Posted On: July 31, 2010 by Michael J. Hassen Email This Post

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New Labor Law Class Action Filings Rise Above 50% And Maintain Top Spot Among Categories Of Class Action Lawsuits Filed In California State And Federal Courts

To assist class action defense attorneys anticipate the types of cases against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in 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 July 23 - 29, 2010, during which time 47 new class actions were filed in these California state and federal courts. Labor law class actions returned to familiar territory, accounting for more than half of all class actions filed during this reporting period with 27 new class actions (representing 57% of the total number of new class actions filed). In distant second, the only other category to break the 10% threshold involved California's Unfair Competition Law (UCL), which includes false advertising with 5 new filings (representing 11% of the total number of new class actions filed).

Posted On: July 24, 2010 by Michael J. Hassen Email This Post

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Labor Law Class Action Complaints Continue Below 50% Level But Again Hold Top Spot Among Categories Of 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 July 16 - 22, 2010, during which time 53 new class actions were filed in these California state and federal courts. Labor law class actions again took the top spot, with 23 new class actions (representing 43% of the total number of new class actions filed). The only other category to break the 10% threshold mirrored the class actions which broke the threshold last reporting period, involving alleged violations of California's Unfair Competition Law (UCL), which includes false advertising with 10 new filings (representing 19% of the total number of new class actions filed).

Posted On: July 19, 2010 by Michael J. Hassen Email This Post

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Cy Pres Class Action Defense Cases–In re American Tower: Massachusetts Federal Court Rejects Request To Distribute Class Action Settlement Cy Pres Funds To Non-Profit Organization

Distribution of Unclaimed Class Action Settlement Funds to Non-Profit Organization Unconnected to Harm Suffered by Class Members Inappropriate Massachusetts Federal Court Holds

Plaintiff filed a putative class action against American Tower Corp. alleging violations of federal securities laws and purported to be brought on behalf of “members of the public who were harmed by the securities fraud.” In re American Tower Corp. Securities Litig., 648 F.Supp.2d 223, 224-25 (D.Mass. 2010). Eventually, the parties negotiated a settlement of the class action which provided for the distribution of unclaimed funds through a cy pres fund. Id., at 224. Lead Plaintiff moved the district court for authorization to distribute the cy pres funds “to The Peggy Browning Fund, a private, nonsectarian, not-for-profit organization with 501(c)(3) tax-deductible status.” Id. The federal court denied the motion because plaintiff sought “to disburse settlement funds to a non-profit organization with little connection to the harms class members suffered,” id. Because the author has received numerous inquiries from defense and plaintiff counsel concerning the proper scope of a cy pres fund, we include this article on the district court’s ruling.

The district court noted that the proper inquiry was to “determine whether the Peggy Browning Fund is an appropriate recipient of any residual settlement funds” of the class action settlement. In re American Tower Corp., at 224. The court explained that the purpose of the use of a cy pres fund is effect a distribution of class action settlement funds “to a ‘next-best’ recipient” when it is impractical to distribute the settlement funds to the class members. Id., at 224-25 (citing In re Airline Ticket Commission Antitrust Litig., 268 F.3d 619, 626 (8th Cir.2001)). “‘In such cases, the court, guided by the parties' original purpose, directs that the unclaimed funds be distributed for the prospective benefit of the class.’” Id. (citation omitted). The federal court easily concluded, then, that the Peggy Browning Fund was “an inappropriate recipient of any unclaimed class funds.” Id. “Disbursement of unclaimed funds must have some relationship to the harm suffered by class members…. However, the Peggy Browning Fund focuses on labor issues…. Therefore, it does not appear that funds donated to the Peggy Browning Fund would benefit the class or address the harms suffered by class members.Id. (italics added). The district court therefore denied the motion, without prejudice to Lead Plaintiff renewing the request and noting that Lead Plaintiff “should, if possible, propose a national organization whose work relates to the harm suffered by class members in this case.” Id.

NOTE: The author notes that trial courts are far too willing to authorize the distribution of cy pres funds to practically any organization. In such cases, the courts appear to be more interested in punishing the defendant than in effecting a distribution of funds to the “next-best” recipient.

Download PDF file of In re American Tower Corp. Securities Litigation

Posted On: July 17, 2010 by Michael J. Hassen Email This Post

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New Labor Law Class Action Complaints Fall Below 40% Level Among Categories Of Class Action Lawsuits Filed In California State And Federal Courts But Still Holds Top Spot Among New Class Action Filings

To assist class action defense attorneys anticipate the types of cases against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in 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 July 9 - 15, 2010, during which time 50 new class actions were filed in these California state and federal courts. Labor law class actions typically top this list, often account for well over half of the total number of new class actions filed during any particular week. This last week, however, employment-related class action lawsuits dropped substantially, falling below 40%. This past week, new labor law class actions accounted for only 19 of the new complaints filed (38% of the total number of new class actions filed). The only other categories to break the 10% threshold mirrored the class actions which broke the threshold last reporting period, involving alleged violations of California's Unfair Competition Law (UCL), which includes false advertising with 16 new filings (representing 32% of the total number of new class actions filed), and more "me too" class actions involving the Apple iPhone, with 6 new class action filings (12%).

Posted On: July 16, 2010 by Michael J. Hassen Email This Post

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Class Action Defense Cases–In re General Mills: Judicial Panel On Multidistrict Litigation (MDL) Denies Defense Motion To Centralize Class Action Litigation

Judicial Panel Denies Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. — 1407, Agreeing With Objections of Class Action Plaintiffs that Alternatives to Centralization Exist to Avoid Duplicate Discovery

Four class actions were filed against General Mills – one each in California, Florida, New Jersey and Ohio – arising out of defendant’s marketing of its Yo-Plus and/or Yo-Plus Light yogurts. In re General Mills, Inc., YoPlus Yogurt Prod. Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 8, 2010) [Slip Opn., at 1]. Each class action sought to represent only a statewide class, id. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of Florida; plaintiffs in each of the class actions opposed pretrial coordination. Id. While the Judicial Panel recognized that the class actions “do share some factual questions regarding General Mills’s nationwide marketing of its Yo-Plus and/or

Yo-Plus Light yogurt,” the Florida class action was “already certified as a statewide class of all persons who purchased Yo-Plus yogurt in Florida to obtain its claimed digestive benefits.” Id. Moreover, “The other three actions seek similar putative statewide classes encompassing consumers from different states. Accordingly, the certified and putative classes will likely not overlap significantly.” Id. Finally, in light of the fact that General Mills was the sole defendant, “the parties have every ability to cooperate and minimize the possibilities of duplicative discovery and/or inconsistent pretrial rulings.” Id. Accordingly, the Judicial Panel denied the motion to centralize the class actions. Id., at 2.

Download PDF file of In re General Mills, Inc., YoPlus Yogurt Prod. Marketing & Sales Prac. Litigation Transfer Order Posted In: Multidistrict Litigation, Class Action Court Decisions

Posted On: July 15, 2010 by Michael J. Hassen Email This Post

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Class Action Defense Cases–American Honda v. Allen: Seventh Circuit Court Reverses Class Action Certification Order Holding District Court’s Daubert Analysis Inadequate And Expert Testimony Inadmissible

District Court Erred in Granting Class Action Certification because Expert Testimony Establishing Rule 23(b)(3)’s Predominance Prong was Unreliable and District Court’s Daubert Analysis Inadequate Seventh Circuit Holds

Plaintiffs filed a putative class action against American Honda and Honda of America (collectively “Honda”) alleging product defect liability concerning Honda’s Gold Wing GL1800 motorcycle; specifically, the class action complaint alleged that a design defect in the steering assembly causes the motorcycle to “wobble.” American Honda Motor Co., Inc. v. Allen, 600 F.3d 813, 814 (7th Cir. 2010). Plaintiffs moved the district court to certify the litigation as a class action under Rule 23(b)(3), relying heavily on an expert’s opinion that common issues predominate; Honda opposed class action treatment and challenged the expert opinion relied upon by plaintiffs in their motion. Id. Defense attorneys moved under Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993), to strike plaintiffs’ expert report on the grounds that the expert’s “wobble decay standard was unreliable because it was not supported by empirical testing, was not developed through a recognized standard-setting procedure, was not generally accepted in the relevant scientific, technical, or professional community, and was not the product of independent research.” Id. The district court agreed to rule on the admissibility of the report prior to ruling on class certification because the report was central to the motion, id. But while the court announced “definite reservations about the reliability of [the expert’s] wobble decay standard,” it refused to exclude the report entirely “at this early stage of the proceedings.” Id., at 814-15. The district court granted class action certification, id., at 815, and Honda sought leave to appeal, id., at 814. The Seventh Circuit granted Honda’s request and reversed.

The Circuit Court explained that the issue before it was “whether the district court must conclusively rule on the admissibility of an expert opinion prior to class certification in this case because that opinion is essential to the certification decision.” American Honda, at 814. The Court summarized the expert’s “wobble decay” opinion, which was based on a standard the expert himself had devised and that he himself characterized as “reasonable.” Id. The expert opinion was important because “most of Plaintiffs' predominance arguments rest upon the theories advanced by [their expert].” Id. (quoting Allen v. Am. Honda Motor Co., 264 F.R.D. 412, 425 (N.D. Ill. 2009)). In response to Honda’s objections and following the Daubert hearing, the district court “noted that it was concerned that, among other things, [the expert’s] wobble decay standard may not be supported by empirical evidence, the standard has not been generally accepted by the engineering community, and [his] test sample of one may be inadequate to conclude that the entire fleet of GL1800s is defective.” Id., at 814-15. Nevertheless, the lower court believed it was too early in the litigation to dismiss the4 expert’s opinion in its entirety, and so it granted class action treatment without prejudice to Honda moving to exclude the expert’s opinion. Id., at 815.

Continue reading "Class Action Defense Cases–American Honda v. Allen: Seventh Circuit Court Reverses Class Action Certification Order Holding District Court’s Daubert Analysis Inadequate And Expert Testimony Inadmissible" »

Posted On: July 14, 2010 by Michael J. Hassen Email This Post

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CAFA Class Action Defense Cases–Moffitt v. Residential Funding: Fourth Circuit Court Affirms District Court Order Denying Remand Of Class Actions Holding CAFA Jurisdiction Existed At Time Remand Motions Filed

Even if Defendants Removed Class Actions to Federal Court Prematurely, Subsequent Class Action Complaints Filed by Plaintiffs Prior to Filing Motion for Remand Established Federal Court Jurisdiction under Class Action Fairness Act (CAFA) so District Court did not Err in Denying Motion to Remand Class Actions to State Court Fourth Circuit Holds

In 2003, three plaintiffs filed individual state court lawsuits against various defendants, including Residential Funding, “alleging violations of the Maryland Secondary Mortgage Loan Law.” Moffitt v. Residential Funding Co., LLC, ___ F.3d ___ (4th Cir. May 3, 2010) [Slip Opn., at 1, 4]. The lawsuits were dismissed in 2006 on statute of limitations grounds, “[b]ut in 2009, the Maryland Court of Appeals reversed, permitting the cases to go forward.” Id., at 4 (citation omitted). Plaintiffs’ counsel then advised the various defendants, in writing, “that plaintiffs intended to amend their individual complaints into class actions.” Id. Plaintiffs’ counsel also provided defendants with copies of the three anticipated class action complaints. Id. The draft class action lawsuits alleged that the putative class covered “thousands of members” and, though they did not pray for a specific amount in damages, the cover letter estimated that the damage suffered by each class member ranged from $20,000 to $90,000. Id. Believing that the draft complaint constituted “other paper[s]” within the meaning of 28 U.S.C. § 1446(b) and that the draft class action complaints established federal jurisdiction under the Class Action Fairness Act (CAFA), and “[f]earing that the thirty-day deadline would expire before plaintiffs actually filed the amended complaints,” defense attorneys removed the lawsuits to federal court. Id. Plaintiffs’ counsel thereafter filed the amended class action complaints in the federal court, id., at 4-5, and “defendants filed motions for leave to amend their original notices of removal in order to base removal on plaintiffs’ actual filing of the complaints,” id., at 5. Plaintiffs then moved to remand the class actions to state court, id., at 5. Plaintiffs’ counsel conceded that the amended class action complaints fell within the scope of CAFA for purposes of federal court jurisdiction, but they argued that the removals were premature because neither the letter nor the draft class action complaints constituted “other paper[s]” within the meaning of § 1446(b). Id. The district court denied the motion, id. Plaintiffs obtained leave to appeal the district court’s order, id., at 5-6, and the Fourth Circuit affirmed.

The Circuit Court began its analysis by observing that it “need not decide whether the cases were improperly removed” because even if they were “the amended complaints provided an independent basis for the district court to retain jurisdiction.” Moffitt, at 3. Plaintiffs’ “principal argument” is that federal court jurisdiction “did not exist at the time of removal,” accordingly, the motion for remand should have been granted. Id., at 6. The Fourth Circuit recognized that the removal statute requires the case be subject to federal court adjudication “at the time the removal petition is filed,” id. (citation omitted), but held that “the mere fact that a case does not meet this timing requirement is not ‘fatal to federal-court adjudication’ where jurisdictional defects are subsequently cured.” Id. (citation omitted). It was therefore unnecessary for the Court to decide whether federal court jurisdiction over the cases existed at the time defense counsel removed them to federal court, because “plaintiffs independently conferred jurisdiction on the district court by filing their amended class action complaints prior to moving to remand.” Id., at 7. The Circuit Court also reasoned, “Requiring pointless movement between state and federal court before a case is tried on the merits can…impose significant costs on both courts and litigants[,]” and “Here, it would be a waste of judicial resources to remand these cases on the basis of an antecedent violation of the removal statute now that jurisdiction has been established.” Id., at 8. Put simply, the Fourth Circuit found that “these cases would likely end up in federal court regardless of whether we ordered remands at this juncture.” Id. Thus, “considerations of judicial economy weigh against requiring such a pointless exercise and in favor of allowing this case to go forward in a federal forum where jurisdiction has been perfected.” Id. The Circuit Court therefore affirmed the district court order denying plaintiffs’ motion to remand the class actions to state court, id., at 9.

Download PDF file of Moffitt v. Residential Funding

Posted On: July 13, 2010 by Michael J. Hassen Email This Post

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Class Action Defense Cases–Hershey v. Energy Transfer Partners: Fifth Circuit Court Affirms Dismissal Of Class Action Complaint Under Commodities Exchange Act Holding Plaintiffs Failed To Adequately Allege Specific Intent

As Matter of First Impression in Circuit, Class Action Claims under CEA (Commodities Exchange Act) Required Allegation of Specific Intent to Manipulate Natural Gas Prices at a Specific Location/for a Specific NYMEX Contract, so District Court Properly Dismissed Class Action Complaint Fifth Circuit Holds

Plaintiffs filed a putative class action against Energy Transfer Partners and its affiliates alleging that they manipulated the price of natural gas futures and options in violation of the Commodities Exchange Act (CEA). Hershey v. Energy Transfer Partners, L.P., ___ F.3d ___, 2010 WL 2510122, *1 (5th Cir. June 23, 2010). According to the allegations underlying the class action complaint, plaintiffs bought and sold natural gas futures and options on the New York Mercantile Exchange (NYMEX), and sought “to represent a class of natural gas futures and options contracts traders.” Id. The class action alleged that defendants “manipulate[ed] the price of natural gas delivered at the Houston Ship Channel (‘HSC’) and alleged economic harm to [plaintiffs’] NYMEX natural gas futures contracts caused by that manipulation.” Id. Defense attorneys moved to dismiss the class action on the ground that the CEA required plaintiffs to allege that defendants specifically intended to manipulate NYMEX natural gas futures contracts; the district court agreed and dismissed the complaint. Id., at *1, *4. Plaintiffs appealed and the Fifth Circuit affirmed.

We do not here summarize the natural gas futures market. See Hershey, at *1-*2. The issue presented, as a matter of first impression in the Fifth Circuit, was whether defendants were correct in arguing that in order to assert a claim under the CEA plaintiffs were required “to allege that Defendants specifically intended to manipulate the price of natural gas” at a specific location (the Henry Hub) thereby satisfying the requirement under the CEA “that the manipulation be specifically directed toward the underlying commodity of the contract.” Id., at *4. And the district court was considering this defense against a backdrop of regulatory action in that defendants previously had paid $10 million to the Commodities Futures Trading Commission (CFTC) and $30 million to the Federal Energy Regulatory Commission (FERC) to settle claims that defendants “created and then exploited price differences between the HSC and the Henry Hub, a major confluence of natural gas pipelines and the settlement price for all NYMEX natural gas futures contracts.” Id., *1, *3. Not surprisingly, plaintiffs’ class action complaint “substantially mirror[ed] the allegations in regulatory actions against Defendants by the CFTC and FERC.” Id., at *3.

Continue reading "Class Action Defense Cases–Hershey v. Energy Transfer Partners: Fifth Circuit Court Affirms Dismissal Of Class Action Complaint Under Commodities Exchange Act Holding Plaintiffs Failed To Adequately Allege Specific Intent" »

Posted On: July 12, 2010 by Michael J. Hassen Email This Post

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iPhone Class Action Defense Cases–Apple and AT&T Mobility Antitrust Litigation: California Federal Court Certifies Nationwide Class Action Against Apple And AT&T On iPhone Antitrust Claims

Class Action Complaint Against Apple and AT&T for Antitrust Violations in Connection with Sale and Marketing of iPhone Warranted Class Action Treatment California Federal Court Holds

Plaintiffs filed a putative nationwide class action against Apple and AT&T Mobility (ATTM) alleging federal antitrust violations; specifically, the class action complaint alleged “monopolization in violation of Section 2 of the Sherman Act, violation of the Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301, et seq., and violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030.” In re Apple & ATTM Antitrust Litig., ___ F.Supp.3d ___ (N.D.Cal. July 8, 2010) [Slip Opn., at 1]. The district court summarized the allegations underlying the class action complaint at page 1 as follows: “Plaintiffs allege that although they were required to purchase a two-year service agreement with ATTM when they purchased their iPhones, Apple and ATTM had secretly agreed to technologically restrict voice and data service in the aftermarket for continued voice and data services for five years, i.e., after Plaintiffs’ initial two-year service period expired. Plaintiffs also allege that Apple monopolized the aftermarket for third party software applications for the iPhone, and that Apple caused the iPhone to become unusable if it detected that a customer had “unlocked” their iPhone for use with other service providers.” Defense attorneys for Apple moved for summary judgment with respect to the class action’s iPhone Operating System Version 1.1.1 claims, which the district court granted. Id., at 2. We do not here discuss that portion of the court order. Rather, as part of the same order, the district court considered plaintiffs’ motion to certify the litigation as a class action; the district court granted class action treatment to the lawsuit. Id. It is the class action certification portion of the decision that we discuss below.

Plaintiff’s class action certification motion sought to certify the litigation on behalf of a nationwide class defined as follows: “All persons who purchased or acquired an iPhone in the United States and entered into a two-year agreement with Defendant AT&T Mobility, LLC for iPhone voice and data service any time from June 29, 2007, to the present.” In re Apple, at 12-13. (The motion additionally sought certification of a sub-class defined as “All iPhone customers whose iPhones were ‘bricked’ by [Apple] at any time during the Class Period.” Id., at 13. However, the district court granted Apple’s motion for summary judgment on the “bricking” claim, so the court did not address the sub-class. Id.) The federal court noted that with respect to Rule 23(a)’s requirements for class action certification, Apple and ATTM did not contest numerosity, see id., at 13-14, nor did they contest adequacy of representation, see id., at 21-22. But defendants argued that the commonality and typicality requirements of Rule 23(a) had not been met, and that Rule 23(b) had not been met.

Continue reading "iPhone Class Action Defense Cases–Apple and AT&T Mobility Antitrust Litigation: California Federal Court Certifies Nationwide Class Action Against Apple And AT&T On iPhone Antitrust Claims" »

Posted On: July 10, 2010 by Michael J. Hassen Email This Post

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New Labor Law Class Action Complaints Again Top 50% Level Among Categories Of 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 July 2 - 8, 2010, during which time 46 new class actions were filed in these California state and federal courts, despite the fact courts were closed for the July 4th holiday. While labor law class actions fell below the 50% threshold of new class action filings last week, during this reporting period employment-related claims rose. This past week, new labor law class actions accounted for 24 of the new complaints filed (52% of the total number of new class actions filed), once again topping the list. 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 with 11 new filings (representing 24% of the total number of new class actions filed), and class actions involving the Apple iPhone, with 5 new class action filings (11%).

Posted On: July 9, 2010 by Michael J. Hassen Email This Post

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HELOC Class Action Defense Cases–In re JP Morgan Chase: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs Motion To Centralize Class Action Litigation In Northern District Of Illinois

Judicial Panel Grants Plaintiffs Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Defendants, and Transfers Class Actions to Northern District of Illinois

Nine class actions – two each in the Central and Northern Districts of California, and one each in the Eastern and Southern Districts of California, the Northern District of Illinois, the District of Minnesota, and the Northern District of Texas – were filed against various Chase defendants arising out of home equity lines of credit. In re JP Morgan Chase Bank Home Equity Line of Credit Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 7, 2010) [Slip Opn., at 1]. According to the allegations under the class actions, “Chase improperly suspended or reduced plaintiffs’ respective home equity line of credit accounts and, relatedly, used inappropriate automated valuation models in assessing the value of the underlying properties.” Id. Attorneys for plaintiffs in seven of the 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 or, alternatively, in the Northern District of California. Id. Plaintiff and defendants in the Minnesota class action supported the motion; plaintiff in the Northern District of California class action supported centralization in that district instead of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that it “will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.” Id. The Judicial Panel also agreed that the Northern District of Illinois was the appropriate transferee court because “Defendants and almost all plaintiffs support centralization in this district” and because it “provides a convenient forum.” Id., at 2. Accordingly, the Panel transferred all class actions pending outside of Illinois to that district. Id.

Download PDF file of In re JP Morgan Chase Bank Home Equity Line of Credit Litigation Transfer Order

Posted On: July 8, 2010 by Michael J. Hassen Email This Post

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Bankruptcy Class Action Defense Cases–In re Wilborn: Fifth Circuit Court Reverses Class Action Certification Order By Bankruptcy Court Because Requirements Of Rule 23(b) Not Met

Bankruptcy Court had Jurisdiction to Certify Debtor-Class Action Against Wells Fargo but Prerequisites for Class Action Certification under Rule 23(b) were not Satisfied, Particularly with Respect to Damages Fifth Circuit Holds

The three named plaintiffs in this action (Judy Wilborn, Karlton and Monica Flournoy, and Judy Martin) filed Chapter 13 bankruptcy petitions in Texas. In re Wilborn, ___ F.3d ___ (5th Cir. June 18, 2010) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, plaintiffs have home loans that are held or serviced by Wells Fargo Bank, and they allege that the Bank “charged, or charged and collected, unreasonable and unapproved post-petition professional fees and costs during the pendency of their bankruptcies.” Id., at 2. The fees and costs challenged by the class action – which “include such things as bankruptcy attorneys’ fees, recording fees, notification fees, title search fees, document fees, and property inspection fees” – are permitted under each plaintiff’s loan documents. Id. Nonetheless, plaintiffs’ class action complaint accused the Bank of engaging in a pattern and practice of charging such fees in violation of bankruptcy laws on the theory that “Wells Fargo’s failure to disclose these fees to the bankruptcy court interferes with their ability to complete their Chapter 13 reorganization plans and emerge from bankruptcy having cured all arrearages.” Id. Plaintiffs also object to the fact that these fees and costs continued to accumulate during the pendency of the bankruptcy even though Wells Fargo received distributions from the Chapter 13 Trustee in accord with the individual bankruptcy plans. Id. The class action complaint acknowledged that the Bank charged plaintiffs fees that it had incurred both prior to and after confirmation of the bankruptcy plans, that the fees ranged from $1200 to $4000, and that in some instances at least a portion of the fees were approved by the bankruptcy court. Id., at 3. Plaintiffs moved the bankruptcy court to certify their complaint as a class action; the bankruptcy court granted the motion, certifying a class that consisted of more than 1200 members. Id., at 3-4. The bankruptcy court certified its class action certification order for direct appeal to the Fifth Circuit, and Wells Fargo also petitioned the Circuit Court for permission to appeal the certification order. Id., at 4. The Fifth Circuit granted the Bank’s petition for an interlocutory appeal and reversed the class action certification order. The Court concluded that “a bankruptcy judge may certify a class of debtors under appropriate circumstances but that the proposed class in this case does not satisfy the requirements of Federal Rule of Civil Procedure 23 and Federal Bankruptcy Rule of Procedure 7023.” Id., at 2.

The Fifth Circuit explained that the appeal presented two issues: “The questions at issue are whether a bankruptcy judge may certify a class action comprised of debtor-plaintiffs, and if so, whether the class certification in this case was proper.” In re Wilborn, at 1-2. Wells Fargo first challenged whether the bankruptcy court had jurisdiction to enter the class certification order, id., at 4. While the Circuit Court recognized that “there has been disagreement among courts as to whether a bankruptcy judge may certify a class action of debtors,” id., at 8, it had no difficulty in holding that the bankruptcy court had jurisdiction over the putative class action, see id., at 4-9. The central issue on appeal, then, was whether the prerequisites for class certification under Rule 23 had been met. Id., at 9.

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Posted On: July 7, 2010 by Michael J. Hassen Email This Post

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Arbitration Class Action Defense Cases–Puleo v. Chase Bank: Third Circuit Court Affirms District Court Order Compelling Arbitration Of Individual Claims Based On Class Action Waiver In Arbitration Clause

Unconscionability Challenge to Class Action Waiver in Cardmember Agreement Governing Credit Card was Properly Determined by District Court, not Arbitrator, so District Court did not Err in Granting Bank’s Motion in Putative Class Action to Compel Plaintiffs to Arbitrate Individual Claims Third Circuit Holds

Plaintiffs filed a putative class action against Chase Bank alleging that the Bank improperly increased the interest rates on their credit card account balances, and that it did so retroactively. Puleo v. Chase Bank USA, N.A., ___ F.3d ___ (3d Cir. May 10, 2010) [Slip Opn., at 1, 4]. The class action was filed in Pennsylvania state court, but removed to federal court on grounds on diversity. Id., at 6-7. According to the allegations underlying the class action complaint, the Bank retroactively increased the interest rate on one plaintiff’s account from 4.99% to 29.99%, and on another plaintiff’s account from 14.74% to 25.99%. Id., at 4. Defense attorneys argued that the terms of the Cardmember Agreements permitted the challenged interest rate increases, and that the interest rate increases did not violate state or federal laws. Id. However, the propriety of the increases is not relevant to the appeal. Rather, the appeal focused on the arbitration clause in the Cardmember Agreement, which prohibits class actions. Id., at 3. Plaintiffs filed the putative class action in state court, and Chase removed the action to federal court and moved the district court to compel plaintiffs to arbitrate their claims on an individual basis because of the class action waiver in the Cardmember Agreement, id. Plaintiffs countered that the class action waiver was unconscionable, and that the question of its enforceability should be decided by the arbitrator instead of the court. Id. The district court disagreed, “concluding, first, that [plaintiffs’] challenge to the enforceability of the class action waiver was a question of arbitrability for the court to decide, and, second, that the entirety of the Arbitration Agreement was enforceable.” Id. On appeal, plaintiffs argued only that the district court erred in ruling on the issue of the unconscionability of the class action waiver, id. In a 6-4 decision, the Third Circuit concluded that the district court properly determined the enforceability of the class action arbitration wavier and affirmed. Id.

The Cardmember Agreement required credit card account customers to arbitrate any disputes with Chase on an individual basis. Puleo, at 5-6 (see NOTE, below). “Despite the express ban on class actions, [plaintiffs] initially brought this case as a putative class action in Pennsylvania state court on behalf of themselves and other similarly situated Chase credit card holders in Pennsylvania.” Id., at 6 (footnote omitted). As noted above, defense attorneys removed the putative class action to federal court, and the district court granted a defense motion to compel plaintiffs to arbitrate their claims on an individual basis, upholding the enforceability of the class action waiver. Id., at 7-8. The Third Circuit began its analysis by noting that “Congress enacted the Federal Arbitration Act (‘FAA’) ‘to reverse the longstanding judicial hostility to arbitration agreements . . . and to place arbitration agreements upon the same footing as other contracts.’” Id., at 9 (citations omitted). And with respect to the specific issue presented by the appeal, the Circuit Court noted that Supreme Court authority holds that “[t]he question whether the parties have submitted a particular dispute to arbitration, i.e., the question of arbitrability, is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.” Id., at 9-10 (citation omitted).

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Posted On: July 6, 2010 by Michael J. Hassen Email This Post

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Class Action Defense Cases–Morrison v. National Australia Bank: Supreme Court Affirms Dismissal Of Securities Class Action Holding No Cause Of Action Exists For Foreign Plaintiffs Suing For Misconduct Involving Securities Traded On Foreign Exchanges

District Court Properly Dismissed Securities Class Action but Existing Circuit Court Authority Overruled because Neither § 10(b) of the Securities Exchange Act of 1934 nor Rule 10b-5 is Extraterritorial Supreme Court Holds

Plaintiffs filed a putative class action against National Australia Bank, and its wholly-owned subsidiary HomeSide Lending (a mortgage servicing company) and three of its executives, alleging violations of the Securities Exchange Act of 1934 after National announced that it was writing down the value of HomeSide causing its stock price to drop. Morrison v. National Australia Bank Ltd., ___ U.S. ___, 130 S.Ct. 2869, 2010 WL 2518523, *3-*4 (2010). According to the allegations underlying the class action, from 1998 to 2001 both National's annual reports and other public documents, and HomeSide’s executives, “touted the success of HomeSide's business.” Id., at *3. But in July 2001, National wrote down the value of HomeSide by $450 million, and in September it wrote down the value of HomeSide by another $1.75 billion. Id. The class action alleged that National downplayed the write-downs, and that HomeSide and its executives “had manipulated HomeSide's financial models...in order to cause the mortgage-servicing rights to appear more valuable than they really were.” Id. The class action complaint was filed in the district court for the Southern District of New York and “alleged violations of §§ 10(b) and 20(a) of the Securities and Exchange Act of 1934…, and SEC Rule 10b-5,” id., at *4. Defense attorneys moved to dismiss the class action for lack of subject-matter jurisdiction under Rule 12(b)(1) and for failure to state a claim under Rule 12(b)(6). Id. The federal court dismissed the class action for lack of subject matter jurisdiction “because the acts in this country were, ‘at most, a link in the chain of an alleged overall securities fraud scheme that culminated abroad.’” Id. (citation omitted). The Second Circuit affirmed on the same grounds, id. (citation omitted). The Supreme Court granted certiorari, and affirmed.

The Supreme Court explained that this case presented the question of “whether § 10(b) of the Securities Exchange Act of 1934 provides a cause of action to foreign plaintiffs suing foreign and American defendants for misconduct in connection with securities traded on foreign exchanges.” Morrison, at *3. As a preliminary matter, the High Court addressed Second Circuit’s analysis of the extraterritorial reach of § 10(b) and circuit court precedent on the issue. Id. (citing Schoenbaum v. Firstbrook, 405 F.2d 200, 208, modified on other grounds en banc, 405 F.2d 215 (2d Cir. 1968); In re CP Ships Ltd. Sec. Litig., 578 F.3d 1306, 1313 (11th Cir. 2009); Continental Grain (Australia) Pty. Ltd. v. Pacific Oilseeds, Inc., 592 F.2d 409, 421 (8th Cir. 1979)). The Court explained at page *4, “But to ask what conduct § 10(b) reaches is to ask what conduct § 10(b) prohibits, which is a merits question. Subject-matter jurisdiction, by contrast, ‘refers to a tribunal's “‘power to hear a case.’”’ [Citations.] It presents an issue quite separate from the question whether the allegations the plaintiff makes entitle him to relief. [Citation.]” But while this was error, the Supreme Court declined to remand the matter finding “that unnecessary” because “nothing in the analysis of the courts below turned on the mistake, [so] a remand would only require a new Rule 12(b)(6) label for the same Rule 12(b)(1) conclusion.” Id., at *4-*5.

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Posted On: July 5, 2010 by Michael J. Hassen Email This Post

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HAPPY JULY 4th FROM THE CLASS ACTION DEFENSE BLOG

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

Posted On: July 3, 2010 by Michael J. Hassen Email This Post

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Labor Law Class Action Filings Fall Below 50% Level But Continues As Top Category 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 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 June 25 - July 1, 2010, during which time 49 new class actions were filed in these California state and federal courts. Labor law class actions frequently top the list, often accounting for more than half of the new class action filings in any particular week. This past, week, however, new labor law class actions accounted for less than 50% of the total number of new class actions filed, but still managed to come in as the top category with 22 new class actions (representing 45% of the new 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 with 9 new filings (representing 18% of the total number of new class actions filed), and class actions alleging violations of federal securities laws, with 5 new filings (10%).

Posted On: July 1, 2010 by Michael J. Hassen Email This Post

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CAFA Class Action Defense Cases–Anderson v. Bayer: Seventh Circuit Court Holds Class Action Fairness Act (CAFA) Provision For "Mass Actions" Did Not Allow Federal Courts To Treat Separate Lawsuits As One Lawsuit To Meet 100 Plaintiff Threshold

“Mass Action” Provision in Class Action Fairness Act (CAFA), Extending Federal Court Jurisdiction to Lawsuits Involving at Least 100 Plaintiffs, did not Permit Federal Courts to Treat Multiple, “Virtually Identical Complaints” by Same Plaintiffs’ Counsel as a Single Lawsuit for Purposes of Determining Number of Plaintiffs Seventh Circuit Holds

Five separate but “mostly identical complaints” (not class actions) were filed against various Bayer entities in Illinois state court seeking damages for personal injuries allegedly caused by Bayer’s prescription drug Trasylol. Anderson v. Bayer Corp., ___ F.3d ___ (7th Cir. June 22, 2010) [Slip Opn., at 1, 3]. According to the “virtually identical” lawsuits, “plaintiffs (or their decedents) suffered injuries as a result of being administered Trasylol during heart surgery.” Id., at 3-4. Defense attorneys removed the lawsuits to federal court under the Class Action Fairness Act (CAFA), asserting that the lawsuits fell within CAFA’s “mass action” provision “which allows the removal of cases joining the claims of at least 100 plaintiffs that otherwise meet CAFA’s jurisdictional requirements.” Id., at 3. The district court remanded four of the five lawsuits on the ground that they involved less than 100 – it was, apparently, only by accident that the fifth lawsuit named precisely 100 plaintiffs. Id. Bayer asked the Seventh Circuit for permission to appeal the remand order; defense attorneys argued that the Circuit Court should “hold that (1) plaintiffs cannot avoid federal diversity jurisdiction by carving their filings into five separate pleadings, and (2) there is diversity jurisdiction over most plaintiff’s claims because the claims of the small number of non-diverse plaintiffs were fraudulently misjoined and should be severed.” Id. The Circuit Court rejected the appeal because it agreed with the district court that the lawsuits fell outside the scope of CAFA’s “mass action” provision because they involved fewer than 100 plaintiffs; accordingly, the Court held that it was without jurisdiction to reach the second issue advanced by Bayer. Id.

Plaintiffs’ counsel originally filed “four virtually identical complaints, using verbatim language,” in Illinois state court “on behalf of 57 unrelated plaintiffs.” Anderson, at 3-4. Defense attorneys removed the lawsuits to federal court on grounds of diversity, arguing that the non-diverse plaintiffs had been joined fraudulently to defeat diversity jurisdiction. Id., at 4. The federal court remanded the complaint to state court sua sponte. Id. On remand, plaintiffs’ counsel amended the lawsuits to add another 111 plaintiffs, distributed across the four complaints and bringing the total number of plaintiffs in one of those lawsuits to 100; plaintiffs’ counsel also filed a fifth lawsuit. Id. Bayer again removed the lawsuits to federal court on the ground that the five separate complaints “should be treated as a single mass action,” id. The lawsuits were again remanded to state court and Bayer filed a petition seeking permission to appeal under the CAFA provision that “creates an exception for class actions to the general rule that remand orders are not reviewable.” Id. (citing 28 U.S.C. § 1447(d)).

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