Class Action Defense Blog

Labor Law Class Action Alleging Wal-Mart Discriminates Against Female Employees in Violation of Title VII of the Civil Rights Act of 1964 Properly Certified As Nationwide Class Action by District Court Ninth Circuit Holds

Plaintiffs filed a class action against Wal-Mart alleging violations of Title VII of the Civil Rights Act of 1964; specifically, the class action complaint alleged that Wal-Mart discriminates against its female employees. Dukes v. Wal-Mart Stores, Inc., ___ F.3d ___ (9th Cir. April 26, 2010) [Slip Opn., at 6137, 6146]. According to the allegations underlying the class action complaint (originally filed in 2004), Wal-Mart discriminated against women employees in violation of Title VII of the 1964 Civil Rights Act because “women employed in Wal-Mart stores: (1) are paid less than men in comparable positions, despite having higher performance ratings and greater seniority; and (2) receive fewer—and wait longer for—promotions to in-store management positions than men.” Id., at 6147. The class action complaint sought to represent a nationwide class on the grounds “that Wal-Mart’s strong, centralized structure fosters or facilitates gender stereotyping and discrimination, that the policies and practices underlying this discriminatory treatment are consistent throughout Wal-Mart stores, and that this discrimination is common to all women who work or have worked in Wal-Mart stores.” Id. The proposed class included “women employed in a range of Wal-Mart positions, from part-time entry-level hourly employees to salaried managers.” Id. Plaintiffs’ counsel moved the district court to certify the litigation as a class action, defined as “All women employed at any Wal-Mart domestic retail store at any time since December 26, 1998 who have been or may be subjected to Wal-Mart’s challenged pay and management track promotions policies and practices.” Id., at 6148. Defense attorneys opposed class certification and stressed that the proposed class would consist of as many as 1.5 million current and former employees who worked at 3,400 stores in 41 regions. Id., at 6148 and n.3. The district court granted the motion and certified the litigation as a class action, id., at 6146-47. The Ninth Circuit affirmed. The Circuit Court opinion is quite lengthy, so we simply “hit the highlights” in this article. Defense attorneys may contact the author of the Blog for a more detailed discussion of the case.

The Ninth Circuit spent a considerable amount of time discussing the standard governing district court consideration of class certification under Rule 23 and clarified the “proper standard of Rule 23 adjudication.” See Dukes, at 6149-83. This analysis includes a discussion, and rejection, of the dissent’s “significant proof” standard. See id., at 6177-83. The Circuit Court then turned to the merits of the Rule 23 analysis, beginning with Rule 23(a)(1)’s numerosity requirement, which was not contested given the enormous size of the class. Id., at 6185. The Court also found that Wal-Mart had not waived its right to object to Rule 23(a)(3)’s typicality requirement, see id., at 6209-10, but concluded that the district court did not err in finding that the named-plaintiffs’ claims were sufficiently typical of those of the class: “Even though individual employees in different stores with different managers may have received different levels of pay or may have been denied promotion or promoted at different rates, because the discrimination they claim to have suffered occurred through alleged common practices—e.g., excessively subjective decision making in a corporate culture of uniformity and gender stereotyping—the district court did not abuse its discretion by finding that their claims are sufficiently typical to satisfy Rule 23(a)(3).” Id., at 6210. Moreover, “because all female employees faced the same alleged discrimination, the lack of a class representative for each management category does not undermine Plaintiffs’ certification goal.” Id., at 6211. And the Ninth Circuit found no difficulty in finding that the adequacy of representation test in Rule 23(a)(4) had been met. Id., at 6212.

Continue reading "Wal-Mart Class Action Defense Cases–Dukes v. Wal-Mart: Ninth Circuit Court Affirms Class Action Certification Of Largest Labor Law Class Action In U.S. History" »

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

District Court Order Remanding Class Action to State Court Must be Dismissed because Class Action Fairness Act did not Authorize Appellate Review of Specific Facts of the Case Second Circuit Holds

Plaintiffs, the “holders of certificates issued by the trusts,” filed a putative class action in New York state court against various Countrywide Financial entities seeking a declaratory judgment that, under the terms of Pooling and Servicing Agreements between plaintiffs and defendants, Defendant Countrywide Servicing is required to repurchase the certain loans from the plaintiff-trusts “at a price equal to their unpaid principal plus any accrued interest.” Greenwich Financial Services Distressed Mortgage Fund 3 LLC v. Countrywide Financial Corp., ___ F.3d ___, 2010 WL 1541628, *1, *2 (2d Cir. April 20, 2010). Defense attorneys removed the class action to federal court pursuant to the Class Action Fairness Act (CAFA), id., at *1. Plaintiffs moved to remand the class action to state court on the grounds that “while CAFA extended federal jurisdiction for most class actions meeting certain monetary and diversity requirements, it did not apply to this action because the statute exempted suits involving claims that ‘relate[d] to the rights, duties[,] ... and obligations relating to or created by or pursuant to any security.’” Id. (quoting 28 U.S.C. § 1332(d)(9)(C)). The district court agreed and remanded the class action to state court, id. Defendants appealed the remand order. The Second Circuit dismissed the appeal, concluding that it lacked jurisdiction to consider it.

The Circuit Court explained that appeal turned on a provision in CAFA that “bars appellate review of orders remanding securities class actions to state court.” Greenwich Financial, at *1. By way of background, the defendants originate and service residential home loans. Id. Defendant Countrywide Home Loans raised money to finance the loans by selling mortgages in securitization transactions “to specially created trusts, which received payment of interest and principal from mortgage borrowers.” Id. The trusts then “sold certificates to investors,” which entitled the owners to repayment of their principal and to interest payments, id. Defendant Countrywide Servicing administered the loans under Pooling and Servicing Agreements (PSAs). Id. Defendants Countrywide Home Loans and Countrywide Servicing, together with various other entities, were parties to the PSAs; however, the holders of the certificates and Defendant Countrywide Financial were not. Id. According to the allegations underlying the class action, in 2008, the attorneys general of seven states filed lawsuits against various Countrywide entities alleging predatory lending; specifically, “The states alleged that Countrywide engaged in deceptive sales practices, charged unlawful fees, and made loans it had no reasonable basis to think could be repaid.” Id., at *2. Countrywide eventually entered into a single settlement agreement resolving the multi-state litigation, which required Countrywide “to modify the terms of many of the mortgages owned by the trusts and administered by Countrywide Servicing on behalf of the trusts.” Id. Under the terms of the settlement, some homeowners “would make smaller payments of interest and principal to the trusts, thereby decreasing the value of the certificates.” Id.

Continue reading "Countrywide Class Action Defense Cases–Greenwich Financial v. Countrywide: Second Circuit Court Dismisses Appeal From Order Remanding Class Action To State Court Holding CAFA Exception Precluded Appellate Review" »

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions, PSLRA/SLUSA Class Actions

To assist class action defense attorneys anticipate the types of cases against which they may 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 April 16 - 22, 2010, during which time 49 new class actions were filed in these California state and federal courts. Labor law class actions generally account for more than half of the new class action filings in any particular week, though has not been true for the past several weeks. During this past week, a wide range of class actions were filed but only 16 of them were labor law class actions, representing only 33% 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 filings (representing 14% of the total number of new class actions filed), class actions alleging violations of the federal Fair Debt Collection Practices Act (FDCPA), with 6 new filings (12% of the total number of new class actions filed) and 5 class actions (10% of the total number of new class actions filed) alleging antitrust violations, each of which were transferred into California as part of the In re Optical Disk Drive Products Antitrust Litigation action.

Posted In: Class Actions In The News

The author of the Class Action Defense Blog is pleased to share with you the first edition of the JMBM "OC Litigation News" newsletter, written by members of the Litigation Department in the Orange County office of Jeffer Mangels Butler & Marmaro LLP.

JMBM has represented Orange County businesses since the firm was founded in 1981. In 2007, we opened an office in Orange and it continues to grow. Our lawyers include Orange County residents who have practiced law at the area’s most reputable firms for decades, and have supported the needs of Orange County’s businesses and communities throughout their careers.

In the Spring 2010 edition of our OC Litigation News, you will find the following articles:

Pause Before Sending: Using Unenforceable Non-Competes Can be Very Costly

Mark S. Adams explains why the use of unenforceable non-compete agreements can be very costly to companies that use them to limit the number of competitors in the marketplace. In two separate jury trials, his trial team prevailed in Orange County Superior Court against STAAR Surgical Company for tortiously interfering with the prospective economic relationships of clients Parallax Medical Systems and Scott C. Moody, Inc., costing STAAR $11.4 million in damages.

Served Today, Trial Tomorrow

Mark S. Adams discusses Corporations Code section 709 actions, which can be used by stockholders to overturn or validate board elections and are required to go to trial within five days of filing.

Just the Right Fit, Just in Time: Utilizing Outside Counsel to Save Legal Expenses

Eudeen Y. Chang reports on the increased use of General Counsels’ reliance on outside counsel to help reduce costs and staff “just in time.”

Protecting Ownership of Your Property: The Importance of Employment Agreements

Stanley M. Gibson reports on a recent decision from the Federal Circuit Court of Appeals that highlights the importance of employment agreements in protecting the ownership of intellectual property.

The Section 998 Minefield

Monica Q. Vu discusses the use of Code of Civil Procedure section 998 settlement offers which, if not properly understood, may not provide the intended strategic benefit in litigation maneuvers.

To read a PDF version of the entire newsletter, click here.

Posted In: Topics of Interest

Class Action Complaint Properly Dismissed on Grounds that Tender by Defendant Made Prior to Court Ruling on Motion to Amend Complaint to Add New Party-Plaintiffs because Plaintiffs could have Filed Separate Lawsuit or Filed Original Lawsuit to Avoid Risk of Mootness Fifth Circuit Holds

A putative class action was filed against Ticor Title, Chicago Title and others, alleging that Ticor “had overcharged them to record documents related to their residential real estate closings and that the other Defendants were also liable under theories of vicarious liability.” Murray v. Fidelity Nat’l Fin., Inc., 594 F.3d 419, 420 (5th Cir. 2010). After it became apparent that the original plaintiffs had not conducted business with any of the named defendants, but rather with a closely-named but unrelated entity called “Ticor Title of San Antonio,” plaintiffs’ counsel filed a motion for leave to amend the class action complaint to name new individuals (the Murrays), who had conducted business with Chicago Title, as party-plaintiffs. Id. Before the district court ruled on the motion, Chicago Title tendered a check to the potential new plaintiffs as payment in full of their claim against it; nonetheless, the district court granted the motion for leave to amend and a new class action complaint was filed. Id. Defense attorneys moved to dismiss the class action complaint on the grounds that plaintiffs’ claims had been rendered moot by the tender, and moved for summary judgment on the ground that none of the defendants had conducted business with the original plaintiffs. Id., at 420-21. The district court granted the motions, and the new plaintiffs appealed the dismissal of their class action claims against Chicago Title. Id., at 421. The Fifth Circuit affirmed.

The thrust of the appellate argument was as follows: “because Rule 15(a)(2) requires plaintiffs to seek leave of the court before amending, plaintiffs are forced to inform defendants of proposed class representatives before those representatives are protected by Zeidman v. J. Ray McDermott & Co., 651 F.2d 1030 (5th Cir. 1981) and Sandoz v. Cingular Wireless LLC, 553 F.3d 913 (5th Cir. 2008),” and this “provides defendants the opportunity to ‘pick off’ would-be class representatives by tendering the amount claimed individually by the plaintiff, thereby effectively preventing the original plaintiffs from amending a complaint to add other plaintiffs who better represent the interests of the putative class.” Murray, at 421. The Circuit Court refused to extend its holding in Zeidman to situations governed by Rule 15(a)(2). Id., at 421-22. The Fifth Circuit explained that its prior cases need not be extended because the new plaintiffs “could have availed themselves of Zeidman and Sandoz by filing a separate complaint, which could have been consolidated with the original suit, had that suit not been moot.” Id., at 422. In other words, the prospective new plaintiffs “had a readily available means of preventing the defendants from mooting their suit.” Id. If they had pursued that course of action (or if they had been the original party-plaintiffs), then Chicago Title would not have had an opportunity to moot their claims, id. Accordingly, the Fifth Circuit affirmed the district court order dismissing the class action claims on the grounds that the new plaintiffs’ claims had been rendered moot. Id., at 423.

Posted In: Class Action Court Decisions

Class Action Settlement of Lawsuits Challenging Merger of Schering-Plough and Merck Warranted Approval where Terms Required Declaratory Relief for Class in the Form of Additional Disclosures by Schering-Plough Prior to Shareholder Vote on Proposed Merger and Payment of $3.6 Million to Class Counsel in Attorney Fees and Costs New Jersey Federal Court Holds

Following the announcement of a planned merger, various plaintiffs filed several class action lawsuits in New Jersey state and federal courts against Schering-Plough and its Board of Directors seeking to block the company’s merger with Merck. In re Schering-Plough/Merck Merger Litig., U.S.D.C. Case No. 2:09-cv-01099-DMC-MF (D.N.J. March 26, 2010) [Slip Opn., at 1-2]. According to the allegations underlying the various class action complaints, “the Schering board members had breached their fiduciary duties to shareholders by approving the Merger, because the terms of the Merger were insufficiently favorable to Schering’s shareholders and/or the Board had failed to perform appropriate due diligence before approving the Merger.” Id., at 3. The New Jersey district court appointed Class Counsel, and consolidated all of the federal class actions and denied a request to abstain from considering the class actions during the pendency of the state court class actions. Id., at 2-3. The state court dismissed the state class actions, id., at 3. Defendants denied any wrongdoing, id. Following the filing of a consolidated class action complaint, id., at 3-4, and after conducting discovery, id., at 4-5, the parties agreed upon a proposed class action settlement, id., at 5-6. The proposed settlement called for Schering to make additional disclosures to shareholders in advance of a vote on the proposed merger with Merck, id., at 5; Schering made the disclosures agreed upon by the parties and its shareholders “voted overwhelmingly” in favor of the merger, id., at 6. The district court gave preliminary approval to the proposed class action settlement, id., at 6-7. The parties then moved the district court to give final approval to the class action settlement, id., at 1. In an unpublished order, and noting that “only five Class members objected to the Settlement, representing a minuscule .00001% of the Class,” id., at 7, the district court granted the motion.

The federal court first analyzed whether the class action requirements of Rule 23 had been satisfied, and concluded that class action treatment was warranted. In re Schering-Plough, at 11-16. The court then considered the proposed terms of the settlement, and found them to be fair, reasonable and adequate. See id., at 16-23. The court discussed the handful of objections filed against the class action settlement and found them inadequate to reject the settlement. See id., at 23-28. The most interesting aspect of the settlement was its provision for payment of $3.5 million to Class Counsel, which the district court affirmed under the “common benefit doctrine,” despite the relief secured for the class. See id., at 28-34. The federal court also award Class Counsel costs in the amount of $131,777.16. Id., at 35. Accordingly, the district court granted final approval to the class action settlement and awarded Class Counsel in excess of $3.6 million in fees and costs. Id.

Posted In: Class Action Court Decisions, PSLRA/SLUSA Class Actions

Class Action Complaint Premised on Risk of Identity Theft Failed to Adequately Allege Injury in Fact and, Accordingly, Must be Dismissed for Lack of Standing Pennsylvania Federal Court Holds

Plaintiff filed a putative class action against Aetna in federal court, asserting jurisdiction under the Class Action Fairness Act (CAFA), arising out of “an alleged security breach of Defendant’s online job application database”; specifically, the class action complaint alleged that plaintiff (who had worked for Aetna previously) applied online for a position with Aetna and, as part of the application, “uploaded his personal information as well as his resume” and subsequently learned that Aetna’s job application website had been hacked. Allison v. Aetna, Inc., ___ F.Supp.2d ___ (E.D. Pa. March 8, 2010) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, Aetna “tout[ed] the security measures that [it] employed to protect such information against accidental or unauthorized access or disclosure.” Id., at 1. The website contained email addresses, Social Security numbers, and personal contact information of people to whom Aetna had extended job offers. Id..at 2. Aetna disclosed that the email addresses had been stolen but that it did not know whether any other information had been compromised, id. Additionally, Aetna could not confirm that plaintiff’s email address had been stolen, and the class action complaint did not allege that plaintiff had received any phishing email or that there was “any other sort of misuse of the database information or his information specifically.” Id., at 2-3. In response to the intrusion, Aetna “offered Plaintiff credit monitoring assistance and identity theft insurance.” Id., at 3. Instead, plaintiff filed his putative class action, alleging that Aetna’s data security system was inadequate and asserted causes of action “for negligence, breach of implied contract, breach of express contract, negligent misrepresentation, and invasion of privacy.” Id., at 3-4. Defense attorneys moved to dismiss the class action, id., at 4. The district court granted the motion, concluding that plaintiff had failed to establish an injury in fact.

The district court explained that the class action complaint was light on facts. The complaint “details the various ways in which Sensitive Information can be exploited, the dangers of identity theft, and the costs and inconvenience it causes its victims”; however, the “only allegation of actual misuse relates solely to the phishing emails that were sent to others.” Allison, at 3-4. The complaint also outlines various steps taken by putative class members, largely centered on monitoring identity theft, and concludes that class members “face a significant risk of identity theft” and that he, personally, suffered anxiety, emotional distress, and loss of privacy. Id., at 4. In analyzing the motion to dismiss, the federal court began by noting that Article III jurisdiction requires plaintiff establish standing to prosecute the class action and, specifically, that he establish “an injury in fact . . . ; a causal connection between the injury and the conduct complained of; and substantial likelihood of remedy - rather than mere speculation – that the requested relief will remedy the alleged injury in fact.” Id., at 4-5 (citation omitted). Moreover, “[t]he assumption of truth does not apply . . . to legal conclusions couched as factual allegations or to ‘[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.’” Id., at 6 (citation omitted).

Continue reading "Aetna Class Action Defense Cases–Allison v. Aetna: Pennsylvania Federal Court Dismisses Class Action Holding Plaintiff Failed To Establish Standing Because Alleged Injury Too Speculative" »

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions

Class Action Alleging Violations of Federal Real Estate Settlement Procedures Act (RESPA) and California’s Unfair Competition Law (UCL) Properly Dismissed by District Court because Class Action Claims were Preempted by National Bank Act Ninth Circuit Holds

Plaintiffs filed a putative class action against Wells Fargo alleging violations of the federal Real Estate Settlement Procedures Act (RESPA) and California’s Unfair Competition Law (UCL); specifically, the class action complaint alleged that Wells Fargo violated RESPA’s prohibition against “unearned fees” by “overcharging” its customers, and that “Wells Fargo’s conduct was ‘unfair,’ ‘fraudulent’ and ‘illegal,’ all in violation of the UCL.” Martinez v. Wells Fargo Home Mortgage, Inc., ___ F.3d ___ (9th Cir. March 9, 2010) [Slip Opn., at 3763, 3767]. According to the allegations underlying the class action complaint, Wells Fargo charged plaintiffs an $800 underwriting fee in connection with refinancing their home loan. Id., at 3767. The class action alleges that the fee violated was excessive “because it was not reasonably related to Wells Fargo’s actual costs of performing the underwriting,” id., at 3767-68. Plaintiffs earlier sought to intervene in a New York lawsuit that contained identical claims; but the federal court denied intervention and dismissed the class action, and “the Second Circuit affirmed in part and remanded, holding that RESPA Section 8(b) clearly and unambiguously does not apply to excessive fees charged by a lender.” Id., at 3768. The essence of the present class action complaint was that “Wells Fargo marked up certain charges and overcharged for services in connection with mortgage loans, in violation of federal and state law.” Id. Defense attorneys moved to dismiss the class action, and the district court granted the motion on the grounds that RESPA does not apply to “overcharge” claims and that the class action’s UCL claims were preempted by the National Bank Act and “failed to identify an underlying illegal predicate act.” Id., at 3768-69. Plaintiffs appealed, and the Ninth Circuit affirmed.

The Ninth Circuit first held that the district court properly dismissed the class action’s RESPA claim because the statute does not apply to overcharge claims: “The language of Section 8(b) prohibits only the practice of giving or accepting money where no service whatsoever is performed in exchange for that money: ‘No person shall give and no person shall accept . . . any charge made or received . . . other than for services actually performed.’ 12 U.S.C. § 2607(b) (emphasis added). By negative implication, Section 8(b) cannot be read to prohibit charging fees, excessive or otherwise, when those fees are for services that were actually performed.” Martinez, at 3770 (footnote omitted). This was a matter of first impression in the Ninth Circuit, but the Court followed the holdings of the Second, Third and Eleventh Circuits in reaching this conclusion. Id., at 3771-72 (citing Kruse v. Wells Fargo Home Mortgage, Inc., 383 F.3d 49 (2d Cir. 2004); Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384 (3d Cir. 2005); Friedman v. Mkt. St. Mortgage, 520 F.3d 1289 (11th Cir. 2008)).

Continue reading "Wells Fargo Class Action Defense Cases–Martinez v. Wells Fargo: Ninth Circuit Court Affirms Dismissal Of Class Action Holding RESPA and UCL Claims Preempted By National Bank Act" »

Posted In: Class Action Court Decisions, RESPA/TILA Class Actions

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 April 9 - 15, 2010, during which time 53 new class actions were filed in these California state and federal courts. While labor law class actions generally top the list by a wide margin -- often accounting for more than half of the new class action filings in any particular week -- this past week only 20 new labor law class actions were filed, representing only 38% 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 12 new filings (representing 23% of the total number of new class actions filed), and class actions alleging violations of federal securities laws, with 6 new filings (11% of the total number of new class actions filed).

Posted In: Class Actions In The News

To assist class action defense attorneys anticipate the types of cases against which they may have to defend in California courts, 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 April 2 - 8, 2010, during which time 53 new class actions were filed in these California state and federal courts. Generally labor law class actions top the list, and often account for more than half of the new class action filings in any particular week. Last week, however, only 17 new labor law class actions were filed (representing a paltry 38% of the total number of new class actions filed during that reporting period), and this week only 19 new labor law class actions were filed (representing only 36% of the total number of class actions filed during this reporting period). 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 14 new filings (representing 26% of the total number of new class actions filed), and class actions alleging antitrust violations, with 6 new filings (11% of the total number of new class actions filed).

Posted In: Class Actions In The News

District Court Erred in Dismissing Class Action Based on New York law Barring Class Actions that Seek Penalties or Statutory Damages because the Statute is Incompatible with Rule 23’s Mandate Allowing Class Action Certification if Requirements are Met Supreme Court Holds

Plaintiff, a medical care provider, filed a class action in New York federal court against Allstate Insurance; the class action complaint alleged that plaintiff provided medical care to an Allstate insured and accepted an assignment of the insured’s rights to benefits of her Allstate policy, and that Allstate paid benefits under the policy “but not on time, and it refused to pay the statutory interest that accrued on the overdue benefits (at two percent per month).” Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., ___ U.S. ___, 130 S.Ct.1431, 2010 WL 1222272, *3 (March 31, 2010). (The class action asserted federal court jurisdiction under the Class Action Fairness Act (CAFA), id. n.3.) According to the allegations underlying the class action complaint, “Allstate routinely refuses to pay interest on overdue benefits” so plaintiff “sought relief on behalf of itself and a class of all others to whom Allstate owes interest.” Id. Defense attorneys moved to dismiss the class action for lack of jurisdiction on the grounds that New York law, § 901(b), prohibits class actions which seek only to recover “penalties” as damages. Id. Defense attorneys moved to dismiss the class action complaint, id. The district court granted the motion, concluding that statutory interest constituted a “penalty” under § 901(b), and dismissed the class action. See 466 F.Supp.2d 467 (2006). On appeal, the Second Circuit held that no conflict existed between § 901(b) and Rule 23 because they address different issues; accordingly, the Circuit Court affirmed the dismissal of the class action. See 549 F.3d 137 (2008). The Supreme Court granted certiorari and, in a sharply divided decision, reversed.

The Supreme Court explained, “New York law prohibits class actions in suits seeking penalties or statutory minimum damages.” Shady Grove, at *3 and n.1 (citing N.Y. Civ. Prac. Law Ann. § 901(b) (West 2006) [“Unless a statute creating or imposing a penalty, or a minimum measure of recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained as a class action.”]). The issue before the Court was “whether this precludes a federal district court sitting in diversity from entertaining a class action under [Rule 23].” Id. The High Court explained the framework for its analysis as follows: “We must first determine whether Rule 23 answers the question in dispute…. If it does, it governs-New York's law notwithstanding-unless it exceeds statutory authorization or Congress's rulemaking power…. We do not wade into Erie's murky waters unless the federal rule is inapplicable or invalid….” Id., at *4 (citations omitted).

Continue reading "Class Action Defense Cases–Shady Grove v. Allstate: Divided Supreme Court Reverses Dismissal Of Class Action Holding New York Law Barring Class Actions Seeking Penalties Falls To Rule 23" »

Posted In: Certification of Class Actions, Class Action Court Decisions

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 March 26 - April 1, 2010, during which time 45 new class actions were filed in these California state and federal courts. Class actions involving employment-related claims generally account for more than half of the new class action filings in any particular week, but during this reporting period only 17 new labor law class actions were filed, representing a remarkably low 38% of the total number of new class actions filed. The only other category to break the 10% threshold involved the bandwagon class actions against Toyota premised on product defect claims with 8 new class action lawsuits (18% of the new class actions filed during the reporting period).

Posted In: Class Actions In The News