’s credit card purchase, Williams-Sonoma requested her zip code, and used it (in combination with her name) to perform a reverse-search, from which it obtained her residential mailing address. Id., at 2. Defense attorneys demurred to the class action on the grounds that “a zip code is not ‘personal identification information’” within the meaning of Song-Beverly. Id., at 3. (We do not here discuss the other causes of action.) The trial court agreed and dismissed the class action. Id. The Court of Appeal affirmed.

The Court of Appeal did not spend an excessive amount of time analyzing the issue before it, as it is quite straight-forward and, in the author’s view, governed by existing case law. See Party City Corp. v. Superior Court, 169 Cal.App.4th 497 (Cal.App. 2008) (concluding zip codes are not “personal identification information” under Song-Beverly). After summarizing Song-Beverly, see Pineda, at 4, the appellate court followed Party City. The Court rejected plaintiff’s argument that Party City was distinguishable on the ground that, in that case, there was no evidence that the merchant actually used the zip code to perform a reverse search, id., at 5-6. The Court of Appeal concluded, “Simply put, the Act either allows a retailer to ask customers for a zip code or it prohibits this conduct. The Party City court concluded, and we agree, that the Act does not prohibit this conduct.” Id., at 6. Accordingly, the appellate court affirmed the dismissal of the class action. Id., at 9.

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

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Class Action Lawsuits Alleging Labor Law Claims Maintain Grip On 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 October 30 - November 5, 2009, during which time 48 new class action cases were filed in these California state and federal courts. Labor law class action generally top the list by a wide margin, and this past week was no exception. During this reporting period, there were 25 new class actions alleging employment-related claims (52% 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), which includes false advertising claims, with 9 new class action lawsuits (19% of the new class actions filed during the reporting period).

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

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Class Action Defense Cases–Trombley v. Bank of America: Rhode Island Federal Court Grants Plaintiffs Additional Time To Conduct Discovery Concerning Unconscionability Of Class Action Waiver In Arbitration Clause

Plaintiffs in Class Action Challenging Late Fees Imposed on Credit Card Accounts and Contesting Enforceability of Arbitration Clause that Includes a Class Action Waiver were Entitled to Conduct Limited Discovery to Support Claim that Class Action Waiver was Unconscionable Rhode Island Federal Court Holds

Plaintiffs filed a putative class action against Bank of America alleging violations of the federal Truth in Lending Act (TILA) and breach of credit card agreements based on the late fees charged by the Bank on credit card accounts; the class action complaint also sought a declaration that the arbitration clause in the credit card agreements, which included a class action waiver, was unenforceable. Trombley v. Bank of America Corp., 636 F.Supp.2d 151, 152 (D.R.I. 2009). The Bank argued that the credit card agreements “include an enforceable arbitration provision, which provides that Delaware law is the governing authority, precludes class actions, and designates the National Arbitration Forum (‘NAF’) for arbitration proceedings.” Id., at 153. Defense attorneys moved to compel arbitration of the class action’s claims on an individual basis based on the class action waiver in the arbitration clause; plaintiffs opposed the motion, arguing that the class action waiver was unconscionable and therefore unenforceable. Id., at 152. Plaintiffs also sought additional time to respond to the Bank’s motion, in order to conduct discovery concerning the unconscionability of the class action waiver. Id., at 153. The Bank opposed plaintiffs’ request for additional time, asserting that the motion to compel arbitration presented issues that were “largely legal questions and that the information necessary to support the plaintiffs’ arguments is available to them without discovery.” Id. The district court granted plaintiffs additional time to conduct discovery and, accordingly, postponed ruling on the motion to compel arbitration.

Preliminarily, the district court observed that the arbitration clause contains an express exception which provides that any challenge to the class action waiver is to be decided by the court rather than by an arbitrator. Trombley, at 152-53. The federal court also noted that it was plaintiffs’ burden to establish that the arbitration clause was unconscionable, and that plaintiffs’ request for additional time was for purposes of conducting “limited discovery” concerning the Bank’s assertion that the class action claims “are subject to arbitration.” Id., at 153. Specifically, plaintiffs argued “that they need[ed] discovery to challenge the class action waiver in the arbitration provision with factual support that the waiver is unconscionable because it operates as a bar to the claims raised in this case.” Id., at 154. The district court agreed that plaintiffs were entitled to conduct discovery relevant to the issue of whether, because of the small amounts involved in any individual claim “has resulted in few or no individual claims being brought against [the Bank],” id. And with respect to the question of unconscionability, the district court held that plaintiffs were entitled to “limited discovery to address the procedures used by [the Bank] to sign up credit card members and the substantive issues of the costs and the alleged institutional bias of the NAF,” id. Accordingly, the federal court granted plaintiffs 60 days for the purpose of conducting “discovery limited to the enforceability of the class action waiver provision and the procedural and substantive unconscionability of the arbitration provision.” Id.

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

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Class Action Defense Cases–Premium Mortgage v. Equifax: Second Circuit Affirms Dismissal Of Class Action Against Credit Reporting Agencies Holding State-Law Claims Preempted By Fair Credit Reporting Act (FCRA)

Class Action Complaint Against Credit Reporting Agencies Alleging State Law Claims Arising from Sale of “Trigger Leads” to Mortgage Lenders Properly Dismissed because Class Action Claims were Preempted by Federal Fair Credit Reporting Act (FCRA) Second Circuit Holds

Plaintiff, a mortgage lender, filed a putative class action against various consumer reporting agencies, including Equifax, Trans Union and Experian, alleging various state-law claims based on defendants’ “sale of mortgage ‘trigger leads’ to third party lenders”; the class action complaint explained that “trigger leads” reflect a consumer’s interest in obtaining a loan. Premium Mortgage Corp. v. Equifax, Inc., 583 F.3d 103, 2009 WL 3163225, *1 (2d Cir. 2009). According to the allegations underlying the class action complaint, “defendants’ practice of permitting other lenders to purchase ‘pre-screened’ consumer reports…that, in essence, contain trigger leads” results in the disclosure of “proprietary customer information” because “such information is not readily known in the industry and it cannot be obtained except through extraordinary effort.” Id. Specifically, “the prescreened reports in question use the information conveyed by a trigger lead as a screening criterion in order to generate a list of consumers who are in the market for mortgages and other loan facilities” and “[t]he lenders purchasing these lists then compete with plaintiff and similarly situated mortgage brokers by offering terms on loans to the customers.” Id. Defense attorneys moved to dismiss the class action on the grounds that the claims were preempted by the federal Fair Credit Reporting Act (FCRA); the district court granted the motion and dismissed the class action. Id. The Second Circuit affirmed.

The Circuit Court reviewed the district court order de novo. Premium Mortgage, at *2. The Second Circuit readily affirmed the district court’s order with respect to “the bulk of plaintiff’s state common-law claims” based on the FCRA’s unambiguous language that “no requirement or prohibition may be imposed under the laws of any State ... with respect to any subject matter regulated under ... subsection (c) or (e) of section 1681b of this title, relating to the prescreening of consumer reports.” Id. (quoting § 1681t (b)(1)(A)). The class action’s claims concerned “consumer reports,” within the meaning of the FCRA, because “trigger leads are simply one of the constituent parts” of such reports; the Circuit Court therefore rejected plaintiff’s argument that “its claims are not preempted because the trigger leads themselves are not “consumer reports” under the FCRA.” Id. The Second Circuit also rejected plaintiff’s attempt to create a distinction, for preemption purposes, between the class action’s statutory and common-law claims. See id., at *2-*4. Because the claims fell squarely within the FCRA, the Circuit Court affirmed the district court order dismissing the class action complaint on grounds of preemption. Id., at *4.

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

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Class Action Defense Cases–Cohen v. DIRECTV: California Appellate Court Affirms Denial Of Class Action Certification In UCL/CLRA Class Action Holding Class Membership Lacked Commonality

Class Action Alleging Violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA) Properly Denied Class Action Treatment because Putative Class Members Lacked Commonality California Appellate Court Holds

Plaintiff filed a putative class action in California state court against DIRECTV on behalf of satellite television service subscribers alleging false advertising; specifically, the class action complaint alleged that DirecTV violated California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL). Cohen v. DIRECTV, Inc., ___ Cal.App.4th ___ (Cal.App. October 28, 2009) [Slip Opn., at 1, 2]. According to the allegations underlying the class action complaint, defendant used false advertising to induce consumers to “purchase more expensive ‘high definition’ or ‘HD’ services.” Id., at 2. Plaintiff alleges that he had the company’s “basic” service, but switched to HD service, at a higher monthly fee and purchasing the new equipment required, based on advertisements promising “higher quality television images,” id., at 2. However, the class action alleged that DIRECTV “started tinkering with the HDTV channels making up the HD Package in an effort to preserve bandwidth” and eventually “reduced the bandwidth of transmission from ‘19.4 Mbps’ … to ‘an astonishing 6.6 Mbps,’ and also reduced the ‘horizontal and interlaced vertical lines’ on certain channels.” Id. The complaint was premised on the theory that class members had “‘subscribed to DIRECTV’s HD Package based upon DIRECTV’s national advertising and marketing of the HD Package;’ and that DIRECTV ha[d] ‘represented that channels in its HD Package are broadcasted in the . . . 1920x1080i standard and at 19.4 Mbps, which they are not,’ and that DIRECTV has ‘advertised the sale of its HD Package without the intent to provide the customers with broadcasts in the . . . 1920x1080i standard and at 19.4 Mbps.’” Id., at 3. Defense attorneys moved the trial court to compel arbitration of the class action claims, but the court denied the motion and the appellate court affirmed. See Cohen v. DIRECTV, Inc., 142 Cal.App.4th 1442 (Cal.App. 2006). Eventually, plaintiff moved the trial court to certify the litigation as a nationwide class action, and supported the motion with “print advertising and promotional materials for its HD Package.” Cohen, at 4. Defense attorneys opposed class action treatment, and submitted to the trial court declarations from a number of subscribers attesting that they upgraded their service without relying on the company’s print advertising or other promotional materials. Id. The trial court denied class action certification, holding that the class was not ascertainable and did not possess a well-defined community of interest because it included subscribers who never saw any DIRECTV ads, or who saw ads that did not reference bandwidth or pixels, or who otherwise were not influenced by the company’s advertising. Id., at 5-6. The class definition was thus overbroad, id., at 6. Additionally, the laws of each state would govern the claims of their respective class members. Id., at 6-7. The trial court therefore denied class action certification, id., at 7. Plaintiffs appealed, and the Court of Appeal affirmed.

After summarizing the standard governing class action certification in California, see Cohen, at 8, the appellate court turned to the question of ascertainability. The Court of Appeal held that the trial court erred in finding that the class was not ascertainable because “The defined class of all HD Package subscribers is precise, with objective characteristics and transactional parameters, and can be determined by DIRECTV’s own account records.” Id., at 10. However, the appellate court agreed that the proposed class lacked commonality. First, the appellate court agreed that “subscribers’ legal rights may vary from one state to another state, and that subscribers outside of California may not be protected by the CLRA and UCL.” Id., at 13. The appellate court concluded that it was not error to deny plaintiff’s request to restrict class membership to a state-wide class because even as so limited commonality would not exist. The Court explained at page 13, “The record supports the trial court’s finding that common issue of fact do not predominate over the proposed class because the class would include subscribers who never saw DIRECTV advertisements or representations of any kind before deciding to purchase the company’s HD services, and subscribers who only saw and/or relied upon advertisements that contained no mention of technical terms regarding bandwidth or pixels, and subscribers who purchased DIRECTV HD primarily based on word of mouth or because they saw DIRECTV’s HD in a store or at a friend’s or family member’s home.”

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

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Countrywide RESPA Class Action Defense Cases–Alston v. Countrywide: Third Circuit Reverses Dismissal Of RESPA Class Action Alleging Payment Of Kickbacks Holding Plaintiffs Had Standing To Prosecute Class Action

District Court Erred in Dismissing RESPA Class Action because Kickback Prohibition does not Require that Consumers Suffer an Overcharge as a Prerequisite to Prosecuting Claim for RESPA Violation Third Circuit Holds

Plaintiffs filed a putative class action against Countrywide Financial Corporation, Countrywide Home Loans and Balboa Reinsurance Company alleging violations of the federal Real Estate Settlement Procedures Act of 1974 (RESPA); the class action complaint was “brought by homebuyers who sought to recover statutory treble damages pursuant to section 8(d)(2) of [RESPA], codified at 12 U.S.C. § 2607(d)(2).” Alston v. Countrywide Fin. Corp., 585 F.3d 753 (3d Cir. 2009) [Slip Opn., at 1, 3]. According to the allegations underlying the class action complaint, “[plaintiffs’] private mortgage insurance premiums were channeled into an unlawful ‘captive reinsurance arrangement’ – essentially, a kickback scheme – operated by their mortgage lender, Countrywide Home Loans… and its affiliated reinsurer, Balboa Reinsurance…in violation of RESPA section 8(a) and section 8(b),” id., at 3. The class action alleged that “in enacting and amending section 8, Congress bestowed upon the consumer the right to a real estate settlement free from unlawful kickbacks and unearned fees, and Countrywide’s invasion of that statutory right, even without a resultant overcharge, was an injury-in-fact for purposes of Article III standing.” Id. Defense attorneys moved to dismiss the class action complaint for lack of jurisdiction on the ground that “plaintiffs’ monthly PMI premiums were filed with the PID [Pennsylvania Insurance Department] and, therefore, per se reasonable under the filed rate doctrine.” Id., at 7. Defense attorneys also argued that because plaintiffs’ PMI rates had been approved by the state, they could not have suffered an overcharge and, absent an overcharge, they had not suffered the “injury-in-fact” required for Article III standing. Id. The district court granted the motion and dismissed the class action without prejudice. Id., at 3, 7-8. Plaintiffs appealed, and the Third Circuit reversed.

The class action was premised on the theory that Countrywide steered homebuyers who needed PMI insurance to companies that would “reinsure” the PMI policies with Balboa pursuant to a “captive reinsurance arrangement.” Alston, at 5. Further, the lawsuit claimed that because “Balboa did not assume risk commensurate with the amount of premiums it received” – having purportedly collected almost $900 million without paying any money in claims – the premiums paid to Balboa constituted “kickbacks to Countrywide by the primary insurer, in return for Countrywide’s referral of PMI business to the primary insurer, thereby violating RESPA’s anti-kickback provision,” id., at 6. In other words, Countrywide “offered only ‘sham’ reinsurance coverage,” id. Plaintiffs alleged that because of the kickback scheme they were entitled to statutory damages under RESPA even if the scheme did not result in overcharges to the consumer. Id., at 6-7. The Circuit Court defined the issue as follows: “What is before us for decision turns on a question of statutory interpretation—does or does not the plain language of RESPA section 8 indicate that Congress created a private right of action without requiring an overcharge allegation? We conclude that it does. Accordingly, we will reverse the Order of the District Court.” Id., at 3.

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