Class Action Defense Blog

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 In: Certification of Class Actions, Class Action Court Decisions

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 In: Certification of Class Actions, Class Action Court Decisions

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.

Continue reading "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" »

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

Nationwide Class Action (excluding California and New York) Alleging Domino’s Systematically Underpaid Delivery Drivers in Violation of Fair Labor Standards Act (FLSA) Entitled to Conditional Class Action Certification because Evidence Submitted by Plaintiffs Met Minimal Burden Required at First Stage of FLSA Proceedings Minnesota Federal Court Holds

Plaintiffs filed a putative class action against their employer, Domino’s Pizza, alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, the class action complaint alleged that Domino’s failed to pay its pizza delivery drivers minimum wage. Luiken v. Domino’s Pizza, LLC, ___ F.Supp.2d ___ (D. Minn. June 21, 2010) [Slip Opn., at 1-3]. According to the allegations underlying the class action, Domino’s failed to reimburse its delivery drivers for all automobile expenses incurred in the course of their employment, id., at 4. The class action sought to represent a nationwide class, except for delivery drivers in California and New York. Id., at 2. Plaintiffs moved the district court to certify the litigation as a class action, id., at 1. Defense attorneys opposed class action treatment, arguing that class members were not “similarly situated” because of “highly individualized fact-specific determinations taking into account driver-specific factors such as type of car, routes, and total mileage” and because “reimbursements vary by geographic region.” Id., at 2. Noting the difference between class action certification motions under Rule 23 and conditional class certification under the FLSA (technically, certification of a “collective action”), the district court granted plaintiffs’ motion.

The federal court explained that class action certification under the FLSA is a two-part process, and that in determining whether to conditionally certify a class (the first step in the process), the court determines whether plaintiffs have established “a colorable basis that the putative class members are the victims of a single decision, policy, or plan.” Luiken, at 4 (citation omitted). Here, plaintiffs argued that Domino’s employed “a single policy which systematically under-reimbursed them for automobile expenses incurred in the course of their employment” and, accordingly, they were “paid below the federal minimum wage.” Id. In brief, plaintiffs argued that Domino’s used a uniform set of assumptions in determining reimbursement rates, and that those assumptions were uniformly unfair. Id. Defense attorneys countered that individual issues, including the base wages paid each driver, defeat class certification. Id., at 5. Domino’s additionally argued that at least some drivers were paid more than the federal minimum wage, and plaintiffs conceded that subclasses may be necessary due to differences in base pay. Id., at 5 n.5.

Continue reading "FLSA Class Action Defense Cases–Luiken v. Domino's Pizza: Minnesota Federal Court Grants Conditional Class Action Treatment To Nationwide Labor Law Class Action Alleging Failure To Pay Minimum Wage To Delivery Drivers" »

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

Class Action Against Tobacco Company Alleging Unfair Trade Practices and Breach of Implied Warranty and Seeking Medical Monitoring for Lung Cancer on Behalf of Class of Smokers who have not been Diagnosed with Lung Cancer and who are Asymptomatic Warranted Class Action Certification under both Rule 23(b)(2) and (b)(3) Massachusetts Federal Court Holds

Plaintiffs filed a putative class action against Philip Morris alleging “unfair or deceptive” trade practices in violation of Massachusetts state law, breach of implied warranty, and negligence; specifically, the class action complaint “allege[d] that Philip Morris designed, marketed, and sold Marlboro cigarettes that delivered an excessive and dangerous level of carcinogens.” Donovan v. Philip Morris USA, Inc., ___ F.Supp.2d ___ (D.Mass. June 24, 2010) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, “plaintiffs have no apparent symptoms of lung cancer, and as such, are not seeking damages.” Id. Thus, this class action “diverges from a typical tobacco suit,” id. Instead of seeking damages, the class action sought to compel Philip Morris to pay for medical monitoring – “that is, regular screenings to determine whether they have early signs of the disease” based on the argument that “if [class members] do eventually develop lung cancer, these screenings will increase their likelihood of survival almost six-fold.” Id., at 1-2. Plaintiffs sought certification of a class action “on behalf of Massachusetts residents, age fifty and older, who have smoked Marlboro cigarettes for at least twenty pack-years.” Id., at 1. Further, “No class member may be diagnosed with lung cancer or be under a physician’s care for suspected lung cancer, and all must have smoked Marlboro cigarettes within the Commonwealth of Massachusetts.” Id., at 2. Defense attorneys opposed class action treatment. In a 56-page order, the district court granted plaintiffs’ motion for class action certification.

In analyzing whether to grant class action treatment, the district court noted that “the motion was not easily resolved because it raised threshold issues of Massachusetts products liability law.” Donovan, at 2. First, the class action certification motion presented a set of issues tied to “the unusual remedy plaintiffs seek, a supervised medical monitoring program using Low-Dose Computed Tomography (‘LDCT’) scans.” Id. Plaintiffs argued that unlike x-rays, which could only detect lung cancer “when it had reached an advanced stage,” the new LDCT-scanning technology allowed for much earlier detection “significantly increasing survival rates from about fifteen percent to eighty-five percent.” Id. (Plaintiffs argued that monetary damages would not adequately compensate class members for the cost of medical monitoring, id., at 3.) Second, the class action certification motion presented the question of whether the named plaintiffs had standing to prosecute the class action because “[b]y definition, plaintiffs who seek medical monitoring to determine whether they have cancer are asymptomatic.” Id. And third, the class action presents a “novel issue [that] pertains to the timing of plaintiffs’ claims and the related issue of claim preclusion.” Id. “Typically, toxic tort exposure cases put the plaintiffs on the horns of a dilemma. If they bring a claim when they are aware of their exposure – assuming the standing issues are resolved – they take the risk that they cannot recover if they develop cancer in the future under the ‘single controversy rule.’ If they wait until they develop cancer to bring a claim, the statute of limitations will have expired because they knew of the risks at an earlier time.” Id. Here, plaintiffs argued that this dilemma was avoided because “The statute of limitations should run from the date that plaintiffs develop subcellular changes that substantially increase their risk of cancer and where that increase triggers a medically-accepted form of screening.” Id., at 4.

Continue reading "Class Action Defense Cases–Donovan v. Philip Morris: Massachusetts Federal Court Certifies Class Action Seeking Medical Monitoring For Lung Cancer Of 20-Year Marlboro Smokers" »

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

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–Cunningham Charter v. Learjet: 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 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

District Court Denial of Class Action Certification on Grounds that Individuals Issues will Predominate over Common Issues Contradicted by Defense Arguments on Appeal that it will Raise Common Challenges in Individual Lawsuits First Circuit Holds

Plaintiffs filed a class action against Bouchard Transportation arising out of an oil spill in Buzzards Bay in southeastern Massachusetts; the class action complaint alleged Massachusetts state law claims for “strict liability for damage to real property on the owner of a vessel from which oil has spilled” and for “negligent discharge of petroleum,” and a common law claim for nuisance. Gintis v. Bouchard Transp. Co., ___ F.3d ___ (1st Cir. February 23, 2010) [Slip Opn., at 2, 3]. According to the allegations underlying the class action complaint, in 2003 a fuel barge owned and operated by defendant strayed off course in Buzzards Bay and struck a reef, spilling 98,000 barrels of oil and contaminating 90 miles of the shore. Id., at 2. Defendants engaged in government-supervised cleanup operations that were completed in October 2006, id., at 2-3, Plaintiffs owned “residential waterfront property on the bay,” id., at 2. Plaintiffs moved the district court to certify the litigation as a class action; the district court denied class action treatment concluding that individual issues would predominate. Id., at 3-4. Specifically, the district court observed that defendant “has not conceded liability to any individual plaintiffs, that on the public nuisance claim plaintiffs must show both unreasonable interference and special injury to each claimant, and that plaintiffs must establish compensatory damages specific to each piece of property.” Id., at 4. The First Circuit reversed.

The Circuit Court noted that the district court’s class action certification determination had “relied heavily on the denial of class certification in Church v. General Electric Co., 138 F. Supp. 2d 169 (D. Mass. 2001), which had stressed that recovery for contamination of land downstream from a point of toxic discharge into a river would require parcel-by-parcel determinations as to injury and damages.” Gintis, at 4. The First Circuit concluded, however, that Church “does not support a general rule that pollution torts charged against a single defendant escape class treatment on the ground that the requirements to show injury, cause and compensatory amount must be sustainable as to specific plaintiffs.” Id., at 5. On the contrary, “If that were the law, the point of the Rule 23(b)(3) provision for class treatment would be blunted beyond utility, as every plaintiff must show specific entitlement to recovery, and still Rule 23 has to be read to authorize class actions in some set of cases where seriatim litigation would promise such modest recoveries as to be economically impracticable.” Id. (citation omitted). The Circuit Court also observed that several cases “in the same genre go the other way.” Id., at 5-6 (citations omitted).

Continue reading "Class Action Defense Cases–Gintis v. Bouchard Transportation: First Circuit Reverses Denial Of Class Action Treatment Holding Defense Arguments Suggest Common Issues May Predominate" »

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

District Court Erred in Denying Class Action Certification Motion in Class Action Alleging Violations of Hawaii’s Deceptive Practice Act because Hawaii Case Law Establishes that Individualized Reliance need not be Shown so Common Questions Predominated over Individual Questions Ninth Circuit Holds

Plaintiff filed a putative class action against Midland National Life Insurance Company alleging violations of Hawaii’s Deceptive Practices Act; specifically, the class action complaint alleged that the brochures prepared by Midland to market annuities to senior citizens violated Hawaii law. Yokoyama v. Midland National Life Ins. Co., ___ F.3d ___ (9th Cir. February 8, 2010) [Slip Opn., at 2127, 2130]. (Similar class actions had been filed against Midland, but this class action was exempted by the order of the Judicial Panel on Multidistrict Litigation which centralized the other class actions in the Central District of California “, because this action has been narrowly tailored to rely only on Hawaii law.” Id., at 2130-31.) Plaintiff moved the district court to certify the litigation as a class action; defense attorneys opposed class action treatment on the ground, inter alia, that plaintiff failed to establish the predominance and superiority requirements for a Rule 23(b)(3) class. Id., at 2131. “The district court denied class certification, holding that in order to succeed under the Hawaii Act, each plaintiff would have to show subjective, individualized reliance on deceptive practices within the circumstances of each plaintiff’s purchase of the annuity.” Id. (citing Yokoyama v. Midland Nat’l Life Ins. Co., 243 F.R.D. 400 (D. Haw. 2007)). Plaintiffs appealed the denial of class action certification, id. The Ninth Circuit reversed.

The Ninth Circuit began its analysis with the following observation: “The dispositive issue is…whether Hawaii’s Deceptive Practices Act requires a showing of individualized reliance.” Yokoyama, at 2131. The district court concluded that common issues did not predominate because of the individual inquiries inherent in determining reliance: “The district court refused to certify a class in this case because it determined that Hawaii’s consumer protection laws require individualized reliance showings. Believing that the plaintiffs’ claims would ‘require inspection of whether the class members individually relied on Midland’s misstatements,’ the district court concluded that class issues do not predominate over issues affecting individual members.” See id., at 2138. In so ruling, the district court misinterpreted Hawaii law. The Ninth Circuit explained that, under Hawaii law, individual proof of reliance was unnecessary. “The Hawaii Supreme Court has considered the issue of whether the statute requires actual, i.e., subjective reliance. It has said that the dispositive issue is whether the allegedly deceptive practice is “likely to mislead consumers acting reasonably under the circumstances.” [Citation.] “[A]ctual deception need not be shown, the capacity to deceive is sufficient.” [Citation.] This is an objective test, and therefore actual reliance need not be established. Accordingly, there is no reason to look at the circumstances of each individual purchase in this case, because the allegations of the complaint are narrowly focused on allegedly deceptive provisions of Midland’s own marketing brochures, and the fact-finder need only determine whether those brochures were capable of misleading a reasonable consumer.” Id., at 2131. See also, id., at 2136-38. More specifically, the Circuit Court explained, “These plaintiffs base their lawsuit only on what Midland did not disclose to them in its forms. The jury will not have to determine whether each plaintiff subjectively relied on the omissions, but will instead have to determine only whether those omissions were likely to deceive a reasonable person. This does not involve an individualized inquiry.” Id., at 2138-39. The Ninth Circuit held, therefore, that the district court abused its discretion in denying class action treatment because its decision was premised on a legal error. Id.

Continue reading "Class Action Defense Cases–Yokoyama v. Midland National Life: Ninth Circuit Reverses Denial Of Class Action Certification Holding Individualized Reliance Not Required Under Hawaii Deceptive Practices Act" »

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

In Case Removed to Federal Court under Class Action Fairness Act (CAFA), District Court Erred in Remanding Class Action Complaint to State Court Following Denial of Class Action Treatment because Jurisdiction is Generally Determined at Time Complaint is Filed and Class Action Allegations were not Frivolous Seventh Circuit Holds

Plaintiff filed a putative class action in Illinois state court against Learjet alleging breach of warranty and product liability claims; the class action complaint sought to represent all purchasers of Learjets “who had received the same warranty from the manufacturer that [plaintiff] had received.” Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805 (7th Cir. 2010) [Slip Opn., at 1]. Defense attorneys removed the class action to federal court under CAFA (the Class Action Fairness Act of 2005), id., at 1-2. Plaintiff then moved the district court to certify two classes, but the court denied class action treatment “on the ground that neither proposed class satisfied the criteria for certification set forth in Rule 23.” Id., at 2. The federal court then ruled that the denial of the class action certification motion removed federal court jurisdiction under CAFA and remanded the complaint to state court. Id. Defendant petitioned the Seventh Circuit for leave to appeal the remand order; the Circuit Court granted the petition “to resolve an issue under the Class Action Fairness Act that this court has not heretofore had to resolve.” Id. The Circuit Court reversed.

The Seventh Circuit explained that CAFA creates federal court diversity jurisdiction in cases of minimal diversity; that is, “over certain class actions in which at least one member of the class is a citizen of a different state from any defendant (that is, in which diversity may not be complete).” Learjet, at 2. CAFA expressly applies “to any class action [within the Act’s scope] before or after the entry of a class certification order.” Id. (quoting § 1332(d)(8)). The Circuit Court explained that CAFA implies an “expectation” of class certification in that a district court should remand a putative class action to state court if “it would have been certain from the outset of the litigation that no class could be certified.” Id., at 3. On the other hand, “jurisdiction attaches when a suit is filed as a class action, and that invariably precedes certification.” Id. The Circuit Court concluded, therefore, “All that section 1332(d)(1)(C) means is that a suit filed as a class action cannot be maintained as one without an order certifying the class. That needn’t imply that unless the class is certified the court loses jurisdiction of the case.” Id.

Continue reading "CAFA Class Action Defense Cases–Cunningham Charter v. Learjet: Seventh Circuit Court Holds Class Action Removed To Federal Court Under CAFA Remains In Federal Court Following Denial Of Class Action Certification" »

Posted In: Class Action Fairness Act (CAFA), Certification of Class Actions, Removal & Remand, Class Action Court Decisions

Class Action under California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA) Arising out of Merck’s Manufacture and Marketing of Vioxx Properly Denied Class Action Certification because Evidence Supported Trial Court’s Conclusion that Individual Issues Predominate Over Common Issues California Appellate Court Holds

Plaintiffs filed a putative class action in California state court against Merck arising out of its manufacture and marketing of Vioxx, which Merck pulled from the market in September 2004 after a study revealed an increased risk of cardiovascular problems associated with the drug; specifically, the class action complaint alleged causes of action for violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA) and alleging unjust enrichment. In re Vioxx Class Cases, 180 Cal.App.4th 116, 103 Cal.Rptr.3d 83, 87-88 (Cal.App. December 15, 2009). According to the allegations underlying the class action complaint, plaintiffs did not “suffer[] any adverse effects from taking Vioxx” but, they alleged, Merck was liable for false advertising and for marketing a drug that was “less safe than other, less expensive, pain relievers.” Id., at 87; see also id., at 89-90. Plaintiffs moved the trial court to certify the litigation as a class action, id., at 90; defense attorneys opposed class action treatment on the grounds that individual issues would predominate over questions common to the putative class and that the claims of the named representatives were not typical. Id., at 91-92. The trial court agreed with Merck and denied class action certification. Id., at 92-93. In part, the trial court found that the named plaintiffs (who were individuals) “did not possess claims typical of prescription drug benefit providers,” id., at 88. The California Court of Appeal affirmed, rejecting plaintiffs’ claim that reversal was compelled by the Supreme Court’s decision in In re Tobacco II Cases, 46 Cal.4th 298 (Cal. 2009), which issued after the trial court order denying class action treatment.

The appellate court observed that “trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, [and so] they are afforded great discretion in granting or denying certification.” In re Vioxx, at 93 (quoting In re Tobacco II, at 311). In California, “in the absence of other error, a trial court ruling supported by substantial evidence generally will not be disturbed ‘unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation].’” In re Tobacco II, at 311. Particularly here, where the trial court considered thousands of pages of documents in determining the propriety of class action treatment, the appellate court will not substitute its decision for the trial court’s with respect to the inferences to be drawn from the evidence. In re Vioxx, at 94 (citation omitted).

Continue reading "Vioxx Class Action Defense Cases–In re Vioxx: California Appellate Court Affirms Denial Of Class Action Treatment In Putative UCL/CLRA Class Action Involving Vioxx Because Individual Issues Predominate" »

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

Class Action Complaint Challenging Microsoft’s “Windows Genuine Advantage” Software could be Amended to Withdraw Class Action Allegations Provided Plaintiffs Dismiss All Class Claims and Provided Plaintiffs Reimburse Microsoft the Attorney Fees Reasonably Incurred in Opposing Plaintiffs’ Class Action Certification Motion before Plaintiffs Voluntarily Withdrew that Motion Washington Federal Court Holds

In April 2009, plaintiffs filed a putative class action against Microsoft in Washington federal court alleging, in the second amended class action complaint, “claims for unjust enrichment, breach of End User License Agreement (‘EULA’) contracts, violation of Washington’s Consumer Protection Act, and trespass to chattels, nuisance and interference with property” arising out of “Microsoft’s distribution of Windows Genuine Advantage (‘WGA’) software.” Johnson v. Microsoft Corp., ___ F.Supp. 2d ___ (W.D.Wash. January 15, 2010) [Slip Opn., at 1-2.] In September 2008, plaintiffs filed a motion requesting that the district court certify the litigation as a class action; however, in November 2009, plaintiffs withdrew their class action certification motion and “indicated an intent to withdraw class allegations.” Id., at 2. Plaintiffs thereafter moved to file a third amended class action complaint “that would eliminate most (but not all) class allegations, add a new cause of action and related allegations, and specify injunctive relief sought.” Id. Defense attorneys opposed the motion with one exception: Microsoft did not oppose the motion to the extent it sought to withdraw class action claims, provided that plaintiffs did not seek to “re-inject them at a later point in the proceeding.” Id. In addition, defense attorneys requested permission “to file a fee petition for the expenses incurred as a result of defending against Plaintiffs’ class-certification motion,” id. The district court granted the motion in part and denied the motion in part.

The district court began by noting the well-settled rule that leave to amend is “generally allowed absent bad faith, undue delay, futility, or prejudice to the opposing party.” Johnson, at 2 (citing Eminence Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th Cir. 2003)). Nonetheless, the federal court denied plaintiffs’ request to add claims (and allegations in support of claims) for fraudulent misrepresentation, negligent misrepresentation and fraudulent concealment because defense attorneys opposed these amendments and plaintiffs agreed to withdraw them. Id., at 2-3. Similarly, Microsoft opposed plaintiffs’ request to seek additional forms of injunctive relief, and plaintiffs agreed to withdraw those proposed amendments. Id., at 3. Accordingly, the district court denied that portion of plaintiffs’ motion, id. For our purposes, the most important aspect of the district court’s order concerns the class action allegations, to which we now turn.

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

Class Action Alleging Illegal Fee Splitting of Title Insurance Premiums in Violation of RESPA (Real Estate Settlement Procedure Act) did not Warrant Class Action Treatment because Individual Inquiries Predominate as to Whether Section 8(b) Violation Occurred Fifth Circuit Holds

Plaintiffs filed a putative class action against their title insurer, Stewart Title Guaranty, alleging inter alia violations of the federal Real Estate Settlement Procedure Act (RESPA); the class action complaint alleged that Stewart Title failed to provide certain discounts to class members and split with its agents “the illegal, unearned charges on the policies.” Mims v. Stewart Title Guaranty Co., 590 F.3d 298, 2009 WL 4642631, *1 (5th Cir. 2009). According to the allegations underlying the class action complaint, “consumers who refinanced their home mortgages…[were entitled ] to receive a mandatory discount on their premiums for new title insurance policies acquired from Stewart” provided that the new title insurance policy “is issued within seven years of the closing of the prior mortgage.” Id. The class action alleged that Stewart Title “consistently failed to provide the reissue insurance discount” but, instead, split the savings with its agents, and that this conduct constituted illegal splitting of unearned fees in violation of § 8(b) of RESPA. Id., at *1-*2. Plaintiffs filed a motion to certify the litigation as a class action, id., at *2; defense attorneys opposed class action treatment, but the district court granted the motion, see id., at *1. Stewart Title sought permission to appeal the class action certification order. Id., at *2. The Fifth Circuit reversed, holding that “individual factual issues predominate the RESPA claim.” Id.

The Circuit Court first addressed Stewart Title’s claim that plaintiffs lacked standing to prosecute the class action’s RESPA claim, and explained that the challenge was more accurately denominated an attack on the merits of the claim rather than an issue of standing. See Mims, at *2. The Fifth Circuit stated at page *2, “There is no serious question that the plaintiffs have standing to bring this claim.” The defense argument went to the merits of the RESPA claim which – in light of the limited scope of review under Rule 23(f) – “may only be considered in this case if relevant to the class certification question.” Id., at *3. After summarizing Section 8(b) of RESPA, see id., at *4, the Circuit Court explained that the question is whether Stewart Title’s alleged failure to give consumers discounts represented the retention of a fee for services that were not performed, id. In sum, “plaintiffs' argument thus rests on the theory that the title insurance premium can be split between the amount allowed under Rule R-8 after the appropriate discount is applied and the amount in excess of that amount; they argue that this excess amount represents a charge for which no services were actually performed.” Id. In the Fifth Circuit’s view, the class action alleged: “Stewart charged excessive premiums. Stewart gave, and title agents accepted, a portion of the excessive premiums. The portion accepted by the title agents was excessive and not ‘for services actually performed,’ but instead were in the nature of kickbacks or referral fees.” Id., at *5. The district court had denied Stewart Title’s previous motion to dismiss the RESPA claim because it would that the splitting of such fees “may” violate Section 8(b), depending on the circumstances. Id. The Circuit Court held that class action treatment of the RESPA claim was therefore inappropriate, “because the district court's liability model for violations of RESPA § 8(b) requires an inquiry into the facts of each individual class member's title insurance transaction.” Id. In other words, “The only way the overall practice may be proven to violate RESPA, consistently with the HUD liability standard, is to examine the reasonableness of payments for goods and services. This inquiry must be performed on a transaction-by-transaction basis, because a single finding of liability on an unreasonable relationship between goods and services does not necessitate the conclusion that such unreasonableness exists on a class-wide basis.” Id., at *6. Accordingly, the district court abused its discretion in granting class action treatment to the RESPA claim, id., at *8.

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

Following Denial of Class Action Treatment, Federal Court did not Abuse Discretion in Granting Defense Motion to Enjoin State Court from Ruling on Class Action Certification Motion of Identical Claims brought by Different Plaintiffs Eighth Circuit Court Holds

Plaintiff George McCollins filed a putative class action against Bayer and other defendants, “who manufactured and produced Baycol, a prescription cholesterol lowering medication,” seeking damages for breach of warranties and violation of the West Virginia Consumer Credit and Protection Act (WVCCPA); Baycol was sold from 1997 to 2001, but was taken off the market following the deaths of 31 people. In re Baycol Products Litig., 593 F.3d 716 (8th Cir. 2010) [Slip Opn., at 2, 3.] McCollins’ class action complaint sought to represent residents of West Virginia, id., at 2. McCollins filed his complaint in West Virginia state court in 2001, but defense attorneys removed the class action to federal court on diversity grounds. Id., at 3. (The Circuit Court noted that had the class action been filed “a few years later,” it would have been removable under the Class Action Fairness Act (CAFA). Id.) Also in 2001, two other individuals (Keith Smith and Shirley Sperlazza) filed a similar class action in West Virginia state court, but it was not removed to federal court. Id., at 4. The Judicial Panel on Multidistrict Litigation (MDL) consolidated the McCollins class action with thousands of other individual and class action lawsuits involving Baycol, id., at 2, 3. As the sole putative class representative of West Virginia residents, plaintiff “had not experienced the side effect that led to Baycol's withdrawal from the market[ and the] undisputed record evidence showed that he had physically benefitted from the drug.” Id., at 3. After extensive litigation, including the issuance of more than 160 pretrial orders, the district court rejected the motion by the Plaintiffs’ Steering Committee to certify the Master Class Action Complaint as a nationwide class action, “concluding that since such plaintiffs ‘would have to demonstrate that they were either injured by Baycol, or that Baycol did not provide them any health benefits[,]’ common issues did not predominate,” id., at 3. The district court later issued an order denying class action treatment to McCollins’ complaint on behalf of West Virginia residents, id., at 3, 4. Thereafter, Smith and Sperlazza sought class action certification in West Virginia state court of their Baycol class action; defense attorneys moved the federal court “to enjoin Smith and Sperlazza from relitigating in state court the certification of a West Virginia class.” Id., at 2. The district court granted the motion, and the Eighth Circuit affirmed. Id.

The Eighth Circuit explained that “the Anti-Injunction Act generally prohibits federal courts from interfering in state proceedings, [but] it permits injunctions necessary to ‘protect or effectuate its judgments.’” In re Baycol, at 5 (quoting 28 U.S.C. § 2283). The Circuit Court “review[ed] de novo the district court's determination that the Act's ‘relitigation exception’ applies…, and that it had personal jurisdiction over [Smith and Sperlazza],” id. (citations omitted). This, in turn, required an analysis of collateral estoppel requirements under West Virginia law. Id., at 6. The Circuit Court held that the issue presented by Smith and Sperlazza in their state court motion for class action treatment had been previously decided by the district court in connection with the McCollins action, and that they sought class action certification “on the same legal basis of the same class already denied in this case.” Id. The fact that West Virginia’s Rules of Civil Procedure Rule 23 would be applied in Smith and Sperlazza’s action rather than Fed.R.Civ.P. Rule 23 was of no moment, id. Put simply, “[T]he district court concluded that Baycol plaintiffs cannot state a claim under the WVCCPA without proof of harm or injury. Economic loss alone is insufficient. Certification under the state rule would undermine this conclusion of substantive state law properly made by the district court.” Id. (citation omitted).

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

Class Action Alleging Employer Misclassified Managers as Exempt and Failed to Pay them Overtime Wages Properly Decertified as Class Action because Amount of Time Spent on Managerial Duties Required Individual Inquiry and because “Individualized Issues of Liability and Damages will Predominate” California Appellate Court Holds

Plaintiffs filed a putative class action against their employer, Tuesday Morning, alleging violations of California labor laws; specifically, the class action complaint alleged that defendant misclassified its managers as exempt employees and failed to pay them overtime wages. Keller v. Tuesday Morning, Inc., ___ Cal.App.4th ___ (Cal.App. November 4, 2009) [Slip Opn., at 1-2.] Plaintiffs’ motion for class action certification was granted. Id., at 1. Two years later, defense attorneys moved the trial court to decertify the class. Id. Defendant filed the motion after the parties had conducted “extensive discovery” and supported the motion with 10 declarations and references to the deposition testimony of 49 managers. Id., at 2. “A different trial judge granted the motion on the ground that individual issues predominated over common issues, thus a class action was not the appropriate mechanism by which to litigate the managers’ claims.” Id., at 1. The new trial judge issued his ruling after conducting a three-day evidentiary hearing on the motion. Id., at 6. Based on the evidence, the court concluded that even though there were some common issues, “the amount of time a manager spent performing [various] acts and his or her exercise of discretion are matters of individual inquiry.” Id. Specifically, “the time spent in a managerial duty is an individual inquiry,” and “[e]ach manager’s background and management style varied from store to store.” Id., at 7. Plaintiffs appealed the class action decertification order, and the Court of Appeal affirmed.

The appellate court summarized the evidence presented by defense attorneys in support of the decertification motion. See Keller, at 2-5. The Court of Appeal also discussed two appellate court decisions that similarly concerned “unpaid overtime in retail chain operations” – Walsh v. IKON Office Solutions, Inc., 148 Cal.App.4th 1440 (Cal.App. 2007), and Dunbar v. Albertson’s Inc., 141 Cal.App.4th 1422 (Cal.App. 2006) – each of which affirmed trial court orders denying or decertifying class action treatment. See Keller, at 9-10. Based on Walsh and Dunbar, and the evidence presented in support of the motion to decertify the class, the Court of Appeal held that “[s]ubstantial evidence supports the trial court’s conclusion that individualized issues of liability and damages will predominate over issues common to the class if the overtime claims are tried as a class action.” Id., at 11. Accordingly, the appellate court affirmed the trial court order decertifying the litigation as a class action. Id.

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

FACTA Class Action Alleging Defendant Printed more than Last Five Numbers of Credit Card on Customer Receipt not Entitled to Class Action Treatment because Plaintiff Utilized Business Card for Business Purposes and Corporations do not have Private Rights of Action under FCRA Illinois Federal Court Holds

Plaintiff filed a putative class action in Illinois state court against Amore Mio alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA), which is part of the Fair Credit Reporting Act (FCRA); specifically, the class action complaint alleged that plaintiff used his business credit card at an Amore Mio Restaurant and received a credit card receipt that contained more than the last five digits of his credit card number in violation of FACTA. Pezl v. Amore Mio, Inc., 259 F.R.D. 344, 345 (N.D.Ill. 2009). The original class action complaint was filed by plaintiff’s business, CE Design, but an amended class action complaint substituted in plaintiff as an individual in place of his business. Id., at 345-46. Defense attorneys removed the class action to federal court, id., at 345. Plaintiff moved the district court to certify the litigation as a class action; defense attorneys opposed class action treatment and moved for summary judgment. Id., at 346. The district court denied plaintiff’s motion for class certification and granted defendant’s motion for summary judgment. In ruling on the motions, the district court noted that class action certification generally should be determined prior to addressing the merits, see id., at 346 n.4, so the court began by analyzing plaintiff’s request for class action treatment.

The federal court readily concluded that the numerosity test of Rule 23(a)(1) had been met because the putative class contained thousands of members. See Pezl, at 346. The district court also easily found that the commonality requirement of Rule 23(a)(2) had been satisfied because the “common nucleus of operative fact” involved defendant’s “standardized conduct” of allegedly “printing of receipts in violation of FACTA.” See id., at 346-47. But the court found that plaintiff failed to satisfy the typicality test of Rule 23(a)(3) because of the existence of “defenses particular to the named plaintiff” – specifically, that plaintiff’s claim was “based on a credit card number belonging to a corporation,” id., at 347. As previously noted, plaintiff used a business credit card to pay for a transaction that “was for business purposes,” id. The FCRA, however, excludes business transactions; the FCRA provides for liability to a “consumer,” which is defined as “an individual.” Id. (citations omitted). Plaintiff’s business therefore did not have a private right of action under the FCRA, id. The district court rejected plaintiff’s argument that FACTA claims may be treated differently, holding that “only consumer cardholders have a private right of action under FACTA.” Id., at 347-48 (citation omitted). Accordingly, plaintiff’s claims were not “typical” of the putative class and so the complaint did not warrant class action certification. Id., at 348. (For the same reasons, the federal court additionally found that plaintiff failed to satisfy the adequate representation test of Rule 23(a)(4). See id., at 348 n.8.)

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

Class Action Alleging Violations of California’s Unfair Competition Law and Breach of Contract for “Pay-Per-Click” Charges based on Click Fraud/Doubleclicks Warranted Nationwide Class Action Treatment California Federal Court Holds

Plaintiff filed a putative class action in California state court against IAC/Interactive Corp., Ticketmaster dba Citysearch.com, and Citysearch.com alleging violations of California’s Unfair Competition Law (UCL), as well as breach of contract and negligence; defense attorneys removed the class action to federal court. Menagerie Productions v. Citysearch, ___ F.Supp.2d ___ (C.D.Cal. November 9, 2009) [Slip Opn., at 1.] According to the allegations underlying the class action complaint, class members “entered into a contract with Citysearch to place ‘pay-per-click’ advertisements on the Citysearch website, and that Citysearch failed to detect and prevent ‘click fraud.’” Id., at 2. Following extensive law and motion practice and amendments to the class action complaint that added new party plaintiffs, see id., plaintiffs moved the district court to certify the litigation as a class action, id., at 3. The class action sought certification of a nationwide class defined as, “All persons or entities in the United States who paid money for pay-per-click advertising through Citysearch.com.” Id., at 7. Defense attorneys opposed class action treatment. The district court concluded that the complaint warranted class action treatment as to certain claims but denied class action certification as to other claims.

The federal court explained that the class action complaint was premised on two theories. First, that class members’ contracts with defendants for pay-per-click advertising “contained an implied covenant of good faith and fair dealing” which Citysearch violated “by collecting fees from plaintiffs and the Class for click fraud even though Citysearch knew, or should have reasonably known, that the clicks were not ‘actual clicks’ but rather purposeful clicks made for an improper purpose” and “by failing to implement effective oversight, investigating oversight and prevention of click fraud.” Menagerie Productions, at 6-7. Second, that Citysearch engaged in “unfair business practices” within the meaning of California’s UCL “because Citysearch ‘(a) fails to employ any method to track fraudulent clicks, including clicks originating from its own employees and/or agent and clicks originating from Citysearch’s “partner sites”; (b) fails to inform its customers that it does not employ a method to track fraudulent clicks, including clicks originating from its own; and (c) charges customers for invalid clicks.’” Id., at 7. The class action alleged that this conduct violated the UCL because Citysearch led customers to believe “that they will not be charged for ‘invalid’ clicks, when in fact, Citysearch routinely charges its customers for clicks that it knows, or by the exercise of reasonable care, should know are not clicks that originate from potential customers who actively and legitimately chose the advertiser’s link.” Id.

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

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.

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

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.

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

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 In: Certification of Class Actions, Class Action Court Decisions

Class Action Alleging Antitrust Violations on Behalf of Indirect Purchasers Failed to Satisfy Class Action Requirements of Rule 23(b)(3) because no Methodology for Establishing Class Wide Damages but Request for Class Action Certification under Rule 23(b)(2) taken under Submission California Federal Court Holds

Plaintiff filed a putative class action against Apple alleging violations of federal and state antitrust laws; specifically, the class action complaint challenged Apple’s sale of music for its iPod through its iTunes online music store. Somers v. Apple, Inc., 258 F.R.D. 354, 355 (N.D. Cal. 2009). According to the allegations underlying the class action complaint, Apple utilizes proprietary hardware and software for its iPod and digital music downloads, Apple’s share of the online music market is 83% and of the online video market is 75%, and Apple “deliberately” makes music and videos purchased at its online store “inoperable with its competitors’ [hardware],” id., at 355-56. The class action alleges that this allows Apple “to charge iPod purchasers a supracompetitive price by preventing consumers who have purchased music files from iTMS from playing their music on Apple’s competitors’ digital media players.” Id., at 356. While a related case sets forth parallel allegations on behalf of consumers who purchased iPod’s directly from Apple, see The Apple iPod iTunes Antitrust Litigation, U.S.D.C. Northern District of California Case No. C 05-00037 JW, this class action is filed on behalf of consumers who made their purchases through third-party vendors. Id. Plaintiff moved the court to certify the litigation as a class action under both Rule 23(b)(2) and (b)(3), id., at 357. Defense attorneys opposed the motion, arguing that “Plaintiff fails to advance class-wide methods of demonstrating individual coercion or damages” and that “a nationwide class is not appropriate, because California antitrust law should not be applied on a nationwide basis.” Id., at 357-58. The district denied the motion.

After summarizing the legal framework surrounding certification of class actions in indirect purchaser antitrust class actions, see Somers, at 358-59, the district court turned to the request for certification under Rule 23(b)(3). (The court assumed without discussion that requirements of Rule 23(a) had been met.) Plaintiff argued that a class action would be manageable because “her expert’s methodology is sufficient to establish damages on a class-wide basis.” Id., at 359. Defense attorneys disagreed, arguing that the expert “fails to demonstrate how all class members suffered injury as a consequence of [Apple’s] alleged anticompetitive activity,” id. The district court held an evidentiary hearing on the competing, proposed methodologies, id., at 360-61, and concluded that plaintiff had not assuaged the court’s concerns as to a method of establishing damages for the class, id., at 361. Accordingly, the court denied class action certification because “Plaintiff has failed to meet her burden of establishing ‘a reliable method for proving common impact on all purchasers of [D]efendant’s products throughout the chain of distribution.’” Id., at 361 (citation omitted). And with respect to plaintiff’s motion for certification of a class under Rule 23(b)(2), the district court noted that it had requested further briefing on this issue and held that “the Court will not rule on this issue until it has greater understanding of the claims, the class definition, and the form of injunctive relief sought by Plaintiff in this case and the Plaintiffs in the parallel Direct Purchaser Action.” Id. Accordingly, it took the latter request under submission. Id.

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

Class Action Alleging Violations of Federal Americans with Disabilities Act (ADA) could not Properly be Certified with Respect to All 92 Franchise Restaurant Locations because no Common Architectural Design to Stores so no Commonality/Typicality Existed, but Class Action Treatment Warranted as to 10 Stores Frequented by Named Plaintiffs California Federal Court Holds

Three named plaintiffs filed a putative class action against Burger King alleging that certain of its California restaurants violated the federal Americans with Disabilities Act (ADA), California’s Americans with Disabilities Act (Unruh) and California’s Disabled Persons Act (CDPA) in various ways; specifically, the class action complaint alleged that the three named plaintiffs are mobility-impaired and had encountered barriers at Burger King restaurants. Castaneda v. Burger King Corp., ___ F.Supp.2d ___, 2009 WL 3151168 (N.D. Cal. September 25, 2009) (Slip Opn., at 1-2). Burger King has about 600 California locations, 92 of which “are leased by Burger King Corporation to the franchisees, which operate and maintain them.” Id., at 2. This class action involved only the 92 leased properties, id. The class action complaint sought injunctive relief, as well as statutory penalties under Unruh and the CDPA. Id. According to the allegations underlying the class action, the locations at issue “were built according to ‘one or a limited number of architectural design prototypes developed by Burger King’” and that some locations were “remodeled in conformance with Burger King’s construction and design plans and specifications.’” Id., at 5 (italics omitted). Plaintiffs moved the district court to certify the litigation as a state-wide class action, but “retreated from their allegations of common architecture, design, construction, and policies.” Id. Instead, plaintiffs argued that Burger King “maintains substantial control over the leased restaurants,” id., at 9. Defense attorneys opposed class action treatment, arguing inter alia that common questions do not predominate. The district court granted class action treatment, but severely limited the scope of the class: the court explained, “The normal class in an ADA action proceeds against a single store on behalf of all disabled persons using that store. The instant action seeks to proceed against approximately 92 different stores throughout California on behalf of a class of all mobility-impaired persons at all 92 locations. All of the stores are Burger King restaurants. Although the class claims would share Burger King Corporation as a common target, the physical differences among the 92 locations would predominate over the common issues, there being no common blueprint among them (or even among any subset of them). Whether or not any store was ever out of ADA compliance would have to be determined store by store, feature by feature, before turning to the easier question of whether defendant as the franchisor/landlord, would have a duty to force the franchise to remediate. Therefore, such a large sprawling class will not be certified. Instead, separate classes will be certified against each of the ten individual restaurants where a named plaintiff encountered alleged access barriers.” Id., at 1-2.

The district court addressed first plaintiffs’ request for certification under Rule 23(b)(2) of a class action covering all 92 leased stores. See Castaneda, at 12 et seq. The federal court found “several major obstacles to a 92-store class.” Id., at 13. It found the class lacked commonality under Rule 23(a)(2), explaining that “[b]ecause each location has unique facilities, there is neither a common core of salient facts regarding what accessibility barriers each restaurant’s patrons face nor a shared predicate legal issue of whether each restaurant’s facilities violates the ADA or California statutes.” Id. The court also found that typicality under Rule 23(a)(3) was missing “because every store may well be different,” id. As to Rule 23(b)(2)’s class action factors, the district court found class action treatment inappropriate because (1) the class action complaint sought significant statutory damages, and (2) injunctive relief cannot be awarded against stores that are not in violation of the ADA, which would require “a highly individualized and extremely detailed mirror-by-mirror, door-to-door, ramp-by-ramp, detail-by-detail examination of each store.” Id. The federal court’s detailed analysis of these factors may be found at pages 14 through 22 of its opinion.

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

Class Action Seeking Damages for Diminished Property Values resulting from Release of Chemicals causing Ground Contamination Warranted Class Action Treatment Florida Court Holds

Plaintiffs filed a putative class action against Raytheon alleging that the release of chemicals at a Facility owned by Raytheon caused ground contamination that diminished the property values. Sher v. Raytheon Co., 261 F.R.D. 651 (M.D. Fla. 2009) (Slip Opn., at 1-2, 13-14). According to the allegations underlying the class action complaint, “various industrial activities” were performed at the site which “caused chemicals…including TCE, vinyl chloride and 1, 4-dioxane, to leak into the soil and groundwater at the Facility.” Id., at 2 (footnotes omitted). The class action alleges that the chemicals leaked into the ground and “migrated beyond the boundaries of the Facility and into the surrounding neighborhood,” id., at 2-3. Plaintiffs claim that they were unaware of the ground contamination until a March 2008 news article and newscast. Id., at 4. The federal court explained, “In its current form, the proposed class area consists of over 1,000 property owners and 1,300 parcels of property…. The proposed class area is composed of ten sub-areas or neighborhoods…. There are seventeen different property types within the proposed class area, including various residential (single-family, apartments, condominiums); commercial (stores, shopping center); and institutional uses (schools, a church); as well as vacant land….” Id., at 5. The class action sought monetary damages “for the diminution in the value of their properties that the contamination caused and any restoration costs,” as well as injunctive relief to prevent further contamination. Id., at 13-14. Plaintiffs moved the district court to certify the litigation as a class action, id., at 1. Defense attorneys opposed class action treatment primarily on the ground that “common issues cannot predominate when the Court will have to make individualized inquiries as to causation and damages for each property owner.” Id., at 14. The defense also argued that “under Plaintiffs’ definition, every property owner would be included even if chemicals from the Facility cannot be detected in their groundwater.” Id. The district court granted class action treatment.

We do not here summarize the federal court’s discussion of the named plaintiffs or the various experts. See Sher, at 5-13. The district court began its analysis by noting that the definition of the class “is an overriding concern in environmental or mass toxic tort cases” and that “many courts treat ‘class definition’ as a threshold issue.” Id., at 17. This requirement necessitates that plaintiffs “‘distinguish[] members of the proposed class from the general public based upon’ the defendant's alleged actions against them.” Id. (citations omitted). Plaintiffs argued that their proposed class definition was proper “because it includes a particular group (real property owners), that were harmed during a particular time frame (beginning on March 29, 2008), in a particular location (over Defendant’s groundwater plume) and in a particular way (groundwater contamination).” Id., at 18. Defense attorneys countered that “the geographic boundaries delineated on the Property Map arbitrarily identify a subset of the general public http://classactiondefense.jmbm.com/cgi-bin/mt.cgi?__mode=view&_type=entry&blog_id=1#rather than a distinct class of persons affected by Defendant's alleged activities” and that the putative class subsumes within its sweep “every property owner in the proposed class area – including countless persons whose properties show no detection of chemicals from the Facility.” Id. The federal court concluded that the class definition was sufficiently definite. Id., at 18-20.

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

Class Action Challenging Disney Prohibition Against use of Segways at Parks Warranted Dismissal for Lack of Standing Florida Federal Holds because Disney Afforded Named Plaintiffs “Access” to its Parks through Scooters, Wheelchairs, and 4-Wheel “Electronic Stand-Up Vehicles” (ESVs) but Barred Segways for Safety Reasons

Plaintiffs filed a putative class action against Walt Disney World alleging violations of the federal Americans with Disabilities Act (ADA); specifically, the class action complaint alleged that Disney violated the ADA by refusing to allow disabled persons to use Segways within the park. Ault v. Walt Disney World Co., ___ F.Supp.2d ___ (M.D. Fla. October 6, 2009) (Slip Opn., at 1, 3-5). According to the allegations underlying the class action complaint, plaintiffs are disabled individuals who prefer to use Segways for mobility “rather than a ‘traditional’ mobility device such as a wheelchair or scooter.” Id., at 3. Disney accommodates disabled guests, and provides wheelchairs and scooters, but for safety reasons has banned the use of two-wheeled devices such as Segways. Id. However, because it realized that some disabled guests would prefer to stand, it designed a 4-wheel “electronic stand-up vehicle” (ESV) that it makes available to guests. Id., at 4. The parties vigorously litigated the class action, and ultimately reached a proposed class action settlement that would permit Disney’s policy against Segways to remain but require Disney “to make a certain number of its ESVs available to disabled guests at its Parks.” Id., at 5. The district court conditionally certified the matter as a class action for settlement purposes and granted preliminary approval to the settlement, id., at 1. The federal court received almost 100 objections to the proposed settlement, including objections from various disability-rights groups, the U.S. Department of Justice and the Attorneys General of twenty-three States. Id., at 1-2. After conducting “an extensive two-day fairness hearing,” the federal court concluded that plaintiffs lacked standing to prosecute the action and, accordingly, vacated its prior order and dismissed the class action complaint without prejudice. Id., at 2.

The class action focuses on the use of Segways at Disney parks. The district court explained, “Although Disney has reviewed its policy against Segways annually, it has consistently concluded that Segway use may not be safe in its densely crowded Parks. For that reason, Disney’s ESV was built around essentially the same technology as its proprietary sit-down scooters and underwent similar safety testing.” Ault, at 4-5. Specifically, Disney designed its ESV to meet “the safety standards for power scooters established by the Rehabilitation Engineering and Assistive Technology Society of North America.” Id., at 5 n.8. In examining the standing of the named plaintiffs, the court noted that one of them, who suffered from progressive Multiple Sclerosis, would “sometimes uses a Segway as her mobility device,” but her legs would get stiff and it was “difficult for her to even stand without needing to hold on to something,” id., at 6; accordingly, she only used her Segway about once a month, id., at 6 n.11, and previously used a traditional scooter during a multi-day visit to Disney parks, id., at 6. Another named plaintiff walked around the park during the first two days of her trip to Disney World, but used a scooter on the third day for a couple of hours. Id., at 7. The last named plaintiff testified that he is “physically able to use a wheelchair or scooter” but prefers his Segway “because no one looks at him and wonders what is ‘wrong’ with him,” id. The district court also summarized various objections to the class action settlement. See id., at 8-11.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As Matter of First Impression, Class Action Plaintiff Attorney Ethically Prohibited from Contacting Class Members in Class Action once Trial Court Conditionally Certifies Litigation as a Class Action and Appoints Class Counsel California State Court Holds

Plaintiffs filed three separate putative class action lawsuits against Vitamin Shoppe alleging labor law violations; specifically, the class action complaint alleged that defendant failed to pay employees overtime, or to provide meal and rest periods, as allowed by California law. Hernandez v. Vitamin Shoppe Ind. Inc., 174 Cal.App.4th 1441, 95 Cal.Rptr.3d 734, 737-38 (Cal.App. 2009). The Perry class action (which included appellant Lisa Hernandez as a named plaintiff) was filed in Marin County, as was the Beauford class action; the Thompson class action was filed in Orange County. Id., at 738. Plaintiff’s attorney in the Thompson class action was Jeffrey Spencer; Spencer also represented named plaintiff Hernandez in the Perry class action. Id., at 737-38. Defense attorneys offered to settle the putative class actions on a class-wide basis, provided that all three plaintiffs attended the mediation; Spencer, on behalf of the Thompson class action, refused to participate. Id., at 738. The parties reached a proposed class action settlement of the Perry class action, and Spencer – as plaintiff’s attorney in Thompson – tried unsuccessfully to coordinate the three class actions or, alternatively, to stay the Perry class action. Id. Spencer, again acting as counsel for the Thompson plaintiffs, opposed court approval of the proposed class action settlement in Perry on the grounds that the settlement “was based on erroneous factual and legal assumptions, and that it was not within a range of reasonableness.” Id. The trial court gave preliminary approval to the proposed class action settlement in Perry and appointed class counsel (not Spencer), but before the claims administrator had sent notice to the class, Spencer (acting as counsel in the Thompson class action) sent letters to Vitamin Shoppe employees urging them to opt-out of the proposed settlement in the Perry class action and to retain him as their attorney. Id., at 739. In pertinent part, the court proceedings that followed included a court order that “ordered that a corrective notice be sent, directed Spencer to refrain from any further communications with class members that he did not represent, and granted the request for monetary sanctions.” Id., at 740. Following reassignment to a new judge after Spencer successfully challenged the original trial court for bias, id., the trial court reaffirmed the court order enjoining Spencer from communicating with any class members that he did not represent, ordering a corrective notice be sent to the class (as well as a procedure for determining the impact of Spencer’s letter on class members), and imposing sanctions against Spencer, id., at 741. The appellate court affirmed the order except for the award of sanctions.

For purposes of this article, we focus on the court order prohibiting Spencer from further communication with members of the putative class and awarding sanctions. The appellate court easily found that the court order did not create any conflict with Spencer’s ethical obligation to communicate with clients because it specifically exempted communications with class members who had retained him. See Hernandez, at 743-44. On the contrary, the court order prohibited Spencer from communicating directly with individuals represented by other counsel – class counsel. The Court of Appeal also concluded that the trial court order was well within its discretionary power to oversee litigation, and “‘to protect the rights of all parties, and to prevent abuses which might undermine the proper administration of justice.’” Id., at 745 (citation omitted). In this regard, the appellate court held that the trial court’s duty to protect absent class members is “particularly pronounced” following class action certification “because class members must decide whether or not to opt out.” Id. (citation omitted). In this case, “Spencer sent his letters unilaterally, without court approval, after the court had reviewed the proposed settlement, counsel’s arguments, preliminarily approved the settlement, and ordered the claims administrator to send notice to the class.” Id. Moreover, Spencer’s letters were misleading, id., at 745-46. And finally, the Court of Appeal rejected the claim that the court order infringed on Spencer’s right to free speech, holding at page 746, “Spencer fails to establish that his constitutional free speech rights entitled him to interfere with the trial court’s duty and authority to supervise the exclusion process after conditionally certifying the class, or to contact class members for whom the court had appointed class counsel.” Accordingly, the Court affirmed the trial court orders, save for the sanction as noted below. Id., at 751.

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

District Court did not Err in Granting Defense Motion to Deny Class Action Certification in Labor Law Class Action because Rule 23 does not Preclude Defendants from Filing such Motions, Plaintiffs had Adequate Time to Conduct Discovery, and District Court did not Abuse its Discretion in Concluding Rule 23(b)(3)’s Predominance Requirement could not be Satisfied Ninth Circuit Holds

Plaintiffs filed a putative class action against Countrywide Home Loans alleging labor law violations; the class action complaint alleged that defendant misclassified its 1,140 External Home Loan Consultants (HLCs) as “exempt” and, accordingly, failed to pay them overtime and other wages lawfully due non-exempt employees. Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935 (9th Cir. 2009) [Slip Opn., at 8299, 8303]. Plaintiffs filed the class action in California state court, but defense attorneys removed the class action to federal court. Id., at 8305. According to the allegations underlying the class action, Countrywide employs HLCs to sell loan products and pays them entirely on a commission basis. HLCs “are focused on outside sales and ‘represent Countrywide in local communities, and specifically work with realtors, builders, and other potential business partners in order to develop business relationships and obtain referral business.’” Id., at 8304. Prior to the discovery cut-off date and before plaintiffs moved for class certification, defense attorneys filed a motion to deny class action treatment. Id., at 8303. Countrywide admitted that it “applies a uniform wage exemption to HLCs,” classifying them as “exempt” outside salespeople under California law and the federal Fair Labor Standards Act (FLSA). See id., at 8304-05. But Countrywide asserted that it does not monitor what the HLCs do and that it “has no control over what HLCs actually do during the day”; rather, each HLC independently decides “how much, or how little time HLCs spend in the office, or working overall,” “how they want to market themselves,” and “how much money they want to make.” Id., at 8304. With respect to this last issue, the average HLC was paid more than $100,000 per year, and some earned “several hundreds of thousands of dollars,” id. Countrywide additionally introduced evidence that the amount of time individual HLCs spent in the office “varies greatly” and that it tracks only “the number and value of loans that HLCs close each month.” Id., at 8305. The district court granted Countrywide’s motion, concluding that class action treatment was not warranted. Id., at 8303. Plaintiffs appealed, and the Ninth Circuit affirmed.

The class action complaint alleged twelve causes of action against Countrywide, each premised on the assumption that Countrywide misclassified HLCs as exempt. Vinole, at 8305. The appeal centered on “whether the district court abused its discretion by (1) considering Countrywide’s motion to deny class certification before Plaintiffs had filed a motion to certify and prior to the pretrial and discovery cutoffs, and (2) denying class certification based on its reasoning that individual issues predominate over common issues.” Vinole, at 8303. We do not belabor the Ninth Circuit’s holding that “Rule 23 does not preclude a defendant from bringing a ‘preemptive’ motion to deny certification.” Id., at 8307. Other courts have reached a similar conclusion, and it rests on the solid observation that “[n]othing in the plain language of Rule 23(c)(1)(A) either vests plaintiffs with the exclusive right to put the class certification issue before the district court or prohibits a defendant from seeking early resolution of the class certification question.” Id., at 8307-08. In resolving this issue of first impression in the Ninth Circuit, the Court explained that “no rule or decisional authority prohibited Countrywide from filing its motion to deny certification before Plaintiffs filed their motion to certify, and Plaintiffs had ample time to prepare and present their certification argument.” Id., at 8303.

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

Putative Class Action Alleging Violations of Federal Fair Labor Standards Act (FLSA) not Subject to Class Action Treatment because “Opt-In” Provision of FLSA Incompatible with “Opt-Out” Nature of California Class Action Lawsuits California State Court Holds

Plaintiffs filed a putative class action in California state court against the City of Rosemead alleging violations of the federal Fair Labor Standards Act (FLSA); the class action complaint alleged that the City failed to pay nonexempt employees “for all hours worked.” Haro v. City of Rosemead, 174 Cal.App.4th 1067, 94 Cal.Rptr.3d 874, 876 (Cal.App. 2009). According to the allegations underlying the class action complaint, the City did not pay the employees sought to be covered by the action “the wages to which they were entitled.” Id., at 878. Plaintiffs filed a motion with the trial court to certify the litigation as a class action under California Code of Civil Procedure section 382; defense attorneys opposed class action treatment on the ground that the “opt-in” requirement of an FLSA collective action was incompatible with the “opt-out” nature of class actions under Section 382. Id. The trial court agreed and refused to certify the litigation as a class action, id., at 876; in so ruling, the court observed that plaintiffs had not sought to proceed with a “collective action” under the FLSA but, rather, as a class action under Section 382, id., at 878-79. The trial court denied also plaintiffs’ motion for leave to amend their class action complaint. Id., at 876. Plaintiffs appealed both orders, and the California Court of Appeal dismissed the appeals on the grounds that the underlying trial court orders were not appealable.

The Court of Appeal began by analyzing the differences between “collective actions” under the FLSA and “class actions” under Section 382. Haro, at 876. Importantly, the FLSA requires that members of the putative class affirmatively “opt-in” to the litigation, id. (citation omitted), which has been referred to as “‘[p]robably the most significant difference in procedure between the FLSA’ and, in federal practice, class actions under Federal Rules of Civil Procedure, rule 23,” id. (citation omitted). For this reason, at least one federal circuit court has held, “There is a fundamental, irreconcilable difference between the class action described by Rule 23 and that provided for by FLSA § 16(b). In a Rule 23 proceeding a class is described; if the action is maintainable as a class action, each person within the description is considered to be a class member and, as such, is bound by judgment, whether favorable or unfavorable, unless he has ‘opted out’ of the suit. Under § 16(b) of FLSA, on the other hand, no person can become a party plaintiff and no person will be bound by or may benefit from judgment unless he has affirmatively ‘opted into’ the class; that is, given his written, filed consent.” Id., at 876-77 (quoting LaChapelle v. Owens-Illinois, Inc., 513 F.2d 286, 288 (5th Cir.1975) (footnote omitted). Moreover, “at least one California court has held that the opt-in feature cannot be adopted in California class actions.” Id., at 877 (citing Hypertouch, Inc. v. Superior Court, 128 Cal.App.4th 1527, 1550 (Cal.App. 2005). The California appellate court reaffirmed that “FLSA actions are not class actions,” id.

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

Labor Law Class Action Certification Order Reversed because District Court Abused its Discretion in Relying on Wells Fargo’s Internal Policy of Treating Employees as Exempt “To the Near Exclusion of Other Relevant Factors Touching on Predominance” under Rule 23(b)(3) Ninth Circuit Holds

Plaintiffs filed a putative class action in California against their employer, Wells Fargo Home Mortgage, alleging labor law violations; the class action complaint – brought individually and on behalf of roughly 5000 other current and former Wells Fargo home mortgage consultants (HMCs), who market and sell mortgages – alleged defendant paid HMCs by sales commission until 2005, when “Wells Fargo changed the commission system to include a minimum, non-recoverable draw against commissions.” In re Wells Fargo Home Mortgage Overtime Pay Litig., 571 F.3d 953 (9th Cir. 2009) [Slip Opn., at 8325, 8328-29]. According to the allegations underlying the class action, prior to 2005 Wells Fargo did not track the hours worked by HMCs or pay them overtime because “it treated nearly all of its HMCs as exempt from state and federal overtime requirements.” Id., at 8329. Several plaintiffs filed various putative class action lawsuits against Wells Fargo alleging state and federal labor law violations, which the Judicial Panel on Multidistrict Litigation ultimately consolidated in the Northern District of California. Id. The plaintiffs in this particular California class action (Mevorah) alleged that Wells Fargo’s conduct violated California’s Unfair Competition Law (UCL) by violating the federal Fair Labor Standards Act (FLSA), id. Plaintiffs’ counsel moved the district court to certify the litigation as a class action; defense attorneys opposed the motion in part on the ground that “individual issues predominated and that class treatment was not superior,” and “pointed to a number of exemptions under the FLSA (applicable through the UCL) and California labor law that would require individualized inquiries.” Id. The district court agreed that “individual inquiries would be necessary with respect to five exemptions: the federal outside sales exemption…, California’s outside sales exemption…, California’s commissioned sales exemption…, and the federal highly compensated employee exemption….” Id., at 8329-30. Specifically, the federal court found that these inquiries “would require an analysis of the job experiences of the individual employees, including the amount of time worked by each HMC, how they spend their time, where they primarily work, and their levels of compensation.” Id., at 8330. On the other hand, the district court concluded that common issues existed only as to two exemptions – “whether Wells Fargo qualifies as a ‘retail or service establishment’ for purposes of a federal exemption for commissioned sales…, and whether the employees earned ‘commission wages’ under California’s commissioned sales exemption….” Id. The court nonetheless granted class action treatment “relying on Wells Fargo’s uniform exemption policies,” id., at 8330-31. The Ninth Circuit reversed, holding that while “uniform exemption policies” – such as “an employer’s internal policy of treating its employees as exempt from overtime laws” – is relevant to the predominance test in Rule 23(b)(3), “it is an abuse of discretion to rely on such policies to the near exclusion of other relevant factors touching on predominance.” Id., at 8328.

The Ninth Circuit explained at page 8332: “The question here is whether the district court abused its discretion in finding Rule 23(b)(3)’s predominance requirement was met based on Wells Fargo’s internal policy of treating all HMCs as exempt from state and federal overtime laws. To succeed under the abuse of discretion standard, Wells Fargo must demonstrate that the district court either (a) should not have relied on its exemption policy at all or (b) made a clear error of judgment in placing too much weight on that single factor vis-a-vis the individual issues.” The Circuit Court construed Wells Fargo’s arguments “as a challenge to the weight accorded to the internal exemption policies” in that the district court “[considered] the proper factors but committing clear error in weighing them.” In re Wells Fargo Home Mortgage, at 8332. Specifically, defense attorneys argued that the weight afforded by the district court to Wells Fargo’s exemption policy “was tantamount to estoppels.” Id., at 8332-33. The Circuit Court agreed, finding at page 8333 that the district court’s class action certification order “was clearly driven by Wells Fargo’s uniform exemption policy.” That finding, in turn, “leads to the central question: whether such heavy reliance constituted a clear error of judgment in assaying the predominance factors.” Id.

Continue reading "Wells Fargo Class Action Defense Cases–In re Wells Fargo: Ninth Circuit Reverses Certification Of Labor Law Class Action Holding District Court Erred In Relying On Employer's Uniform Exemption Policy To Exclusion Of Other Factors" »

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

Class Action Plaintiffs’ Renewed Motion for Class Action Treatment Adequately Addressed District Court’s Concerns Regarding Rule 23(a)’s Requirements for Class Action Certification but Failed to Satisfy Predominance Prong of Rule 23(b)(3) Massachusetts Federal Court Holds

Plaintiffs – consisting of consumers and third-party payors (TPPs) – filed a putative nationwide class action against Warner-Lambert and Pfizer arising out of defendants’ manufacture and distribution of the drug Neurontin; specifically, the class action complaint alleged that defendants “systematically and knowingly engaged in a fraudulent campaign to market and sell Neurontin for treatment of ‘off-label’ indications – conditions for which the Federal Drug Administration (‘FDA’) had not approved Neurontin – even though defendants knew Neurontin was not effective for those conditions.” In re Neurontin Marketing, Sales Practices & Prod. Liab. Litig., ___ F.R.D. ___ (D.Mass. May 13, 2009) [Slip Opn., at 1]. According to the allegations in the class action complaint, defendants’ conduct violated federal RICO (Racketeer Influenced and Corrupt Organizations Act) and the New Jersey Consumer Fraud Act (NJCFA), as well as claims for common law fraud and unjust enrichment, id., at 1-2. Thus, despite its caption, the class action was not a products liability case, id., at 2. Plaintiffs’ moved the district court to certify the litigation as a nationwide class action, but the court denied the motion finding that plaintiffs “failed to satisfy the commonality, numerosity, typicality, and predominance requirements of Rule 23 of the Federal Rules of Civil Procedure.” See In re Neurontin Mktg. & Sale Practices Litig., 244 F.R.D. 89, 105-107 and 114-16. (D. Mass. 2007). But the federal court denied class action certification without prejudice to the filing of a new motion for class action treatment “that addressed the Court’s concerns.” In re Neurontin, at 2 (citing 244 F.R.D. at 115). Plaintiffs filed a new motion for class certification, but the district court denied the motion finding that “common questions will not predominate over issues affecting individual plaintiffs, in accordance with Rule 23(b)(3),” id., at 2-3.

We do not here summarize the factual history set forth in the district court’s opinion, see In re Neurontin, at 3-6, or the court’s analysis of the commonality, numerosity and typicality requirements of Rule 23(a) for class action treatment, which the court concluded were satisfied by plaintiffs’ renewed motion for class certification, see id., at 6-17. But the district court spent more than 30 pages analyzing whether the predominance prong of Rule 23(b)(3) had been met, and concluded that it had not. See id., at 17 et seq. We do not discuss the lengthy order in detail. We note that with respect to the first class certification motion, “the Court’s concerns [with predominance] with respect to both groups emanated from their ability to demonstrate by common proof that defendants’ fraudulent marketing of Neurontin caused financial injury to all plaintiffs.” Id., at 18. More specifically, on the facts of this case “the Court could not simply presume that defendants’ fraudulent conduct caused all the off-label Neurontin prescriptions.” Id., at 23. Based on the New Jersey Supreme Court’s subsequent opinion concerning Vioxx in International Union of Operating Engineers Local No. 68 Welfare Fund v. Merck & Co., Inc., 192 N.J. 372 (2007), referred to as Vioxx by the district court, the federal court refused to grant class action treatment to the litigation because “Vioxx precludes NJCFA plaintiffs from establishing causation through a report from a single expert, and the instant plaintiffs seek to do exactly that,” id., at 25.

Continue reading "Class Action Defense Cases–In re Neurontin: Massachusetts Federal Court Denies Class Action Certification In Class Action Complaint Arising Out Of Manufacture And Sale Of Prescription Drug Neurontin" »

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

Class Action Complaint Alleging Violations of California State Laws not Entitled to Nationwide Class Action Treatment because Plaintiffs Failed to Establish that California Law Applies to Non-Residents or that Nationwide Class Action Treatment would be “Superior” Means of Adjudicating Dispute or that Trial of Nationwide Class Action would be Manageable California Federal Court Holds

Plaintiffs filed a putative nationwide class action against Sprint Solutions and Sprint Spectrum (Sprint) alleging violations of various California consumer protection statutes; specifically, the class action complaint alleged inter alia claims under California’s Unfair Competition Law (UCL), Consumer Legal Remedies Act (CLRA), and Public Utilities Code (for cramming), as well as under the Federal Communications Act, 47 U.S.C. §201(b). Utility Consumers’ Action Network v. Sprint Solutions, Inc., ___ F.R.D. ___ (S.D.Cal. June 23, 2009) [Slip Opn., at 1]. Plaintiffs moved the district court to certify the litigation as a class action, id., at 1-2. Defense attorneys opposed class action certification, in part on the ground that various states will interpret the relevant contracts differently and have different consumer protection laws such that a nationwide class action would be unworkable. Id., at 2. The federal court refused to grant class action treatment to the lawsuit.

In arguing in favor of a nationwide class action, plaintiffs asserted that “California law applies to non-California residents because there is a presumption California law applies absent a showing to the contrary under California choice of law principles, and that California law does not conflict with other state laws. “ Sprint, at 2. Plaintiffs further argued that a nationwide class action was the “superior” means of adjudicating the dispute “because the common issue is the misbilling practices of the Defendants,” id. Defense attorneys countered “that there are individual issues that predominate; that various states will enforce several provisions in the terms and conditions of relevant contracts in various ways; that California statutes cannot be applied to consumers outside of California; and that Plaintiffs’ proposed trial plan is unworkable.” Id. The district court cited well-settled law that the moving party bears the burden of establishing that the requirements for class action treatment have been met, id., at 2-3, and turned immediately to a “rigorous analysis” of whether the class action requirements of Rule 23(b)(3) had been met because the elements of Rule 23(a) “are not seriously in dispute,” id., at 3-4.

Continue reading "Class Action Defense Cases–Utility Consumers’ Action Network v. Sprint: California Federal Court Denies Nationwide Class Action Treatment To Class Action Complaint Alleging Violations Of California Laws" »

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

Employee Representative Action Under California’s Unfair Competition Law (UCL) Must Satisfy Class Action Requirements, but Employee Representative Actions Seeking Penalties Under California Labor Code’s Private Attorneys General Act of 2004 (PAGA) Need Not Satisfy Class Action Requirements California Supreme Court Holds

Plaintiff filed a putative class action against his former employer, Angelo Dairy, alleging labor law violations; the class action complaint alleged causes of action for violations of the Labor Code, labor regulations, and an Industrial Welfare Commission wage order, for .breach of contract and “breach of the warranty of habitability on the ground that defendants provided residential units in a defective and dangerous condition,” for violations of California’s Unfair Competition Law (UCL) “based on defendants' failures to credit plaintiff for all hours worked, to pay overtime wages, to pay wages when due, to pay wages due upon termination, to provide rest and meal periods, and to obtain written authorization for deducting or offsetting wages.” Arias v. Superior Court, ___ Cal.4th ___, 95 Cal.Rptr.3d 588, 2009 WL 1838973, *1 (Cal. June 29, 2009). In addition, the class action complaint sought enforcement under the UCL of penalties provided for in the Labor Code, and alleged under California’s Private Attorneys General Act of 2004 (PAGA), Labor Code § 2698 et seq., that “defendants had violated the Labor Code, labor regulations, and an Industrial Welfare Commission wage order by failing to pay all wages due, to provide itemized wage statements, to maintain adequate payroll records, to pay all wages due upon termination, to provide rest and meal periods, to offset proper amounts for employer-provided housing, and to provide necessary tools and equipment.” Id. Defense attorneys moved to strike five causes of action in the class action complaint “on the ground that plaintiff failed to comply with the pleading requirements for class actions”; the trial court granted the motion. Id. Plaintiff sought a writ of mandate from the Court of Appeal, which held that UCL claims brought in a representative capacity had to satisfy class action requirements, but that representative labor law claims under PAGA need not, id. The Supreme Court granted review and held “that an employee who, on behalf of himself and other employees, sues an employer under the [UCL]…for Labor Code violations must satisfy class action requirements, but that those requirements need not be met when an employee's representative action against an employer is seeking civil penalties under [PAGA].” Id.

The Supreme Court began in analysis by rejecting plaintiff’s claim that representative actions under the UCL (brought individually and on behalf of others) need not comply with the requirements for class actions. Arias, at *2. After summarizing California’s UCL, including the 2004 amendments thereto, and after noting that California Code of Civil Procedure § 382 does not mention the words “class action,” the Court addressed the issue of whether the UCL, as amended by the voters so as to require that private plaintiffs bringing representative actions comply with Section 382, “imposes a requirement that the action be brought as a class action.” Id. Based on the Supreme Court’s analysis of the statutory language, and recognizing that a “literal construction of an enactment…will not control when such a construction would frustrate the manifest purpose of the enactment as a whole,” id., at *3, the Supreme Court concluded that California voters clearly intended “to impose class action requirements on private plaintiffs' representative actions” under the UCL, id. The Court therefore held that representative actions under the UCL must comply with class action requirements, id., at *4.

Continue reading "Class Action Defense Cases–Arias v. Superior Court: California Supreme Court Holds Representative Actions Under UCL Must Comply With Class Action Requirements But Labor Law PAGA Representative Claims Need Not Meet Class Action Requirements" »

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

Class Action Complaint Alleging Deceptive Marketing Practices in Sale of Vioxx not Entitled to Class Action Treatment because Individual Issues will Predominate over Common Questions of Law or Fact California State Trial Court Holds

Various class action lawsuits against Merck were consolidated in the Los Angeles Superior Court under the title In re Vioxx Consolidated Cases; the class action lawsuits alleged that Merck knew of the cardiovascular dangers associated with Vioxx long before it voluntarily pulled it from the market. In re Vioxx Conxolidated Cases, Los Angeles Superior Court Case No. JCCP4247 (April 30, 2009) [Slip Opn., at 1-2]. The consolidated class action complaint alleged that “Merck’s deceptive marketing practices violate the unfair competition law [(UCL)]…and false advertising law…, constitute deceptive trade practices under the Consumers Legal Remedies Act [(CLRA)]…, and resulted in unjust enrichment.” Id., at 2. Interestingly, the class action “[did] not allege that Vioxx itself harmed anyone or was ineffective, only that consumers lost money in purchasing it because it was more expensive than, but not better than less expensive [alternatives].” Id. Plaintiffs’ lawyers moved the trial court to certify the litigation as a class action; defense attorneys opposed class action treatment, arguing that “individual issues of causation and reliance predominate over any common issues because Merck knew different things about Vioxx at different times and class members, physicians and TPPs [third party payors] were exposed to different representations at different times and were influenced by representations to varying extents.” Id., at 3. Additionally, defense attorneys argued that individual issues will predominate as to economic injury, and that the named representatives’ claims are not typical of the claims of the class. Id. The trial court denied the motion for class action certification.

After summarizing the standards governing class action certification of UCL and CLRA claims, see In re Vioxx, at 3-4, and after readily determining that the numerosity and ascertainability requirements for class action treatment had been met, id., at 5, the trial court turned its attention to the question of typicality – that is, “whether a sufficient relationship exists between the injury to the named plaintiff and the conduct affecting the class.” Id., at 5 (citation omitted). The trial court found that the claims of the individual plaintiffs were not typical of the TPPs based on Merck’s evidence that “the decisionmaking that goes into purchasing Vioxx on an individual basis is entirely distinct from the process of putting it into a group formulary.” Id. The trial court found further that plaintiffs failed to meet their burden of providing “substantial evidence” that common questions of law or fact will predominate over individual issues affecting the various class members. Id., at 6. The court did agree with plaintiffs that Merck engaged in a “uniform marketing scheme that was likely to deceive patients and physicians,” id., at 6-7, and that the information available to physicians was susceptible to common proof, id., at 8, but plaintiffs must additionally prove “damage suffered ‘as a result of’ a deceptive practice,” and this element was not subject to common proof, id., at 8-11. As the trial court explained at page 9, “Under all of plaintiffs’ causes of action, a central issue will be whether defendant’s alleged misrepresentations or nondisclosures were material to those who purchased Vioxx.” This means that plaintiffs will have to prove reliance, id., at 10, and the evidence presented in opposition to the motion for class certification demonstrates that class-wide proof of reliance will not exist. Id., at 10-11. And under the circumstances of this case, the necessary proof of reliance cannot be inferred. Id., at 11-12. Nor are the claims of the TPPs subject to common proof, id., at 11.

Continue reading "Merck Class Action Defense Cases–In re Vioxx: California Trial Court Denies Class Action Certification Of Putative Class Action Complaint Against Merck Arising From Sale Of Vioxx" »

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

Class Action Certification Order of Labor Law Class Action must be Reversed because District Court Failed to Conduct “Rigorous Analysis” of Rule 23’s Requirements for Class Action Treatment Eleventh Circuit Holds

Plaintiff filed a putative nationwide class action against his former employer, T-Mobile, after it fired him for poor attendance; the class action complaint alleged labor law violations. Vega v. T-Mobile USA, Inc., ___ F.3d ___, 1260-61 (11th Cir. 2009). Specifically, the class action alleged that “by charging back commissions advanced on sales of ‘deactivated’ prepaid service plans, T-Mobile violated the terms of the compensation program, failed to pay commissions earned by the sales representatives, and was unjustly enriched by retaining the benefit of its employees' services without fully compensating them for such services.” Id., at 1262. T-Mobile’s compensation package for retail sales representatives consisted of an hourly wage plus commissions. Id., at 1261. The commissions were incentive-based, paid on the employee’s “net activations” – if a customer canceled service within 180 days of activation then T-Mobile would “charge-back” the commission previously paid “in order to reclaim that amount from the sales representative.” Id. Under T-Mobile’s plan, commissions paid within the 180-day window are “paid as an advance against commissions anticipated to be earned in the future” and “[c]ommissions are not earned until the expiration of the 180-day commission charge back window.” Id. Additionally, T-Mobile, in its sole discretion, determined whether sales qualified for commission payments, id. The class action complaint was filed in Florida state court, id., at 1262, but defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id., at 1263. Plaintiff moved the district court to certify the litigation as a class action; defense attorneys opposed class action treatment and moved for summary judgment. Id. The district court denied T-Mobile’s summary judgment motion, and granted class action certification on behalf of a Florida class only. Id., at 1263-64. Pursuant to Federal Rule of Civil Procedure 23(f), the Eleventh Circuit granted interlocutory review of the class action certification order and reversed. Id., at 1264.

The class action complaint did not impress the Circuit Court, which it characterized as “incomplete and ambiguous.” Vega, at 1263. The vague complaint “simply alleges: (1) that, because prepaid customers paid up-front for their service, T-Mobile ‘bore no risk of non-payment’; (2) that when T-Mobile charged its employees back for commissions on prepaid plans, ‘even though T-MOBILE received the full benefit of its agreement with the prepaid plan customers, T-MOBILE's commission based employees lost the benefits of those sales and the resulting commissions’; and (3) that ‘T-MOBILE has unfair [sic] and unjustly profited from its internal systems error by unduly charging back its employees on the prepaid plans and retaining its employee's [sic] wages for its own use and benefit.’” Id., at 1262. The class action asserted two claims – one for “unpaid wages” and one for “unjust enrichment” – arising out of the central allegation that “T-Mobile improperly withheld or charged back from its employees.” Id. The class action did not allege that employees nationwide were subject to the same compensation structure, id. The Eleventh Circuit noted that the district court certified the litigation as a class action despite two concerns: first, that a nationwide class “lacked commonality due to variations in the contract and employment laws of the fifty states,” and second, that the class action complaint’s allegations “focused on charge backs of commissions already paid, but indicated nothing about any failure to pay commissions in the first instance, the inclusion in the class of T-Mobile ‘employees ... who ... were entitled to receive[ ] commissions ... who did not receive their commissions’ would implicate claims falling outside the scope of the complaint, as pled, and, thus, failed the typicality requirement.” Id., at 1263-64.

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

Class Action Complaint Alleging Violations of State and Federal RICO laws based on Employer’s Conspiracy to Hire Illegal Workers and Depress Wages of Legal Workers Satisfied Rule 23(a)’s Commonality and Typicality Class Action Requirements, and Requires Further Analysis by District Court as to Whether Rule 23(b)(3)’s Class Action Requirements had been Met Eleventh Circuit Holds

Plaintiffs filed a class action against their employer, Mohawk Industries, alleging labor law violations; specifically, the class action complaint asserted that defendant conspired with various temporary employment agencies to hire illegal aliens and depress wages. Williams v. Mohawk Industries, Inc., ___ F.3d ___ (11th Cir. May 28, 2009) [Slip Opn., at 2-3]. According to the allegations underlying the class action, defendant’s activities violated state and federal racketeering laws, and defendant was “unjustly enriched by its criminal activities,” id., at 3. Defense attorneys moved to dismiss the class action, ultimately resulting in a circuit court opinion that held the class action’s unjust enrichment claims failed but the class actions state and federal racketeering claims survived. Id., at 3-4. Plaintiffs’ lawyers moved to certify the litigation as a class action, id., at 5; the district court denied class action treatment because it found that the commonality and typicality requirements for class action certification had not been met, id., at 7. The district court also denied plaintiffs’ motion because it found that Rule 23(b)’s requirements for class action certification had not been met. See id., at 8-9. Plaintiffs’ appealed and the Eleventh Circuit reversed.

In denying class action certification, the district court found that commonality did not exist because defendant’s operations were “extremely decentralized,” contradicting the idea of “one grand conspiracy to employ illegal workers.” Williams, at 8. Also, plaintiffs claims were not typical because one of them never worked at a facility that used with temporary workers and because each of them “worked at only a handful” of defendant’s locations. Id. As for Rule 23(b)(2), the federal court found that the prayer for monetary relief was not merely incidental to their demand for injunctive relief, id., and that Rule 23(b)(3) had not been met because common issues did not predominate and because a class action was not the superior means of redress, in part because class action treatment would present an “unmanageable number of individual legal and factual issues,” id., at 8-9.

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

Petition under Rule 23(f) for Permission to Appeal Class Action Certification Order Untimely and that Defendant and its Counsel “Would File – and Attempt to Justify – such a Blatantly Untimely Petition” is “Troubling” District of Columbia Circuit Holds

Plaintiff filed a class action against DC Water and Sewer Authority (WA SA) alleging violations of the Civil Rights Act of 1964; the class action complaint asserted that WASA engaged in acts of discrimination in the hiring and promotion of employees. In re DC Water & Sewer Auth., 561 F.3d 494, 495 (D.C. Cir. April 3, 2009). The district court granted plaintiff’s motion to certify the litigation as a class action under Rule 23(b)(2), id. The class action was on behalf of “Black employees at WASA who sought and were denied positions, career ladder promotions, or other advancement, or whose advancement was delayed, or whose compensation was otherwise affected by WASA's alleged unlawful discrimination, from October 1996 through December 2000.” Id. The district court granted plaintiff’s motion to certify the litigation as a class action, and on March 27, 2007 WASA filed a motion for reconsideration of the class action certification order. Id. and n.1. The district court denied WASA’s motion for reconsideration on September 13, 2007, id., at n.1. On April 9, 2008, WASA asked the district court to “clarify” its certification order; on July 24, 2008, the district court “summarily denied” WASA’s motion. Id., at 495. Finally, on August 7, 2008, WASA petitioned the Circuit Court of Appeals for the District of Columbia “pursuant to Federal Rule of Civil Procedure 23(f) for permission to appeal the district court's order certifying a class of WASA employees in an employment discrimination class action.” Id., at 494-95. The Circuit Court denied the petition was untimely.

By way of background, Rule 23(f) provides in part: “A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission to appeal is filed with the circuit clerk within 10 days after the order is entered.” Fed.R.Civ.P. 23(f) (italics added). Various circuit courts have held that the 10-day period for seeking permission to appeal must be strictly construed, though some circuits have held that the 10-day period “resets” once a district court rules on a motion for reconsideration. In re DC Water, at 495-96 (citations omitted). Here, defense attorneys filed their petition almost 17 months after the district court entered its class certification order, and almost a year after the district court summarily denied WASA’s motion for reconsideration: “By any measure, then, the petition was far out of time.” Id., at 496. The Circuit Court easily dismissed WASA’s claim that the April 2008 “motion for clarification” somehow restarted the 10-day deadline in Rule 23(f), finding that defendant’s argument “runs counter to the plain language of Rule 23(f).” Id. Put simply, the district court order denying WASA’s motion for clarification was not “an order granting or denying class-action certification” as required by Rule 23(f), and to hold otherwise would allow any party “to restart [the 10-day clock] at any time simply by filing a pleading styled as a ‘motion to clarify.’” Id., at 496-97 (citations and footnotes omitted). The Circuit Court concluded at page 497, “In its dogged pursuit of an interlocutory appeal – based on the most tenuous (if not untenable) grounds – WASA has both disrupted the class action proceeding in the district court and wasted the resources of the parties and the court. We find it troubling that WASA and its lawyers would file – and attempt to justify – such a blatantly untimely petition.” (Citations omitted.) Accordingly, the Court denied defendant’s petition for permission to appeal the class certification order, id.

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

Class Actions Alleging Violations of California’s Unfair Competition Law (UCL) may be Certified as a Class Action even if Putative Class Members Lack Standing to Prosecute UCL Claims in Their Own Name, but Class Representative Alleging Misrepresentation as Basis of UCL Class Action Claim must Demonstrate Actual Reliance on the Defendant’s Allegedly Deceptive or Misleading Statements California Supreme Court Holds

A class action lawsuit was filed in California state court against various tobacco industry defendants alleging violations of California’s Unfair Competition Law (UCL); specifically, the class action complaint asserted that defendants “conduct[ed] a decades-long campaign of deceptive advertising and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease.” In re Tobacco II Cases, ___ Cal.4th ___, 93 Cal.Rptr.3d 559 (Cal. 2009) [Slip Opn., at 1-2]. The class action complaint was amended numerous times; the trial court granted plaintiffs’ motion to certify the litigation as a class action, filed in connection with the seventh amended class action complaint. Id., at 3. At the time the trial court granted class action status to the lawsuit, under California law an individual had standing to file suit alleging UCL violations even if the individual had not suffered any injury; following class certification, Californians passed Proposition 64, which amended the UCL so as to condition standing to file suit to a “person who has suffered injury in fact and has lost money or property as a result of [such] unfair competition.” Id., at 1-2 (quoting Cal. Bus. & Prof. Code, § 17204). Additionally, prior to Prop 64 UCL representative actions did not have to satisfy the requirements for class action treatment under California Code of Civil Procedure section 382, but Prop 64 explicitly requires such compliance, id., at 13. Based on the standing requirement imposed by Prop 64, the trial court granted defendants’ motion to decertify the class “on the grounds that each class member was now required to show an injury in fact, consisting of lost money or property, as a result of the alleged unfair competition.” Id., at 2. The appellate court affirmed, “agreeing with the trial court that, post Proposition 64, individual issues of exposure to the allegedly deceptive statements and reliance upon them, predominated over class issues.” Id., at 9. But the California Supreme Court – in a 4-3 decision – reversed.

The California Supreme Court’s decision is ground-breaking: it represents the first opinion known to this author that allows an individual to be a member of a class even if that person does not have standing to file suit in his or her own name. The Supreme Court addressed two issues: “First, who in a UCL class action must comply with Proposition 64’s standing requirements, the class representatives or all unnamed class members, in order for the class action to proceed?” In re Tobacco II, at 2. This is the question on which we focus here. “Second, what is the causation requirement for purposes of establishing standing under the UCL, and in particular what is the meaning of the phrase ‘as a result of’ in section 17204?” Id. While we do not discuss this aspect of the Court’s opinion, we note its holding: “We conclude that a class representative proceeding on a claim of misrepresentation as a basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions.” Id.

Continue reading "Prop 64 Class Action Defense Cases–In re Tobacco II: California Supreme Court “Turns Class Action Law Upside Down” And Holds UCL Class Actions May Be Certified Even If Class Members Lack Standing To File Suit In Own Name" »

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

Labor Law Class Action Against 3M Alleging Age Discrimination Warranted Class Action Certification Minnesota State Court Holds

Plaintiff filed a class action against his employer, 3M, alleging labor law violations; the class action complaint asserted that 3M discriminated against employees on the basis of age with respect to leadership development opportunities, promotion decisions, compensation decisions, and job eliminations. Whitaker v. 3M Co., Ramsey County District Court, Second Judicial District, Case No. 62-C4-04-012239 (April 11, 2009) [Slip Opn., at 2-3]. According to the allegations underlying the class action, 3M’s employment practices had a disparate impact on members of the putative class, id., at 3. Plaintiff’s attorneys moved the trial court to certify the litigation as a class action on behalf of “All persons who were 46 or older when employed by 3M in Minnesota in a salaried exempt position below PS grade 180 at any time on or after may 10, 2003, and who did not sign a document on or about their last day of employment purporting to release claims arising out of their employment with 3M.” Id., at 1. The trial court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

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

FACTA Class Action Seeking $4.6 Million to $46 Million in Statutory Damages from Restaurant with Net Worth of $40,000 did not Warrant Class Action Treatment because Class Action not “Superior” Method of Resolving Dispute Florida Federal Court Holds

Plaintiff filed a putative class action in Florida state court against Mama Mia, “a local restaurant in Hollywood, Florida, with approximately $40,000 in net assets”; the class action alleged that defendant violated the Fair and Accurate Credit Transactions Act (FACTA), which requires that merchants truncate credit card and debit card numbers on electronically-printed customer receipts. Leysoto v. Mama Mia I., Inc., 255 F.R.D. 693, 694 (S.D.Fla. 2009). According to the allegations underlying the class action, the receipts defendant provided to customers “displayed both the expiration date and full number of [the customers’] credit card.” Id. (The district court noted that defendant “ceased this practice, and began truncating customer receipts to merely four (4) card numbers, no later than June 26, 2008.” Id.) The class action complaint sought “statutory and actual damages, as well as attorneys' fees and costs,” id. Defense attorneys removed the class action to federal court, id., and plaintiff moved for class certification, arguing a Rule 23(b)(3) class action should be certified, id., at 694-95. Defense attorneys opposed class action certification on the grounds that class action treatment would expose defendant to statutory damages of $4.6 million - $46 million, even though plaintiff concedes he did not suffer any actual economic injury and even though there was no evidence that any member of the putative class suffered actual economic injury. Id., at 695 and n.5. The district court denied plaintiff’s motion.

The district court explained that the class certification motion “turns on two related questions: (1) whether potential class damages are a proper consideration at the motion to certify stage; and, if so; (2) whether the potential class damages in this matter preclude certification under Fed.R.Civ.P. 23(b)(3).” Leysoto, at 694. Of course, plaintiff bears the burden of establishing that class action treatment was warranted, id., at 695 (citations omitted). FACTA provides for recovery of actual damages or statutory damages of “not less than $100 and not more than $1,000.” Id. (citation omitted). This is important because under Eleventh Circuit authority the district court “may consider potential class damages in adjudicating Plaintiff's Motion, and given the vast disparity between the requested statutory damages and the actual injury caused by Defendant, the class vehicle is not the superior method for fairly and efficiently adjudicating this dispute.” Id., at 694.

Continue reading "FACTA Class Action Defense Cases–Leysoto v. Mama Mia: Florida Federal Court Denies Class Action Treatment Of FACTA Class Action Because Potential Liability Vastly Disproportionate To Actual Damages Suffered By Putative Class" »

Posted In: Class Actions In The News, Certification of Class Actions, FCRA Class Actions, Class Action Court Decisions

Nationwide Class Action Complaint Alleging Unjust Enrichment and Violations of New Jersey’s Consumer Fraud Act Claims Warranted Class Action Treatment because Sale by Mercedes of Analog-Based Tele Aid Systems Involved Common Issues that Predominated over Individual Issues and because Balance of Rule 23’s Requirements for Class Action Certification had been Satisfied New Jersey Federal Court Holds

Ten separate class action lawsuits were filed in six different states against Mercedes-Benz and other defendants arising from vehicles equipped with the “Tele Aid” emergency response system; Mercedes-Benz moved the Judicial Panel on Multidistrict Litigation to consolidate the class action complaints for pretrial purposes, pursuant to 28 U.S.C. § 1407. In re Mercedes-Benz Tele Aid Contract Litig., ___ F.Supp.2d ___ (D.N.J. April 27, 2009) [Slip Opn., at 5]. The Judicial Panel granted the motion, and the various class actions were transferred to New Jersey, id., at 5-6. (The district court observed that the amount in controversy exceeds $5,000,000 and that minimal diversity exists; accordingly, the court had jurisdiction under the Class Action Fairness Act (CAFA). Id., at 2.) Once the class actions were centralized, the district court appointed interim class counsel and directed counsel to file a consolidated amended class action complaint, id., at 6. The putative nationwide class action complaint alleged causes of action for common law unjust enrichment and violations of the New Jersey Consumer Fraud Act “premised on the contention that Mercedes made statements or omissions of material facts that it knew or should have known were false or misleading when promoting vehicles purchased by Plaintiffs that were equipped with ‘Tele Aid,’ an emergency response system which links subscribers to road-side assistance operators by using a combination of global positioning and cellular technology.” Id., at 2-3. At bottom, the class action claims are premised on the theory that Mercedes knew “that the analog network on which the Tele Aid systems contained in their vehicles depended would cease to function in 2008, but continued to market Tele Aid without disclosing that fact.” Id., at 6. Plaintiffs’ attorneys moved the district court to certify the litigation as a class action; defense attorneys argued against class action treatment. Id., at 1. The district court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

The district court explained that plaintiffs’ task at the class action certification stage was to demonstrate that the claims in the class action complaint were susceptible to common proof at trial rather than relying on evidence that is individual to the putative class members. In re Mercedes-Benz, at 4. Plaintiffs’ motion for class action treatment was supported in part by three expert reports; the experts supported plaintiffs’ claim that Mercedes failed to adequately inform customers that analog service would terminate at the end of 2007, even though “discontinuation of analog service in early 2008 was a regulatory certainty at the time the FCC finalized its rule on August 8, 2002.” Id., at 3. “Mercedes began including Tele Aid systems in most of its vehicles in 2000,” id., and “touted its ability to provide subscribers with emergency road-side assistance, remotely unlock doors, and track stolen vehicles,” id., at 7. Certain of these vehicles relied solely on analog signals over wireless telephone networks; the company subsequently sold vehicles that were capable of using both analog and digital signals. Id. We do not discuss the facts in greater detail here, see id., at 7-12. The basis of plaintiffs’ class action certification motion was that “this case is particularly well-suited to class treatment because (1) their claims ‘arise from a single course of conduct that affect[ed] large numbers of consumers,’ and (2) the costs to each class member of pursuing his or her suit would exceed any potential recovery.” Id., at 13. Defense attorneys opposed class action treatment because (1) a nationwide class should not be certified as the claims of each named plaintiff are governed by the laws of their respective home states, which differ in material ways, and (2) common questions of fact do not predominate. Id., at 13-14.

Continue reading "Mercedes-Benz Class Action Defense Cases–In re Mercedes-Benz: New Jersey Federal Court Grants Class Action Treatment To Class Action Claims For Unjust Enrichment And Consumer Fraud Based On Analog-Based Tele Aid Sales" »

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

Class Action Complaint Alleging Consumer Fraud/Deceptive Practices Based on Alleged Misrepresentation by McDonald’s as to Whether its Potato Products Contained Certain Allergens did not Warrant Class Action Treatment because Individual Issues Predominate Illinois Federal Court Holds

Plaintiffs filed a nationwide class action against McDonald’s alleging “violations of all of the fifty states’ and the District of Columbia’s consumer fraud and/or deceptive trade practices acts, breach of express warranty, and unjust enrichment”; the class action complaint asserted that plaintiffs suffer from “certain medical conditions” and were deceived by McDonald’s as to the ingredients contained in its french fries and hash browns. In re McDonald’s French Fries Litig., ___ F.Supp.2d ___ (N.D. Ill. May 6, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action, McDonald’s would par-fry (or blanch) its potato products “in an oil made of 99% vegetable oil and 1% natural beef flavor”; the beef flavor, in turn, contained “hydrolyzed wheat bran and hydrolyzed casein (a dairy product).” Id. McDonald’s would advertise its potato products, however, as “gluten, wheat, and dairy-free,” thus making McDonald’s representations (according to the class action) “at best incorrect, if not intentionally misleading” – claims that McDonald’s denied. Id., at 2. (However, McDonald’s later corrected its disclosures about its potato products.) Plaintiffs disclaimed any physical injury from eating the potato products but alleged economic harm in that they would not have purchased products with allergens (i.e., gluten, wheat or dairy) but for McDonald’s misrepresentations. Id. The class action sought to recover the “actual economic harm” suffered by the putative class – “(i.e., the purchase price of the Potato Products) based on the difference in value between the gluten, wheat, dairy, and allergy-free products plaintiffs wanted and the non-conforming products they actually received.” Id., at 2-3. Plaintiffs’ moved the district court to certify the litigation as a nationwide class action; defense attorneys argued against class action treatment. Id., at 3-4. The district court determined that class action treatment was not warranted and therefore denied plaintiffs’ class action certification motion.

Plaintiffs proposed to define the nationwide class to include “All persons residing in the United States…(i) who purchased Potato Products from McDonald’s restaurants on or after February 27, 2002 through February 7, 2006 and (ii) who at the time of purchase had 3 been medically diagnosed with celiac disease, galactosemia, autism and/or wheat, gluten or dairy allergies.” McDonald’s, at 4. After summarizing the Rule 23 requirements governing class action motions and noting the “broad discretion” afforded district courts in deciding whether to grant such motions, see id., at 3-4, the court noted that plaintiffs sought certification of a Rule 23(b)(3) class, which requires (in addition to the four elements set forth in Rule 23(a) of numerosity, commonality, typicality and adequacy of representation) that plaintiffs demonstrate “(1) common issues of law and fact predominate, and (2) a class action is superior to other forms of adjudication,” id., at 4 (citation omitted). But preliminarily, the district court observed that the proposed class is overly broad, as the definition includes people who never saw or heard anything from McDonald’s concerning whether the potato products were allergen free. Id., at 5. This was important given that none of the named plaintiffs suffered any physical reaction from eating McDonald’s potato products despite allergens, id., at 6. As the federal court concluded at pages 6 and 7, “It is fairly assumable…that many persons in the class as defined by plaintiffs have gone on eating defendant’s Potato Products since defendant corrected its disclosure. By any definition, these people have suffered no injury, not even the economic one claimed in this lawsuit.”

Continue reading "McDonald’s Class Action Defense Cases–In re McDonald’s French Fries: Illinois Federal Court Denies Class Action Treatment Of Consumer Fraud Class Action Complaint Because Individual Issues Predominate Over Common Issues" »

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

Motions by Plaintiffs in Class Actions Asserting Labor Law Violations Denied because Class Action Device not “Superior” means of Resolving Employees’ Claims given Bankruptcy Proceeding and because Lifting Stay to Allow Class Action Litigation to Proceed would Waste Defendants’ Resources and Distract from Reorganization Efforts New York Bankruptcy Court Holds

Certain putative class action lawsuits were filed against Bally Total Fitness, which subsequently filed a petition for bankruptcy protection. In re Bally Total Fitness of Greater New York, Inc., 402 B.R. 616, 2009 WL 931537, *1 (S.D.N.Y. 2009). Plaintiffs in one of the class action lawsuits, the “Carrera” plaintiffs, “brought…a class action on behalf of thousands of employees” and alleged that Bally made employees work off-the-clock, failed to provide meal and rest periods, failed to provide timely itemized wage statements or final paychecks, and failed to reimburse business expenses. Id. Plaintiffs in another class action lawsuit, the “Flores” plaintiffs, “brought…a class action on behalf of Bally employees…for unpaid wages, failure to provide meal and rest periods mandated by California law and failure to reimburse business expenses.” Id., at *2. The Flores class action was originally filed in California state court, but defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act of 2005), id. Bally’s employees had entered into a written agreement with the company, the “Bally Total Fitness Corporation Employment Dispute Resolution Procedure” (EDRP), which required that employment-related claims be submitted to arbitration and which contained a class action waiver provision such that employment claims were required to be arbitrated individually. Id. In Carrera, Bally lost a motion to compel arbitration of the individual claims, and appellate proceedings were stayed due to the bankruptcy filing; in Flores, Bally’s motion to compel arbitration of individual claims was pending when the company filed bankruptcy, so a decision on that motion was stayed. Id. Plaintiffs in the Carrera class action moved the bankruptcy court to (1) permit them to file a “class proof of claim,” and (2) lifting the automatic stay so the class action could proceed in state court in order to “liquidate” the claims or, alternatively, certifying the litigation as a class action. Id., at *1. Plaintiffs in the Flores class action moved the bankruptcy court to certify the litigation as a class action. Id. The bankruptcy court denied each motion.

With respect to the Carrera plaintiffs’ request for leave to file a class proof of claim, the bankruptcy court noted that there is “no absolute right to file a class proof of claim under the Bankruptcy Code.” In re Bally, at *2 (citations omitted). Rather, in deciding whether to permit the filing of a class proof of claim, bankruptcy courts consider “a) whether the class claimant moved to extend the application of Rule 23 to its proof of claim; b) whether ‘the benefits derived from the use of the class claim device are consistent with the goals of bankruptcy’; and c) whether the claims which the proponent seeks to certify fulfill the requirements of Rule 23.” Id. (citation omitted). The bankruptcy court denied the motion because plaintiffs “failed to demonstrate that the requested relief would both be consistent with the goals of bankruptcy and satisfy the Rule 23 requirements.” Id. In this regard, the Court explained that class proofs of claim are consistent with the goals of bankruptcy “in two principal situations: (i) where a class has been certified pre-petition by a non-bankruptcy court; and (ii) where there has been no actual or constructive notice to the class members of the bankruptcy case and Bar Date.” Id., at *3. As neither situation applied to either the Carrera or Flores class action complaints, the Court denied the motion to permit the filing of a class proof of claim. Id.

Continue reading "Bankruptcy Class Action Defense Cases–in re Bally Total Fitness: New York Bankruptcy Court Denies Motions By Class Action Plaintiffs To Permit Class Proof Of Claim, To Certify Class Actions Or To Lift Stay" »

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

Class Action Bar in Franchise Agreement Precluded Class Action Certification of Lawsuit by Franchisees Against Quiznos because Class Action Bar was not Unconscionable under Colorado Law Federal Court Holds

Plaintiffs filed a class action against various Quiznos entities and others (collectively “Quiznos”) alleging defendants misled prospective franchisees; the class action complaint asserted that it was only after plaintiffs signed 30-page franchise agreements that defendants revealed the restaurant locations were “not as profitable as Quiznos had promised.” Bonanno v. The Quizno’s Franchising Co., LLC, ___ F.R.D. ___ (D.Colo. April 20, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, Quiznos also failed to provide plaintiffs with “any of the promised expert help,” but nonetheless demanded that they open restaurants within the one-year deadline set forth in the franchise agreements or the agreement would be terminated and Quiznos would keep the franchise fee. Id., at 2. The class action centered, then, on claims on behalf of “sold but not opened franchisees,” id. (Defendants conceded that “not every signed franchise agreement results in a functioning restaurant,” id., at 4.) Plaintiffs moved the district court to certify the litigation as a class action, id., at 3. Defendants opposed class action treatment, primarily on the ground that Section 21.4 of the franchise agreement prohibits class action lawsuits between the franchisor and the franchisee. Id., at 3. The district court held that class action waiver was enforceable and, accordingly, that class action certification was not warranted. The federal court therefore denied the motion. (We do not discuss in detail the 53-page opinion filed by the district court; it is well worth reading and it is available at the link following this article. For our purposes, the important issue is the enforceability of the class action waiver in the franchise agreement.)

Plaintiffs argued that “[t]he most significant issue…is whether, in light of the provision of the franchise agreements that purports to bar class actions, this case can be maintained as a class action in the first instance.” Bonanno, at 3. The district court held a hearing on the validity of the class action bar, and accepted supplemental briefing on the issue. Id., at 3-4. The district court’s order contains a lengthy discussion of the facts that “help elucidate the Court’s decision to enforce the class action bar.” Id., at 4. We do not summarize those facts here, see id., at 4-17, or the federal court’s summary of the standard of review, see id., at 17-19, or the court’s summary of the “history and evolution of class action litigation,” see id., at 20-25, because the district court held that the class action bar was enforceable and therefore did not address the merits of Rule 23, id., at 19.

Continue reading "Quiznos Class Action Defense Cases–Harlow v. Sprint: Colorado Federal Denies Grants Class Action Treatment Of Class Action Complaint By Prospective Franchisees Against Quiznos Because Of Class Action Bar In Agreement" »

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

Products Liability Class Action Properly Certified as Class Action with Respect to Breach of Warranty Claim and Appellate Court Erred in Reversing Class Action Certification Order Oklahoma Supreme Court Holds

Plaintiffs filed a class action against Ford Motor and Williams Control for product liability; the class action complaint asserted claims based on “design and/or manufacturing defects in the fixed, non-adjustable accelerator pedal, i.e., the ‘electronic throttle control’, or ‘ETC’, which is designed and manufactured by Williams and installed in certain trucks manufactured by Ford.” Cuesta v. Ford Motor Co., ___ P.3d ___, 2009 OK 24, ¶ 2 (Okla. April 21, 2009) (footnotes omitted). According to the allegations underlying the class action, “the pedals, which were modified twice, failed Ford's ‘overload’ tests and engineering specifications.” Id. Specifically, “when forcible pressure is applied to the pedals that they cause the vehicles to shift to idle instead of accelerating and, therefore, are defective and unreasonably dangerous.” Id. The class action complaint alleged causes of action for breach of express and implied warranties, negligence and strict products liability. Plaintiffs filed a motion with the trial court to certify the litigation as a class action; the trial court granted the motion, agreeing with plaintiffs that the following questions of law and fact are common: “(1) whether the accelerator pedals at issue are defective; (2) whether the pedals are unreasonably dangerous; (3) whether the pedals reduce the value of the vehicles; and (4) whether the sale of the vehicles containing these pedals to members of the class constitutes a breach of any express or implied warranty by Defendants Ford and WCI?” Id. The Oklahoma Court of Civil Appeals reversed the class action certification order, id., at ¶ 1. The Oklahoma Supreme Court granted plaintiffs’ petition for writ of certiorari and vacated the appellate court’s opinion, holding that the trial court did not abuse its discretion in granting class action treatment.

The Oklahoma Supreme Court began by noting that it was determining “only whether class certification is appropriate to determine a breach of warranty theory under the facts presented.” Cuesta, at ¶ 2. The Court noted also that “[a] trial court's order certifying a class action is reviewed for an abuse of discretion.” Id., at ¶ 7 (citation omitted). It began its legal analysis by discussing the applicable choice of law, see id., at ¶¶ 8 et seq. We do not summarize the Oklahoma Supreme Court’s analysis of this issue, noting simply that the Court concluded that the law of Michigan governed the class action’s breach of warranty claims, id., at ¶¶ 15-16.

Continue reading "Ford Class Action Defense Cases–Cuesta v. Ford Motor: Oklahoma Supreme Court Reinstates Class Action Certification Order Holding Trial Court Did Not Abuse Discretion In Certifying Class Action" »

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

Class Action Complaint Alleging Violations of FLSA (Fair Labor Standards Act) based on Misclassification of Store Managers and Consequent Failure to Pay Overtime Satisfied First-Tier’s “Lenient Standard” for Conditional Class Action Certification Florida Federal Court Holds

Plaintiff filed a class action against Starbucks alleging violations of the federal Fair Labor Standards Act (FLSA); the class action complaint asserted that Starbucks misclassified him (and other store managers) as exempt and failed to pay him overtime. Reed v. Starbucks Coffee Co., ___ F.R.D. ___ (S.D.Fla. April 23, 2009) [Slip Opn., at 1]. According to plaintiff, a similar class action was filed over this issue in 2004 entitled Pendlebury v. Starbucks, which was settled in August 2008. Id., at 1-2. The present class action seeks overtime pay for store managers who worked for Starbucks on or after January 15, 2006, id., at 2. Plaintiff filed a motion with the district court for conditional certification of the litigation as a class action, id., at 1, and provided notices from five other individuals who consented to joining in the action since the class action complaint had been filed, id., at 2. The district court determined that conditional class action treatment was warranted and therefore granted plaintiffs’ conditional class action certification motion.

The district court explained that the Eleventh Circuit “has endorsed a two-tiered approach to certification of collective actions” under the FLSA. Reed, at 3 (citation omitted). The first stage employs “a fairly lenient standard” that requires the district court to determine whether the lawsuit is “suitable” for class action treatment. Id. This requires “some evidence that there are other employees of the defendant-employer who wish to opt-in the action.” Id. (citation omitted). The federal court found persuasive not only the five notices of consent to join filed in the present case, but “the fact that a previous suit resulted in 900 opt-in plaintiffs.” Id. The first stage requires also a showing that the members of the proposed class are “similarly situated,” id. In this regard, the district court found adequate plaintiff’s allegation “that there is a company-wide pay policy that results in all store managers being improperly classified as exempt and thus denied overtime compensation.” Id., at 4. The federal court therefore found that plaintiff had adequately established a basis for granting conditional class action certification to the lawsuit, id., at 4-5. Accordingly, the district court granted plaintiff’s motion and authorized the sending of notification to potential class members, id., at 5.

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

As a Matter of First Impression, Credit Card Debtor’s Class Action Cross-Complaint Alleging Violations of California’s Fair Debt Collection Practices Act (Rosenthal Act) Properly Dismissed on Demurrer for Failure to Define an Ascertainable Class and because Debt Collector was not Obligated to Disclose to Debtors that Debts Sought to be Collected were Time-Barred California State Court Holds

Plaintiff Asset Acceptance filed a lawsuit against debtor Lilia Hanson to collect on a $1300 credit card debt; the debtor filed a putative class action cross-complaint against Asset alleging that it violated California’s Fair Debt Collection Practices Act (“the Rosenthal Act”), which incorporates the federal Fair Debt Collection Practices Act (FDCPA), and Unfair Competition Law (UCL). Asset Acceptance, LLC v. Hanson, (Cal.App., Case No. B208548, April 1, 2009) (unpublished) [Slip Opn., at 1]. The class action claims were premised on the allegation that Asset systematically and fraudulently sought to collect on debts that were time-barred. Id. The central allegation underlying the class action cross-complaint is that Asset purchased credit card debts “for pennies on the dollar and tricks debtors into making payments, which has the legal effect of reviving the debt.” This is because, under California law, “If a debtor acknowledges a debt in writing after the statute of limitations has run, ‘a new obligation is created, for which the original barred debt is said to be “consideration.” The cause of action is on the new obligation, and a new statutory period starts running as on any other written promise.’” Id., at 2 (citations omitted). Asset demurred to the third amended class action cross-complaint; the trial court sustained the demurrer on the ground that the class action sought to represent a class that lacked a “well-defined community of interest.” Id., at 1. In an unpublished opinion, the California Court of Appeal affirmed.

The Rosenthal Act “prohibits debt collectors from using threats, physical force, obscene language, annoying telephone calls, false representations, or falsely simulating a legal action.” Asset Acceptance, at 2 (citations omitted). In part, the statute prohibits a debt collector from obtaining “an affirmation from a debtor who has been adjudicated a bankrupt of a consumer debt which has been discharged in such bankruptcy, without clearly and conspicuously disclosing to the debtor, in writing, at the time such affirmation is sought, the fact that the debtor is not legally obligated to make such affirmation,” id. (citation omitted). The appellate court observed, however, that “The Rosenthal Act is silent on whether a debt collector must give a similar warning when attempting to collect a time-barred debt that has not been discharged in bankruptcy.” Id. This was the central issue on appeal, because the class action alleged that Asset failed to disclose to the putative class members that the debts it was seeking to collect were time barred when it contacted them demanding about payment on the credit card debts. Id., at 3. Further, not only was this a matter of first impression under California case law, but federal courts considering the issue under the FDCPA have reached different conclusions. Id., at 2-3.

Continue reading "FDCPA Class Action Defense Cases–Asset Acceptance v. Hanson: California State Court Affirms Dismissal Of FDCPA Class Action Claims Holding Debt Collector Not Obligated To Inform Debtors That Debts Were Time-Barred" »

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

As Matter of First Impression, Class Action Complaint Against Insurance Company Alleging Breach of Contract for Paying Discounted PPO Rate to Medical Providers Without a PPO Contract with Insurer did not Warrant Class Action Treatment because Class Action Failed as a Matter of Law as Medical Providers are not Third Party Beneficiaries of Workers’ Compensation Policies and no Exception Applied Illinois State Appellate Court Holds

Plaintiff, a chiropractor, filed a class action in Illinois state court against Grinnell Mutual Reinsurance Company alleging violation of the Illinois Consumer Fraud Act, conspiracy, unjust enrichment and breach of contract; the class action complaint arose out of defendant’s decision to pay plaintiff a discounted amount for his treatment of a patient. Martis v. Grinnell Mut. Reins. Co., ___ N.E.2d ___ (Ill.App. March 27, 2009) [Slip Opn., at 1-2]. The class action sought to represent “a class of Illinois health care providers who submitted bills to defendant under workers’ compensation insurance and had bills reduced because of a PPO discount even though the providers did not have a PPO contract with defendant.” Id., at 2. The class action complaint originally contained seven causes of action, but the trial court granted defendant’s motion to dismiss all claims except the breach of contract claim, id., at 2-3. Plaintiff’s moved the trial court to certify the litigation as a class action, and the court granted plaintiff’s motion. Id., at 3. Defense attorneys sought and received leave to appeal the class action certification order, id., at 3-4. The appellate court reversed, concluding that plaintiff could not state a claim for breach of contract.

Defense attorneys argued that the trial court erred in certifying the litigation as a class action because “plaintiff’s class action [is] based on his breach of contract claim … [but] plaintiff is not an intended third-party beneficiary of the workers’ compensation policy.” Martis, at 4. The Court of Appeal noted that the legal effect of a contract is a question of law, id., and then discussed at length Illinois law governing enforcement of contracts by third parties, see id., at 4-6. The appellate court explained at page 6, “The issue we must decide in this case, whether a medical provider is a third-party beneficiary of a workers’ compensation policy, is one of first impression in this state.” The Court therefore examined the law of sister jurisdictions, see id., at 6-9, and summarized those cases as holding that “medical providers are generally not third party beneficiaries of insurance policies, particularly workers’ compensation policies,” id., at 9. The issue became, then, whether an exception to this general rule applied.

Continue reading "Class Action Defense Cases–Martis v. Grinnell Mutual: Illinois State Court Reverses Class Action Certification And Orders Class Action Complaint Dismissed Because Medical Provider Not Third Party Beneficiary Of Insurance Policy" »

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

Class Action Complaint Challenging Defendant’s Calculation of Royalty Payments based on Inter-Company Sale of Gas to Wholly-Owned Subsidiary Warranted Class Action Treatment Oklahoma Federal Court Holds

Plaintiffs, royalty owners, filed a class action in state court against XTO Energy seeking an accounting of gas produced by certain wells in Texas County, Oklahoma; the class action complaint requested “the legal right to receive a royalty calculated by [XTO]…regarding production from a well in Colorado, Kansas, New Mexico, Oklahoma or Texas.” Beer v. XTO Energy, Inc., ___ F.Supp.2d ___ (W.D. Okla. March 20, 2009) [Slip Opn., at 1]. According to the class action, defendant systematically underpaid royalty owners, id., at 2. After defense attorneys learned that plaintiffs were seeking more than $27 million in damages, they removed the class action to federal court. Id. Plaintiffs moved the district court to certify the litigation as a class action, id. The class action certification motion defined two subclasses: a Kansas subclass consisting of individuals “who receive royalties from at least one well located in Kansas,” and an Oklahoma subclass consisting of individuals “who receive royalties from at least one well located in Oklahoma.” Id., at 2-3. Defendant operates the wells at issue in the class action, and “sells the gas produced from the individual wells to its wholly-owned subsidiary, Timberland Gathering and Processing,” id., at 3. Defense attorneys opposed class action treatment. The district court determined that class action certification was warranted and granted plaintiffs’ motion.

The district court explained that whether class action treatment is warranted “is an intensely fact-based question that is fraught with practical considerations.” XTO Energy, at 4 (citation omitted). After summarizing the well settled rules governing class action certification under Rule 23, see id., at 4-6, the court stated that it was originally concerned with whether plaintiffs were adequate class representatives, id., at 6. Plaintiffs responded by filing supplemental materials, and the district court turned to the merits of the motion, id. The numerosity prong was not at issue, as defendant conceded that plaintiffs could establish it. Id., at 7. The commonality test also was satisfied because defendant’s own employees conceded that differences in lease language did not affect the royalty payments, id., at 9; the federal court therefore agreed that a common question existed as to whether defendant was permitted to base its royalty payments on an inter-company sale, id., at 8-9. And the typicality test was met because plaintiffs had standing to assert claims on behalf of the class; “defendant’s officers and its expert witness conceded that all royalty owners, regardless of well location, are treated identically by defendant for purposes of royalty payments.” Id., at 10. And finally, the court found that plaintiffs and their counsel would adequately represent the interests of the class, id., at 11-12.

Continue reading "Class Action Defense Cases–Beer v. XTO Energy: Oklahoma Federal Court Grants Class Action Treatment To Class Action Against Defendant Improperly Calculated Royalty Payments" »

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

Securities Fraud Class Action Survives Motion to Dismiss because Class Action Complaint Adequately Alleged that Defendants Failed to Timely Discover and/or Disclose Material Adverse Information New York Federal Court Holds

Plaintiffs filed a class action against Arotech Corporation, a defense contractor, and three of its officers alleging violations of federal securities laws; the class action complaint violations Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and seeking to hold the individual defendants liable as “control persons” under Section 20(a) of the Act. Akerman v. Arotech Corp., ___ F.Supp.2d ___ (E.D.N.Y. March 30, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action, defendants made materially false statements and withheld materials facts concerning Arotech’s financial condition, id. The class action centered on Arotech’s acquisition of Armour of America (AofA) in August 2004 for $19 million in cash “with additional possible earn-outs if AofA is awarded certain material contracts” up to a maximum of $40 million. Id., at 2-3. Arotech’s total revenue in 2003 was only $17.3 million, but its revenue in 2004 increased to $50.4 million, id., at 3-4. Defense attorneys moved to dismiss the class action complaint “principally on the grounds of materiality, scienter and particularity” as required by the Private Securities Litigation Reform Act (PSLRA). Id., at 1. The district court concluded that the class action complaint adequately alleged securities fraud.

The class action complaint cited various confidential witnesses who alleged that “Arotech’s pre-acquisition due diligence did not reveal all material information about AofA before the acquisition.” Akerman, at 4. In particular, the confidential witnesses cited the federal government’s cancellation of a substantial helicopter contract with AofA based on a “termination for default” (T4D), that is, the government’s belief that AofA had overstated the armor weight of the helicopters. Id., at 4-5. The T4D, together with stigma accompanying the T4D, created a “domino effect” at AofA that seriously impacted sales, id., at 5. The class action alleged that defendants had access to this information, despite the fact that AofA did not disclose it, id., at 5-6. Additionally details may be found in the district court opinion at pages 6 through 11.

Continue reading "PSLRA Class Action Defense Cases–Akerman v. Arotech: New York Federal Court Denies Motion To Dismiss Securities Fraud Class Action Finding Class Action Complaint Adequately Alleged Materiality, Scienter And Particularity" »

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

Labor Law Class Actions did not Warrant Class Action Treatment because Hiring Process Involved too many Individual Questions to Meet Requirements for Class Action Certification under Rule 23 Michigan Federal Court Holds

Plaintiffs filed two separate class actions against Cintas Corporation, a company that provides uniforms and other supplies to various businesses across the United States, alleging labor law violations; the class action complaints asserted that Cintas discriminated against employees in violation of Title VII of the Civil Rights Act. Serrano v. Cintas Corp., ___ F.Supp.2d ___ (E.D. Mich. March 31, 2009) [Slip Opn., at 1-2]. According to the allegations underlying one class action (Serrano), Cintas discriminated against Michigan employees who applied for position of Service Sales Representative (SSR) on the basis of gender; according to the other class action (Avalos), Cintas discriminated against employees nationwide on the basis of race. Id., at 2. The two class actions were consolidated for pretrial purposes, id., at 1. Plaintiffs in the companion cases filed motions with the district court to certify each lawsuit as a class action. Id. The district court determined that class action treatment was not warranted in either lawsuit and therefore denied both plaintiffs’ class action certification motions.

Cintas SSRs perform a wide range of duties, and are used by the company as entry-level sales and customer service representatives. Serrano, at 2. Each SSR reports to a Service Manager, who in turn reports to a General Manager; and in addition to a “common corporate structure,” Cintas also “uses common orientation manuals and policy statements throughout its facilities” and “has standard courses and training sessions for managers and SSRs.” Id. Importantly, the class action complaints allege further that Cintas “has a standard system for hiring SSRs.” Id. The district court summarized the hiring process as including “an initial screening of the application, a series of interviews, a route ride with another SSR, standardized tests, an exchange of information among hiring managers, and a final hiring decision made by the General Manager of the Cintas facility.” Id., at 2-3. Finally, the federal court explained that “[t]he hiring process has both objective and subjective components,” and that some criteria are required while others are preferred. Id., at 3.

Continue reading "Cintas Class Action Defense Cases–Serrano v. Cintas: Michigan Federal Court Denies Class Action Treatment Of Labor Law Class Action Against Cintas Holding Commonality, Typicality And Adequacy Of Representation Elements Not Met" »

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

Class Action Certification not Warranted where Putative Class Action Complaint Prayed for Medical Monitoring of Individuals who had “Disavowed” any Present Injury and where Proposed Definition of Property Owner Class was not Administratively Feasible Oklahoma Federal Court Holds

Plaintiffs filed a putative class action against various defendants, including Asarco Incorporated and Gold Fields Mining, alleging nuisance and praying for medical monitoring of individuals covered by the class action; the class action complaint asserted that defendants mined lead and zinc along a 40-square mile stretch of Tar Creek in Oklahoma, and that the byproducts caused by that mining activity “caused air, surface and ground water and soil contamination of [plaintiffs’] property, exposing residents to unsafe levels of lead, heavy metals and other toxins.” Cole v. Asarco Inc., ___ F.Supp.2d ___ (N.D. Okla. April 2, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, these contaminants present “a risk of neurological damage, including cognitive and verbal function deficits, decreased educational performance, learning difficulties, aggression, anti-social behavior and attention deficits,” and that young children, under age 6, are particularly at risk. Id., at 2. Plaintiffs filed a motion to have the litigation certified as a class action, id., at 3. Asarco filed for bankruptcy protection, and plaintiffs dismissed Asarco with prejudice, id., at 3-4. The remaining defendants opposed class action treatment, and the district court agreed with defense attorneys that class action certification was not warranted.

After summarizing the well settled rules governing class action certification under Rule 23, see Cole, at 5-7, the district court began its analysis with plaintiffs’ medical monitoring class, which was “based on Oklahoma’s common law of nuisance,” id., at 7. While neither the parties nor the court could find any state law authority on the issue of medical monitoring, the federal court observed that “Oklahoma law requires plaintiffs to demonstrate an existing disease or physical injury before they can recover the costs of future medical treatment that is deemed medically necessary,” and in this case the named plaintiffs specifically “disavowed any injury.” Id., at 8. Further, Tenth Circuit authority “casts doubt” on the medical monitoring as a permissible remedy, id. (citations omitted). Accordingly, the district court denied class action certification of the medical monitoring class. Id., at 9. And with respect to the proposed “property owner” class, the district court concluded that “identification of members would not be administratively feasible.” Id., at 9. Specifically, the court found that “the proposed class is untenable with respect to [the proposed class definition] of persons who ‘owned or had an interest in real property.’” Id., at 10-11. Because class action certification requires that there be a “cognizable class,” the federal court found that Rule 23’s prerequisites for class action treatment had not been met. Id., at 11. Accordingly, the court denied plaintiffs’ motion for class certification. Id., at 15.

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

Class Action Alleging FDCPA Violations Arising from Collection Practices Utilized to Collect from Check Writers of Bounced Checks Satisfied Rule 23 Requirements for Class Action Treatment California Federal Court Holds

Plaintiffs filed a putative class action against various defendants, including American Corrective Counseling Services (ACCS), alleging that they “engaged in a pattern of behavior in implementing the District Attorney Bad Check Diversion Program” that violated, inter alia, the California Constitution and the federal Fair Debt Collection Practices Act (FDCPA); specifically, the class action complaint alleged that defendants “operated the Diversion Program unlawfully by using the names of local district attorneys, demanding fees, and using the threat of criminal prosecution to force bad check writers to comply with their payment demands.” Del Campo v. American Corrective Counseling Services, Inc., ___ F.Supp.2d ___ (N.D. Cal. December 3, 2008) [Slip Opn., at 1 (footnote omitted)]. According to the allegations underlying the class action, various retail merchants would refer bounced checks to the District Attorney, who in turn would decide whether to refer the check writer to the diversion program. If it is referred, then defendants “instruct the merchants not to communicate” with the check writers and send out letters “purporting to be from the Santa Clara District Attorney’s Bad Check Restitution Program or the Sonoma County District Attorney Bad Check Restitution Program” and explaining that they can “avoid criminal prosecution for allegedly violating California Penal Code 476(a) by enrolling in the optional Bad Check Programs, without any admissions of guilt.” Id., at 2-3. The letter would instruct the bad check writers to make new checks out to the Bad Check Program, and included in the total to be paid the amount of the bounced check, a $35 administration fee, and a diversion program fee. Id., at 3. Many check writers tendered less than the total amount listed in the letter, and never intended on participating in the Bad Checks Program and did not participate in the program, id. Defendants sent subsequent letters demanding payment of the balance of the sums owed. The class action followed, alleging inter alia violations of the FDCPA and California’s Unfair Business Practices Act. Id. Plaintiffs’ attorneys moved the district court to certify the litigation as a class action; defense attorneys argued against class action treatment. Id., at 2. The district court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

With respect to Rule 23(a)’s requirements for class certification, the district court noted that defendants did not contest numerosity or commonality, but argued that plaintiffs’ claims were not typical and that they were not adequate representatives of the class. Del Campo, at 6. The federal court agreed that the numerosity and commonality tests had been met, see id., at 7-9. Turning to the typicality test, the court noted at page 9, “Defendants contend that Plaintiffs have not met the typicality requirement because the collection letters sent by Defendants contained ‘significant differences’ on a county-by-county basis.” Plaintiffs countered that the class action allegations assert that each of the letters “contain representations that: (1) the letter is from the local District Attorney, who has reviewed a criminal complaint made by the recipient of a dishonored check; (2) check writers who do not choose ‘diversion’ face a real risk of prosecution; and (3) to avoid prosecution, the check writer must pay the check, plus enumerated fees, and attend a ‘Financial Accountability’ Class.””Id., at 9. The district court agreed with plaintiffs, and found that the typicality test had been met, id., at 10. Defendants also argued that the named plaintiffs were not adequate representatives of the class and that plaintiffs’ counsel had a conflict of interest in representing the class. Id., at 10. The basis for the attack on the plaintiffs was their dishonesty, as evidenced by the fact that they bounced checks; the district court readily concluded that an element of being in the class could not disqualify someone from serving as the class representative. Id., at 11. And the court rejected the idea that the lobbying efforts of plaintiffs’ counsel created a conflict of interest in representing the class. Id., at 12.

Continue reading "FDCPA Class Action Defense Cases–Del Campo v. American Corrective Counseling: California Federal Court Certifies FDCPA Class Action Finding Attack On Practices Used To Collect On Bounced Checks Warranted Class Action Treatment" »

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

Class Action Complaint Alleging Violations of Federal Truth in Lending Act (TILA) did not Warrant Class Action Treatment because Plaintiff Lacked Standing to Prosecute TILA Claim, Plaintiff was an Inadequate Representative because he could not Establish Traceability, and Plaintiff’s Claims were not Typical of the Putative Class Claims California Federal Court Holds

Plaintiff filed a putative class action against Paul Financial concerning option adjustable rate mortgages (Option ARMs); specifically, the class action complaint alleged that Option ARMs are “deceptively devised” in that they “promise that the loan [will] have a low, fixed interest rate” when in fact the loan carries a much higher interest rate. The class action alleged further that defendant “disguised” the fact that the Option ARM “was designed to cause negative amortization.” Jordan v. Paul Financial, LLC, ___ F.Supp.2d ___ (N.D. Cal. January 27, 2009) [Slip Opn., at 1-2]. The class action alleged, inter alia, violations of the federal Truth in Lending Act (TILA) and California’s Unfair Competition Law (UCL), id., at 2, and amendments to the class action complaint added HSBC and Luminent Capital Mortgage as defendants, id., at 1. Plaintiff sought to represent two classes of borrowers who received Option ARM loans secured by their primary residences: (1) a nationwide class, and (2) a California statewide class, id., at 1-2. Plaintiff’s attorney moved the district court to certify the litigation as a class action; defense attorneys argued against class action treatment. Id., at 1. The district court determined that class action treatment was not warranted and therefore denied plaintiff’s class action certification motion.

Paul Financial originated residential loans, and while it also serviced loans, Paul Financial sold 75% of its loans to third party investors and sold the servicing rights to other investors. Jordan, at 2. Defendant “sold the loans to about ten investors,” but does not have records of subsequent sales by those investors, id., at 2-3. Plaintiff’s loan, for example, was sold to defendant Luminent, and then pooled with other Option ARM loans into a mortgage-backed security pool; defendant HSBC was the trustee of the pool. Id., at 3. Defendant sold the servicing rights for plaintiff’s loan to yet another investor, Greenwich Capital, id. By December 2008, Paul Financial had less than $1000 and planned to cease operations on December 31, 2008. Id., at 2. After discussing the general rules regarding class action certification under Rule 23, see id., at 3-4, the district court turned to whether plaintiff had standing to represent the TILA class or the California class.

Continue reading "TILA Class Action Defense Cases–Jordan v. Paul Financial: California Federal Court Denies Class Action Treatment To TILA Law Class Action Holding Plaintiff Lacks Standing And His Claims Lack Typicality" »

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

Defense Motion for Summary Judgment Granted as to Class Action’s Express Warranty Claim and Granted as to Other Class Action’s Claims as to Individuals who did not Benefit from Off Label Use of Prescription Drug, and Defense Established Grounds to Decertify Class Action because Individual Questions Predominate Pennsylvania State Trial Court Holds

Plaintiffs filed a class action against Pfizer and Warner-Lambert alleging that their drug, Neurontin, approved by the FDA for epilepsy and for neuralgia, was sold by prescription for “off label” purposes “not approved by the FDA.” Clark v. Pfizer, Inc., Philadelphia Common Pleas Case No. 1819 (February 9, 2009) [Slip Opn., at 1]. The trial court noted that doctors were free to prescribe Neurontin “for any condition that they believe to be appropriate even if not FDA approved,” explaining that this practice “is known as off-label prescribing and although permissible in the medical profession, federal law prohibits a drug manufacturer from promoting off-label uses of an approved medication.” Id. According to the class action, defendants “deliberately and unlawfully promoted Neurontin to physicians for ‘off-label uses’ for which effectiveness had not been scientifically demonstrated.” Id., at 2. Defendants were charged criminally in federal court; they pleaded guilty to two specific violations of off-label marketing, and paid a $240 million fine. Id. The class action asserted claims for misrepresentation, negligence and breach of warranty, and sought reimbursement of all drug costs paid by individuals as opposed to insurers, id., at 1. The trial court certified the lawsuit as a class action; defense attorneys moved to decertify the class action and for summary judgment. Id.

Defendants’ motion stressed that certain physician’s prescribed Neurontin for off-label purposes because they believed it would help – and believed it did help – their patients, not because of defendants’ marketing efforts. Clark, at 2-4. The trial court easily concluded that the class action’s express warranty claim failed because “there is no evidence that plaintiffs saw, heard or in any way received any warranties that Neurontin could be used in circumstances not approved by the FDA.” Id., at 4. Further, “[t]he alleged fraud on the medical profession which is the essence of plaintiffs’ claims does not create any warranty.” Id. Accordingly, the trial court granted summary judgment as to the class action’s express warranty claim, id. As to the misrepresentation and negligence claims, the class action alleged that “through defendants’ concerted activities they incorrectly convinced that entire medical community of the effectiveness of off label uses.” Id. However the evidence presented demonstrated that “some of the class members have suffered no injury” because they “received a medical benefit” from the off-label use of Neurontin, id. The court therefore granted summary judgment “as to those class members who benefited from prescribed off label uses of Neurontin,” but denied the motion as to class members who received no benefit from off label uses. Id., at 4-5.

Continue reading "Pfizer Class Action Defense Cases–Clark v. Pfizer: Pennsylvania State Trial Court Grants Summary Judgment As To Certain Class Action Claims And Decertifies Litigation As Class Action" »

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

Though District Court Initially Granted Class Action Treatment in Class Action Challenging Microsoft’s Marketing of “Vista Capable” PCs, Motion to Decertify Class Action Granted because Plaintiffs could not Establish Causation Element on a Class-Wide Basis Washington Federal Court Holds

Plaintiffs filed a putative nationwide class action against Microsoft alleging inter alia violations of Washington’s Consumer Protection Act or similar state consumer protection statutes and for unjust enrichment; the class action complaint “challenge[d] various aspects of Microsoft’s marketing of its Windows Vista…operating system.” Kelley v. Microsoft Corp., ___ F.Supp.2d ___ (W.D. Wash. February 18, 2009) [Slip Opn., at 2-3]. According to the allegations underlying the class action, nearly a year before releasing Vista, Microsoft authorized PC manufacturers to place stickers on their computers indicating that they were “Windows Vista Capable”; the class action complained that “a large number” of these computers were in fact capable of operating only the “Basic” version of Vista, not the Premium, Business or Ultimate versions of Vista. Id., at 2. The class action additionally alleged that Microsoft’s “Express Upgrade Guarantee Program” permitted customers to upgrade from Windows XP only to Vista Basic, id. The gravamen of the class action complaint is that “Basic cannot fairly be called ‘The Real Vista.’” Id. Defense attorneys countered that “Basic provides customers with a number of benefits over XP and is part of the Vista line.” Id. The district court certified the litigation as a class action, and Microsoft subsequently moved to decertify the class and for summary judgment, id., at 1. The district court granted the motion to decertify the litigation as a class action but denied summary judgment.

The federal court began by noting that “a district court may revisit its decision to certify a class in order to address developments that arise during the course of litigation.” Kelley, at 4 (citations omitted). Indeed, “[a] court’s power to revisit certification is ‘a vital ingredient in the flexibility of courts to realize the full potential benefits from the judicious use of the class action device.’” Id., at 5 (citation omitted). Microsoft’s motion for class decertification centered on Rule 23(b)(3)’s predominance requirement, id. “Courts have recognized that consumer fraud cases may present unique considerations when determining predominance” and “courts have decertified classes when it becomes apparent that the predominance factor can no longer be satisfied.” Id. (citations omitted). Defense attorneys argued that plaintiffs cannot establish on a class-wide basis the “causation” element of the complaint’s consumer fraud claim. Id., at 8. The district court agreed.

Continue reading "Microsoft/Vista Class Action Defense Cases–Kelley v. Microsoft: Washington Federal Court Grants Microsoft Motion To Decertify Class Action Because Rule 23(b)(3)’s Predominance Requirement No Longer Met" »

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

Class Action Challenging Defendants Debt Collection Practices Warranted Class Action Treatment Illinois Federal Court Holds

Plaintiffs filed a class action against MRC Receivables and others alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and the Illinois Collection Agency Act (ICAA). Herkert v. MRC Receivables Corp., 254 F.R.D. 344, 346 (N.D.Ill. 2008). Defendants are engaged in the business of “purchasing and managing charged-off consumer receivables portfolios.” Id. After defendants filed suit against them to collect on credit card debts, plaintiffs filed their class action lawsuit, id. Specifically, the class action complaint alleged that defendants “had a policy and practice of violating Section 1692e and 1692f of the FDCPA, and Section 425/9(a)(20) of the ICAA,” id., at 346-47. The gravamen of the class action is that defendants filed lawsuits to collect credit card debts without attaching a signed contract to the complaints, and after the expiration of the 5-year statute of limitations. Id., at 347. Plaintiffs moved the district court to certify the litigation as a class action, id., at 346. The district court amended the definition of the class and, as amended, granted plaintiffs’ motion for class action treatment.

The motion for class certification proposed three classes, under the FDCPA and one under the ICAA. Heckert, at 347. The district court readily found Rule 23(a)(1)’s numerosity requirement for class actions to be satisfied because defendants “file…thousands of cases each month in Illinois state court.” Id., at 348. The federal court rejected defendants’ claim that they would not be able “to construct an accurate search of their record-keeping system on a searchable, system-wide basis, and that it would thus be impossible to determine the identity of the class members.” Id. However, the court agreed to amend the class definitions “to ensure that the classes are ascertainable based on objectively identifiable criteria, namely, according to the date of the final statement of account as given in the affidavits attached to the state court complaints.” Id. As so amended, the class definition would not require the parties to rely on defendants’ records in order to ascertain class membership, id., at 349.

Continue reading "FDCPA Class Action Defense Cases–Herkert v. MRC Receivables: Illinois Federal Court Amends Class Definitions And Certifies Class Action In FDCPA (Fair Debt Collection Practices Act) Class Action" »

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

District Court Erred in Dismissing Class Action under Rule 23(b)(3) for Improper Venue because Forum Selection Clause in Internet Member Agreement Effectively Precluded Class Action Relief Ninth Circuit Holds

Plaintiffs filed a nationwide class action against AOL alleging violations of the federal electronic privacy law; the class action complaint asserted that AOL “made publicly available the internet search records of more than 650,000 of its members” that “contained personal and sometimes embarrassing information about the members.” Doe 1 v. AOL LLC, ___ F.3d ___ (9th Cir. January 16, 2009) [Slip Opn., at 686]. The class action also defined a subclass of California residents and asserted separately claims for violations of various California state laws, including California’s Consumers Legal Remedies Act (CLRA). Id. Plaintiffs filed their class action complaint after AOL accidentally made publicly available, for 10 days, “roughly twenty million AOL Internet search records”; the class action complaint alleged that the data disclosed by AOL included “addresses, phone numbers, credit card numbers, social security numbers, passwords and other personal information of AOL members.” Id., at 688. In addition to asserting claims for relief under the federal Electronic Communications Privacy Act and California’s CLRA, the class action additionally asserted claims under California’s Customer Records Act, False Advertising Law, and Unfair Competition Law. Id., at 688-89. Plaintiffs filed the class action in the Northern District of California, id., at 687-88; however, the Member Agreement governing plaintiffs’ use of AOL included both a choice of law clause, which stated that Virginia law governed any disputes between AOL and its members, and a forum selection clause, which designated Virginia as the fora for disputes between AOL and its members. Id., at 687. Defense attorneys moved to dismiss the class action under Rule 12(b)(3) on the grounds of improper venue given the forum selection clause; plaintiffs argued that class action relief would not be available to them in Virginia and, accordingly, “violates California public policy favoring consumer class actions and renders the forum selection clause unenforceable.” Id. The district court granted AOL’s motion and dismissed the class action without prejudice, id.; the Ninth Circuit reversed.

AOL is headquartered in Dulles, Virginia. AOL, at 689. As a prerequisite to using AOL’s online services, each member must agree to the terms of the AOL Member Agreement, and must manifest their agreement by clicking a box that “states the member has agreed to the terms of the Member Agreement,” id., at 689-90. As noted above, the Member Agreement contains both a choice of law clause and a forum selection clause, which declare that Virginia law governs disputes and that disputes must be brought in Virginia state or federal courts. Id., at 690. The district court granted AOL’s Rule 12( b)(3) motion holding that the forum selection clause “expressly requires that this controversy be adjudicated in a court in Virginia” and that “[p]laintiffs agreed the courts of Virginia have ‘exclusive jurisdiction’ over any claims or disputes with AOL” thus rendering venue in California improper. Id., at 691. The Ninth Circuit reversed, concluding that the forum selection clause was unenforceable.

Continue reading "AOL Class Action Defense Cases–Doe 1 v. AOL: Ninth Circuit Reverses Dismissal Of Class Action Holding Forum Selection Clause Unenforceable In CLRA/UCL Class Action Because Virginia State Courts Would Not Provide Class Action Relief" »

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

Class Action by Victims of Hurricanes Katrina and Rita and FEMA and Others Alleging High Levels of Formaldehyde in Trailers Supplied to Displaced Citizens Failed to Satisfy Class Action Requirements of Rule 23 and therefore Class Action Treatment was not Warranted Louisiana Federal Court Holds

Numerous class action lawsuits were filed against the federal government and several others arising out of the trailers provided to evacuees of Hurricanes Katrina and Rita; the class actions were filed by individuals “claiming that they either lived or resided along the Gulf Coast of the United States in travel trailers, park models, and manufactured homes provided to them by the Federal Emergency Management Agency (‘FEMA’)” and that they “have been exposed to purportedly high levels of formaldehyde contained in these [emergency housing units] EHUs, and…have suffered damages as a result.” In re FEMA Trailer Formaldehyde Products Liab. Litig., ___ F.Supp.2d ___ (E.D.La. December 29, 2008) [Slip Opn., at 3]. The class action complaints advanced various claims against the defendant manufacturers, including products liability under Louisiana, Alabama and Texas law, strict liability under Mississippi law, failure to warn; and “breach of express or implied warranty and/or failure to conform to other express factual representations on which the plaintiffs justifiably relied.” Id., at 3-4. The class actions also asserted claims “against the United States/FEMA…under Louisiana Civil Code Articles 2316 and 2317.” Id., at 4. Eventually, the Judicial Panel on Multidistrict Litigation coordinated the various class actions in the Eastern District of Louisiana, id., at 3, and plaintiffs moved the district court to certify the litigation as a class action, id., at 1-3. The district court denied the motion.

Plaintiffs proposed numerous subclasses for the proposed class action: a Louisiana subclass, a Texas subclass, a Mississippi subclass, and an Alabama subclass, as well as subclasses for individuals in need of future medical care and individuals who suffered economic loss. In re FEMA Trailer, at 1-3. The district court first addressed numerosity under Rule 23(a)(1), noting that this inquiry considered such factors as “the geographical dispersion of the class, the ease with which class members may be identified, the nature of the action, and the size of each plaintiff’s claim. Id., at 9 (citation omitted). Further, “each proposed subclass must independently meet all of the requirements of Rule 23.” Id. (citing FRCP Rule 23(c)(5)); see also id., at 10, n.5. The court concluded that plaintiffs “fail[ed] to demonstrate or offer any evidence as to whether numerosity exists as to each proposed sub-class.” Id., at 10. Accordingly, class action treatment was not warranted, id. But the district court held further that Rule 23(a)(2)’s commonality requirement for class action treatment also had not been met, agreeing with defense attorneys that “there is no commonality because Plaintiffs lived in different EHUs.” Id., at 10-11. Put simply, “this case does not involve one single product that is alleged to have caused Plaintiffs damage” but, rather, “that dozens of different manufacturing defendants have manufactured products or EHUs that have caused them harm” and that “some defendants have manufactured multiple models of EHUs that Plaintiffs claim to have caused them harm.” Id., at 11. And these facts highlighted the numerous individual inquiries that defeated Rule 23(a)(3)’s typicality test, see id., at 12-18. And while plaintiffs’ counsel were adequate to represent the class, the court found that the plaintiffs themselves were not adequate representatives of the class. See id., at 18-22.

Continue reading "FEMA Class Action Defense Cases–In re FEMA Trailer Formaldehyde: Louisiana Federal Court Denies Class Action Treatment To Products Liability Class Action Arising From Trailers FEMA Provided Hurricane Victims" »

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

In Denying Motion for Class Action Certification, Trial Court Erroneously Concluded that it would be Required to Reach Merits of Class Action Allegations in order to Determine Ascertainability and Numerosity, Thus Necessitating Reversal and Remand with Instructions to Certify Labor Law Class Action California State Appellate Court Holds

Plaintiffs filed a class action against his employer, Diva Limousine, alleging labor law violations; the class action complaint asserted, in part, that Diva failed to pay overtime and failed to provide its employees with meal and rest breaks. Ghazaryan v. Diva Limousine, Ltd., ___ Cal.App.4th ___ (Cal.App. January 12, 2009) [Slip Opn., at 3, n.3]. According to the class action’s allegations, Diva’s drivers collectively made anywhere from 100 to more than 200 trips on any given day, id., at 2. The facts underlying the class action complaint are as follows: Diva would provide its drivers with their first few assignments in order to permit the drivers to plan their breaks. Id. Diva also permitted about 75% of its drivers to take their vehicles home so that they could drive straight to their first assignment. Id. Once the first batch of trips had been completed, Diva’s dispatcher would dole out “additional trips according to location, availability and fairness among drivers”; on any given day, a driver may have as many as 8 assignments or less than 5. Id. The class action alleged that “Drivers have no way of predicting the length of any particular period of gap time although, on occasion, dispatchers may accommodate requests to schedule assignments around the drivers’ personal appointments.” Id. at 2-3. Plaintiff worked full-time for Diva, was “hard working” and “asked for as many assignments as available.” Id., at 3. Nonetheless, plaintiff “frequently had significant periods of on-call time between assignments.” Id. Diva prohibited its drivers from using company vehicles during “gap time” and required its drivers “to utilize gap time for their mandatory rest and lunch breaks, which could be interrupted if dispatched on an assignment.” Id. Further, drivers were not permitted to turn down assignments, even if the assignment conflicted with a meal or rest break, id. Plaintiff moved the trial court to certify the litigation as a class action, id., at 2. The trial court denied the motion, but the California Court of Appeal reversed.

Defense attorneys argued against class action treatment “principally because of the purported difficulties in identifying eligible members of the class and assessing the validity of Diva’s compensation policy as applied to different drivers who may or may not have used their gap time for personal pursuits”; certain employees, for example, are “dedicated event drivers” and are paid for their gap time. Ghazaryan, at 4. Additionally, a number of Diva’s drivers provided declarations that they “typically use unpaid gap time for their own purposes, such as working out at the gym, napping or eating at home or running personal errands,” and that they opposed plaintiff’s efforts to modify the manner in which Diva paid its drivers. Id. The trial court was persuaded by the defense arguments and refused to grant class action treatment to the litigation because of the “many individualized issues” raised by the class action complaint. Id. The trial court explained that determining numerosity would require that it “first determine an ultimate issue in the case, which this Court cannot do to determine the class.” Id., at 5. The trial court found further that the class was not ascertainable because it would first have to “determine if Diva’s practices are improper and, if so, which drivers fit into an appropriate class.” Id. The Court of Appeal reversed.

Continue reading "Class Action Defense Cases– Ghazaryan v. Diva Limousine: California State Court Reverses Denial Of Class Action Treatment In Labor Law Class Action Holding Trial Court Erred In Believing It Had To Reach Merits To Certify Class Action" »

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

Trial Court Amendments to Class Definitions in Response to Defense Motion to Decertify Class Action did not Create a “New Action” Sufficient to Justify Removal under Class Action Fairness Act of 2005 (CAFA) Illinois Federal Court Holds

Plaintiffs filed a state court class action complaint against H&R Block Tax Services in January 2002 alleging “statutory fraud by omission in violation of the Illinois Consumer Fraud Act (‘ICFA’) and ‘the substantially similar statutes of specific sister states’ and breach of fiduciary duty.” Marshall v. H&R Block Tax Services Inc., ___ F.Supp.2d ___ (S.D.Ill. December 17, 2008) [Slip Opn., at 2]. According to the allegations underlying the class action, H&R Block sold a “Peace of Mind” (POM) guarantee – an “extended-warranty product under which consumers are paid additional taxes owed as a result of a tax-preparation error.” Id., at 1. The state court granted plaintiffs’ motion to certify the litigation as a class action, and subsequently partially granted a defense motion to decertify the class action. Id. Following partial decertification of the class action, defense attorneys removed the class action to federal court claiming removal jurisdiction under the Class Action Fairness Act of 2005 (CAFA); according to H&R Block’s theory, “the decertification order greatly increased its potential liability for POM sales with which it had no involvement, which commenced a new, removable cause of action.” Id., at 1-2. Plaintiffs’ moved to remand the class action to federal court, arguing that “the state court’s August 5, 2008 decertification order narrowed the action from a multistate class to a thirteen-state class”; accordingly, it did not constitute the commencement of a new action for purposes of removal under CAFA. Id., at 1. The district court granted the motion and remanded the class action to state court.

After summarizing the applicable legal standard, see Marshall, at 2-4, the district court noted that the defense removed the class action based on the state court’s decision to amend the class definition to address, in part, the defense motion to decertify, id., at 4. The defense argued “[the] amended class definitions commenced a new action by expanding the scope of Block’s potential liability to include the acts of entities merely affiliated with Block as well as independent franchisees.” Id. According to the federal court, the state court believed that his modifications to the class definitions “related back to Plaintiffs’ amended complaint” and “expressly set forth his rationale for limiting the Plaintiff Classes to make the action more manageable and to eliminate from the action those states where applicable laws differed significantly.” Id., at 7. The federal court rejected defense arguments that the new class definitions “greatly increased” H&R Block’s liability and thus constituted a new lawsuit within the meaning of CAFA. Id., at 7-9. Put simply, the amendments to class definitions did not add any “new or different POM transactions” to the case; accordingly, the class action “does not fall within the ambit of ‘sufficiently independent of the original contentions that it must be treated as fresh litigation.’” Id., at 10 (citation omitted). In sum, “Block has identified no basis for the Court to conclude that the state court’s modification of the classes commenced a new, removable action.” Id. Accordingly, it remanded the class action to state court, id., at 11.

Continue reading "H&R Block CAFA Class Action Defense Cases–Marshall v. H&R Block: Illinois Federal Court Remands Class Action To State Court Holding Modifications To Class Definition Did Not Support Removal Under Class Action Fairness Act (CAFA)" »

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

Class Action Complaint’s Anti-Cybersquatting Protection Act Claims do not Warrant Class Action Treatment because Rule 23(b)(3)’s Predominance Requirement for Class Action Certification not Met due to Individualized Issues Surrounding Trademarks or Personal Names Illinois Federal Court Holds

Plaintiffs filed a class action against Google and others alleging “a wide-ranging scheme whereby they receive ‘billions of dollars in ill-gotten advertising and marketing revenue’ by knowingly and intentionally registering, licensing and monetizing purportedly deceptive domain names at the expense of the plaintiff-mark owners.” Vulcan Golf, LLC v. Google Inc., ___ F.Supp.2d ___ (N.D.Ill. December 18, 2008) [Slip Opn., at 1]. In part, the class action alleged that Google’s conduct violated the Anti-Cybersquatting Protection Act (ACPA), id. Plaintiffs filed a motion for class action certification, id.; defense attorneys countered that class action treatment was not warranted because plaintiffs’ claims are not typical and because they are not adequate class representatives, see id., at 4, and because the predominance and superiority tests of Rule 23(b)(3) had not been met, see id., at 7. The district court rejected the first defense challenges, finding the requirements for class action certification under Rule 23(a) were satisfied. However, the district court concluded that Rule 23(b)(3)’s requirements for class action treatment had not been met. Accordingly, the court refused to certify the litigation as a class action.

With respect to the requirements for class action certification set forth in Rule 23(a), the district court easily found that numerosity and commonality had been satisfied. Vulcan Golf, at 4-5. Defense attorneys argued that plaintiffs’ claims were atypical and that they were not adequate class representatives “because intra-class conflicts exist.” Id., at 5. For reasons we do not detail here, the district court rejected the defense arguments and found that each of Rule 23(a)’s requirements for class action treatment had been met. See id., at 5-7. In sum, the federal court explained at page 7, “The representatives’ claims arise from the same course of conduct as the other class members and the class representatives have the same interests and have suffered the same injury as the putative class members.” It turned, therefore, to whether the class action requirements of Rule 23(b)(3) had been met.

Continue reading "Google Class Action Defense Cases–Vulcan Golf v. Google: Illinois Federal Court Denies Class Action Treatment For Class Action Complaint Against Google Alleging Violations Of Anti-Cybersquatting Protection Act" »

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

District Court Independently Analyzes Class Action Certification Requirements of ERISA Class Action Complaint, despite Lack of Defense Objection to Class Action Treatment, and Concludes Class Action Certification Warranted Texas Federal Court Holds

Plaintiffs, retirees of BellSouth Corporation, a subsidiary of AT & T, filed a class action against AT&T and BellSouth alleging violations of the he Employee Retirement Income Security Act of 1974 (ERISA); specifically, the class action complaint alleged “that (1) a benefit known as telephone concession, which was provided to certain employees of BellSouth after retirement, constitutes a defined benefit pension plan under ERISA (hereinafter, ‘plan claims’); and (2) that Defendants violated ERISA in administering and maintaining the telephone concession plan (hereinafter, ‘benefit claims’).” Boos v. AT&T, Inc., 252 F.R.D. 319, 321 (W.D. Tex. 2008). Plaintiffs’ lawyers filed a motion with the district court to certify the litigation as a class action. Id. Defense attorneys did not oppose plaintiffs’ motion for class action treatment; nonetheless, the district court conducted a thorough analysis of the propriety of class action certification under Rule 23 because Rule 23(c)(1)(A) requires that the district court “determine by order whether to certify the action as a class action.” Id. The federal court further observed at page 321 that “[t]he Fifth Circuit has also held that in order to certify a class, a district court must specifically find that the proposed class satisfies the requirements of Rule 23.” (citing Vizena v. Union Pac. R.R. Co., 360 F.3d 496, 503 (5th Cir. 2004)). Based on its detailed analysis, see id., at 321-26, the district court concluded that the requirements for class action certification had been satisfied and therefore granted plaintiffs’ motion. Id., at 326-27.

NOTE: We discuss this case only to make the point that Rule 23 requires a district court to independently determine whether class action treatment is warranted, whether the defendant objects or whether the parties stipulate to class action certification as part of a settlement agreement.

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

Class Action Claims Alleging DuPont knew but Failed to Disclose Health Risks Associated with use of Non-Stick Cookware Coatings (including Teflon) not Entitled to Class Action Treatment because Class Definition Failed and Membership in Proposed Class could not be Objectively Established Iowa Federal Court Holds

Thirteen class action lawsuits were filed against E.I. DuPont De Nemours concerning its production and marketing of Teflon non-stick cookware coatings; specifically, the class action complaints alleged that “DuPont made false, misleading and deceptive representations regarding the safety of its product.” In re Teflon Products Liab. Litig., ___ F.Supp.2d ___ (S.D. Iowa December 5, 2008) [Slip Opn., at 1]. In essence, the class action plaintiffs asserted that the non-stick coatings “can decompose at temperatures within the realm of ‘normal use,’ potentially releasing a synthetic chemical” that is harmful to humans and could even cause birth defects. Id., at 2. Ultimately, the Environmental Protection Agency brought claims against DuPont under the Federal Toxic Substances Control Act, which DuPont settled in 2005 by paying “‘the largest civil administrative penalty [the] EPA has ever obtained under any federal environmental statute.’” Id., at 2-3. The Judicial Panel on Multidistrict Litigation centralized the class actions in the Southern District of Iowa pursuant to 28 U.S.C. § 1407, see id., at 1 n.2. According to the allegations underlying the class action, DuPont knew of these dangers prior to 1960, but failed to disclose them to consumers, id., at 3. Plaintiffs’ attorneys moved the district court to certify the litigation as a class action. Id. Defense attorneys argued against class action treatment, id., at 1. The district court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

After outlining the rules governing class action certification under Rule 23, see In re Teflon, at 5-7, the district court observed that there are two additional “implicit” requirements: “1) that the class definition is drafted to ensure that membership is ‘capable of ascertainment under some objective standard;’ and 2) that all class representatives are in fact members of the proposed class,” id., at 7 (citations omitted). The federal court began its analysis, then, with the definition of the class, which it noted “is at the heart of any decision” on class action treatment, id., at 8. Because several putative class representatives testified in deposition that they were uncertain whether the products they purchased in fact had been manufactured by DuPont, or that they mistakenly believed that all non-stick cookware coatings were manufactured by DuPont, the district court concluded that the class definition failed. See id., at 8-14. Additionally, the court could not conclude “that each proposed representative is in fact a member of the proposed class, or…sub-class” because “the vast majority of plaintiffs must rely on memory to establish crucial facts [which] will prevent the parties and the Court from ever being able to establish membership with objective certainty.” Id., at 14. Accordingly, it held that it “cannot in good conscience grant certification.” Id.

Continue reading "DuPont Class Action Defense Cases–In re Teflon: Iowa Federal Court Denies Class Action Treatment To False Advertising Class Action Against DuPont Alleging Failure To Disclose Health Risks Associated With Non-Stick Cookware Coatings" »

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

Class Action Complaint Alleging Computer Problems Systematically Caused Sprint to Pay Employees Less than they were Due Warranted Class Action Treatment as Common Issues – Centered on Sprint’s Computer System – Predominated Class Action Claims Kansas Federal Court Holds

Plaintiffs filed a class action against Sprint Nextel Corporation and Sprint/United Management (collectively “Sprint”) alleging labor law violations; the class action complaint asserted that a computer error caused Sprint to systematically fail to properly calculate commissions due employees of Sprint’s Business Direct Channel. Harlow v. Sprint Nextel Corp., ___ F.Supp.2d ___ (D.Kan. December 10, 2008) [Slip Opn., at 1-2]. According to the allegations underlying the class action, these computer problems resulted in Sprint employees receiving each month $500-$1000 less than the amounts they were due, id., at 2. The class action centered, then, on a “problem with Sprint’s computer system that affects the amount of commissions the class members received.” Id. Originally, the class action complaint alleged causes of action for violations of Kansas’s Wage Payment Act, breach of contract, quantum meruit, promissory estoppels and unjust enrichment, but the parties stipulated to the dismissal of all claims except the Wage Payment Act and breach of contract class action claims. Id., at 4-5. Plaintiffs’ attorneys moved the district court to certify the litigation as a class action; defense attorneys argued against class action treatment. Id., at 1. The district court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

In ruling on the class action certification motion, the federal court stressed that the class action “centers on Sprint’s computerized procedures for calculating and paying commissions and not, for example, [on] a policy-based decision by Sprint to award a particular commission to one employee over another.” Harlow, at 5. The district court stressed that “[t]his distinction is key to the certification analysis.” Id. As the district court had little difficulty in finding that the requirements for class action certification under Rule 23(a) had been met, see id., at 13-17 (discussing numerosity, commonality, typicality, and adequacy of representation), we focus here – like the court – on the class action requirements set forth in Rule 23(b)(3). And in that regard, the federal court had little difficulty in determining that a class action is a superior means of resolving the issues presented in the complaint, rejecting Sprint’s objection that “a class action of this magnitude would be unmanageable because of the individualized inquiries to each plaintiffs’ claims” because the individual questions involved damage calculations. See id., at 11-13.

Continue reading "Sprint Class Action Defense Cases–Harlow v. Sprint: Kansas Federal Court Grants Class Action Treatment To Labor Law Class Action Against Sprint Alleging Systematic Failure To Properly Calculate Commissions Due Employees" »

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

FDCPA Class Action Complaint Warranted Class Action Treatment because Plaintiff Satisfied Requirements for Rule 23(b)(3) Class Illinois Federal Court Holds

Plaintiff filed a class action against Revenue Production Management, Inc., a debt collection agency, alleging violations of the federal Fair Debt Collection Practices Act (FDCPA); the class action complaint asserted “that Defendant had a policy and practice of violating Section 1692e of the FDCPA by: (1) sending [debt collection letters] after the expiration of the 30-day validation period outlined in the initial communication; (2) informing the consumer that the debt must be disputed in writing after expiration of the 30-day validation period outlined in the initial communication; and (3) informing the consumer that a dispute must be made within 30 days of the initial communication, after the expiration of the 30-day validation period outlined in the initial communication.” Quiroz v. Revenue Production Management, Inc., 252 F.R.D. 438, 440 (N.D. Ill. 2008). Plaintiff’s lawyers filed a motion with the district court to certify the litigation as a class action. Id. The district court concluded that class action treatment was warranted and granted plaintiff’s motion.

Plaintiff incurred debts in connection with medical treatment he received, but “[he] did not pay the debt because he believed it was covered by his employer's workers' compensation insurance.” Quiroz, at 440. After plaintiff defaulted on the obligation, it was assigned to defendant who sent plaintiff an initial debt collection letter on April 17, 2007. Id. It was not until June 6, 2007, however, that defendant sent a letter to plaintiff advising him that “[i]f you dispute the validity of this debt then you must notify us in writing within 30 (thirty) days of our initial notice to you.” Id. Plaintiff’s class action certification motion asserted that a Rule 23(b)(3) class action should be certified, id., at 440-41.

Continue reading "FDCPA Class Action Defense Cases–Quiroz v. Revenue Production Management: Illinois Federal Court Certifies Class Action Holding Requirements For Certification Of Rule 23(b)(3) Class Action Had Been Met" »

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

Class Action Seeking Statutory Damages on behalf of all Applicants could not Survive Defense Motion for Summary Judgment because Class Action Representatives Suffered no Injury and Legislature did not Intend to Permit Unaffected Individuals to Recover Statutory Damages California State Court Holds

Plaintiffs filed a class action against Starbucks alleging violations of California labor law provisions concerning information collected from prospective employees during the application process; specifically, the class action complaint asserted that Starbucks improperly asked applicants “about prior marijuana convictions that are more than two years old.” Starbucks v. Superior Court, 168 Cal.App.4th 1436 (Cal.App. 2008) [Slip Opn., at 2]. According to the class action, “Starbucks uses the same two-page job application form nationwide for store level employees” and that one of the questions asked is, “Have you been convicted of a crime in the last seven (7) years?” Id. The application makes clear that “arrests are not convictions,” and advises that a conviction “will not necessarily disqualify you for employment.” Id. The class action sought statutory damages in the amount of $200 per applicant – “a remedy which, by Starbucks’ estimation, could total a whopping $26 million.” Id. The trial court granted plaintiffs’ motion for class action treatment, certifying a class of approximately 135,000 applicants. Id. The trial court certified the class action on behalf of all applicants who completed a questionnaire with the convictions question and who sought no more than $200 in damages, id., at 5. In the trial court’s words, “The mere offering of the application containing the impermissible question is a violation of the Labor Code. [¶] Damages may be calculated simply by multiplying the probable number of applicants during the class period times $200.00.” Id. Defense attorneys moved for summary judgment of the class action claims, asserting in part that class members suffered no damage. Id., at 2. The trial court denied the motion, and defense attorneys sought extraordinary relief from the Court of Appeal, id. The California Court of Appeal reversed, concluding that “[n]othing in the statutes in question authorizes job applicants to automatically recover $200 per person without proof they were aggrieved persons with an injury the statute was designed to remedy,” and ordered the trial court to enter judgment in favor of Starbucks.

The thrust of the class action was that California prohibits employers “from asking about marijuana-related convictions that are more than two years old.” Starbucks, at 4. The class action further argued that California law permits applicants “to recover actual damages or $200 each, whichever is greater.” Id. (citations omitted). The appellate court observed, however, that Starbucks disclosed on the reverse side of the application that California applicants need not disclose marijuana-related convictions that are more than two years old, stating in full: “CALIFORNIA APPLICANTS ONLY: Applicant may omit any convictions for the possession of marijuana (except for convictions for the possessions of marijuana on school grounds or possession of concentrated cannabis) that are more than two (2) years old, and any information concerning a referral to, and participation in, any pretrial or post trial diversion program.” Id., at 2-3. Notably, each of the named plaintiffs had read the disclaimer on the reverse of the Starbucks application and each understood that they were not required to disclose any marijuana convictions that were more than two years old; moreover, none of the named plaintiffs had been arrested for or convicted of a marijuana-related crime. Id., at 4-5. The Court of Appeal summarized at page 2, “Plaintiffs’ lawsuit suffers from two fundamental flaws, either of which provides ample grounds for writ relief. First, Starbucks attempted to disclaim an interest in such prohibited information, and two of the plaintiffs understood Starbucks not to be seeking it. Second, no plaintiff had any marijuana-related convictions to reveal.”

Continue reading "Class Action Defense Cases–Starbucks v. Superior Court: California State Appellate Court Orders Judgment In Favor Of Starbucks In Labor Law Class Action Holding Named Plaintiffs In Class Action Suffered No Injury" »

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

FDCPA Class Action Claims Certified as a (b)(2) Class after Modification of Class Definition but (b)(3) Class Lacked Predominance as Mini-Hearings would be Required to Establish Damages for each Class Member Ohio Federal Holds

Plaintiffs filed a class action against Cheek & Zeehandelar (an Ohio-based law firm that litigates debt collection actions) and two of its attorneys alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and Ohio's Consumer Sales Practices Act (CSPA); specifically, the class action complaint alleged that defendant “seeks to garnish or attach the property of Ohio consumers who have defaulted on credit and loan agreements, without having first investigated the nature of the debtors' property to determine if it is legally exempt from garnishment or attachment.” Stewart v. Cheek & Zeehandelar, LLP, 252 F.R.D. 387, 388-89 (S.D. Ohio 2008). Plaintiffs moved the district court to certify the litigation as a class action: the class action certification motion sought a Rule 23(b)(2) class for declaratory and injunctive relief, and a Rule 23(b)(3) sub-class for monetary damages. Id., at 389. . Id. The district court granted plaintiffs’ motion to certify the Rule 23(b)(2) class, but denied class action treatment as to the Rule 23(b)(2) sub-class.

Ohio law permits a judgment creditor to garnish property based on an affidavit stating “that the person named in the affidavit as the garnishee may have property, other than personal earnings, of the judgment debtor that is not exempt under” Ohio or federal law. Stewart, at 389. According to the class action, defendants execute such affidavits for the purpose of attaching property without conducting a proper investigation. Defendants, by contrast, testified to procedures they had in place to ensure that the affidavits were accurate, though the person who executed the affidavits “never personally contacted the debtors to determine whether their property or funds were exempt, nor did he contact the debtors' banks, or conduct debtors' examinations.” Id., at 389-90. Moreover, defendants testified that they did not being sending out discovery “to ascertain the status of their property or funds” until after the class action lawsuit had been filed, id., at 390.

Continue reading "Class Action Defense Cases– Stewart v. Cheek & Zeehandelar: Ohio Federal Court Certifies (b)(2) Class Action But Refuses To Certify (b)(3) Class Action Of FDCPA Class Action Claims Against Law Firm Debt Collector" »

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

Discrimination Class Action Against eHarmony.com Granted Class Action Status as to Claims by Gay, Lesbian and Bisexual People Denied Services on Basis of Sexual Orientation, but Class Action Treatment Denied as to Claims by Gay, Lesbian and Bisexual People who were “Deterred” from using eHarmony because of its Refusal to Serve Homosexual and Bisexual Individuals California State Trial Court Holds

Plaintiffs filed a class action against matchmaking website eHarmony.com alleging discrimination under California state law for failing to serve people who are homosexual or bisexual; specifically, the class action complaint asserted that eHarmony’s policy violates California’s Unruh Civil Rights Act, Cal. Civ. Code, § 51 et seq., by denying equal treatment on the basis of sexual orientation. Carlson v. eHarmony.com, Los Angeles Superior Court Case No. BC371958 (November 19, 2008) [Slip Opn., at 2]. Plaintiffs moved the trial court to certify the litigation as a class action, defining the general class as all gay, lesbian and bisexual individuals who were denied services on the basis of sexual orientation. Id. Plaintiffs also sought class action treatment on behalf of two subclasses: (1) all gay, lesbian and bisexual people who tried to use eHarmony but were denied service (essentially tracking the definition of the general class), and (2) all gay, lesbian and bisexual people who were deterred from using eHarmony because of its refusal to provide service to homosexual and bisexual individuals. Id. Defense attorneys argued that class action treatment was not warranted because “the proposed class is not ascertainable and individual issues will predominate.” Id. The trial court granted plaintiffs’ motion and certified the lawsuit as a class action with respect to the general class and first subclass, but denied class action treatment to claims brought on behalf of people “deterred” from using eHarmony’s services. Id.

In addressing the ascertainability of the proposed class, the trial court noted that the class definition first limited membership to “gay, lesbian, and bisexual” people, and that “this part of the proposed class is ascertainable” because it falls within the class of people protected by the Unruh Act. Carlson, at 4. The further limitation in the proposed definition, restricting membership to individuals “who allegedly have been ‘denied’ services,” was also ascertainable because defense attorneys “acknowledge that eHarmony.com does not offer same-sex matching services, which is the functional equivalent of denying such services to plaintiffs.” Id., at 5. As to Subclass 1, that group of individuals who “attempted” to use eHarmony’s services but could not was deemed ascertainable, id., at 6, but the group of individuals allegedly “deterred” from even attempting to use eHarmony’s services was not ascertainable because “[d]eterrence is inherently a subjective inquiry” and “individual facts would overwhelm common issues of fact and law,” id., at 6-7. Accordingly, Subclass 2 was not ascertainable, so the trial court refused to certify a class action on behalf of that proposed class. Id., at 7.

Continue reading "Class Action Defense Cases–Carlson v. eHarmony.com: California State Trial Court Certifies Class Action Against eHarmony Granting Class Action Treatment To Claims Of Homosexual And Bisexual People Denied Services Based On Sexual Orientation" »

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

Securities Class Action Complaint Properly Dismissed because Class Action Failed to Satisfy Heightened Pleading Requirements under Private Securities Litigation Reform Act (PSLRA) Ninth Circuit Holds

Plaintiffs filed a class action against InVision Technologies and two of its officers alleging violations of federal securities law; the class action complaint arose because after InVision announced that it had entered into a merger agreement with General Electric, the company disclosed that the merger may not occur because of the discovery of potential violations of the Foreign Corrupt Practices Act causing an immediate drop in InVision’s stock price, even though the merger eventually went through. Glazer Capital Management, LP v. Magistri, 549 F.3d 736 (9th Cir. 2008) [Slip Opn., at 15765-66]. The class action alleged that defendants violated Section 10(b) of the Securities Exchange Act of 1934, as well as Rule 10b-5. Id., at 15768. Defense attorneys moved to dismiss the class action for failure to plead adequately falsity or scienter under the heightened standards established by the Private Securities Litigation Reform Act (PSLRA); the district court granted the motion and dismissed the class action complaint. Id., at 15766. (Plaintiffs had amended the class action complaint twice, but the district court denied them leave to file a third amended class action complaint. See id., at 15768.) The Ninth Circuit affirmed.

We do not discuss here the facts detailed in the Circuit Court’s opinion, see Glazer Capital, at 15766- 68. The pertinent facts are that, after announcing the merger agreement, (1) “on July 30, 2004, InVision issued a press release stating that an internal investigation had revealed possible violations of the FCPA in connection with certain foreign sales transactions,” and (2) “InVision announced that it had voluntarily reported the activities to the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), but warned that subsequent investigations could potentially delay or terminate the merger.” Id., at 15767. InVision’s stock price plummeted on the news, and only a few days later the class action complaint was filed. Id. Within a few months, InVision settled with DOJ and with the SEC, and the merger with GE went through. Id., at 15767-78.

Continue reading "PSLRA Class Action Defense Cases–Glazer Capital v. Magistri: Ninth Circuit Affirms Dismissal Of Class Action Holding Securities Class Action Complaint Failed To Plead Scienter Under PSLRA" »

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

Putative Class Action Alleging Violations of FACTA not Entitled to Class Action Treatment because Rule 23(b)(3)’s Superiority Requirement for Class Action Certification not Met California Federal Court Holds

Plaintiff filed a putative class action against American Multi-Cinema for violating the federal Fair and Accurate Credit Transactions Act (FACTA); specifically, the class action complaint alleged that defendant printed not only the last four digits of a consumer’s credit or debit card on the customer’s receipt, but the first four digits as well. Bateman v. American Multi-Cinema, Inc., 252 F.R.D. 647, 648 (C.D. Cal. 2008). Notably, the class action complaint did not allege that plaintiff, or any putative member of the class action, suffered any harm as a result of the violation. Id. Defendant corrected its sales practices within two weeks of the filing the class action, id. Plaintiff moved the district court to certify the litigation as a class action; the district court denied the motion on the grounds that Rule 23(b)(3)’s superiority requirement had not been met: “The Court found that if certified, the potential statutory damages to be awarded could be enormous and completely out of proportion to any harm suffered by Plaintiff.” Id. (A copy of the district court order denying plaintiff's initial motion for class action treatment may be found here.) However, the district court denied class action treatment without prejudice pending the Ninth Circuit’s decision in Soualian v. Int’l Coffee & Tea LLC, CV 07-502-RGK (JCx), 2007 WL 4877902 (C.D. Cal. filed June 11, 2007). Soualian, however, was settled so the Ninth Circuit dismissed the appeal. Id. The district court permitted plaintiff to renew his motion for class action certification, and again denied the motion.

After summarizing the legal standard for class action certification under Rule 23, see Bateman, at 648-49, the district court summarized the legislative history of FACTA and the statutory penalties provided for FACTA violations, see id., at 649. The federal court also discussed the 2007 Congressional amendment to FACTA, which clarified that the statute was not intended to provide for private rights of action based solely on the failure of a merchant to include the expiration date of the credit/debit card on the customer’s receipt. See id., at 649-50. The amendment, however, “does not provide Defendant with a safe-harbor for truncating its credit card receipts to eight (8) digits rather than five (5).” Id., at 650. Plaintiff argued that class action treatment was warranted because Congress essentially reaffirmed that the failure to truncate the credit or debit card account numbers supported such lawsuits. Id. But the district court observed that the purpose of the statute was to prevent identity theft, and that “the congressional record also supports an inference that members of Congress were primarily concerned with credit card receipts displaying the entire credit card account number.” Id. Accordingly, the federal court concluded that “it is far from clear whether Congress intended to approve class actions for printing eight (8) digits rather than five (5).” Id. However, the court found persuasive the purpose of the statute – viz., “The purpose of this Act is to ensure that consumers suffering from any actual harm to their credit or identity are protected while simultaneously limiting abusive lawsuits that do not protect consumers but only result in increased cost to business and potentially increased prices to consumers.” Id. (quoting Pub.L. 110-241, § 2(b), 122 Stat. 1565 (June 3, 2008)). Because no one suffered any harm as a result of the technical violation of the statute, the court denied class action treatment. Id.

Continue reading "FACTA Class Action Defense Cases–Bateman v. American Multi-Cinema: California Federal Court Denies Class Action Certification Motion Holding Putative FACTA Class Action Failed Superiority Test Because Of Risk Of Excessive Damage Award" »

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

Labor Law Class Action Dismissed because Class Action Predominance Test of Rule 23(b) could not be Satisfied and, Absent Potential for Class Action Certification, Federal Court Lacked Subject Matter Jurisdiction because Class Action Fairness Act (CAFA) was Inapplicable Mississippi Federal Court Holds

Plaintiffs filed a class action lawsuit against Wal-Mart Stores alleging violations of Mississippi’s labor laws; specifically, the class action complaint alleged that Wal-Mart required plaintiffs to work hours “off the clock,” and to work through meal and rest periods for which they were not paid in violation of state law. Robinson v. Wal-Mart Stores, Inc., 253 F.R.D. 396, 397-98 (S.D. Miss. 2008). The class action sought to represent “all current and former hourly-paid employees of Wal-Mart Stores, Inc., in the State of Mississippi that were employed from May 28, 1999 until the present,” and prayed for compensatory and punitive damages. Id., at 398. Defense attorneys moved to dismiss the class action for lack of subject matter jurisdiction, and the district court granted the motion with leave to amend because plaintiffs had failed to allege citizenship as required to establish diversity jurisdiction, id. The amended class action complaint is “virtually identical” to the original class action complaint, and defense attorneys again moved to dismiss for lack of subject matter jurisdiction because the class action failed to allege the $5 million amount in controversy required for federal court jurisdiction under the Class Action Fairness Act (CAFA). Id. Also, the defense asked the federal court to dismiss the class action allegations in the complaint. Id. The district court granted the defense motion in part, and denied it in part.

Consistent with Fifth Circuit authority, the district court began its analysis with the jurisdictional attack under Rule 12(b)(1): “When a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits.” Robinson, at 398 n.1 (quoting Ramming v. United States, 281 F.3d 158, 161 (5th Cir.2001)). After noting that the burden of establishing federal court jurisdiction rested on “the party seeking to litigate in federal court,” id., at 398, the district court turned to Wal-Mart’s argument that CAFA’s $5 million amount in controversy requirement had not been met, id., at 399. Plaintiffs’ argued that the putative class consisted of 80,000 people and, accordingly, “each class member's claim would only need to equal $62.50 to satisfy the $5,000,000 jurisdictional requirement.” Id., at 399. Plaintiffs’ noted also that they sought punitive damages, id. Defense attorneys made several arguments in support of the position that the $5 million threshold had not been met, but the district court concluded “it is not apparent, to a legal certainty, that Plaintiffs cannot recover the jurisdictional amount of $5,000,000 as claimed in their Amended Complaint.” Id. On this ground, then, the district court denied the motion to dismiss the class action, id. It rejected also Wal-Mart’s claim that the federal court lacked subject matter jurisdiction because the claims of some of the class members arose prior to CAFA’s effective date. Id., at 399-400.

Continue reading "Wal-Mart Class Action Defense Cases–Robinson v. Wal-Mart: Mississippi Federal Court Grants Wal-Mart Motion To Dismiss Labor Law Class Action Holding Rule 23(b) Requirements For Class Action Treatment Could Not Be Met" »

Posted In: Class Action Fairness Act (CAFA), Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Class Action Complaint by Car Dealers Against Ford Arising out of Blue Oval Program Erroneously Certified as Class Action because Rule 23(b)(3)’s Predominance and Superiority Requirements not met Third Circuit Holds

Nine plaintiffs filed a putative class action against Ford on behalf of themselves and other Ford dealers; the class action complaint alleged that Ford’s Blue Oval Program violated state and federal law. Danvers Motor Co., Inc. v. Ford Motor Co., 543 F.3d 141, 142-43 (3d Cir. 2008). The federal court dismissed the class action for lack of standing, and plaintiffs filed an amended class action complaint. Id., at 143. In response to a defense motion to dismiss the amended class action, the federal court again concluded that all but one of the named plaintiffs lacked standing to prosecute the action, id. The Third Circuit reversed. See Danvers Motor Co. v. Ford Motor Co., 432 F.3d 286 (3d Cir. 2005). Plaintiffs moved the district court to certify the litigation as a class action, and the court granted the motion. Danvers, 543 F.3d at 143. The Third Circuit granted Ford leave to appeal pursuant to Rule 28 U.S.C. § 1292(b), and reversed.

Ford’s Blue Oval Program, which ran from April 2000 to March 2005, was a voluntary program extended to all Ford dealers “to improve dealer performance and customer satisfaction” by “provid[ing] cash bonus payments and other benefits to Ford dealers who improved customer satisfaction according to certain criteria.” Danvers, at 143. The class action complaint alleged that the Blue Oval Program violated the Robinson-Patman Act, the Automobile Dealer's Day in Court Act, and various state franchise laws. Id., at 143-44. The class action alleged further that Ford breached the terms of its Sales and Service Agreement with its dealers, and sought “both injunctive relief and damages on behalf of approximately 4,000 Ford dealers.” Id., at 144. However, the Third Circuit observed that some dealers were “certified” under the Blue Oval Program while other dealers were not certified under the Program, and that “dealers expended different efforts with respect to certification, [and] the dealers were impacted by the [Program] in different ways.” Id. Indeed, the Third Circuit summarized the way in which the specific injuries allegedly suffered by the nine named plaintiffs showed those differences, see id., at 144-45.

Continue reading "Class Action Defense Cases–Danvers v. Ford Motor: Third Circuit Reverses Certification Of Class Action Holding Rule 23(b)(3)’s Predominance And Superiority Tests For Class Action Treatment Had Not Been Met" »

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

Class Action Claims not Rendered Moot by Rule 68 Offer of Judgment to Settle Individual Claims of Named Plaintiffs so long as Plaintiffs have not Delayed in Seeking Class Action Treatment of Litigation Ohio Federal Holds

Two class action lawsuits were filed against the law firm of Cheek & Zeehandelar, a consumer debt collection firm, alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and Ohio's Consumer Sales Practices Act (CSPA); the class action complaints alleged that defendant “engages in misleading and deceptive debt-collection practices” and that it “uniformly fails to properly investigate whether debtor funds are lawfully subject to attachment, prior to seeking and obtaining orders of attachment. Stewart v. Cheek & Zeehandelar, LLP, 252 F.R.D. 384, 384-85 (S.D. Ohio 2008). The class actions were consolidated, and the district court ordered that plaintiffs file their motion for class action certification by February 15, 2008. Id., at 385. Prior to February 15, defendant served a Rule 68 offer of judgment on plaintiffs, which offered to compensate them for their individual claims only; the Rule 68 offer did not offer to settle the claims of the putative class. Id. Plaintiffs moved to strike the offer of judgment and, on February 15, 2008, filed their motion for certification of the litigation as a class action. Id. The district court granted plaintiffs’ motion to strike the offer of judgment.

The district court began its analysis by noting that “[t]he purpose of Rule 68 ‘is to encourage settlement and avoid litigation.’” Stewart, at 385 (quoting Marek v. Chesny, 473 U.S. 1, 5 (1985)). Rule 23 class actions, by contrast, serves to vindicate important constitutional and statutory rights by permitting individually small damage claims to be grouped together so that the amount of money involved is worth the fight. Id. Or as the Supreme Court put it, “Where it is not economically feasible to obtain relief within the traditional framework of a multiplicity of small individual suits for damages, aggrieved persons may be without any effective redress unless they may employ the class-action device.” Deposit Guar. Nat'l Bank v. Roper, 445 U.S. 326, 339 (1980). The district court observed at page 385, “The great weight of federal authority holds that a Rule 68 offer of judgment cannot moot the named plaintiffs' claims after a motion for class certification has been filed.” (Citations omitted.) To hold otherwise would permit defendants to “unilaterally control whether the district court ever heard the certification motion,” id., at 385-86 Moreover, “Although courts are somewhat more divided about the effect of a Rule 68 offer before a class-certification motion has been filed, most have endorsed the view that the settlement offer will not moot the named plaintiffs' claims so long as the plaintiffs have not been dilatory in bringing their certification motion.: Id., at 386 (citations omitted). After summarizing the reasons behind the majority view, the district court adopted that rule and held, further, that plaintiffs had not been dilatory in seeking class action certification. Id., at 386-87. Accordingly, the district court granted plaintiffs’ motion to strike the Rule 68 offer of judgment, id., at 387.

Continue reading "Class Action Defense Cases--Stewart v. Cheek & Zeehandelar: Ohio Federal Court Strikes Rule 68 Offer Of Judgment In FDCPA Class Action Holding Rule 68 Offer To Settle Individual Claims After Class Action Certification Motion Filed Cannot Moot Class Claims" »

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

Trial Court Erred in Decertifying UCL Class Action because Post-Proposition 64 UCL Relief does not Extend Beyond Named Plaintiffs Absent Class Action Treatment and because Attorney Fees Generally not Recoverable Absent Class-Wide Relief California State Court Holds

Plaintiffs filed a class action against 24 Hour Fitness alleging violations of California’s unfair competition law (UCL) and Consumers Legal Remedies Act (CLRA), and false advertising; the class action complaint asserted that their health club memberships allowed them to renew for an additional three years – the same period as their original membership contract – “at the same rate if they renewed their membership when the initial term expired,” but defendant asserted that the membership contracts permitted “renewals at the specified rate for an annual term only.” Harper v. 24 Hour Fitness, Inc., ___ Cal.App.4th ___ (Cal.App. October 22, 2008) [Slip Opn., at 2-3]. The class action argued that “24 Hour Fitness’s contracts and sales techniques were deceptive and falsely implied that members who prepaid their dues for the entire contract term were entitled to keep their dues at the same rate if they renewed their membership when the initial term expired.” Id., at 2. In March 2003, the trial court granted plaintiffs’ motion to certify the litigation as a class action, id., at 3-4, but plaintiffs thereafter made seven (7) attempts to modify the definition of the class, each of which were rejected by the trial court, id., at 4-5. In January 2006, defense attorneys moved the trial court to decertify the class, which the trial court granted. Id., at 5-7. The Court of Appeal reversed.

The trial court’s class action decertification order was based on the court’s reexamination of whether a class action was a superior means for resolving the UCL claims and whether – with the benefit of three (3) years of class discovery – plaintiffs could establish commonality and typicality. Harper, at 5-6. The trial court concluded that class action treatment was no longer warranted; on the contrary, it found that class action treatment “has ceased to be beneficial” and that class action treatment had “become an obstacle to the prompt, fair, and (reasonably) economical resolution of this matter.” Id., at 6.. The Court of Appeal summarized the court’s ruling at page 6 as follows:

Continue reading "Class Action Defense Cases–Harper v. 24 Hour Fitness: California State Court Reverses Decertification Of Class Action Holding Trial Court’s Analysis Of UCL Class Action Claims Was "Legally Incorrect"" »

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

Class Action Certification of Multi-State Class Action Alleging Consumer Protection Act Violations Improper because Reliance on Allegedly False/Deceptive Advertisements cannot be Presumed and Commonality not Present Seventh Circuit Holds

Plaintiff filed a putative multi-state class action against Sears, Roebuck alleging false advertising under various state consumer protection statutes and individual claims for violations of Tennessee’s Consumer Protection Act; specifically, the class action complaint asserted that Sears engaged in deceptive advertising practices in connection with the sale of its Kenmore clothes dryers. Thorogood v. Sears, Roebuck & Co., 547 F.3d 742 (7th Cir. 2008) [Slip Opn., at 1]. According to the class action, “the words ‘stainless steel’ were imprinted on the dryer, and point of sale advertising explained that this meant that the drum in which the clothes are dried inside the dryer was made of stainless steel”; plaintiff, however, believed that this meant “that the drum was made entirely of stainless steel.” Id. The class action was filed in federal court, asserting federal jurisdiction under the Class Action Fairness Act (CAFA). Id., at 2-3. The district court granted plaintiff’s motion for class action certification, id., at 3. In concluding that class action treatment was warranted, the district court reasoned that because “Sears marketed its dryers on a class wide basis…reliance can be presumed.” Id., at 10. The Seventh Circuit granted Sears’ appeal and reversed.

The Seventh Circuit discussed at length the pros and cons of class action lawsuits. See Thorogood, at 3-6. It identified one of the problems with class action lawsuits as “the tendency, when the claims in a federal class action are based on state law, to undermine federalism.” Id., at 6. The Circuit Court explained at page 6, “Our plaintiff wants to litigate in a single federal district court half a million claims wrested from the control of the courts of the 29 jurisdictions in which those claims arose and the law of which govern the claimants’ entitlement to and scope of relief. The instructions to the jury on the law it is to apply will be an amalgam of the consumer protection laws of the 29 jurisdictions, and procedural rules by which particular jurisdictions expand or contract relief will be ignored.” The Court noted, for example, that Tennessee’s Consumer Protection Act does not permit class actions. Id. Defense attorneys argued, therefore, that the class action sought relief on behalf of Tennessee residents that would not be available to them in state court. Id., at 7-8. The Seventh Circuit agreed, observing that “the purpose of the diversity jurisdiction is to protect out-of-state residents against state judicial bias in favor of residents; it is not to expand relief obtainable under state law.” Id., at 8.

Continue reading "Sears UCL Class Action Defense Cases–Thorogood v. Sears: Seventh Circuit Decertifies Class Action Holding Reliance Cannot Be Presumed And Trial On Consumer Protection Class Action Claims Would Require Individual Hearings And Proof" »

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

Private Injunctive Relief Unavailable Under Truth in Lending Act, so District Court in TILA Class Action Seeking such Relief Improperly Granted Class Action Treatment under Rule 23(b)(2) and Erred Further in Awarding $22 Million in Damages as “Restitution or Disgorgement” under Declaratory Judgment Act Eleventh Circuit Holds

Plaintiff filed a class action against Beneficial Florida, Inc. and numerous affiliates (the Bank) alleging violations of the federal Truth in Lending Act (TILA) in the disclosures made by the Bank in connection with a $2000 loan; the class action complaint alleged that the Bank violated TILA by listing the fee for non-filing insurance (NFI) in the wrong column on the disclosure form. Christ v. Beneficial Corp., ___ F.3d ___ (11th Cir. October 28, 2008) [Slip Opn., at 1-2]. Specifically, the class action alleged that the Bank disclosed the NFI as an “amount charged” when it should have been disclosed as a “finance charge,” id., at 4. In part, plaintiff’s class action complaint sought damages, injunctive relief, declaratory relief, and disgorgement, id., at 4-5. The Judicial Panel on Multi-District Litigation centralized the class action with other related class actions against the Bank in the Middle District of Alabama, and ultimately the Alabama federal court certified a nationwide class action against the Bank under Rule 23(b)(2), id., at 5-6, which authorizes class actions where a defendant acted “on grounds that apply generally to the class, so that injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole,” FRCP Rule 23(b)(2). In certifying the class action, the district court held that “[i]njunctive and declaratory relief are available under TILA,” id., at 6 (citation omitted). The district court later granted summary judgment in favor of the plaintiff class “and awarded injunctive relief and over $22 million in restitution and disgorgement pursuant to the Declaratory Judgment Act.” Id., at 3. The Eleventh Circuit reversed.

The Eleventh Circuit primarily addressed whether “private injunctive relief” is available under TILA: it noted that TILA is silent on the issue, neither expressly authorizing such relief nor prohibiting it, and that the district court “inferred from TILA’s silence that TILA provides private injunctive relief.” Christ, at 8. Based on its detailed analysis, the Circuit Court disagreed. See id., at 8-12. The Eleventh Circuit then held that certification of a Rule 23(b)(2) class action was inappropriate because the Declaratory Judgment Act, standing alone, would not support such an order. Id., at 12. The Court explained, “The relief sought under the Declaratory Judgment Act is essentially a declaration of liability under TILA, and can only ‘lay the basis for a damage award rather than injunctive relief.’” Id. (citation omitted). Accordingly, because it held that TILA did not authorize private injunctive relief, the Eleventh Circuit vacated the class action certification order. Id.

Continue reading "TILA Class Action Defense Cases–Christ v. Beneficial: Eleventh Circuit Reverses Class Action Certification And Damage Award In Truth-In-Lending-Act Class Action Holding TILA Does Not Authorize Actions Seeking Private Injunctive Relief" »

Posted In: Certification of Class Actions, Multidistrict Litigation, Class Action Court Decisions, RESPA/TILA Class Actions

Class Action Alleging Violation of Telephone Consumer Protection Act (TCPA) Improperly Certified as Class Action because Issue of Consent to Receipt of Fax Advertisements not Susceptible to Class-Wide Proof Fifth Circuit Holds

Plaintiff filed a class action against BioPay alleging violations of the federal Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227; The class action complaint alleged that BioPay, through a third-party contractor, sent more than 4000 fax advertisements over a four-year period to potential clients in Louisiana. Gene & Gene LLC v. BioPay LLC, 541 F.3d 318, 322 (5th Cir. 2008). The allegations underlying the class action were that the Bank decided to “implement[] a plan to consolidate the trust management activities of other banks it had acquired” and led class members to believe that “their assets were being managed on an individualized basis, when in fact the assets were being invested in shares of the Nations Funds mutual fund, managed by an investment company substantially owned by the Bank.” Id. The class action alleged further that “higher-yielding and better-managed mutual funds were available in the marketplace,” but the Bank directed customers to Nations Funds for the Bank’s economic benefit and that the Bank accomplished this by sending “misleading letters” to trustees and beneficiaries that, in part, threatened “adverse tax consequences” if they went elsewhere. Id. Defense attorneys moved to dismiss the federal claims on the merits, and moved to dismiss the state-law claims as preempted by SLUSA (Securities Litigation Uniform Standards Act of 1998). Id. In part, the defense argued that the class action should be dismissed on the grounds of judge shopping because plaintiffs’ counsel “had already filed at least five class actions in various jurisdictions seeking redress for the same alleged injuries.” Id., at 1125. The district court granted the defense motion in its entirety, and denied plaintiffs’ request for leave to file an amended class action complaint. Id., at 1125. Defense attorneys filed an interlocutory appeal under Rule 23(f) arguing (1) the district court lacked subject matter jurisdiction over the class action, and (2) the district court erred in certifying the litigation as a class action. Id., at 321-22. The Fifth Circuit held that the district court had subject matter jurisdiction by virtue of the Class Action Fairness Act of 2005 (CAFA), but reversed the class action certification order.

By way of background, the TCPA prohibits sending “unsolicited advertisements” from one fax machines to another; a fax is deemed to be an “unsolicited advertisement” if it advertises “the commercial availability or quality of any property, goods, or services” and is sent without “prior express invitation or permission.” BioPay , at 322 (citation omitted). In this regard, Federal Communications Commission rules adopted to implement the TCPA provide that advertisements “from persons or entities who have an established business relationship with the recipient can be deemed to be invited or permitted by the recipient.” In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 7 F.C.C.R. 8752, 8779 n.87 (1992). (The TCPA was amended by the Junk Fax Prevention Act of 2005, but this case involves acts that predate those amendments.) The TCPA authorizes private rights of action by recipients of unsolicited fax advertisements “to enjoin future violations of the TCPA and/or to recover the greater of his actual damages or $500 for each such violation,” and “[t]he monetary award may be trebled if the court finds that a violation was willful or knowing.” BioPay, at 322 (citation omitted).

Continue reading "Class Action Defense Cases–Gene & Gene v. BioPay: Fifth Circuit Reverses Class Action Certification Of TCPA Class Action Holding Plaintiff Failed To Establish Class-Wide Proof Existed As To Issue Of Consent To Receive Fax Advertisements" »

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

ERISA Class Action Claims Satisfied Requirements for Class Action Treatment because “Federal Courts have Overwhelmingly Held that ERISA Breach of Fiduciary Duty Claims are Appropriate for Class Action Treatment” Ohio Federal Court Holds

Plaintiffs, former employees of Fifth Third Bancorp and participants in the company’s profit sharing plan, filed a class action against various defendants alleging breach of fiduciary duties under ERISA; specifically, the class action complaint asserted that the company’s stock was an “imprudent investment” during the proposed class period. Shirk v. Fifth Third Bancorp, ___ F.R.D. ___ (S.D. Ohio September 30, 2008) [Slip Opn., at 1-2]. According to the class action, defendants “knew or should have known that the merger of Fifth Third with Old Kent Financial Corp. severely strained Fifth Third’s infrastructure and exposed a widespread breakdown in Fifth Third’s internal controls, … [which] ultimately led Fifth Third to take an $81 million dollar pre-tax charge for its erroneous accounting reconciliation.” Id., at 2. Thus, the district court explained at page 2 that “[t]he quintessential claim is that Fifth Third stock was an imprudent investment for the Plan throughout the class period.” Plaintiff filed a motion with the federal court for certification of the litigation as a class action; the district court granted the motion.

Preliminarily, the federal court stated that “federal courts have overwhelmingly held that ERISA breach of fiduciary duty claims are appropriate for class action treatment.” Shirk, at 3 (footnote omitted). The district court readily found the class action numerosity requirement had been met because the proposed class contained 20,000 people. Id., at 3-4. The court also found that the commonality and typicality requirements for class action treatment had been satisfied, id., at 4-5, and that plaintiff was an adequate class representative, id., at 5-6. Finally, analyzing the class action requirements of Rule 23(b), the federal court concluded that ERISA breach of fiduciary duty class actions are properly certified under Rule 23(b)(1)(B), which states that courts may certify a lawsuit as a class action if “the prosecution of separate actions by or against individual members of the class would create a risk of * * * adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.” Id., at 7. Accordingly, the district court granted plaintiff’s class action certification motion. Id., at 9.

Continue reading "Class Action Defense Cases–Shirk v. Fifth Third Bancorp: Ohio Federal Court Certifies ERISA Class Action Holding Rule 23’s Class Action Requirements Were Met And That ERISA Breach Of Fiduciary Duty Claims Are Appropriate For Class Action Treat" »

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

Class Action Complaint Alleging Violations of California’s Unfair Competition Law (UCL) Properly Certified as Class Action because Class Action’s Product Defect Claims were Susceptible of Common Proof and Objection to Class Action Treatment went to Merits of the Lawsuit California Appellate Court Holds

Plaintiff filed a class action complaint against Hewlett-Packard alleging inter alia violations of California’s Unfair Competition Law (UCL); specifically, the class action alleged that HP sold laptop computers knowing that they contained a manufacturing defect that “the computers had defective inverters that could potentially cause dim displays,” but HP failed to disclose this fact to prospective purchasers. . Hewlett-Packard Co. v. Superior Court, ___ Cal.App.4th ___, 83 Cal.Rptr.3d 836 (Cal.App. September 26, 2008) [Slip Opn., at 1-2]. The class action complaint alleged violations of California’s UCL and Consumer Legal Remedies Act, as well as breach of express warranty and unjust enrichment. Id., at 2. Plaintiff first moved the trial court to certify the litigation as a class action in August 2005; defense attorneys opposed class action treatment on the grounds that “plaintiffs had not shown either that common issues of fact and law predominated or that there was an ascertainable class” because “[out] of the approximately 118,514 class model computers sold under the Pavilion brand name, [only] approximately 4,716 were reported to need repairs due to display screen problems.” Id., at 3. The trial court denied the motion, finding that the proposed definition of the class was unworkable but stated that it would consider a new motion for class action certification if plaintiff cured the defect. Id. Plaintiff again sought class action certification, but the trial court expressed concern that the class definition failed to include the specific type of inverter underlying the putative class claims and gave plaintiff an additional opportunity to correct the definition. Id., at 4. Eventually, after several months and additional briefing to address various concerns, the trial court granted the motion and certified the lawsuit as a class action. Id., at 4-5. Defense attorneys filed a petition for a peremptory writ of mandate seeking to vacate the class action certification order on the ground that the required “community of interest” principles enunciated in Daugherty v. American Honda Co., Inc. (2006) 144 Cal.App.4th 824 were not met, thus class action treatment was inappropriate. Id., at 1. In certifying the class, the trial court stated that it was not considering the impact of the Daugherty opinion because the holding in that case went to “whether individual class members are entitled to recover, not whether there is a sufficient class.” Id., at 5. The California Court of Appeal denied the writ.

After the California Supreme Court’s denied a petition for review in Daugherty, defense attorneys filed a motion with the trial court for decertification of the class action. Hewlett-Packard, at 5. The trial court denied the motion on the ground that decertification was “premature,” but the court requested plaintiff to “submit[] a revised proposed class action notice” which it subsequently approved. Id. Defense attorneys filed a petition for writ of mandate, id. After discussing class actions in general and noting that it reviewed the trial court’s order for abuse of discretion, see id., at 5-7, the appellate court explained that “the primary issue in dispute is whether the trial court abused its discretion in concluding that common issues predominate necessitating class treatment,” id., at 7. Defense attorneys argued that Daugherty compelled denial of class action treatment; Daugherty held that claims for breach of express warranty do not extend product defect claims beyond the warranty period, and the defense argued that under the reasoning of Daugherty, the class action claims involve individual issues rather than issues subject to common proof. Id. Defense attorneys argued that the trial court therefore “erred in refusing to apply the principals of Daugherty to the determination of class certification.” Id. The appellate court disagreed.

Continue reading "UCL Class Action Defense Cases–Hewlett-Packard v. Superior Court: California Court Denies Writ Seeking Reversal Of Class Action Certification Order In Unfair Competition Law (UCL) Class Action" »

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

Class Action Alleging Employer Coerced Restaurant Employees to Share Tips in Violation of Federal Fair Labor Standards Act (FLSA) Decertified as Class Action because “Critical Questions of Fact” in Proposed Class Action “Vary from Plaintiff to Plaintiff and Restaurant to Restaurant” Texas Federal Court Holds

Plaintiff filed a class action against her employer, Brinker International, alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, plaintiff alleged that at its Chili’s restaurants, defendant required that servers share their tips with “Quality Assurance employees (QAs). Roussell v. Brinker International, Inc. ___ F.R.D. ___ (S.D. Tex. September 30, 2008) [Slip Opn., at 1]. The district court certified the lawsuit as a class action on behalf of approximately 3500 servers, id. The 3500 servers who opted into the FLSA class action worked at 775 Chili’s restaurants in 45 states, id., at 3. In July 2008, the federal court reaffirmed that “the question of whether QAs were eligible to participate in a mandatory tip pool could be tried collectively,” but it expressed concern that “the question of manager coercion could not be fairly tried using representative testimony based on Plaintiffs’ original trial plan.” Id. The district court requested that plaintiff submit a revised trial plan, id. Plaintiff proposed a three-phase trial plan, id., at 2; defense attorney objected to the proposal and requested that the district court decertify the class action, id., at 3. The federal court granted defendant’s motion and decertified the lawsuit as a class action.

Plaintiff argued that class action treatment was warranted and proposed the following trial plan. The federal court summarized the proposed class action trial plan at page 2 of its opinion. In Phase 1, the court would decide whether QAs are entitled to share in server tips. It they are found to be ineligible, then in Phase 2 the court “a second jury [would] consider whether a test flight of 20 to 50 of the opt-ins deposed in this case were coerced or required to share tips with QAs”; plaintiff argued that Phase 2 would “clarify the legal and evidentiary issues necessary to fully adjudicate such claims.” Roussell, at 2. In Phase 3, the federal court would hold a case management conference to determine how to resolve the claims of the remaining opt-in class members, id. Defense attorneys argued that the revised trial plan did not solve the deficiencies in the original plan, id., at 3. The district court agreed, explaining at pages 3 and 4: “One of the questions central to liability in this case is whether Plaintiffs were coerced by different managers at the 775 stores to share tips with QAs. Plaintiffs’ Revised Trial Plan does not demonstrate that this question can be fairly tried collectively ….” The federal court explained that class action treatment “is only justified in cases in which plaintiffs are similarly situated and where proceeding collectively will not render trial unfair to defendants.” Id., at 4. Class action treatment was inappropriate in this case because “this lawsuit involves critical questions of fact that vary from plaintiff to plaintiff and restaurant to restaurant, and does not allow resolution of the case in a single collective proceeding.” Id., at 5. Accordingly, it granted the defense motion to decertify the class action, id., at 5-6.

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

Class Action Seeking Medical Monitoring due to Exposure to Contaminated Drinking Water Denied Class Action Treatment because Plaintiffs Failed to Demonstrate Existence of Common Proof as to Each Class Member’s Injuries West Virginia Federal Court Holds

Plaintiffs filed a putative class action in West Virginia state court against E.I. du Pont de Nemours and Company seeking damages for harm allegedly caused by drinking water contaminated with perfluoroctanoic acid, also known as “C-8,” which is a chemical that does not degrade and is “used in the manufacture of many industrial and consumer products including non-stick cookware coatings and architectural coatings.” Rhodes v. E.I. Du Pont De Nemours & Co., ___ F.Supp.2d ___ (S.D.W.V. September 30, 2008) [Slip Opn., at 1-2]. Specifically, the class action complaint alleged that DuPont’s Washington Works plant in West Virginia released C-8 into the drinking supply of the Parkersburg Water District, and that because C-8 “is not a naturally occurring substance[,] … all C-8 found in human blood is attributable to human activity.” Id., at 2. Defense attorneys removed the class action to federal court, id., at 5. Plaintiffs moved the court to certify the litigation as a class action; defense attorneys opposed class action treatment. Id., at 1. The district court denied plaintiffs’ motion explaining that while plaintiffs “presented compelling evidence that exposure to C-8 may be harmful to human health,” the class action is premised on “some potential harm to the general public” rather than on “specific injuries to each member of the proposed class.” Id. The federal court explained at page 1, “The fact that a public health risk may exist is more than enough to raise concern in the community and call government agencies to action, but it does not show the common individual injuries needed to certify a class action.” Accordingly, the district court denied plaintiffs’ class action certification motion.

We summarize the facts only briefly. DuPont has used C-8 at its plant for more than 50 years, and has released C-8 into the air and into the Ohio River. Rhodes, at 2-3. The class action alleges that C-8 emissions from the DuPont plant contaminated the public water supply and that in 1984 “detectable levels of C-8 were discovered in the tap water of [certain] communities.” Id., at 3. While the precise effect of C-8 exposure “remains uncertain,” several studies have associated such exposure to various health problems, including several types of cancer. Id. There have been calls for “precautionary measures such as removing C-8 from drinking water supplies and using alternative drinking water sources, especially for children and the elderly,” id., and various state and federal agencies have directed attention to the regulation of C-8 emissions and exposure, see id., at 3-4. A prior class action involving C-8 emissions from the Washington Works plant was filed in West Virginia state court against DuPont in 2002 entitled Leach v. E.I. Du Pont Nemours & Co.; the state court certified that lawsuit as a class action and the class action settlement ultimately approved in Leach defined the class as “all individuals who, for a period for at least one year, consumed drinking water containing .05 ppb (parts per billion) or greater of C-8 attributable to releases from the Washington Works plant from any of six specified Public Water Districts or any eligible private sources and who did not opt out of the class or waive their class member rights.” Id., at 4. Parkersburg Water District was not part of that class action because at the time its water contained less than .05 ppb of C-8; at the time the new class action was filed, the C-8 levels exceed that amount. Id., at 5.

Continue reading "Class Action Defense Cases–Rhodes v. DuPont: West Virginia Federal Court Denies Class Action Certification In Putative Medical Monitoring Class Action Holding Individualized Inquiries Would Predominate" »

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

Labor Law Class Action Erroneously Decertified because Evidence Submitted by Class Action Plaintiffs Concerning Nationwide Practices was Relevant to Predominance of Class Action Claims of Massachusetts Employees Supreme Judicial Court Holds

Plaintiffs filed a putative class action against their former employer, Wal-Mart, alleging labor law violations; the class action complaint alleged that Wal-Mart “wrongfully withheld compensation for time worked and denied of cut short rest and meal breaks to which they were entitled.” Salvas v. Wal-Mart Stores, Inc., 452 Mass. 337, 338-39 (Mass. September 23, 2008). The trial court certified the litigation as a class action on behalf of roughly 67,500 current and former employees who worked for Wal-Mart in Massachusetts during a ten-year period, id. Wal-Mart subsequently moved for summary judgment on the class action claims; Wal-Mart also moved to exclude as unreliable the testimony of plaintiffs’ main expert witness, and to decertify the class action. Id. The trial court granted summary judgment with respect to the class action’s meal breaks claims, and with respect to some of the wage claims; the trial court also granted Wal-Mart’s motions to exclude the expert testimony and to decertify the class action. Id. The Massachusetts Supreme Judicial Court reversed. We address here only that portion of the Supreme Judicial Court’s opinion concerning class action certification.

The Supreme Judicial Court found that Wal-Mart’s home office established and directed corporate-wide policies, including payroll controls. Salvas, at 339. Under these procedures, each hourly employee “adhere[d] to stringent timekeeping procedures, including clocking in and out at the beginning and end of each shift and at other prescribed times.” Id., at 340. According to Wal-Mart policy, “hourly employees should never be required to work ‘off-the-clock’” and hourly employees were generally prohibited from working overtime. Id., at 340-41. Employees were repeatedly warned that they could be terminated for working off-the-clock or for failing to take breaks, and store managers were required to investigate “every instance” of off-the-clock work. Id., at 341. Individual store managers also worked under a competing pressure: “the responsibility for payroll came with considerable pressure from the home office to boost profits by, among other things, minimizing labor costs, one of the corporation’s largest controllable expenses.” Id., at 342. Further, “Store managers were rewarded for keeping payroll costs low. Conversely, if they exceeded Wal-Mart’s stringent labor cost guidelines, they might lose their bonuses or lost their jobs.” Id. And at least as early as 1989, Wal-Mart knew that “despite the written policy directives to the contrary, store managers were sometimes ‘[a]ltering time cards to decrease reported payroll expenses’ and ‘[i]nstructing associates to work off the clock.’” Id. Wal-Mart knew also that some hourly employees were missing meal and rest breaks, id., at 342-43.

Continue reading "Wal-Mart Class Action Defense Cases–Salvas v. Wal-Mart: Massachusetts Reverses Decertification Of Labor Law Class Action (And Grant Of Summary Judgment On Class Action Claims) Holding Predominance Test Had Been Satisfied" »

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

Trial Court Erroneous Order in Labor Law Class Action Denying Motion to Compel Discovery of Contact Information of Putative Class Members Deprived Plaintiff of Opportunity to Develop Evidence Required to Support Motion for Class Action Certification thus Requiring Remand California Court Holds

Plaintiff filed a putative class action against parcel delivery company, Dynamex, alleging labor law violations; specifically, the class action complaint alleged that Dynamex, a nationwide courier and delivery service, “had improperly reclassified the drivers from employees to independent contractors in violation of California law.” Lee v. Dynamex, Inc., ___ Cal.App.4th ___ (Cal.App. August 26, 2008) [Slip Opn., at 2]. Prior to seeking class action certification, plaintiff sought to compel Dynamex to identify and provide contact information for putative class members; the trial court denied the motion, and subsequently denied class action treatment of the lawsuit. Id. The California Court of Appeal reversed, holding that “the trial court’s discovery ruling directly conflicts with the Supreme Court’s subsequent decision in Pioneer Electronics (USA), Inc. v. Superior Court (2007) 40 Cal.4th 360 (Pioneer), as well as our decisions in Belaire-West Landscape, Inc. v. Superior Court (2007) 149 Cal.App.4th 554 and Puerto v. Superior Court (2008) 158 Cal.App.4th 1242 (Puerto), and that ruling improperly interfered with [plaintiff’s] ability to establish the necessary elements for class certification….”Id., at 2.

Since 2001, Dynamex has employed approximately 800 drivers and has operated out of four locations in California; and in December 2004, the company reclassified its drivers as independent contractors “after management concluded such a conversion would generate economic savings for the company.” Lee, at 2. We do not go into greater detail as to the facts underlying the class action allegations, as they are not material to the issue resolved by the appellate court. In brief, plaintiff worked for Dynamex for 15 days, and filed his class action complaint three months after he stopped working for the company. Id., at 3. In essence, the class action alleged that as independent contractors, Dynamex drivers “performed the same tasks in the same manner as they did when they were classified as employees,” id. Soon after filing his class action, plaintiff sought from Dynamex discovery of the names and addresses of all drivers who had worked as independent contractors for the company; Dynamex objected on the ground that its employees should be given the right to “opt-in” to the request, relying on the then-recent appellate opinion in Pioneer Electronics (USA) Inc. v. Superior Court (Mar. 30, 2005, B174826), which held that “opt-in” letters protected consumer privacy rights by giving them the right to choose whether they wished to have their personal contact information shared with class action plaintiff lawyers. Id., at 3-4. The trial court denied plaintiff’s motion to compel as “premature,” and stated personal contact information would not be ordered disclosed unless and until the litigation had been certified as a class action. Id., at 4.

Continue reading "Class Action Defense Cases–Lee v. Dynamex: California Court Reverses Denial Of Class Action Certification Holding Erroneous Discovery Ruling Precluded Plaintiff From Meeting Burden Of Showing Commonality And Typicality Of Claims" »

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

Truth-in-Lending Act (TILA) Class Action Lawsuit Erroneously Granted Class Action Status because TILA does not Permit Rescission as a Class Action Remedy only Damages Seventh Circuit Holds

Plaintiffs filed a putative class action against Chevy Chase Bank for violations of the federal Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq.; the class action complaint alleged that, in connection with its adjustable rate mortgage loans, the Bank failed to make the disclosures required by federal law. Andrews v. Chevy Chase Bank, 545 F.3d 570 (7th Cir. 2008) [Slip Opn., at 3-4]. The class action sought not only statutory damages and attorney fees, but prayed for rescission as well, id., at 4.. The district court granted plaintiffs’ motion for class action certification, see Andrews v. Chevy Chase Bank, FSB, 240 F.R.D. 612 (E.D. Wis. 2007); our summary of that opinion may be found here. The author stated in that summary, “[T]he author notes that the court’s analysis is brief and superficial, and fails to address any of the cases that hold rescission to be unavailable on a class-wide basis. See, e.g., McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 423 (1st Cir. 2007) (holding that ‘as a matter of law, class certification is not available for rescission claims, direct or declaratory, under the TILA’).” Defense attorneys filed an interlocutory appeal: the Seventh Circuit explained, “we are called on to answer one question: May a class action be certified for claims seeking the remedy of rescission under the Truth in Lending Act (‘TILA’), 15 U.S.C. § 1635? The only two federal appellate courts to have addressed this question have answered ‘no,’ see McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir. 2007); James v. Home Constr. Co. of Mobile, Inc., 621 F.2d 727 (5th Cir. 1980), and we agree. TILA’s statutory-damages remedy, § 1640(a)(2), specifically references class actions (by providing a damages cap), but TILA’s rescission remedy, § 1635, omits any reference to class actions. This omission, and the fundamental incompatibility between the statutory-rescission remedy set forth in § 1635 and the class form of action, persuade us as a matter of law that TILA rescission class actions may not be maintained.” Id., at 1-2. Accordingly, the Seventh Circuit reversed.

The Circuit Court noted that because the issue presented in the appeal is “purely legal” – viz., whether class action claims for rescission may be pursued under TILA – the district court order is subject to de novo review, rather than the “abuse of discretion” standard generally employed when reviewing an order granting class action certification. Andrews, at 5. The Seventh Court noted at page 6, “Whether TILA allows claims for rescission to be maintained in a class-action format is an issue of first impression in our circuit, but the First and Fifth Circuits, in addition to California’s court of appeals, have held as a matter of law that rescission class actions are unavailable under TILA.” (Citations omitted.) The problem, in the Circuit Court’s words, was simple: TILA provides borrowers with a right of rescission under certain circumstances: “Debtors may rescind under TILA by midnight of the third business day after the transaction for any reason whatsoever…. Rescinding a loan transaction under TILA ‘“requires unwinding the transaction in its entirety and thus requires returning the borrowers to the position they occupied prior to the loan agreement.”’ Id. (citations omitted). The remedy is considered “purely personal”: “It is intended to operate privately, at least initially, ‘with the creditor and debtor working out the logistics of a given rescission.’” Id., at 7 (citations omitted). Moreover, the rescission remedy provided for in TILA “appears to contemplate only individual proceedings; the personal character of the remedy makes it procedurally and substantively unsuited to deployment in a class action.” Id. (citation omitted). Put simply, “Rescission is a highly individualized remedy as a general matter, and rescission under TILA is no exception. The variations in the transactional ‘unwinding’ process that may arise from one rescission to the next make it an extremely poor fit for the class-action mechanism.” Id.

Continue reading "TILA Class Action Defense Cases–Andrews v. Chevy Chase: Seventh Circuit Reverses Class Action Certification Of TILA Class Action Against Chevy Chase Bank Holding Rescission Not Available In Class Actions Under TILA" »

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

District Court Certified Class Action but Subsequently Decertified Class Action as to Damages because of “Unique and Individualized Proof” Required by Class Action Allegations Eleventh Circuit Holds

The Owner-Operator Independent Drivers Association, which “represents truck owners and truck drivers who enter into lease agreements to provide equipment and services to haul freight in interstate commerce for Landstar System,” a U.S. Department of Transportation-approved motor carrier, filed a class action complaint against Landstar and others alleging defendants violated the federal Truth in Leasing regulations; specifically, the class action alleged that defendants “fail[ed] to disclose in their lease agreements that banking fee charges would be deducted from compensation paid to the truck owners and drivers” and “fail[ed] to provide documentation regarding the computation of charge-back items including pricing information submitted by Qualcomm.” Owner-Operator Independent Drivers Assn., Inc. v. Landstar System, Inc.., ___ F.3d ___, 2008 WL 4058042, *1 (11th Cir. 2008). The class action “sought damages and equitable relief, including restitution, disgorgement of Landstar's profits, and injunctive relief.” Id., at *2. Defense attorneys moved to the complaint on the ground that the two-year statute of limitations had run the class action claims; the district court denied the motion, ruling that a four-year limitations period applied. Id., at *3. Eventually, the district court granted plaintiff’s motion to certify the litigation as a class action, id. The court noted, however, that “not all aspects of this case present common issues” and specifically stated that “if these common questions are resolved in favor of the putative class, the issue of damages will be unique and subject to individualized proof.” Id. The parties waved their right to a jury trial, id., and the district court ruled that “[the] only claims remaining in this action are those regarding injunctive relief, damages sustained, and attorney's fees,” id., at *4. On the first day of trial, the district court granted defendant’s motion to decertify the class as to damages, explaining that “issues regarding damages sustained by individual members of the Class would require unique and individualized proof.” Id., at *4. However, the class action was not decertified with respect to the complaint’s prayer for injunctive relief. Id. Ultimately, the district court entered judgment in favor of Landstar on the issue of damages, and entered judgment as a matter of law in favor of Landstar. Id., at *5-*6. Plaintiff appealed seven of the district court’s rulings, id., at *6; defense attorneys filed a cross-appeal. The Eleventh Circuit affirmed in part and reversed in part.

We do not discuss the specific factual allegations leveled against Landstar. See Landstar, at *1-*3. For our purposes, the Circuit Court’s discussion of the class action certification issues is paramount. In this regard, based on its ruling that plaintiff had to prove actual damages, the district court decertified the class action. Id., at *16. The district court reasoned that “decertification is appropriate because the determination of the remaining issue of damages in this case on a class-wide basis is unfeasible, unmanageable, and would not be superior to individual actions.” Id. The Eleventh Circuit noted that there are “‘extreme cases in which computation of each individual's damages will be so complex, fact-specific, and difficult that the burden on the court system would be simply intolerable...but we emphasize that such cases rarely, if ever, come along.’” Id. (citation omitted). The Circuit Court concluded that plaintiff “failed to establish that actual damages can be easily calculated for all class members, [so] the District Court did not abuse its discretion in decertifying the class for actual damages.” Id., at *17.

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

Trial Court Erred in Denying Class Action Treatment of Class Action Complaint Alleging Failure of Dealer to Attach Hang Tags to Motorcycles because Whether Defendant Violated Statute may not be Determined at Class Action Certification Stage California State Court Holds

Plaintiffs filed a class action against Honda of North Hollywood, which sells new and used Honda, Suzuki and Yamaha motorcycles, for violations of sections 11712.5 and 24014 of California’s Vehicle Code; specifically, the class action complaint alleged that defendant violated California law by failing to attach a label (or “hang tag”) setting forth the manufacturer’s suggested retail price for the motorcycle and defendant’s added charges. Medrazo v. Honda of North Hollywood, ___ Cal.App.4th ___ (Cal.App. August 21, 2008) [Slip Opn., at 2]. The class action alleged that defendant’s conduct violated California’s Unfair Business Practices Act and its Consumer Legal Remedies Act, and sought injunctive and restitutionary relief, disgorgement of the charges imposed by defendant but not disclosed on the hang tag, and damages under the CLRA. Id., at 3. About a year after she filed her class action complaint, plaintiff moved the district court for an order certifying the litigation as a class action, id., at 3-4. Defense attorneys opposed class action treatment on several grounds, including that plaintiff purchased a Honda, and therefore could not assert claims on behalf of purchasers of Suzuki or Yamaha motorcycles, and that it did not violate California law with respect to Suzuki or Yamaha motorcycles because “section 11712.5 is violated only when the manufacturer supplies hang[] tags and the dealer fails to attach them, and Suzuki and Yamaha did not supply any hang[] tags.” Id., at 5. The trial court denied plaintiff’s motion for class action certification finding that (1) dealers are not obligated to attach hang tags unless they are supplied by the manufacturer, which neither Suzuki or Yamaha provided to defendant, (2) the sales agreement plaintiff signed detailed the dealer-added costs, so “she had notice of those costs before she entered the agreement,” and (3) the class was not ascertainable in that “there is nothing in [defendant’s] records to indicate which motorcycles had hang[] tags attached to them.” Id., at 6. The Court of Appeal reversed.

With respect to the failure of Suzuki and Yamaha to supply hang tags, plaintiff argued that California law prohibited defendant from selling motorcycles without hang tags regardless of whether they have been supplied by the manufacturer. Medrazo, at 8. Defense attorneys argued that the statute expressly limits defendant’s obligation to hang tags “furnished by the manufacturer,” id. (citation and italics omitted). Plaintiff countered that resolution of this legal issue was premature at the class action certification stage of the litigation, and the appellate court agreed. Id., at 8-9. (The author finds the court’s reasoning to be wanting: The parties should not be required to prolong litigation, taxing the resources of the parties and the courts, when a legal ruling would resolve an issue central to the litigation. Simply adding the words “class action” to the caption of a complaint should not serve as a talisman to preclude trial courts from making legal rulings that, sooner or later, must be made. In this case, it was not possible for the defense to file a demurrer to the class action complaint because the class action alleged that Suzuki and Yamaha supplied hang tags that defendant failed to attach to its motorcycles. Because the trial court may properly consider evidence in ruling on a motion for class action certification, defense attorneys provided evidence that no such hang tags had been provided; plaintiff had no evidence to the contrary. The legal issue was proper for resolution, and the Court of Appeal should have addressed whether the trial court properly interpreted section 24014, an issue it left unresolved. See id., at 9 n.4.)

Continue reading "Class Action Defense Cases–Medrazo v. Honda of North Hollywood: California State Court Reverses Denial Of Class Action Certification Holding Trial Court Erred In Considering Merits Of Class Action Claims" »

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

Class Action Complaint Alleging Failure to Provide Meal and Rest Breaks not Entitled to Class Action Treatment because Employers need only “Offer” or “Authorize” Employees to Take Meal and Rest Breaks but need not Ensure that Employees Take Them California Federal Court Holds

Plaintiff filed a class action complaint in California state court against her former employer, McDonald’s, on behalf of hourly, non-exempt employees; the class action alleged that she did not receive all of her meal or rest breaks. Kimoto v. McDonald’s Corp., ___ F.Supp.2d ___ (C.D. Cal. August 19, 2008) [Slip Opn., at 1-2]. Defense attorneys removed the class action to federal court, id., at 1-2. Defense attorneys filed a motion to deny class action treatment; plaintiff’s lawyers filed a cross-motion for class certification. Id., at 2. Defense attorneys advanced several grounds for denying class action certification, including that plaintiff could not establish Rule 23(a)’s typicality or adequacy of representation requirements for her meal and rest period claims, that she could not establish Rule 23(b)(3)’s commonality and superiority requirements for her meal period, rest period, wage statement and overtime claims, that she lacks standing to pursue the wage statement claims, and that she is barred from seeking class action treatment because of her failure to seek class certification within the 90-day requirements of the court’s Local Rules or at an “early practicable time” within the meaning of Rule 23. Id., at 4. The district court denied class action certification both as untimely and on the merits.

With respect to the timing of plaintiff’s motion to certify the litigation as a class action, the district court found that plaintiff failed to comply with Rule 23(c)(1)(A)’s mandate to seek class certification at “an early practicable time after a person sues or is sued as a class representative.” Kimoto, at 4. Specifically, the motion was not filed until August 14, 2008 – a full month after the discovery cut-off date, and only two months before trial. Id. In fact, plaintiff waited until “the last date to file a motion of any kind in this action.” Id. The fact that the district court permitted plaintiff to file the motion as late as she did was not dispositive: As the federal court found at page 4, “Given that trial is just two months away, the Court does not find this to be ‘an early practicable time’ under Rule 23(c)(1)(A).” This is particularly true in light of the fact that the parties had previously requested permission of the court to have the motion on class certification heard as late as August 4, but the court denied the motion on the ground that such a late hearing date would be inappropriate. Id., at 4.

Continue reading "Class Action Defense Cases–Kimoto v. McDonald’s: California Federal Court Grants Defense Motion To Deny Class Action Certification Of Labor Law Class Action Holding Employers Need Not Ensure That Employees Take Meal And Rest Breaks" »

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

Class Action Seeking Economic and Personal Injury Damages Resulting from Sale of Contaminated Peanut Butter not Entitled to Class Action Certification because Rule 23(a)’s Typicality Test and Rule 23(b)(3)’s Predominance/Superiority Test not Satisfied Georgia Federal Court Holds

Numerous individual and class action lawsuits were filed against ConAgra arising out of peanut butter contaminated with Salmonella. The Judicial Panel on Multidistrict Litigation consolidated the various individual and class action lawsuits in the Northern District of Georgia, after which a master class action complaint was filed that sought to represent two nationwide classes: (1) purchasers of peanut butter “rendered unusable and valueless” by ConAgra’s recall, and (2) consumers of contaminated peanut butter who suffered personal injury. by the February 14, 2007 recall of such peanut butter.” In re ConAgra Peanut Butter Products Liab. Litig., ___ F.Supp.2d ___ (N.D. Ga. July 22, 2008) [Slip Opn., at 3-4]. The class action complaint sought to recover damages under an “unjust enrichment” theory with respect to the first class, and personal injury damages as to the second class. Id., at 4. Plaintiffs moved the district court to certify the litigation as a class action; the district court denied the motion. Id., at 1.

The event itself was uncontested: the FDA issued a warning concerning ConAgra’s peanut butter in February 2007, and by May 2007, the Center for Disease Control had confirmed that 628 people in 48 states had been infected by Salmonella-tainted peanut butter, and more than 70 people required hospitalization. In re ConAgra, at 1-2. ConAgra recalled all of the potentially-contaminated products. Testing revealed that less than 2% of the jars contained Salmonella, but ConAgra “offered full refunds to all purchasers of recalled peanut butter.” Id., at 3. The district court noted that the recall “received a lot of publicity” and that there was “widespread participation in the refund program.” Id. Specifically, by January 2008 ConAgra had “refunded $2,984,308.68 directly to consumers, representing 941,302 jars of peanut butter” and had “reimbursed retailers $30,665,293.00 for inventory that was in the retailers’ possession at the time of the recall or for product returned to the retailers by customers.” Id.

Continue reading "Class Action Defense Cases–In re ConAgra: Georgia Federal Court Denies Class Certification Motion Holding Proposed Products Liability Class Action Lacked Typicality And Failed Predominance And Superiority Test" »

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

Class Action Complaint Against Mobil Oil Alleging Defendants Improperly Deducted Costs and/or Expenses from Mineral Rights Payments to Royalty Owners Satisfies State’s Class Action Requirements Oklahoma State Court Holds

Plaintiffs filed a class action against various Mobil Oil and Exxon Mobil entities; the class action complaint alleged that defendants had represented to the class that oil royalty payments would be free and clear of any operating or investment costs, but that under the “Fiske Formula” utilized by defendants to calculate payments to class members, defendants deducted from payments to the class certain operating or investment costs. Weber v. Mobil Oil Corp., Custer County District Court Case No. CJ-2001-53 (July 31, 2008) [Slip Opn., at 1-3]. The class action complaint contained, inter alia, theories of breach of fiduciary duty, conversion, fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, violation of Oklahoma’s Production Revenue Standards Act, unjust enrichment, accounting, and constructive trust. See id., at 16-21. Plaintiffs’ lawyers moved the court to certify the litigation as a class action, id., at 1-2. The trial court concluded that the requirements for class action certification had been satisfied and granted the motion.

The trial court first concluded that “all royalty owners could be ascertained by a combination of title searches and data from Mobil and other Tract Operator’s records,” and that numerosity was not subject to dispute given that the class consisted of approximately 1600 members. Weber, at 7. The court also had no difficulty in concluding that plaintiffs were adequate representatives of the members of the proposed class action, and noted that defendants did not contest the adequacy of class counsel. See id., at 12-13. With respect to commonality, the trial court found that Mobil’s operations “were conducted as if there was a single lease executed by all royalty interest mineral owners” and that the “plain language” of the agreement required that distributions be paid “free and clear of all [expenses] and free of any liens.” Id., at 8. Further, the evidence presented in support of class action certification established that “Mobil applied the Fiske Formula, reducing the average weighted price…by 14.83% for the entire period of 1968-1998,” id., at 8-9.Accordingly, the court found “common questions regarding accounting and damages exist for the class.” Id., at 9. Moreover, the court found that common representations and omissions were made to members of putative class, see id., at 9-10. Additionally, the trial court found that common questions of law exist, warranting class action treatment. See id., at 10-11. Finally, the trial court found that plaintiffs’ had demonstrated both predominance and superiority, also warranting class action treatment. See id., at 13-15. Because the court found that plaintiffs had satisfied all of the requirements for class action certification under Oklahoma law, it granted plaintiffs’ motion. Id., at 29. The court’s legal analysis may be found at pages 21-29.

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

Class Action Claims by Rice Growers Seeking Damages Arising from Contamination of U.S. Rice Supply by Non-Approved Genetically Modified Strains of Rice not Appropriate for Class Action Treatment because Substantial Differences in Individual Damages and Proof of Damages Defeat Rule 23(b)(3) Requirement for Predominance and Superiority Missouri Federal Court Holds

Various class action lawsuits were filed against Bayer CropScience and others seeking to recover for damages allegedly when “the defendants contaminated the U.S. rice supply with non-approved genetically modified strains of rice, thereby affecting the market price for plaintiffs’ crops.” The class action complaints were filed after the U.S. Department of Agriculture announced, in August 2006, that trace amounts of a rice seed developed by Bayer CropScience and “designed to be resistant to a Bayer herbicide, Liberty Link,” had been found in the U.S. rice supply. In re Genetically Modified Rice Litig., 251F.R.D 392 (E.D. Mo. 2008) [Slip Opn., at 1-2]. (The rice strain at issue in the class actions “is now deregulated by USDA, [but] at the time of the contamination it was not approved for human consumption.” Id., at 2.) The Judicial Panel on Multidistrict Litigation consolidated the class actions for pretrial purposes in the Eastern District of Missouri, and plaintiffs’ filed a master consolidated class action complaint. Id., at 1. “The plaintiffs in the master consolidated class action complaint are rice producers from five U.S. states where rice is grown and harvested: Arkansas, Louisiana, Mississippi, Missouri and Texas.” Id., at 3.Plaintiffs’ lawyers moved for class action certification; defense attorneys opposed class action treatment on the grounds that individual issues predominate over common issues. Id., at 1. The district court agreed that class action treatment was not warranted, concluding that class action certification was “inappropriate…because plaintiffs’ varying claims for damages are not amenable to class-wide adjudication.” Id.

According to the master class action complaint, world-wide reaction to the announcement directly affected the market for U.S. long grain rice: Japan barred further imports of such rice, the European Union required that all U.S. rice be “tested and certified as free of genetically-modified traits,” and several other countries – including Russia, Canada, the Philippines, Taiwan and Iraq – “imposed restrictions on U.S. rice imports.” In re Genetically Modified Rice, at 2-3. The class action alleged that “the U.S. market price for rice dropped dramatically as a result of Bayer’s contamination of the rice supply.” Id., at 3. The U.S. produces 13% of the world’s rice and exports nearly half of its rice, id. The class action relies on the market price for rice as listed on the Chicago Board of Trade (CBOT) for the period of August 18-23, 2006 to support its claim that the “dramatic price drop” is attributable to the announcement concerning the discovery of the contaminated rice. Id., at 4. The class action alleged further that economic harm continued beyond August 2006, id.

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

Certification of Putative Class Action for Purposes of Settlement Required Satisfaction of Rule 23 Class Action Requirements, and Class Proposed for Settlement of Nationwide Class Action Failed to Meet Rule 23(b)(3)’s Predominance Test Requiring Decertification of Class Action New York Federal Court Holds

In 2005, four class action lawsuits were filed against Take-Two Interactive Software and its wholly-owned subsidiary, Rockstar Games; the complaints sought nationwide class action status and alleged, inter alia, violations of the consumer protection statutes of each state and the District of Columbia based on the “inclusion of an interactive, sexual minigame…in their premier product, Grand Theft Auto: San Andreas.” In re Grand Theft Auto Video Game Consumer Litig. (No. II), ___ F.Supp.2d ___ (S.D.N.Y. July 30, 2008) [Slip Opn., at 1]. The Judicial Panel on Multidistrict Litigation coordinated the various class action lawsuits, together with tag-along class action complaints, in the Southern District of New York. Id., at 2. Soon thereafter, the court appointed lead counsel for the putative class and a consolidated, amended class action complaint was filed. Id., at 2-3. The amended class action alleged that defendants marketed and sold Grand Theft Auto with an improper “content rating,” which they obtained by “withholding pertinent information from the entity charged with assigning content ratings to video games, the Entertainment Software Ratings Board”; specifically, the class action complaint charged that defendants failed to disclose that Grand Theft Auto “contained the Sex Minigame…, a game-within-the-game that allowed players to control the protagonist’s movements as he engaged in various sexual acts” and that purchasers could access the Sex Minigame through what came to be known as the “Hot Coffee Mod.” Id., at 3. Defense attorneys moved to dismiss the class action to the extent it advanced claims “under the laws of states where the named plaintiffs did not purchase” the game; the district court denied the motion, holding that a determination of whether to certify the litigation as a class action “was logically antecedent to the standing issues raised therein.” Id., at 4. Plaintiffs thereafter moved the federal court to certify the litigation as a nationwide class action; defense attorneys opposed class action treatment, “challenging the propriety of a nationwide class action that asserts claims under the disparate laws of the fifty states.” Id., at 4-5. Before the court ruled on that motion, the parties negotiated a settlement of the class action claims, id., at 5. In December 2007, the federal court conditionally certified a nationwide class action for settlement purposes and gave preliminary approval to a settlement of the class action, id., at 1, 5-6. However, in light of the Second Circuit Court of Appeal’s subsequent opinion in McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008), the district court decertified the settlement class. Id. (A summary of the McLaughlin opinion may be found here.)

We cut to the chase of the district court’s 58-page opinion. The district court correctly noted that even for purposes of settlement, the plaintiffs were required to meet the class action criteria set forth in Rule 23(a) – viz., numerosity, commonality, typicality and adequacy of representation – as well as, in this case, Rule 23(b)(3). In re Grand Theft Auto, at 9-10. This latter requirement means that plaintiffs “must show that ‘questions of law or fact common to [Settlement Class] members predominate over any questions affecting only individual members,’ and that the class action ‘is superior to other available methods for fairly and efficiently adjudicating the controversy.’” Id., at 10 (quoting Fed. R. Civ. P. Rule 23(b)(3)). While the proposed settlement is relevant, it goes merely to whether class action treatment would create manageability problems, id. “Trial-manageability issues aside, however, the ‘requirements [of Rule 23(a) and (b)] should not be watered down by virtue of the fact that the settlement is fair or equitable.’” Id. (quoting Denney v. Deutsche Bank AG, 443 F.3d 253, 270 (2d Cir. 2006)).

Continue reading "Class Action Defense Settlement Cases–In re Grand Theft Auto: New York Federal Court Decertifies Class Action Holding Proposed Settlement Class In Nationwide Consumer Protection Law Class Action Lacked "Cohesiveness" Required By Rule 23(b)(3)" »

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

District Court Erred in Finding Lack of Commonality Among Proposed Class in Labor Law Class Action Alleging Pay Discrimination Ninth Circuit Holds but Remands Class Action to District Court for Further Consideration because Lower Court had not Addressed Remaining Rule 23 Class Action Requirements

Plaintiffs, current and former Hispanic employees Bashas’, filed a putative class action against Bashas’ alleging violations of Title VII of the 1964 Civil Rights Act; specifically, the class action alleged that Bashas’ discriminated against members of the putative class on the basis of their national origin in that their “pay and working conditions [were] based on their national origin.” Parra v. Bashas’, Inc., ___ F.3d ___ (9th Cir. July 29, 2008) [Slip Opn., at 9636]. According to the class action complaint, Bashas’ operates 150 grocery stores under the trade names of Bashas’, A.J.’s Fine Foods and Food City, id., at 9637. The demographics of both the patrons and the employees differ substantially; for example, 15% of the Bashas’ and A.J.’s workforce is Hispanic, but 75% of the Food City workforce is Hispanic. Id. The class action alleged that, while the clientele differed, the employee job requirements at the three stores were “practically indistinguishable,” and that in 2003 Bashas’ implemented a program to equalize the pay scales at the stores over a period of time. Id. The class action complaint further alleged that the pay discrepancies ranged from $300-$6000 per year, with Hispanic employees generally receiving less pay than employees at Bashas’ and A.J.’s, id. Plaintiffs moved the district court to certify the litigation as a class action; the federal court granted class action treatment with respect to the “working conditions” claim, but ruled that plaintiffs had failed to adequately establish commonality to support class action treatment of the “pay discrimination” claim. Id., at 9636. The Ninth Circuit granted plaintiffs’ request for leave to appeal the district court’s order, id., at 9638, and reversed.

The Circuit Court focused solely on the district court’s conclusion that plaintiffs “failed to establish commonality among the proposed class members for their pay discrimination claim.” Parra, at 9639. To find commonality under Ninth Circuit authority, “‘[t]he existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies.’” Id., at 9640 (citations omitted). The Court noted at page 9641 that “the district court found past pay disparities for similar jobs at Bashas’, Inc.’s three brand stores,” and that it “noted there significant conclusions conceded by Bashas’, Inc.” – (1) that a higher percentage of its employees work for Food City, (2) that during the relevant time period the pay scale at Food City was lower than at Bashas’ and A.J.’s, and (3) that Hispanic employees were paid a lower hourly rate for similar jobs. The district court found these facts insufficient because ”pay disparities no longer existed at the time the order [denying class action certification] was written.” Id., at 9641. This ruling was error, because the court also should have considered “evidence of past pay disparities and discrimination common to the Hispanic workers at Food City.” Id.

Continue reading "Class Action Defense Cases–Parra v. Bashas’: Ninth Circuit Reverses Denial Of Class Action Treatment Of Labor Law Class Action’s Pay Discrimination Claim And Remands For Consideration Of Remaining Class Action Factors" »

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

Jury Verdict in Antitrust Class Action Affirmed because Plaintiffs Satisfied Rule 23(b)(3) Predominance Requirement for Class Action Certification and because Notice to Absent Class Members was Adequate Sixth Circuit Holds

In 2002, plaintiffs filed a class action against various defendants, including Columbia Iron and Metal Company, alleging violations of federal antitrust laws. The class action complaint sought to represent the interests of plaintiffs and “a class of industrial scrap-generating companies in Northeastern Ohio.” In re Scrap Metal Antitrust Litig., 527 F.3d 517, 523 (6th Cir. 2008). According to the class action, plaintiffs sell unprocessed scrap metal, generated as a byproduct of their manufacturing, to brokers and dealers, “who then haul, clean, sort, and process the scrap before selling it to end users, such as steel mills.” Defendants allegedly violated the Sherman Act by “agreeing not to compete with one another, submitting rigged bids, setting prices for the purchase of unprocessed scrap metal, and imposing financial penalties on co-conspirators for disobeying allocation agreements.” Id. In March 2004, the district court certified the litigation as a class action, id., at 523-24. In 2005, Columbia’s defense attorneys moved to decertify the class on the grounds that notice to the class was inadequate, but the district court denied the motion. Id., at 524. A jury awarded plaintiffs more than $20 million, including $11.5 million against Columbia which the district court trebled, pursuant to 15 U.S.C. § 15(a). Id., at 524. Columbia appealed the jury verdict; the Sixth Circuit affirmed.

The Circuit Court explained at page 523, “The movement of unprocessed scrap from generators to dealers generally works as follows: The dealers submit bids to the generators for the purchase of unprocessed scrap during a specified time period at a set price. In setting their bid price, dealers consult various trade publications, which report the prevailing prices that dealers can expect to charge users for the scrap after they have processed it. To ensure that they turn a profit, dealers set their bid price for the unprocessed scrap below the amount they will ultimately charge the users for the processed scrap. If the bid is accepted by the scrap generator, the generator and the dealer enter into a contract at the bid price for the bid period.” As noted above, the class action complaint alleged that defendants conspired to deflate the prices they paid for scrap metal. Defense attorneys raised several arguments, but we focus only on the claim that the district court should not have permitted the litigation to proceed as a class action. Specifically, Columbia argued that the district court erred in certifying a class action because the “predominance” test of Rule 23(b)(3) had not been satisfied as “damages could not be calculated on a class-wide basis.” Id., at 535. Columbia also challenged the notice given to absent class members on the ground that it failed to adequately inform them of “the binding effect of a class judgment.” Id., at 536.

Continue reading "Class Action Defense Cases–In re Scrap Metal: Sixth Circuit Affirms $34 Million Class Action Judgment In Antitrust Class Action Case Holding District Court Properly Certified Litigation As A Class Action" »

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

Class Action Plaintiff Failed to Establish Proximate Cause Underlying Consumer Fraud Claim based on QVC’s “Retail Value” Comparisons of Retail Products, and Trial Court Properly Denied Plaintiff’s Motion for Class Action Certification and Properly Granted QVC’s Motion for Summary Judgment Illinois State Court Holds

Plaintiff filed a class action complaint in Illinois state court against QVC – a retailer of consumer products on television and on an Internet website – alleging violations of the state’s Consumer Fraud and Deceptive business Practices Act. Mulligan v. QVC, Inc., 888 N.E.2d 1190, 1192 (Ill.App. 2008). QVC generally lists a “comparative price” for its products; QVC airs on television “viewer education spots” that advise prospective customers that when it lists a “retail value” for a product, “that figure represents either an actual comparison-shopped price or the price QVC believes that the same or a comparable product would be offered by department stores or other retailers using a customary markup for that product category.” Id., at 1192-93. QVC also explains that the “retail value” listed “does not necessarily represent the prevailing retail price in every community, or the price at which the item was previously sold by QVC.” Id., at 1193. The class action complaint “alleged that QVC’s listed ‘retail value’ overstated the prevailing market price for certain products it sold and falsely created the impression that consumers were receiving a bargain by purchasing at lower QVC prices.” Plaintiff’s lawyer moved the trial court to certify the litigation as a class action, but the court denied the motion because “individual issues of law and fact predominated.” Id., at 1192. Defense attorneys then moved the court for summary judgment as to plaintiff’s individual claims; the trial court granted the defense motion, thereby terminating all individual and class claims in the putative class action. Id. Plaintiff appealed, arguing that the trial court erred in granting summary judgment and further erred in denying her motion for class action treatment. Id. The appellate court affirmed.

An understanding of the facts foretells the appellate court’s holdings. Plaintiff purchased more than 200 items from QVC, and specifies in her class action complaint four products that she purchased for substantially less than QVC’s listed “retail value”; the retail values ranged from $39-$60, and plaintiff paid from $26.75-$38.12. Mulligan, at 1193. Plaintiff’s expert testified that “she determined comparable prices for the products [plaintiff] purchased from QVC by using a cost and a market approach to valuation,” and that in so doing the retail value for some items was actually less than the amount paid by plaintiff, though she “did not factor in ay applicable sales tax, shipping and handling, or other additional costs.” Id., at 1194. The expert also admitted that the “margin of error on her appraisal” could be $5, and that there were “other factors” that QVC properly could have considered but that she did not incorporate into her appraisals. Id. Plaintiff’s purchased these items for many reasons, “including whether the product was appealing, affordable, an impulse purchase, on sale, and whether she was searching for a particular product.” Id., at 1193. She found it convenient to shop from home, and felt like she was part of the QVC “family.” Id. She had seen QVC’s education spots, and admitted that at times she believed the retail value listed by QVC “seemed…awfully high,” but she would make the purchase because she still believed that she was paying a fair price for the item. Id. Additionally, plaintiff purchased items from QVC even if it did not list a retail value, and plaintiff continued to make purchases from QVC even after she filed her class action complaint. Id. As the appellate court explained at page 1193, “[plaintiff] acknowledges that a consumer could not legitimately claim to be actually deceived by QVC’s retail values if the consumer continued to purchase the products after suing QVC.”

Continue reading "QVC Class Action Defense Cases–Mulligan v. QVC: Illinois State Court Affirms Denial Of Class Action Treatment And Summary Judgment In Favor Of Defense In Unfair Business Practice Class Action" »

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

Trial Court Erred in Granting Class Action Treatment to Complaint Alleging Labor Law Violations because Employer need only “Provide” Meal and Rest Periods to Employees but need not “Ensure” that Meal and Rest Breaks are Taken California State Court Holds

Plaintiffs filed a class action in California state court against Brinker Restaurant, Brinker International and Brinker International Payroll alleging labor law violations; specifically, the class action complaint alleged that Brinker failed to provide its employees with meal and rest breaks. Brinker Restaurant Corp. v. Superior Court, ___Cal.App.4th ___ (Cal.App. July 22, 2008) [Slip Opn., at 3]. Plaintiffs moved the trial court to certify the litigation as a class action, and the court granted the motion. Id. The central issue in the class action was whether an employer must ensure that employees take meal and rest breaks in order to comply with California law, or whether it is sufficient to make available meal and rest breaks; the Court of Appeal held that an employer is not responsible for ensuring that employees take meal and rest breaks to which they are entitled. Id., at 3-4. Accordingly, the appellate court granted defendants’ petition for writ of mandate and reversed the trial court’s class action certification order.

Defendants have a written policy, on a form signed by each employee, that sets forth the statutory meal and rest periods and acknowledging that the employee may be disciplined or terminated for failing to take those breaks. Brinker, at 5. Employees also are required to clock in and out so that defendants may maintain accurate records for payroll purposes, id., at 5-6. Plaintiffs’ class action complaint alleged that defendants failed to provide meal and rest breaks, id., at 7-8. The class action alleged further that defendants required employees to take “early lunches” and then required that they work upwards of 9 hours without any additional meal period, id., at 8. Finally, the class action alleged that defendants required employees to work “off the clock,” id., at 8-9. Plaintiffs argued that employers “must ‘ensure’ that the employee takes meal periods,” id., at 9. The trial court an employer must give employees a meal break “before [an] employee’s work period exceeds five hours,” and that the purpose of the statute is “to provide employees with break periods and meal periods toward the middle of an employee[']s work period in order to break up that employee’s ‘shift.’” Id., at 10.

Continue reading "Labor Law Class Action Defense Cases–Brinker v. Superior Court: California Appellate Court Reverses Trial Court Order Certifying Labor Law Class Action Holding Employers Need Not “Ensure” Employees Take Meal And Rest Breaks" »

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

Class Action Complaint Adequately Pleaded Claims Against T-Mobile because Claims were not Premised on Fraud, so Rule 9(b) did not Apply, and because Claims Sufficiently Pleaded Breach of Contract, Unjust Enrichment and Violation of Consumer Protection Act Washington Federal Court Holds

Plaintiff filed a class action complaint T-Mobile USA alleging unfair business practices in connection with cellular telephone text messaging; specifically, the class action alleged that “T-Mobile charges customers for the receipt of unsolicited text messages, and does not adequately disclose the practice in its contract with customers.” Zaldivar v. T-Mobile USA, Inc., ___ F.Supp.2d ___ (W.D. Wash. July 15, 2008) [Slip Opn., at 1]. The class action complaint alleged breach of contract, unjust enrichment, and violations of Washington’s Consumer Protection Act. Id., at 2. Defense attorneys moved to dismiss the class action complaint under Rule 9(b) for failure to plead fraud with specificity. Id., at 1-2. They argued that the gravamen of the class action was the allegation that T-Mobile defrauded its customers, and therefore Rule 9(b)’s heightened pleading requirements for fraud should apply, id., at 2. The district court disagreed and denied the motion to dismiss the class action.

The federal court distinguished Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003), which held that a plaintiff who “‘rel[ies] entirely’ on a ‘unified course of fraudulent conduct’ to support a claim in which fraud is not a necessary element must nonetheless satisfy Rule 9(b) in ‘pleading the claim as a whole.’” Zaldivar, at 2 (quoting Vess, at 1103-04). Here, the class action does not “‘rely entirely’ on a uniform course of fraudulent conduct”; on the contrary, even if the court assumed that the allegations against T-Mobile were “grounded in fraud” and stripped them from the complaint, the complaint would still state claims for relief against T-Mobile. Id., at 3. For example, the breach of contract claim relies on the allegation the T-Mobile failed to charges customers only for charges ‘contractually agreed upon,” and the Consumer Protection Act class action claim was premised on T-Mobile’s failure to “properly notify or advise” customers that “they were not contractually liable to pay certain fees for text messaging.” Id. Accordingly, the district court denied T-Mobile’s motion to dismiss the class action complaint, id., at 5.

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

Class Action Complaint Alleging Violations of Federal Fair Standards Labor Act (FLSA) and of Oregon State Labor Laws Conditionally Certified as a Class Action as to FLSA Claims but Denied Without Prejudice as to State Law Claims Oregon Federal Court Holds

Plaintiffs filed a class action complaint against Dell Inc. and other defendants alleging violations of the federal Fair Labor Standards Act (FLSA) and Oregon’s state labor laws; the class action alleged that plaintiffs are “consumer sales representatives” (CSRs) who sell Dell computers via telephone, and that Dell (1) misclassified CSRs as exempt from overtime pay, failed to properly pay incentive compensation, and required CSRs to work “off the clock.” Norman v. Dell Inc., ___ F.R.D.___ (D.Or. July 14, 2008) [Slip Opn., at 1, 3]. Plaintiffs’ lawyer moved the district court to certify the litigation as a class action, id., at 1; specifically, plaintiffs sought an order conditionally certifying the class action complaint’s FLSA claims, and an order certifying under state law a class action of the complaint’s state labor law claims, id., at 2. Defense attorneys opposed any class action treatment. Id., at 1. The district court granted the motion with respect to the FLSA claims, but denied the motion without prejudice as to the state law claims pending expiration of the opt-in period for the federal claims and briefing as to the impact on the opt-in response on certification of the state class action claims. Id., at 2.

The federal court addressed first the request for certification of the FLSA claims. After noting that federal law does not define “similarly situated” under the FLSA, the court utilized the two-tier approach followed by most federal courts. Norman, at 2-3. The first step considers whether, “based on the pleadings and affidavits submitted by the parties,” notice should be given to the putative class, and employs a “fairly lenient standard” that, in the court’s opinion, usually results in class certification. Id., at 2. The second step involves a motion by defense attorneys to decertify the class action following completion of discovery, id., at 3. At the first stage, however, courts look only to whether there are “substantial allegations that the putative class members were subject to a single illegal policy, plan or decision,” but plaintiffs may not rely solely on the allegations in their class action complaint. Id. Under that standard, the district court concluded that plaintiffs adequately established that Dell policies and practices with respect to compensation of the putative class members is essentially uniform, id.

Continue reading "Dell FLSA Class Action Defense Cases–Norman v. Dell: Oregon Federal Court Certifies FLSA Class Action Against Dell But Denies Without Prejudice Request To Certify Class Action Of State Law Claims" »

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

Complaint Alleging Labor Law Violations Granted Class Action Status because Overriding Issues Involved Company Policies and Practices and Class Action Treatment was Superior to Other Means of Resolving Disputes California Federal Court Holds

Plaintiffs filed a putative class action complaint in California state court against their former employer, Polo Ralph Lauren, alleging labor law violations; specifically, the class action complaint alleged that in the 28 stores operated by defendants in California, defendants failed to provide rest breaks or pay for off-the-clock time, failed to pay overtime by misclassifying employees as commissions salespeople exempt from such pay, and improperly reduced earnings on future commissions if salespeople failed to meet certain sales requirements. Otsuka v. Polo Ralph Lauren Corp., 251F.R.D. 439 (N.D.Cal. 2008) [Slip Opn., at 1-2]. The complaint identified not only a main class, but two subclasses – one for misclassification and one for arrearages. The class action alleged further that defendants’ California stores used a single employee handbook, and that “defendants’ policies and practices are standardized throughout California in both retail and outlet stores.” Id., at 2. Defense attorneys removed the class action to federal court, id., at 1-2. Plaintiffs moved the district court to certify the litigation as a class action, id., at 1. Defense attorneys “vigorously” objected to class action treatment, id., at 5. The federal court granted the motion, concluding that “defendants’ arguments primarily dispute the merits of plaintiffs’ claims and raise questions of act that will not be resolved at this juncture,” id.

With respect to numerosity, the main class identified in the class action complaint encompassed more than 5,000 employees; the subclasses, however, consisted of 49 members and 69 members, respectively. Otsuka, at 5. Defendants argued these subclasses failed to satisfy the numerosity requirement, id. The federal court disagreed, noting that under Ninth Circuit authority class actions with “as few as 39 members may be sufficiently numerous under the right circumstances.” Id., at 5-6 (citation omitted). Similarly, the district court found that commonality clearly existed as to the main class identified in the class action complaint, id., at 6, and it rejected defense challenge to the subclasses because it attacked the merits but failed to demonstrate that common questions existed within the subclasses, id., at 6-7. With respect to typicality, defense attorneys argued that the claims on the named plaintiffs were not typical with respect to the misclassification subclass because after the lawsuit had been filed defendants performed a reconciliation and compensated them for overtime not previously paid. Id., at 7-8. The court found that this did not render them unqualified to serve as typical class representatives because (1) they may establish that they are entitled to additional overtime pay, and (2) their claims that defendants acted unlawfully by failing to perform annual reconciliations. Id., at 8. With respect to adequacy of representation, the district court rejected the technical objection made by defendants to one of the named representatives, id., at 8-9. Thus, the federal court found that the Rule 23(a) requirements for class action treatment had been met.

Continue reading "Class Action Defense Cases–Otsuka v. Polo Ralph Lauren: California Federal Court Certifies Class Action Against Polo Ralph Lauren Holding Rule 23 Requirements For Labor Law Class Action Had Been Satisfied" »

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

In Connection with Labor Law Class Action Alleging Failure to Pay Managers and Assistant Managers Overtime, Trial Court did not Abuse its Discretion to Manage Class Action Certification when it Granted Defense Motion to Strike Class Action Allegations from Complaint California State Court Holds

Plaintiffs filed a putative class action against AZ3, Inc., doing business as BCBG Maxazria (BCBG), alleging that it had failed to pay its managers and assistant managers for overtime. In re BCBG Overtime Cases, ___ Cal.App.4th ___, 78 Cal.Rptr.3d 257 (Cal.App. June 13, 2008) [Slip Opn., at 2]. A separate class action was filed by a single plaintiff, and then the three plaintiffs filed a coordinated class action complaint against BCBG, id. Defense attorneys moved to strike the class action allegations pursuant to Rule 1857(a)(3) of the California Rules of Court. Id., at 3. The motion was supported by declarations from 25 current or former managers and assistant managers explaining that “managers are not assigned uniform duties and spend more than 50 percent of their time on non-managerial work,” and that each store is different, targeting different customers, and requiring that managers exercise independent judgment in designing and laying out the store. Id. Plaintiffs’ lawyer opposed the motion on the ground that it was improperly sought to circumvent the class action certification process. Id., at 4. At oral argument, after the trial court issued a tentative ruling to grant the motion, plaintiffs asked for leave to depose some of the declarants, and for leave to file an amended class action complaint. The trial court denied plaintiffs’ requests and granted the motion finding that it was “properly before it because ‘class certification issues may be determined at any time during the litigation.’” Id. As the appellate court explained at page 4, “It found that BCBG had met its burden to show that the action is not suitable for class certification by producing ‘substantial evidence which establishes that Plaintiffs cannot prove the elements of typicality or commonality necessary for class certification.’” The Court of Appeal affirmed.

On appeal, plaintiff argued that the trial court should not have considered evidence outside the pleadings in ruling on the defense motion to strike the class action allegations, and that she should have been granted leave to amend. BCBG, at 1-2. In the alternative, plaintiff argued that she should have been allowed to conduct discovery before the court ruled on the motion, id., at 2. With respect to the first issue, the appellate court held that trial courts have considerable “flexibility” in addressing the certification of class actions and, indeed, have been encouraged by the California Supreme Court to be “procedurally innovative” in connection with “determining whether to allow the maintenance of a particular class suit.” Id., at 5 (quoting City of San Jose v. Superior Court, 12 Cal.3d 447, 453 (Cal. 1974)). California law permits either party to file a motion to certify a class action, and provides that “the pleadings be amended to eliminate allegations as to representation of absent persons, and that the action proceed accordingly.” Cal. Rule of Court, Rule 3.767(a)(3).

Continue reading "BCBG Class Action Defense Cases–In re BCBG: California State Court Upholds Court Order Granting Defense Motion To Strike Class Action Allegations In Labor Law Class Action" »

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

Trial Court did not Err in Granting Class Action Treatment to Nationwide Product Defect Class Action Against General Motors because Choice-of-Law Analysis Irrelevant to Class Action Certification Determination Arkansas Supreme Court Holds

In September 2006, plaintiff filed a class action against General Motors in Arkansas state court. The first amended class action complaint alleged that GM sold 4,000,000 pickup trucks and SUVs with defectively designed parking brakes; specifically, the class action alleged that GM discovered the defect in 2000, redesigned the defective part in October 2001, but “withheld from dealers admission of responsibility for the defect until January 28, 2003.” General Motors Corp. d/b/a/ Chevrolet, GMC, Cadillac, Buick, and Oldsmobile v. Bryant, ___ S.W.3d ___ (Ark. June 19, 2008) [Slip Opn., at 1-2]. According to the class action, this scheme permitted GM “to avoid paying millions of dollars in warranty claims.” Id., at 2. Plaintiff alleged further that GM’s 2005 recall involved only about 60,000 of the 4 million vehicles affected, id. Plaintiff filed a motion for class action certification; the trial court granted the motion in a 51-page order. Id., at 2-3. GM sought interlocutory review of the class action certification order, challenging predominance, superiority, and the definition of the class, id., at 3. The Arkansas Supreme Court affirmed.

The primary issue on appeal concerned GM’s challenge to the applicable choice of law. Defense attorneys argued that “the significant variations among the fifty-one motor-vehicles product-defect laws defeat predominance,” and that the trial court was required to perform a choice-of-law analysis before granting class action treatment to the lawsuit. Bryant, at 4. Plaintiff argued that Arkansas law does not require such an analysis prior to class action certification, id. The Arkansas Supreme Court agreed with plaintiff: because if found that a “predominating questions” exists – specifically, “[w]hether or not the class vehicles contain a defectively designed parking-brake system and whether or not General Motors concealed that defect,” id., at 6 – it found that the trial court did not err. In the Court’s words, “That various states’ laws may be required in determining the allegations of breach of express warranty, breach of implied warranty, a violation of Magnuson-Moss Warranty Act, unjust enrichment, fraudulent concealment, damages, and restitution does not defeat predominance in the instant case.” Id., at 7. (The author confesses that he finds this reasoning difficult to follow: legal claims do not exist in a vacuum, and it does not seem “judicially efficient” to try a case on a class-wide basis simply to determine one or two common facts, regardless of how important those facts may be, and then decertifying the case for apparently millions of trials to be held on a case-by-case basis focusing on the various claims of individual class members based on the particular state laws governing those claims.) The Arkansas Supreme Court recognized that other courts have held that choice-of-law “is crucial in making a class-certification decision,” id., at 8 (citation omitted), and indeed cited cases from California, New Jersey and Texas to that effect, see id., at 8-9. Nonetheless, it rejected this approach in favor of the “certify now, decertify later” approach followed in Arkansas, id., at 9-10.

Continue reading "GM Class Action Defense Cases–General Motors v. Bryant: Arkansas Supreme Court Affirms Class Action Certification Of Nationwide Class Action Alleging Product Defect Holding Variations In State Laws May Be Addressed By Decertification of Class Action" »

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

Defense Post-Trial Motion to Decertify FLSA Collective Action Granted because Evidence Revealed Lack of Similarity Among Class Members thereby Precluding Defense from Presenting a Uniform Defense to FLSA Claims Louisiana Federal Court Holds

Plaintiffs filed a labor law class action against Big Lots Stores for violations of the federal Fair Labor Standards Act (FLSA); specifically, the class action complaint alleged that Big Lots had misclassified employees and failed to pay them overtime. Johnson v. Big Lots Stores, Inc., ___ F.Supp.2d ___ (E.D. La. June 20, 2008) [Slip Opn., at 1]. The gravamen of the class action was that Big Lots failed to pay its store managers and assistant store managers for overtime, id., at 3. Over defendant’s objection, the district court certified the litigation as an FLSA collective action and approximately 1,000 people elected to opt-in to the lawsuit, id., at 4-5. Following a one-week bench trial, the federal court decertified the nationwide class, dismissed without prejudice the claims of the individuals who had opted in to the action, and held that plaintiffs could proceed with their individual actions. Id., at 1.

Big Lots is a nationwide retailer with approximately 1,400 stores in 46 states. Johnson, at 2. Typically, each store has store manager and at least one assistant store manager, but the physical size, products available for sale, sales volume, sales history and number of employees all affected the number and nature of managers and assistant managers at any given store. Id. “Significant variations” existed as to the duties performed by assistant store managers, but each one was expected to work at least five 9-hour shifts per week. Id., at 3. All managers and assistant managers were salaried employees, but they were classified as “executive employees” under the FLSA and therefore exempt from overtime pay. Id., at 2. The job description of an assistant store manager supported this classification, see id., at 2-3. The class action complaint, however, filed as a collective action under the FLSA, alleged that Big Lots misclassified its assistant store managers as exempt employees because, in the words of one plaintiff, “a Big Lots ASM is nothing more than a ‘glorified stocker.’” Id., at 3-4.

Continue reading "FLSA Class Action Defense Cases–Johnson v. Big Lots: Louisiana Federal Court Decertifies FLSA Collective Action After Week-Long Bench Trial Because Evidence Revealed Class Members Were Not Similarly Situated" »

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

Class Action Complaint Challenging as Excessive Fees Charged for Medical Records Properly Certified as Class Action because Defense Challenges to Class Action Treatment Went to Issues of Damages or to the Merits, Neither of Which Defeat Class Action Certification Arkansas Supreme Court Holds

Plaintiff filed a putative class action in Arkansas state court against ChartOne, “a health-information management company that provides copying services of medical records for doctors, hospitals, and other medical-care providers throughout Arkansas,” alleging that the fees it charged for copying medical records exceeded the amount allowed by statute. The class action complaint also alleged that ChartOne charged shipping and postage fees that either were not incurred or were reimbursed by the healthcare provider. ChartOne, Inc. v. Raglon, ___S.W.3d ___ (Ark. April 24, 2008) [Slip Opn., at 1-2]. Plaintiff moved the trial court to certify the litigation as a class action; defense attorneys argued that class action treatment was not appropriate because the proposed definition of the class “was ambiguous and provided no objective criteria by which to ascertain the members of the class,” and because plaintiff failed to satisfy the statutory requirements for class action certification. Id., at 2. A representative of ChartOne testified at the class certification hearing that it was not possible to tell from company records whether a particular individual was charged a notary fee, id., at 2-3. Ultimately, the trial court granted plaintiff’s motion and certified a class action covering those “who requested a copy of medical records from a healthcare provider located in Arkansas and who paid ChartOne (1) base fees, clerical fees, retrieval fees and/or page fees as part of a charge for copying medical records, which resulted in charges being in excess of $5 for the first five pages and 25¢ for each page thereafter; and/or (2) shipping charges.” Id., at 3. The Arkansas Supreme Court affirmed.

The Supreme Court addressed first defense objections to the definition of the class. Defense attorneys argued that membership in the class could not be determined in any “reasonable or feasible manner” because “there is no way of ascertaining the per-page charges without reviewing the actual requests for records that are stored with the patients’ medical files” and that a manual, file-by-file review of more than 120,000 files would be required. ChartOne, at 5. Plaintiff responded that membership in the class was readily determinable from ChartOne’s billing records, and that the objective raised by the defense went to damages rather than whether class action treatment was appropriate, id. The Arkansas Supreme Court agreed that class actions must provide a “precise definition” of the putative class, and explained that such a definition ensures that only “those people who are actually harmed by the defendant’s wrongful conduct will participate in the relief ultimately awarded.” Id., at 6. Nonetheless, it agreed that defendant’s objections went to damages, not the definition of the class itself. Id., at 6-7. In particular, the Court was unimpressed by the argument that ChartOne’s “failure to maintain accurate records” could serve to defeat class certification. Id., at 9.

Continue reading "Class Action Defense Cases–ChartOne v. Raglon: Arkansas Supreme Court Affirms Class Action Certification Of Lawsuit Alleging Fees Charged For Medical Records Exceeded Amounts Allowable By Statute" »

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

Antitrust Class Action by Assignees of Direct Purchasers of Antidepressant Wellbutrin SR Satisfied Rule 23 Class Action Requirements Pennsylvania Federal Court Holds

Plaintiffs filed a class action complaint against SmithKline Beecham Corporation dba GlaxoSmithKline (GSK) alleging antitrust violations arising out of its manufacture and sale of the antidepressant drug Wellbutrin SR. The class action purports to be filed on behalf of “direct purchasers” of the drug, and the class action complaint alleges “(1) Defendant unlawfully extended its monopoly over Wellbutrin SR by making fraudulent assertions to the United States Patent and Trademark Office and by engaging in ‘sham’ litigation against generic drug manufacturers seeking to market less expensive versions of the drug; (2) Because the litigation delayed the market entry of generic versions of Wellbutrin SR, the class members were forced to pay unnecessarily high prices for the drug because no generic alternatives were available for nearly two years after Defendant’s patent monopoly would have expired; and (3) Defendant filed the baseless infringement suits against the generic manufacturers solely to preserve its monopoly during the pendency of the infringement litigation.” In re Wellbutrin SR Direct Purchaser Antitrust Litig., ___ F.Supp.2d ___ (E.D. Pa. May 2, 2008) [Slip Opn., at 1-2 (footnotes omitted)]. In essence, plaintiffs allege defendant violated Section 2 of the Sherman Act by requiring that they pay inflated prices “from the time Defendant’s monopoly was extended until the time the price of [the drug] reached competitive levels.” Id., at 4. Defense attorneys moved to dismiss claims in the various class action complaints, and the district court dismissed the claims alleging fraudulent prosecution of a patent and the antitrust claims seeking injunctive relief. Id., at 2 n.4. Plaintiffs moved the district court to certify the litigation as a class action, id., at 2; defense attorneys opposed class action treatment on the grounds that plaintiffs were not adequate representatives of the class and that the definition of the class is overly broad. The district court rejected the defense arguments and certified the litigation as a class action.

The district court had no difficulty in concluding that Rule 23(a)’s numerosity, commonality and typicality requirements had been satisfied. See In re Wellbutrin, at 4-8. With respect to the adequacy of representation of Rule 23(a)(4), defense attorneys did not challenge the qualifications of plaintiffs’ counsel, who the court found to be qualified to represent the class. See id., at 8. Rather, the defense argued (1) that plaintiffs could not represent the class because they are assignees of the direct purchasers (not direct purchasers themselves), (2) that a unique defense exists as to one of the named plaintiffs, “rendering it inadequate to represent the class”; and (3) that “significant conflicts” exist among the class members. Id., at 8-9. The district court rejected each argument. First, it noted that circuit case authority permits the assignment of antitrust claims, see id., at 9-10. Second, it rejected the claim that a defense challenge to the validity of the assignment to named-plaintiff SAJ Distributors will consume SAJ’s attention, id., at 10; as the issue is not likely to be a “major focus” of the class action litigation, the district court concluded that “it is not an issue that will distract SAJ to the detriment of the class itself,” id., at 11. Finally, the district court refused to follow Valley Drug Co. v. Geneva Pharmaceuticals, Inc., 350 F.3d 1181 (11th Cir. 2003), cited in support of the defense claim of a conflict between national drug wholesalers and downstream retail distributors such that the challenged activity may have been financially beneficial to the national wholesalers, explaining at page 14 that “the controlling question is whether the class members suffered an overcharge: if an overcharge occurred, all class members are entitled to recover, whether or not some plaintiffs experienced a net benefit while others experienced a net loss.”

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

Class Action Complaint Alleging Failure to Pay Employees for Time Incurred Doffing and Donning Protective Gear Satisfied Rule 23 Requirements for Class Action Certification Wisconsin Federal Court Holds

Plaintiffs filed a labor law class action against their employer, Kraft Foods, alleging violations of the Federal Labor Standards Act (FLSA) for failure to pay them for time spent doffing and donning protective gear at a meat processing plant; the class action complaint alleged that employees were required “to put on several items of safety and sanitation equipment and then walk to their work stations” before clocking in for the day, and were required to reverse the process after clocking out at the end of the day. Spoerle v. Kraft Foods Global, Inc., ___ F.Supp.2d ___ (W.D. Wis. May 5, 2008) [Slip Opn., at 1]. As the court explained at page 4, Kraft “requires that all hourly employees wear certain company-provided items in the performance of their jobs: footwear…, hair nets, beard nets…, protective headgear…, polyester frocks, and ear plugs or ear muffs,” and that some employees are required to wear cotton shirts and/or safety glasses. Employees are required to don this gear before swiping in, and to doff the gear after swiping out, id., at 5. The time incurred by employees to comply with this requirement varies, as does the time incurred in walking to/from the employee’s workstations. Id., at 1. The gravamen of the class action is that Kraft’s failure to pay for this “off the clock” time violates federal and state labor laws. Id. Defense attorneys moved for summary judgment on the grounds that the time at issue was not compensable because it fell within the scope of various exceptions under the FLSA; the district court denied the motion. See Spoerle v. Kraft Foods Global, Inc., 527 F.Supp.2d 860 (W.D. Wis. 2007). Plaintiffs moved the court to certify a collective action under the FLSA and a Rule 23(b)(3) class action under Wisconsin state law, Spoerle, at 2; the district court granted plaintiffs’ motion, finding this to be “an easy case” for certification of a class action, id., at 3.

The federal court first addressed the defense argument that the state and federal class action claims could not be prosecuted in the same action, based on the theory that “a plaintiff should not be allowed to maintain a representative action involving both federal and state law wage claims because of the procedural differences between the two types of claims.” Spoerle, at 8. This argument is premised on the fact that employees must affirmatively “opt in” to the FLSA class action to be members of the class, but the same employees are deemed members of the state law class action unless they affirmatively “opt out.” Id. According to defense attorneys, “potential plaintiffs will be hopelessly confused by the differences between the two claims and will be unable to make an intelligent decision regarding whether to opt in or out of the lawsuit,” id.; this confusion is exacerbated by plaintiffs’ unilateral and premature notice to the class, which “contained inaccurate information,” id., at 9. The district court agreed that “plaintiffs made a foolish blunder,” id., at 9, but concluded that any confusion could be addressed through carefully drafted notices, id., at 8-9.

Continue reading "Kraft FLSA Class Action Defense Cases–Spoerle v. Kraft: Wisconsin Federal Court Certifies Class Action Of Class Action Complaint Alleging Labor Law Violations For Failure To Compensate Employees For Doffing/Donning Protective Gear" »

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

Fifth Circuit’s “Incidental Damages” Approach to Class Action Certification under Rule 23(b)(2) Inapplicable in Ninth Circuit and District Court Erred in Denying Class Action Treatment of Labor Law Class Action based on Conclusion that “Claims for Monetary Relief were Non-Incidental” Ninth Circuit Holds

Plaintiffs filed a class action against Wal-Mart on behalf of assistant managers alleging labor law violations. Plaintiffs filed a motion with the district court for class action certification, arguing that class action treatment was appropriate under Rule 23(b)(2) and 23(b)(3). In an order denying class action certification that may be found here, see Sepulveda v. Wal-Mart Stores, Inc., 237 F.R.D. 229 (C.D.Cal. 2006), the district court refused to certify the litigation as a class action on the grounds that (1) the claims for monetary relief in the class action complaint were not incidental, thus rendering certification under Rule 23(b)(2) inappropriate, and (2) the duties of associate managers “are not susceptible to collective proof,” thus rendering class action treatment under Rule 23(b)(3) inappropriate. Id., at 245-46 and 248-49. Plaintiffs appealed. Sepulveda v. Wal-Mart Stores, Inc., Case No. 06-56090 (9th Cir. April 25, 2008) [Slip Opn., at 1-2]. In an unpublished opinion, the Ninth Circuit reversed. In a single paragraph, the Circuit Court stated that the district court had “misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied certification under [Rule] 23(b)(2),” and cited a Ninth Circuit opinion that “refus[ed] to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998).” Id., at 2 (citing Molski v. Gleich, 318 F.3d 937, 949-50 (9th Cir. 2003)). Rather, the lower court should have “focus[ed] on the intent of the Plaintiffs in bringing suit.” Id. (citation omitted). By failing to do so, the district court abused its discretion in denying class action treatment under Rule 23(b)(2). Id. The Ninth Circuit instructed the district court to reconsider on remand whether class certification was appropriate under Rule 23(b)(2) and, further, to consider “using Rule 23(c)(4) to certify issues under the Rule 23(b)(2) standard.” Id. (citation omitted).

The author notes that the district court opinion contains the following discussion of Rule 23(b)(2):

Continue reading "Wal-Mart Class Action Defense Cases–Sepulveda v. Wal-Mart: In Unpublished Opinion Ninth Circuit Reverses Denial Of Class Action Treatment In Labor Law Class Action Filed On Behalf Of Assistant Managers" »

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

Microsoft Petition for Permission to Appeal Class Action Certification of Nationwide Class Action Challenging Labeling PCs as “Windows Vista Capable” even if PCs could not Run Premium Vista Properly Denied by Ninth Circuit

We previously reported on the nationwide class action certified against Microsoft arising out of a class action complaint that challenges the marketing of new “Windows Vista Capable” and “Express Upgrade” programs. That class action complaint alleged that almost a year before its release of the new Vista operating system, Microsoft “authorized original equipment manufacturers…to place a sticker on personal computers… indicating that the PCs had been certified by Microsoft as ‘Windows Vista Capable.’” See Kelley v. Microsoft Corp., ___ F.Supp.2d ___ (W.D. Wash. February 22, 2008) [Slip Opn., at 1]. The class action alleged further that a substantial number of PCs that were advertised as “Windows Vista Capable” were limited to “Vista Home Basic” which, according to the complaint, “does not include any of the enhanced features unique to Vista and which make Vista attractive to customers.” Id., at 2. The district court for the Western District of Washington granted class action certification of a nationwide class action. Our summary of that opinion may be found here. Defense attorneys filed a petition with the Ninth Circuit for permission to appeal the district court order certifying a nationwide class action. On April 21, 2008, the Ninth Circuit denied that request.

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

Class Action Alleging Failure to Disclose “Loan-Related” Fees Improperly Certified as Class Action because Class Membership Turned on Finding of Defendant’s Liability and because Class Definition Failed to Adequately Describe “Loan-Related” Fees and Services, Requiring Reversal of Trial Court Order Missouri Supreme Court Holds

Plaintiffs filed a class action in Missouri state court against Allied Mortgage Capital Corporation alleging violations of the state’s Merchandising Practices Act “by misrepresenting charges for third-party services in connection with their loan transaction.” Vandyne v. Allied Mortgage Capital Corp., 242 S.W.3d 695, 696 (Mo. 2008). The class action alleged that Allied “failed to disclose costs incurred in processing Plaintiffs’ loans”; plaintiffs moved to certify the lawsuit as a class action, defining the class “in part as those individuals who paid costs based upon alleged ‘nondisclosures and false, unfair, deceptive or misleading disclosures’ by Allied.” Id., at 697. Defense attorneys objected that the definition of the class “requires the court to resolve a paramount liability question in order to identify class membership.” Id. The trial court granted plaintiffs’ motion for class action certification, but the Missouri Supreme Court unanimously reversed.

The Supreme Court agreed with defense attorneys that the definition of the class was improper; it held, however, that “the class definition can be cured by eliminating the phrase ‘nondisclosures and false, unfair, deceptive or misleading disclosures’ from the class definition.” Vandyne, at 697. The Supreme Court also agreed with a separate defense argument, that the definition of the class “is insufficiently definite with respect to defining what fees and services are ‘loan-related.’” Id. The Court explained that “the question as to whether a particular service or fee is ‘loan-related’ can only be reached through an analysis of each individual potential class members’ loan documents.” Id. Class counsel apparently represented at oral argument that, on remand, the class action complaint would be amended to “state separately those fees and services as to which class certification is sought.” Id., at 697-98

Continue reading "Class Action Defense Cases–Vandyne v. Allied Mortgage: Missouri Supreme Court Reverses Certification Of Class Action Because Membership In Class Action Required A Finding Of Liability And Because Class Definition Ambiguous" »

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

FLSA Class Action Alleging Failure to Compensate Workers for Time Spent Donning, Doffing and Cleaning Safety and Sanitary Gear Involved Putative Class Action Representatives “Similarly Situated” to Members of Proposed Class Warranting Certification of FLSA Collective Action for Purposes of Notice Despite Differences in Employee Equipment Utilized, Time Incurred and Timekeeping Methods Arkansas Federal Court Holds

Various class action lawsuits were filed against Pilgrim’s Pride for violations of the Fair Labor Standards Act (FLSA) alleging failure to compensate employees for time spent donning and doffing safety and sanitary gear at chicken processing plants; the Judicial Panel on Multidistrict Litigation centralized the class actions in the Western District of Arkansas, and plaintiffs filed a consolidated motion for class action certification (technically, a “collective action” under the FLSA). In re Pilgrim’s Pride Fair Labor Standards Act Litig., ___ F.Supp.2d ___ (W.D. Ark. March 13, 2008) [Slip Opn., at 1 and n.1]. The class action covered workers at 21 plants located in 10 states, and covered “tasks on the chicken processing line, such as slaughtering, cutting, deboning, cleaning, and packaging.” Id., at 1-2. The federal court explained at page 2, “Pilgrim’s provides to its employees a variety of required safety and sanitary gear, generally worn over the street clothes. However, the exact combination of protective and sanitary items worn by the employees varies by facility, department, production line, position, and individual.” Moreover, “Pilgrim’s implements various timekeeping systems for its employees who work on the chicken processing line, so that the method for timekeeping varies from facility to facility.” Id., at 2. The defense opposed class action treatment on the grounds that “significant differences exist between the facilities and workers,” id., at 7; the district court found that objection to be premature and conditionally certified the class action for notice purposes.

The district court utilized the two-stage approach to class action treatment of FLSA claims under which the court first considers the “notice stage” and then, after discovery is largely complete, the “opt-in or merits stage.” In re Pilgrim’s Pride, at 4-5. At the notice stage, the federal court considers only “whether notice should be given to potential class members,” id., at 5. The question at this stage is whether the putative class action representatives are “similarly situated” to the members of the proposed class, id., at 6. The court noted that more than 3000 declarations from employees at 20 plants had filed opt-in notices with the court, id.; the court considered, also, 37 declarations from workers at 18 plants describing the company’s “common practice” with respect to the donning, doffing and cleaning of safety and sanitary gear, id., at 6-7. In response, the defense argued that “there are differences in the safety and sanitary clothing worn by employees even within the same departments and variations in the amounts of time it takes different employees to don and doff the protective gear,” id., at 7, and argued also that timekeeping methods differed, particularly as to union employees whose collective bargaining agreement specifically “excludes time spent changing clothes and washing from the compensable workday,” id. and n.3. The court found these arguments “premature at this initial certification stage,” id., at 7. Accordingly, it granted plaintiffs’ consolidated motion for certification of a collective action for purposes of notice to the proposed class, id., at 8.

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

Class Action Complaint Alleging Failure to Disclose Type of Sweetener used in Diet Drink Improperly Granted Class Action Treatment because Definition of Class Included Millions of Uninjured Individuals and Class Definition could not be Permissibly Limited Missouri Supreme Court Holds

Plaintiff filed a putative class action lawsuit in Missouri state court against Coca-Cola alleging that it “made affirmative misrepresentations and omitted material information regarding the types of artificial sweeteners used in fountain Diet Coke” in violation of state law; Specifically, the class action alleged that Coca-Cola “misled consumers into believing that fountain Diet Coke is the same product as bottled Diet Coke,” when in point of fact the fountain Diet Coke is sweetened with aspartame and saccharin while bottled Diet Coke is sweetened only with aspartame. State ex rel. The Coca-Cola Company v. The Honorable W. Stephen Nixon, ___ S.W.3d ___ (Mo. April 15, 2008) [Slip Opn., at 3]. According to the allegations underlying the class action, plaintiff and other putative class members would not have purchased the fountain drink if they had known that it was made with saccharin. Id. Plaintiff filed a motion requesting that the trial court certify the litigation as a class action; she proposed to define the class as “All individuals who purchased for consumption and not resale fountain diet Coke in the State of Missouri after March 24, 1999 through the date of this order.” Id. Defense attorneys opposed the motion on the grounds that the proposed class was overly broad and indefinite, id. Despite the fact that plaintiff provided no estimate of the size of the class, the trial court accepted the proposed definition and granted class action treatment. Id. Ultimately, defense attorneys filed a petition for writ of prohibition with the Missouri Supreme Court, arguing that the trial court abused its discretion in granting class action certification; the Court reversed. Id.

After rejecting plaintiff’s claim that interlocutory relief should not be considered, see Coca-Cola, at 3-4, and after noting that the standard of review was abuse of discretion, id., at 4, the Missouri Supreme Court turned to the merits. It noted that “the underlying question in any class action certification is whether the class action device provides the most efficient and just method to resolve the controversy at hand, all things considered,” id., at 4, and that implicit in the statutory scheme governing certification of class actions is the requirement that the class definition be proper, id., at 4-5 (citations omitted). In fact, the Supreme Court stated that the first task facing a court in ruling on a motion for class certification is “‘to determine whether the class exists and is capable of legal definition.’” Id., at 5 (citation omitted). The Court explained at page 5, “A class definition that encompasses more than a relatively small number of uninjured putative members is overly broad and improper.” (Citations omitted.) And while it was permissible to certify a class action such that the putative class “initially include[s] members who could not have brought the underlying action in their own name,” the definition ultimately must be capable of being modified so as to “remove the uninjured putative members.” Id. (citations omitted). This requires that only “a relatively small number of uninjured putative members remain,” because the trial court may then “easily resolve individual questions after the common questions have been answered.” Id. If it will not be possible to modify the class definition in this manner, then “the putative class is impermissibly overbroad.” Id.

Continue reading "Coca-Cola Class Action Defense Cases–Coca-Cola v. Honorable W. Stephen Nixon: Missouri Supreme Court Reverses Order Granting Class Action Certification Holding That Definition Of Class Action Membership Was Overly Broad And Indefinite" »

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

Labor Law Class Action Plaintiffs Entitled to Redacted Bank Records of Putative Class Members because Defendant Lacked other Business Records Relevant to Class Action Numerosity and Commonality Requirements, and Class Action Defense Attorneys Entitled to Information Regarding Specific Terms of Plaintiffs’ Employment Agreements because Relevant to Typicality and Commonality but not Entitled to Information Concerning Immigration Status, Maryland Federal Court Holds

Plaintiffs filed a labor law class action against S.C.C.P. Painting alleging that it “failed to pay wages for all work performed, failed to pay wages for work directed to be performed but not accounted for on timesheets, failed to pay time and a half for hours worked greater than 40 hours, and deducted wages from paychecks, purportedly for tax withholding purposes but not in fact withheld for that purpose.” Montoya v. S.C.C.P. Painting Contractors, Inc., 530 F.Supp.2d 746, 747 (D.Md. 2008). The class action alleged violations of both state and federal law, and sought to proceed both as a class action under Rule 23 and as a collective action under 29 U.S.C. § 216(b), id. As discovery limited to class action certification issues proceeded, disputes arose and each side filed motions to compel discovery. Id., at 747-48. Plaintiffs’ lawyer sought bank records; defense attorneys sought inter alia information concerning plaintiffs’ immigration status and concerning the specific employment agreements between the putative class representatives and defendant. The court granted the plaintiffs’ motion, and granted and denied the defense motion.

The district court first addressed plaintiffs’ request for bank records, which sought documents “reflecting wages paid to any employees.” Montoya, at 748. The court held that information sought was relevant to issues of numerosity and commonality, and that privacy concerns were resolved by plaintiffs’ agreement that the names of the employees may be redacted from the bank records. Id. The court noted that the records were necessary “in light of the absence of other business records,” and that according to defense attorneys “SCCP did not have any payroll records, no information submitted to tax authorities, no tax sheets or sign-in sheets, no personnel files and no documents showing the rates of pay for any person.” Id. Because the company did not have any information necessary to support a motion for class action certification, plaintiffs were entitled to obtain the bank records.

Continue reading "Class Action Defense Discovery Cases-Montoya v. S.C.C.P. Painting: Maryland Federal Court Holds Employer Bank Records Relevant But Discovery Concerning Immigration Status Irrelevant To Class Action Certification Issues" »

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

Class Action Alleging Fraud Under RICO in Advertising of Light Cigarettes Fails to Satisfy Prerequisites for Class Action Certification Under Rule 23 because Individual Issues Predominate Second Circuit Holds

Judge Jack Weinstein of the United States District Court for the Eastern District of New York certified a class action against Philip Morris USA, R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co., Ligget Group, American Tobacco Co., Altria Group, and British American Tobacco; the underlying class action complaint alleged the tobacco companies duped smokers into believing that “light” cigarettes were less harmful to them. <i>See Schwab v. Phillip Morris USA, Inc.</i>, 449 F.Supp.2d 992 (E.D.N.Y. 2006). We have previously reported on the district court’s 540-page opinion in that class action, and a copy of that summary may be found here. The theory underlying the class action was that defendants deceived smokers “by convincing them that smoking ‘light’ cigarettes was safer for their health.” 449 F.Supp.2d at 1018. As the Second Circuit explained, the class action claims were “brought as based in fraud under the Racketeer Influenced and Corrupt Organizations Act (RICO)…, but under RICO, each plaintiff must prove reliance, injury, and damages.” McLaughlin v. Philip Morris USA, Inc., ___ F.3d ___ (2d Cir. April 3, 2008) [Slip Opn., at 4]. Accordingly, the Circuit Court reversed class action certification, finding that “Plaintiffs’ putative class action suffers from an insurmountable deficit of collective legal or factual questions.” Id.

The district court based its certification of the class action on its belief that there was “evidence of fraud on the class appears to be quite strong”: “If, as contended by plaintiffs, a huge fraud was perpetrated on tens of millions of people causing them billions of dollars in loss—measured largely by the difference between the value people were led to believe they were getting when they bought ‘light’ cigarettes for safety, and what they received, a non-safe product—recovery dependent on proof should be allowed.” Schwab, at 1021. The district court explained at page 1018:

Continue reading "Cigarette Class Action Defense Cases–McLaughlin v. Philip Morris: Second Circuit Reverses Certification Of Class Action Alleging Deceptive Advertising Of "Light" Cigarettes Holding Individual Questions of Reliance Predominate" »

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

In Considering Class Action Certification in 28 Labor Law Class Action Lawsuits Centralized by the Judicial Panel on Multidistrict Litigation, 19 Cases Satisfied Class Action Prerequisites but 9 other Putative Class Actions would Require Individualized Inquiries Sufficient to Defeat Class Action Treatment Indiana Federal Court Holds

Numerous class action lawsuits were filed against FedEx Ground alleging that the company misclassified its pickup and delivery drivers as independent contractors rather than employees; the Judicial Panel on Multidistrict Litigation consolidated the class actions in the Northern District of Indiana, and the plaintiffs in the class action cases characterized as “Wave 1,” “Wave 2” and “Wave 3” moved the district court for class action certification. In re FedEx Ground Package System, Inc., Employment Prac. Litig., ___ F.Supp.2d ___ (N.D. Ind. March 25, 2008) [Slip Opn., at 1]. As the federal court summarized, these class action plaintiffs “assert that although FedEx Ground represents to its drivers that they are only partnering with FedEx Ground and will essentially own their own businesses, all FedEx Ground drivers sign the FedEx Ground Operating Agreement, which actually reserves to FedEx Ground the right to exercise pervasive control over the method, manner, and means of the drivers’ work,” id. FedEx opposed class action treatment, arguing that “the plaintiffs’ claims turn on individualized issues, including whether contractors should be classified as employees under the states’ statutory tests, and whether any individual contractor can meet the high bar for rescission of his individual contract.” Id., at 2. In a 164-page opinion, the district court certified the Wave 1, Wave 2 and Wave 3 cases as class actions with respect to cases involving drivers from Alabama, Arkansas, California, Florida, Indiana, Kentucky, Maryland, Minnesota, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, West Virginia and Wisconsin; the court denied class action treatment for drivers from Illinois, Iowa, Massachusetts, Michigan, Mississippi, Missouri, Montana, South Dakota and Virginia. Id., at 3. The district court noted that it had previously granted class action certification with respect to drivers from Kansas, id., at 9, bringing to 20 the total number of states for which class action treatment has been approved.

Given the extraordinary length and detail of the district court opinion, we provide here only a broad outline of its holdings. Because it had previously granted class action treatment on behalf of the Kansas drivers, the district court used its prior ruling as a benchmark against which it considered the new class action certification motions. In re FedEx Ground, at 9. The court held that class action complaints containing only former drivers as named-plaintiffs could still proceed as class actions on behalf of former and current drivers because “courts have held that former employees have standing to represent a class consisting of both current and past employees.” Id., at 10 (citations omitted); see also, e.g., id., at 24-25 and 30. But with respect to defense attorney efforts to defeat class action treatment on the ground that individual inquiries would be required to determine whether the Operating Agreements were valid and the manner and extent to which the “right to control” will impact the validity of the Operating Agreements, the federal court rejected this argument with respect to the laws of certain states, see, e.g., id., at 14-16 (Tennessee), 25-27 (Arkansas) and 39-42 (Texas), but agreed with FedEx Ground that common questions would not predominate under the laws of other states, see, e.g., id., at 18-20 (Montana), 20-23 (Mississippi) and 80-84 (Michigan). For example, with respect to the Missouri putative class action, the district court explained that class action certification was not warranted because “Whether FedEx Ground has the right to control its drivers within the meaning of Missouri agency law cannot be resolved by simple reference to the Operating Agreements and corporate policies.” Id., at 105. Rather, “Missouri courts define the ‘right to control’ with reference to the actual exercise of control, [citation], which will require a driver-by-driver, terminal-by-terminal, supervisor-by-supervisor analysis that is unnecessary in most other states.” Id., at 105-06. This presented the primary basis for the difference among states for which the court certified class actions and states for which it denied motions for class certification.

Continue reading "FedEx Class Action Defense Cases–In re FedEx Ground: Indiana Federal Court Grants Class Action Treatment In 19 Labor Law Class Action Cases Alleging Misclassification Of Pickup/Delivery Drivers But Denies Certification In 9 Other Class Actions" »

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

Class Action Treatment Warranted for Class Action Claims Against Health Clubs based on Violations of State Law but not as to Class Action Complaint’s Unjust Enrichment Claim Pennsylvania Federal Court Holds

Plaintiffs filed a putative class action in Pennsylvania state court against three health clubs (Holiday Universal, Scandinavian Health Spa and Bally Total Fitness) alleging violations of Pennsylvania’s Health Club Act and Unfair Trade Practices and Consumer Protection Law (UTPCPL); defense attorneys removed the class action to federal court. Allen v. Holiday Universal, ___ F.Supp.2d ___ (E.D. Pa. March 11, 2008) [Slip Opn, at 1]. The class action complaint alleged that plaintiffs entered into “Retail Installment Contract” prepared by defendants that required payment of a membership fee ($632 for one of the named plaintiffs, which she financed at 17.50% interest, and $1275 for the other named plaintiff, which he financed at 13% interest) and monthly dues; the health club memberships renewed automatically. Id., at 3. The theory underlying the class action was that the health clubs charged “grossly excessive initiation fees” in violation of Pennsylvania state law. Id. Plaintiffs moved the district court to certify the litigation as a class action, id., at 2; defense attorneys opposed the motion. The federal court found the elements of Rule 23 satisfied and granted plaintiffs’ request for class action treatment.

The defense first argued that the definition of the proposed class was overly broad because it included within its sweep individuals who suffered no damage because they wanted, accepted and benefited from the health club memberships. Allen, at 6-8. The district court disagreed, holding that if the initiation fees were excessive under Pennsylvania law then every member of the proposed class action suffered damage, regardless of whether they wanted and utilized the health club services, id., at 8. The district court also rejected a claim that the class action’s definition of the class was improper because it created a “‘fail/safe’ class, that is, membership in a portion of the Class depends upon a finding for Plaintiffs’ on the merits.” Id., at 15. In essence, the defense argued that inclusion in the class turned on whether a particular health club was owned by defendant Bally Holding; plaintiffs countered that club ownership was not the “central issue of liability” presented by the class action and, accordingly, there was no improper “fail/safe” class. Id., at 15-16. The district court agreed with plaintiffs, and noted that “the question of whether any particular health club in Pennsylvania is owned by the Health Clubs is a question of fact not central to the question of liability and easily answered through further discovery.” Id., at 16. However, the federal court made it clear that it “expect[ed] the parties to promptly clarify any remaining confusion as to this issue.” Id. (The court also rejected a “ratification” argument, but that is not summarized here. See id., at 8-15.)

Continue reading "Class Action Defense Cases–Allen v. Holiday Universal: Pennsylvania Federal Court Certifies Class Action Against Health Clubs Alleging Excessive Membership Fees In Violation Of State Law But Denies Class Action Treatment Of Unjust Enrichment Claim" »

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

Federal Securities Class Action Satisfied Rule 23 Requirements for Class Action Treatment but Duration of Class Period must be Limited as Requested by Defense District of Columbia Federal Court Holds

Several federal securities class action lawsuits were filed against various defendants Federal National Mortgage Association (Fannie Mae) and its former accountant KPMG, as well as various officers and directors of Fannie Mae alleging that they “intentionally manipulated earnings and violated Generally Accepted Accounting Principles (‘GAAP’), causing losses to investors.” In re Federal Nat’l Mortgage Ass’n Securities, Derivative, & “ERISA” Litig., 247 F.R.D. 32, 33-34 (D.D.C. 2008) (footnote omitted). The class actions were consolidated, and the consolidated class action complaint alleged accounting discrepancies at Fannie Mae in violation of GAAP and inadequate internal controls, id., at 34-35. The class action cited to an SEC investigation and to the Paul Weiss report, each of which confirmed accounting problems at Fannie Mae. Id., at 35-36. The class action alleged that Fannie Mae was ordered to restate its financial statements, and that concerns with these financial reports caused the stock to drop dramatically. Id., at 35. Plaintiffs moved for certification of the litigation as a class action and for appointment of class counsel, id., at 33. Defense attorneys apparently did not oppose class certification per se, id., at 36, but rather objected to the proposed duration of the class period (April 2001 to September 2005) and the identity of the putative class members, id., at 33-34. The district court granted the motion in part.

In addressing whether to grant class action treatment, the district court noted that “[t]he requirements of Rule 23(a) are so clearly met in this case that the defendants raise no opposition to this requirement being satisfied.” In re Federal Nat’l Mortgage, at 37. Defense attorneys did oppose, however, the relevant class period: The parties (other than KPMG) agreed that the start date was April 17, 2001, but while plaintiff sought an end date of September 27, 2005, the defense (except KPMG) sought an end date of December 22, 2004. Id. The defense argued that after December 22, 2004, “it was unreasonable, as a matter of law, for any investor to rely on Fannie Mae's financial statements as a basis to allege that they were a victim under a fraud on the market theory.” Id., at 37-38. The defense selected that date because Fannie Mae issued a corrective disclosure warning on December 22, 2004 that disavowed its earlier financial reports; accordingly, the defense argued that “any purchasers who acquired stock after December 22, 2004, cannot rely on that presumption because Fannie Mae's corrective disclosure cured the fraud on the market and thus rebutted the presumption of reliance, leaving only individual issues of reliance to predominate thereafter.” Id., at 38. The district court agreed.

Continue reading "ERISA Class Action Defense Cases-In re Federal National Mortgage: District Of Columbia Federal Court Grants Motion To Certify Securities Class Action Against Fannie Mae and KPMG But Grants Defense Request To Limit Class Period" »

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

Class Action Alleging Companies Erroneously Advised Lenders that Homes were Outside Flood Zones Properly Dismissed because (1) Plaintiff Lacked Standing to Pursue Class Action Claims Against Companies that did not Provide Plaintiff’s Lender with Flood Zone Determination and (2) Company that Provided such Determination on Plaintiff’s Property owed Duties Only to Lender not Plaintiff Fifth Circuit Holds

After his home suffered floodwater damage from Hurricane Katrina, plaintiff filed a putative class action in Louisiana state court against numerous defendants that provide flood zone determinations to lenders; the class action alleged that defendants failed to properly determine whether homes were located within a Special Flood Hazard Area (SFHA), and sought damages under state law based on theories of negligence, failure to warn, detrimental reliance, and breach of guaranty or warranty. Audler v. CBC Innovis Inc., 519 F.3d 239, 2008 WL 509323 (5th Cir. 2008). Each claim in the class action complaint was “separate and apart from the federal flood insurance legislation governing lenders and… none of [the] claims arise under that legislation.” Id., at *3. In essence, the class action alleged that the class members failed to secure flood insurance because defendants erroneously advised them that their homes were outside a SFHA, so they were uninsured when Hurricane Katrina struck. Id., at *2. Defense attorneys removed the class action to federal court on the ground of diversity jurisdiction and under the Class Action Fairness Act of 2005 (CAFA), id., at *3. The defense then moved to dismiss the class action complaint for failure to state a claim and for lack of standing, id. The district court agreed with the defense arguments and dismissed the class action. Id. The Fifth Circuit affirmed.

Preliminarily, it bears noting that “[a] determination…that a property is not located within a SFHA does not prevent a borrower from purchasing private flood insurance.” Audler, at *2. The defendant involved in plaintiff’s loan (CBC) argued that it prepared flood zone determinations for the lender and that it owed no duties to the borrower in the loan transaction. Id., at *3. The other class action defendants argued that they were not involved in plaintiff’s loan and thus he lacked standing to prosecute any claims against them, id. Following dismissal of the class action complaint, plaintiff appealed to the Fifth Circuit; two defendants moved to dismiss the appeal for lack of standing. Id.

Continue reading "Hurricane Class Action Defense Cases-Audler v. CBC Innovis: Fifth Circuit Holds Plaintiff Lacked Standing To Prosecute Class Action Against Companies Unrelated To His Property And Affirms Dismissal Of Class Action Complaint Against Remaining Defendant" »

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

District Court Order Striking Class Action Allegations but Permitting Named Plaintiffs to Pursue Individual Claims not Appealable thus Requiring Dismissal of Appeal from Class Action Order Fifth Circuit Holds

Plaintiffs filed a class action lawsuit against various defendants alleging that the Army Corps of Engineers had defectively designed and constructed various levee and floodwall systems that failed during a hurricane, resulting in flood damage. In re Complaint of Ingram Barge Co., 517 F.3d 246, 2008 WL 315465, *1 (5th Cir. 2008). Defense attorneys moved to strike the class action allegations and plaintiffs’ demand for a jury trial. Ingram, at *1. The district court granted the motion, but though it struck the class action allegations it permitted the plaintiffs to pursue their claims individually. Id. Plaintiffs appealed, contending that appellate jurisdiction existed under 28 U.S.C. §§ 1291 and 1292(a)(3); defense attorneys moved to dismiss the appeal on the ground that the order striking the class action allegations was not an appealable final decision because the district court permitted plaintiffs to pursue their claims individually. Id. The Fifth Circuit agreed with the defense and dismissed the appeal for lack of jurisdiction.

The Circuit Court noted that plaintiffs had not sought a Rule 54(b) certification, and that while Rule 23(f) confers appellate jurisdiction over orders granting or denying class action certification, appellate review thereunder must be sought within 10 days of entry of the class action certification order. Ingram, at *1. Plaintiffs did not seek such review. Accordingly, the sole issue was whether the district court order striking the class action allegations constituted a final decision within the meaning of § 1291, and the Fifth Circuit held that it did not. Id. Accordingly, it dismissed the appeal for lack of jurisdiction.

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

Trial Court Order Denying Class Action Certification Barred Subsequent Class Action Filed by Absent Class Member of Prior Class Action Oklahoma State Court Holds, Otherwise “Plaintiffs [could] Continue Filing Broad Class Actions…Until a Trial Court Grants Class Certification, Rendering Ineffective the Previous Denials of Other Courts”

Plaintiff filed a putative class action in Oklahoma state court (LeFlore County) against BP America alleging “BP underpaid royalties by wrongfully charging marketing fees and costs of making the gas marketable, including costs for gathering, treatment, compression, and dehydration, to royalty owners.” Rees v. BP America Prod. Co., ___ F. 3d ___ (Okla.App. February 22, 2008) [Slip Opn., at 2]. The complaint purported to be a class action, brought on behalf of “all similarly situated persons and entities who have received royalty payments from [BP] on Gas Substances produced from the Red Oak-Norris Field.” Id. Defense attorneys moved to dismiss the class action on the ground that two other class actions were pending against BP alleging underpaid royalties (Watts and Chockley); alternatively, defense attorneys requested that the Rees class action litigation be stayed or transferred to the county in which the Watts class action was pending (Pittsburg County). Id. The basis for the defense motion was that the Watts class action purported to represent a class of royalty owners in several counties, including LeFlore, id., at 2-3. The Chockley class action also was defined broadly enough to arguably include plaintiff’s claims within its scope, id., at 3.

The plaintiffs in the Watts class action had moved the court to certify that litigation as a class action, but the trial court denied the motion. Rees, at 3. The Oklahoma Court of Civil Appeals affirmed the denial of class action treatment, and the Oklahoma Supreme Court denied certiorari. Id., at 3-4. The trial court in the Rees class action granted a stay, over plaintiff’s objection, pending the appellate court decision in Watts, id., at 3, and then granted BP’s motion to dismiss the Rees complaint, id., at 4. Specifically, “the trial court applied the principle of issue preclusion in ruling Rees, as an unnamed member of the proposed class in Watts, was bound by the decision in Watts denying class action certification.” Id. (citing In re Bridgestone/Firestone, Inc., Tires Products Liab. Litig., 333 F.3d 763 (7th Cir. 2003)).

Continue reading "BP Class Action Defense Cases-Rees v. BP America: Oklahoma State Court Affirms Dismissal Of Class Action Complaint Holding Plaintiff's Class Action Barred Because He Was Absent Class Member Of Prior Class Action" »

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

Class Action Challenging Labeling PCs as “Windows Vista Capable” even if PCs could not Run Premium Vista Properly Certified as Nationwide Class Action and Washington State Law may be Applied to Claims of All Members of Class Action Washington Federal Court Holds

Plaintiffs filed a putative class action lawsuit against Microsoft challenging the marketing of its new “Windows Vista Capable” and “Express Upgrade” programs; specifically, the class action complaint alleged that almost a year before its release of the new Vista operating system, Microsoft “authorized original equipment manufacturers…to place a sticker on personal computers… indicating that the PCs had been certified by Microsoft as ‘Windows Vista Capable.’” Kelley v. Microsoft Corp., ___ F.Supp.2d ___ (W.D. Wash. February 22, 2008) [Slip Opn., at 1]. The class action alleged further that a substantial number of PCs that were advertised as “Windows Vista Capable” were limited to “Vista Home Basic” which, according to the complaint, “does not include any of the enhanced features unique to Vista and which make Vista attractive to customers.” Id., at 2. Some PCs were labeled as “Premium Ready” rather than “Windows Vista Capable,” id., but at that time consumers were unaware of the various Vista operating systems that would be available or the differences between them. The class action also alleged that Microsoft offered an “Express Upgrade Guarantee Program” to PC customers that would allow purchasers to “Windows Vista Capable” PCs to upgrade to Vista for little or no cost, but failed to disclose that the upgrade generally would be limited to Vista Home Basic. Id. Plaintiffs moved for the district court to certify the litigation as a nationwide class action and to apply Washington law to the class action. Id., at 1. Defense attorneys opposed both motions. The district court granted class action certification and agreed that Washington law governs the lawsuits.

The gravamen of the class action complaint was that “Microsoft eventually released four versions of Vista - Basic, Premium, Business, and Ultimate” - but that “the Premium version that is the ‘real’ Vista.” Kelley, at 2. Computers were advertised as “Windows Vista Capable,” the class action alleged, in order to “boost holiday sales of personal computers after delaying the release of Vista from March 2006 to early 2007” because Microsoft was “concerned that consumers looking to buy a new computer would delay their purchases until the release of Vista (and therefore after the holiday season).” Id. Thus, Microsoft allegedly engaged in the false and deceptive business practice of advertising PCs as “Windows Vista Capable” even if they could only run the Basic version “because Microsoft was concerned that few PCs on the market at the time could run the more premium versions of Vista” and so it “endeavored to assure consumers that their new computers would run the soon-to-be released Vista operating system.” Id. Microsoft countered that while Vista Home Basic “lack[ed] some of the capabilities of the premium versions of Vista, [it] still provides material improvements over Microsoft’s earlier operating system, Windows XP,” id., and pointed to various “marketing materials, sales aids, and training materials that described what features the different Windows Vista editions would provide and explained that not every ‘Windows Vista Capable’ computer would be able to provide every advanced feature available in every edition of Windows Vista,” id., at 3.

At the time plaintiffs sought class action treatment, the complaint sought relief for unjust enrichment and for violation of Washington’s Consumer Protection Act (CPA) or other state consumer protection acts. Kelley, at 4. Plaintiffs sought to certify a nationwide class action, and argued that Washington law applied to the claims of all class members. Id. The district court began its analysis by addressing the choice of law question, id. Defense attorneys argued that “the laws of all 50 states are relevant to Plaintiffs’ claims,” id., at 5. The federal court explained that it must first determine whether applying Washington law would be unconstitutional, and if not, whether applying Washington law would be “appropriate under Washington’s choice of law rules.” Id. (citing Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985)). The district court easily concluded that applying Washington law would not violate the Constitution because “[a]lthough the injury to Plaintiffs and the potential class members may have occurred outside of Washington, application of Washington law is not arbitrary, unfair, or unforeseeable.” Id., at 5-6 (citation omitted). The court’s analysis of Washington’s choice of law rules was much more extensive, see id., at 6-11. Washington law requires a determination first of whether an actual conflict exists between the laws of Washington and other states, and if so, “the forum or fora that have the ‘most significant relationship’ to the action to determine the applicable law.” Id., at 6 (citation omitted).

Continue reading "Microsoft Vista Class Action Defense Cases-Kelley v. Microsoft: Washington Federal Court Certifies Nationwide Class Action Against Microsoft For Class Action Complaint Challenging OEM Marketing Of Vista Operating System" »

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

Class Action Plaintiff must Suffer Loss of Money or Property to have Standing to Prosecute UCL (Unfair Competition Law) Class Action and must Establish Causal Connection Between Alleged Loss and Defendants Conduct California State Court Holds

Plaintiff filed a putative action lawsuit against various Time Inc. entities for violations of Californias unfair competition law (UCL) by allegedly tricking people into buying books as part of a free trial period program. Hall v. Time Inc., 158 Cal.App.4th 847, 70 Cal.Rptr.3d 466, 467 (Cal.App. January 28, 2008). The gravamen of the class action was that Time engaged in a scheme by which it induced consumers to purchase books by offering a free preview period during which the consumer had 21 days in which to review the book and return it to Time with no obligation to buy. Id. The class action complaint alleged that after the consumer reviews the book pursuant to an ostensible no obligation free trial basis, Time employs a scheme to obtain immediate payment from the consumer throughmisleading and deceitful tactics. Id. Defense attorneys moved to dismiss the class action on the ground that plaintiff did not suffer an injury in fact and thus lacked standing to prosecute the class action; the trial court agreed and dismissed the class action complaint. Id. The Court of Appeal affirmed.

Plaintiff alleged that he ordered a book from Time. Hall, at 468. The class action alleged that Time sent a bill with the book that encouraged him to pay for the book immediately but made clear that he was under no obligation to do so and that he had 21 days to return the book at Times expense, id., at 467-68. Plaintiff admits he kept the book and did not pay for it. Id., at 468. According to the allegations in the class action complaint, after the trial period ended Time began sending bills to plaintiff demanding payment; when plaintiff failed to pay, the matter was referred to collection. Id. Ultimately, plaintiff paid for the book and then filed the class action complaint alleging that Time had engaged in an ongoing, unfair and/or fraudulent and/or unlawful business practice by sending invoices before the expiration of the free trial period to obtain immediate payment for the book requested. Id. The trial court granted Times motion to dismiss the class action for lack of standing, finding that plaintiff got the book that he asked for, at the price he asked for it, and the payment schedule he wanted. Id.

Continue reading "UCL Class Action Defense Cases-Hall v. Time: California State Court Affirms Dismissal Of Class Action Complaint Concluding Plaintiff Lacked Standing Under Unfair Competition Law (UCL) To Prosecute Class Action Claims" »

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

Class Action Alleging Fidelity Failed to Disclose and Provide Discounted Title Insurance Rates to Homeowners as Part of Refinance Transactions Entitled to Class Action Treatment Ohio Federal Court Holds

Plaintiffs filed a class action lawsuit against their title insurance carrier, Fidelity National Title, alleging that the cost it charged insureds for insurance issued in connection with refinance transactions; specifically, the class action alleged that plaintiffs “have been injured and wronged by defendant’s failure to charge them a lower premium,” as required by Ohio law, “even though they were not named insureds under the title insurance policy.” Randleman v. Fidelity National Title Ins. Co., ___ F.Supp.2d ___ (N.D. Ohio January 31, 2008) [Slip Opn., at 1]. Of course, homeowners typically pay for title insurance, both for themselves and for their lenders, id., at 2. Defense attorneys filed a motion to dismiss the class action to the extent it asserted claims for breach of implied-in-fact contract and unjust enrichment, which the district court denied. See Randleman v. Fidelity National Title Ins. Co., 465 F.Supp.2d 812, 827 (N.D. Ohio 2007). Plaintiffs then filed a motion to certify the litigation as a class action, id. The trial court concluded that the matter may proceed as a class action.

Like all other title insurers doing business in Ohio, Fidelity belongs to the Ohio Title Insurance Rating Bureau (OTIRB) and files its insurance rates with the Ohio Superintendent of Insurance. Randleman, at 2. “The OTIRB files a manual of rates with the Ohio Department of Insurance (ODI), setting forth the rates title insurers will charge for policies.” Id. The rates in the manual are binding on title insurers, and the listed rates are mandatory though Ohio law provides for certain discounted rates, id., at 2-3. The class action complaint alleged that plaintiffs refinanced their Ohio home and paid a non-discounted rate for a title policy for their lender, id., at 3. The class action further alleged that plaintiffs had refinanced within the time period that would have qualified them to receive a discounted reissue rate, and that “they were overcharged $213.57.” Id., at 4. Plaintiffs’ class action certification motion argued that Fidelity systematically failed to provide discounts “despite knowledge that particular consumers are entitled to the discounted rate.” Id., at 5. Defense attorneys opposed class action treatment on the ground that “the issue of knowledge of the discount on the part of each individual class member would be determinative, and would require individualized adjudication of ‘as to the knowledge and practices of the particular lender, mortgage broker, agent, and borrower involved in the transaction’…, and thus, individual adjudication of each class member’s claim.” Id. Plaintiffs countered that Fidelity’s non-disclosure or a homeowner’s lack of knowledge is not an element of the causes of action underlying the class certification motion, so individual trials would not be required. Id., at 5-6.

Continue reading "Fidelity Class Action Defense Cases-Randleman v. Fidelity National Title: Ohio Federal Court Grants Class Action Treatment Against Title Insurer Alleging Class Action Claims Based On Failure To Give Homeowners Discounted Rates" »

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

On Appeal from Order Granting Class Action Treatment Against Dow Chemical for Damages Allegedly Caused by Dioxin from Dow Plant, Defense Failure to Request or Seek to Introduce Evidence in Opposition to Motion to Certify Class Action Undermines Claim that Trial Court Erred in Failing to Hold Evidentiary Hearing Split Michigan State Court Holds

Plaintiffs filed a class action lawsuit against Dow Chemical alleging toxic tort claims based on the alleged release of dioxin at Dow’s Midland, Michigan, plant. Henry v. Dow Chemical Co., Mich. Ct. App. Case No. 266433 (unpublished) (Mich.App. January 24, 2008) [Slip Opn., at 1]. In part, the class action complaint “presented an issue of first impression” in that plaintiffs sought certification of a class action to create a medical monitoring program funded by Dow, id. In 2003, plaintiffs moved for class action certification, and defense attorneys moved for summary disposition of the medical monitoring claim, id., at 2. The trial court denied the defense motion, but the Michigan Supreme Court reversed reasoning that “[b]ecause plaintiffs do not allege a present injury, plaintiffs do not present a viable negligence claim under Michigan’s common law.” Henry v. The Dow Chemical Co., 701 N.W.2d 684, 473 Mich. 63, 68 (Mich. 2005). On remand, the trial court considered class action treatment of the remaining claims for nuisance, negligence, and public nuisance, Slip Opn., at 3, and granted the motion, id., at 6-7. Defense attorneys appealed and, in an unpublished and divided opinion, the Michigan Court of Appeals affirmed.

The Court of Appeals noted that the sole issue before it was whether the trial court’s order granting class action treatment was “clearly erroneous.” Henry, at 7 (citation omitted). Defense attorneys argued on appeal that individual questions of law or fact will predominate over common questions, and that the trial court erred in concluding otherwise without first holding an evidentiary hearing. Id., at 8. The lead opinion, by Judge Hood, states at page 7 that “in my view, the trial court’s decision with regard to certification of the class was not clearly erroneous.” With respect to the lack of an evidentiary hearing, the court noted that the parties made the strategic decision not to introduce evidence but, rather, to rely on case law in support of, and opposition to, the class action certification motion, id., at 8. Of course, “[w]ithout an evidentiary hearing, there are no factual findings to review,” id., and having made the tactical decision not to request an evidentiary hearing or seek to present testimony in opposition to class certification, the defense could not now be heard to complaint. And with respect to Dow’s arguments that “the properties and the dioxin levels vary,” thus creating predominantly individual questions of fact, the appellate court concluded that (1) under Michigan law, “the trial court is not required to accept the defendant’s assertions and proofs, but looks to the allegations in the complaint,” and (2) the investigation and report of the Michigan Department of Environmental Quality (MDEQ) concluded that certain areas contained excessive amounts of dioxin and that Dow’s Midland facility was the source of the contamination. Id., at 11-12. While Dow argued that another sources of contamination existed, the MDEQ had concluded that the alternate source was not a factor so the trial court’s decision was not clearly erroneous. Id., at 12.

Continue reading "Dow Class Action Defense Cases-Henry v. Dow Chemical: Divided Michigan Appellate Court Affirms Class Action Certification Of Toxic Tort Class Action Complaint Arising From Release Of Dioxin At Dow Chemical Plant" »

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

District Court Erred in Holding Plaintiffs Lacked Standing to Prosecute Class Action Complaint and in Ruling on Suitability of Complaint for Class Action Treatment at the Pleading Stage of the Litigation Eleventh Circuit Holds

Plaintiffs filed a class action lawsuit in Florida state court against their mobile home owner’s insurance carrier, Foremost Insurance, for underpayment of damages caused by hurricanes, and defense attorneys removed the class action to federal court. Mills v. Foremost Ins. Co., 511 F.3d 1300, 2008 WL 45806, *1 (11th Cir. 2008). The class action complaint alleged that plaintiffs tendered a claim to Foremost for hurricane damages, but that “Foremost failed to compensate the Millses for contractors' overhead and profit charges, and for state and local sales taxes on materials, incurred by the Millses in having their hurricane-damaged property repaired or replaced.” Id. The Eleventh Circuit referred to these unpaid items as “Withheld Payments,” see id. n.2. Before either side filed a motion concerning class action certification, defense attorneys moved to dismiss the class action on the ground “that class action treatment was inappropriate because common legal or factual questions would not predominate over individual issues.” Id. The district court granted the motion to dismiss on the ground that plaintiffs lacked standing to prosecute the class action claims, id. Plaintiffs appealed dismissal of the class action, and the Eleventh Circuit reversed.

The district court dismissed the class action based on its conclusion that, in order to have standing to prosecute the class action, plaintiffs had to satisfy three “preconditions” set forth in the insurance policy: “(1) they must complete the repairs or replacement of the damaged property; (2) they must actually incur overhead, profit, and sales tax in connection with the repairs or replacement; and (3) they must make a further claim for any ‘additional costs’ (including overhead, profit, and sales tax) incurred in repairing or replacing the damaged property.” Mills, at *1. Because the class action complaint sought damages for Withheld Payments, the district court reasoned that plaintiffs themselves would not be entitled to such damages unless they met these preconditions. Because plaintiffs “failed to allege that they had completed the repairs or replacement and made a claim for such repair or replacement costs,” the district court held that they lacked standing to prosecute the complaint either individually or as a class action. Id. The district court further held that class action treatment would be inappropriate because “the individual inquiry of the facts surrounding the property damage claims of thousands of Foremost policy holders under thousands of separate insurance policies would predominate and overwhelm any common issue.” Id., at *2. Accordingly, it granted the defense 12(b)(6) motion to dismiss the class action complaint, id.

Continue reading "Class Action Defense Cases-Mills v. Foremost: Eleventh Circuit Reverses District Court Dismissal Of Class Action Complaint Alleging Underpayment Of Policy Benefits Holding Plaintiffs Possess Standing And Should Be Allowed To Conduct Discovery" »

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

Plaintiff's Motion for Class Action Certification of FDCPA (Fair Debt Collection Practices Act) Class Action Against Law Firm Granted by New York Federal Court because the"Win-Loss" Record of Plaintiff's Counsel did not Defeat his Adequacy to Serve as Class Counsel and because a De Minimis Recovery of $2.50 per Class Member did not Defeat Superiority

Plaintiff filed a class action lawsuit against the law firm of Karp & Kalamotousakis, LLP alleging that it violated the federal Fair Debt Collection Practices Act (FDCPA). Kalish v. Karp & Kalamotousakis, LLP, ___ F.R.D. ___, 2007 WL 4048559, *1 (S.D.N.Y. November 13, 2007). The class action complaint alleged that the law firm violated the FDCPA “by sending a form letter that incorrectly informed her that she could only dispute a debt owed to Defendant in writing.” Id. Plaintiff’s counsel sought class action certification; defense attorneys did not dispute liability on the FDCPA claim but challenged both the adequacy of counsel and the superiority of class action treatment. Id. The district court rejected the defense arguments and certified the litigation as a class action.

With respect to the adequacy of plaintiff’s lawyer to serve as class counsel, the district court explained that while prior Second Circuit authority directed district courts to consider whether proposed class counsel was “qualified, experienced and generally able” to handle the class action, Kalish, at *1, under the 2003 Amendments to Rule 23, and specifically Rule 23(g), “the court must consider: (a) the work counsel has done in identifying or investigating potential claims in the action, (b) counsel's experience in handling class actions, other complex litigation, and claims of the type asserted in the action, (c) counsel's knowledge of the applicable law, and (d) the resources counsel will commit to representing the class,” and may consider as well “any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class,” id. n.4. So viewed, the federal court found the defense argument against plaintiff’s counsel wanting because it “mistakenly conflates ‘qualified’ with ‘successful’ and thereupon undertakes a detailed description of some of [counsel’s] losses in court.” Id., at *2. The court found counsel’s “win-loss” record immaterial to a determination of his qualifications because “Rule 23 requires only that class counsel have experience in the particular type of law at issue or that she have demonstrated her competence in other ways, such as through the quality of her submissions to the court.” Id. (citation omitted). The court concluded that counsel was adequate to represent the class, id.

Continue reading "FDCPA Class Action Defense Cases-Kalish v. Karp: New York Federal Court Grants Class Action Treatment To Fair Debt Collection Practices Act (FDCPA) Class Action Against Law Firm Despite De Minimis Recovery And Class Counsel's Limited Success" »

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

Denial of Class Action Certification Motion Improper in Class Action Case Against Insurer Alleging Violations of State Unfair Competition Law (UCL) because Equitable Defenses of Fraud and Unclean Hands cannot be used to Defeat UCL Claims so Individual Issues Related to such Defenses will not Predominate over Common Issues California Appellate Court Holds

Plaintiff filed a putative class action complaint against his health insurer, Blue Shield of California, alleging inter alia that Blue Shield violated California’s unfair competition law (UCL) and state insurance code “by failing to attach his application to or endorse it on the insurance policy when issued, and later rescinding the policy on the ground he had made misrepresentations in that application.” Ticconi v. Blue Shield of Cal. Life & Health Ins. Co., 157 Cal.App.4th 707, 68 Cal.Rptr.3d 785, 788-89 (Cal.App. 2007). Plaintiff moved the trial court for class action treatment; defense attorneys opposed the class action certification motion on the ground the individual issues related to Blue Shield’s fraud and unclean hands defenses would predominate over common issues. Id., at 789. The trial court agreed with defense counsel and refused to grant class action status. Id. The Court of Appeal reversed, holding that the trial court abused its discretion in denying the class action certification motion because “[e]quitable defenses cannot be used to defeat a UCL cause of action and Blue Shield Life may not raise the defense of fraud based on statements that insureds made in an application for insurance where the application had been neither attached to nor endorsed on the policy when issued,” id. (citations omitted).

According to the class action complaint, plaintiff applied for a short-term health and accidental death insurance policy from Blue Shield. Ticconi, at 789. The application completed by plaintiff “was neither attached to the policy nor endorsed onto it when the policy was issued.” Id. Blue Shield issued the policy, and plaintiff paid the premiums as required, id. During the policy period, plaintiff’s health care bills exceeded $100,000, but upon receiving the bills Blue Shield refused payment and rescinded the policy on the ground that plaintiff “made material misrepresentations in his application for insurance about the condition of his health.” Id. Plaintiff denied this claim, insisting that he “answered truthfully all health questions posed on the policy application” and that “a reasonable investigation would have shown this.” Id. The class action further alleged that Blue Shield violated California law because it failed to attach or endorse a copy of his application to the policy, and Insurance Code section 10113 forbids incorporation of the application by reference, and that even if his statements were false, plaintiff “not bound by any statement made therein because that document had not been attached to or endorsed on the policy when issued.” Id., at 789-90. Plaintiff filed his lawsuit as a class action alleging that Blue Shield similarly “had rescinded a large number of policies that did not have the applications attached to or endorsed on the policies” in violation of Insurance Code sections 10113 and 10381.5, and that as such the rescissions represented an unlawful business practice under the UCL. Id., at 790.

Continue reading "UCL Class Action Defense Cases-Ticconi v. Blue Shield: California Court Reverses Denial Of Class Action Motion Holding Trial Court Erred In Refusing Class Action Treatment Based on Equitable Defenses To Unfair Competition Law (UCL) Claims Against Insurer" »

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

In Class Action Lawsuit Alleging Fraud, Trial Court Abused its Discretion in Decertifying Class Action because Subsequent Discovery did not Amount to “Changed Circumstances” Necessary to Support Decertification of Class Action, but Summary Judgment in Favor of Defense Properly Granted because Class Action Representative could not Establish Reliance thus Requiring Appointment of New Class Representative Illinois Appellate Court Holds

Plaintiff filed a class action lawsuit against her insurer, Health Care Service Corporation (dba BlueCross BlueShield of Illinois), alleging common law fraud and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act arising out of the company’s allegedly fraudulent business practices in the setting and revising of its policyholders’ premium rates. Wernikoff v. Health Care Serv. Corp., 877 N.E.2d 11, 13-14 (Ill.App. 2007). Specifically, the class action complaint alleged that defendant “failed to disclose to policyholders the option of reapplying as a new policyholder and, if approved, paying the new business rate premium.” Id., at 14. Plaintiff filed a class action certification motion in 2003, which the trial court granted, id., at 13. In 2006, after the case had been reassigned to a new judge, defense attorneys moved to decertify the class action and for summary judgment; the trial court granted both motions. Id., at 14. The appellate court reversed the order decertifying the class action, but affirmed the order granting summary judgment.

Addressing the order decertifying the class action, the appellate court explained that “an order setting aside an earlier determination of class certification would be proper if clearly changed circumstances or more complete discovery warranted it, rather than mere feelings of error regarding the original certification order.” Wernikoff, at 14 (citing Barliant v. Follett Corp., 74 Ill.2d 226, 231 (Ill. 1978)). An order decertifying a class action is reviewed for abuse of discretion. Id., at 14-15 (citation omitted). Plaintiff argued that the trial court abused its discretion because there were no “changed circumstances” and because the additional discovery did not warrant decertification; defense attorneys countered that more than 24 additional depositions had been taken and that the circumstances had changed. Id., at 15. “Specifically, defendant points to plaintiff's second deposition, which occurred after the class was certified, in which plaintiff admitted that he knew about the option to reapply to receive the new business rate but chose not to do so for several years. Defendant also points to the fact that the depositions of many policyholders revealed that not all policyholders relied on the ‘standard written materials’ but relied on the statements made in oral communications with defendant's customer service representatives.” Id.

Continue reading "Class Action Defense Cases-Wernikoff v. Health Care Service: Illinois Appellate Court Reverses Order Decertifying Class Action But Affirms Summary Judgment As To Plaintiff's Claims Thus Requiring Appointment Of New Class Representative" »

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

Plaintiff is not an Adequate Class Representative if She does not have a Viable Claim Against Defendant thus Compelling Denial of Class Action Certification Motion in Breach of Contract Class Action Against Life Insurer Pennsylvania Federal Court Holds

Plaintiff filed a putative class action against life insurance company for breach of contract, constructive fraud and unjust enrichment alleging that State Farm the premiums it charged for the insurance policies covering the lives of her two minor children “was based on an aggregate of mortality rates for both smokers and non-smokers, rather than a premium based solely on the mortality rate of non-smokers.” Alleman v. State Farm Life Ins. Co., 508 F.Supp.2d 452, 453 (W.D.Pa. 2007). Plaintiff moved for certification of a class action on the breach of contract claim only; defense attorneys opposed class action treatment and moved for summary judgment on the grounds that plaintiff did not have a viable breach of contract claim. Id. The district court agreed with the defense, denied the class action certification motion, and granted summary judgment in favor of the defense.

The federal court began its analysis by explaining the need to consider the class action certification motion and summary judgment motion as one - a point that often puzzles inexperienced state and federal courts that are concerned with ruling on the “merits” prior to class certification. As the district court explained at page 453, “Because the issue of whether plaintiff's claims are typical of the class and whether plaintiff is an adequate representative as required by [Rule 23] and defendant's summary judgment motion turn on whether plaintiff has a viable breach of contract claim we will address the two issues as one.” In other words, a court must determine as a threshold matter whether a particular putative class representative may assert a valid claim against the defendant in his or her own name; if not, then class action treatment is inappropriate because there is no adequate class representative to pursue the claim. As the Third Circuit explained, “Depending on the circumstances, class certification questions are sometimes enmeshed in the factual and legal issues comprising the plaintiff's cause of action and courts may delve beyond the pleadings to determine whether the requirements for class certification are satisfied.” Beck v. Maximus Inc., 457 F.3d 291, 297 (3d Cir. 2006) (citations and internal quotations omitted). Here, for example, because the plaintiff did not herself have a viable breach of contract claim, she was not an adequate class representative (compelling denial of the class action certification motion) and supporting the defense motion for summary judgment. Id., at 453-54.

Continue reading "State Farm Class Action Defense Cases-Alleman v. State Farm: Pennsylvania Federal Court Refuses To Certify Breach Of Contract Class Action Challenging Calculation Of Insurance Premiums And Grants Defense Summary Judgment Motion On Contract Claim" »

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

Ninth Circuit Reaffirms that District Court did not Abuse its "Broad Discretion" in Certifying Nationwide Sex Discrimination Class Action Against Wal-Mart Creating "the Largest Certified Class in History"

In June 2001, plaintiffs filed a putative class action against Wal-Mart in the San Francisco federal court alleging sex discrimination in the payment of wages and in promotions. In April 2003, plaintiffs moved to certify a nationwide class action on behalf of 1.5 million former and present female employees “employed in a range of Wal-Mart positions - from part-time, entry-level, hourly employees to salaried managers.” Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. 2007). Defense attorneys argued that the requirements of Rule 23 had not been satisfied, stressing in particular several problems inherent in litigating a class of record size. More than a year later, in an 84-page decision handed down in June 2004, the district court rejected all but one of the defense arguments and, save for that one point, certified the class action as requested by plaintiffs. Both sides appealed and on February 6, 2007 the Ninth Circuit affirmed the district court order in all respects; our article discussing that opinion may be found here .Defense attorneys asked the Panel to reconsider its decision, and on December 11, 2007 the Ninth Circuit again affirmed class action treatment of the claims against Wal-Mart. Dukes v. Wal-Mart, Inc., ___ F.3d ___ (9th Cir. December 11, 2007) [Slip Opn., at 16207 et seq.] The Panel denied rehearing, withdrew its February 6, 2007 opinion, and filed a new Opinion and Dissent affirming the class action order. Id., at 16212.

Plaintiffs’ motion sought certification of a nationwide class action on behalf of “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.” Dukes, at 16213. Wal-Mart stressed the “‘historic’ nature of Plaintiffs’ motion, inasmuch as it concerns a class of approximately 1.5 million women who work or worked in one or more of Wal-Mart’s 3,400 stores in 41 regions at any time since 1998.” Id., at 16214. The district court recognized Wal-Mart’s concerns but concluded that “while the class size was large, the issues were not unusual.” Id. The Ninth Circuit summarized the district court’s order at page 16214 as follows:

Continue reading "Wal-Mart Class Action Defense Case-Dukes v. Wal-Mart: Ninth Circuit Again Upholds Class Action Certification Order In Nationwide Sex Discrimination Lawsuit Against Wal-Mart Finding Class Action With 1.5 Million Members Was Nonetheless Manageable" »

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

Copyright Act Section 411(a) Limits Federal Court Jurisdiction to Registered Works and District Court Lacked Jurisdiction to Approve Class Action Settlement that Included Unregistered Copyrights Second Circuit Holds

Plaintiffs filed a class action on behalf of a class that consisted primarily “of freelance writers who contracted with publishers to author the works for publication in print media, and retained the copyrights in those works,” but whose work had been reproduced without their consent on various electronic databases. In re Literary Works In Electronic Databases Copyright Litig., ___ F. 3d ___ (2d Cir. November 29, 2007) [Slip Opn., at 3]. The legal foundation of the class action rested on New York Times Co. v. Tasini, 533 U.S. 483, 488 (2001), which “held that § 201(c) of the Copyright Act does not permit publishers to reproduce freelance works electronically when they lack specific authorization to do so.” Id., at 4. Essentially, Tasini requires publishers obtain a separate license to reproduce written works electronically. Defense counsel argued, however, relying on section 411(a) of the Copyright Act, that the district court lacked jurisdiction over the class action because putative members of the class action generally failed to register their copyrights. Id., at 5. The Circuit Court noted at page 3 that “The overwhelming majority of claims within the certified class arise from the infringement of unregistered copyrights.” Nonetheless, based on Tasini the district court ordered the parties to mediation, and after three years a settlement was reached, id., at 6. The district court eventually approved the class action settlement, and several objectors appealed. Id., at 7-8. The Second Circuit reversed, holding that the district court lacked jurisdiction to approve the settlement.

We do not here discuss the details of the class action allegations or the terms of the class action settlement. For present purposes, it is sufficient to note that class was defined so as to include works that had not been registered, In re Literary Works, at 6, and that defense counsel argued “that this litigation possessed scant settlement value because the District Court could never certify the vast majority of the claims for inclusion in any proposed class” because section 411(a) of the Copyright Act provides that “no action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title,” id., at 5 (quoting 17 U.S.C. § 411(a)). Defense counsel introduced survey evidence suggesting that less than one percent of the works had been registered; thus, according to the defense the jurisdictional defect exited as to “more than 99 percent of the claims at issue.” Id., at 5-6. Plaintiffs’ lawyers did not concede the precise number at issue, but admitted that “the large majority of ‘subject works’ have not been registered with the U.S. Copyright Office.” Id., at 6. “The District Court never considered whether it had jurisdiction to certify a class consisting mostly of claims arising from unregistered copyrights, or to approve a settlement resolving those claims.” Id., at 8.

Continue reading "Class Action Defense Cases-John v. National Security: Second Circuit Reverses District Court Approval Of Class Action Settlement Holding Lower Court Lacked Jurisdiction Over Class Action Claims For Unregistered Copyrights" »

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

Trial Court Properly Held Illinois Law Applied to Class Action Certification Motion but Improperly Certified Statewide Fraud Class Action Against Intel because Company’s Allegedly Deceptive Statements were not Actionable Illinois Supreme Court Holds

Purchasers of computers run by Intel’s Pentium 4 processors filed a putative nationwide class action in Illinois state court alleging claims for unfair business practices under California law and Illinois law based on the allegation that, contrary to its billion-dollar marketing campaign that “4 is better than 3,” the Pentium 4 performed no better than the Pentium III. Barbara’s Sales, Inc. v. Intel Corp., 879 N.E.2d 910 (Ill. 2007) [Slip Opn., at 1-2]. The class action complaint essentially alleged that the Pentium 4 was not “better” than its predecessor and did not necessarily make programs run faster than its predecessor, id., at 5-6. Defense attorneys opposed class certification in part on the grounds that Illinois law applied and further argued that the decision to purchaser a Pentium 4 was not made “simply based on the number 4 being higher than the number 3.” Id., at 7. The parties’ experts disagreed on whether Pentium 4 outperformed the Pentium III, id., at 6-8. The trial court agreed that Illinois law applied and denied class certification on the California-law claims. The trial court also found that Illinois law could not be applied to a nationwide class action and so certified only a statewide class under the Illinois Consumer Fraud and Deceptive Business Practices Act claim, id., at 8. Our previous article summarizing the July 2006 Illinois appellate court opinion that had reversed the trial court statewide class certification order - holding that California law applies and a nationwide class action should have been certified - may be found here. Defense attorneys appealed to the Illinois Supreme Court, which held that Illinois law applied and that class action treatment should have been denied.

The Supreme Court explained that it certified review only of (1) whether Illinois or California law applied to the nationwide class action complaint, and (2) whether the lawsuit should have been certified as a class action. Intel, at 10. The class action sought relief on behalf of ‘a nationwide class of consumers who have made purchases and received representations in all 50 states and the District of Columbia,” and the Illinois High Court recognized “substantial differences” among the fraud laws of the 50 states, id., at 11. As “the masters of their complaint,” however, plaintiffs limited the class action to “relief only under Illinois or California,” id. After a detailed analysis, see id., at 11-20, the Supreme Court concluded that Illinois law applied, id., at 20-21. The Court noted also that plaintiffs did not argue that Illinois law should be applied to a nationwide class, so the only remaining inquiry was whether a statewide class action should have been certified, id., at 21.

Continue reading "Intel Class Action Defense Cases-Barbara's Sales v. Intel: Illinois Supreme Court Applies Illinois Law To Fraud Class Action And Reverses Certification Of Class Action Against Intel" »

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

Determination of Loss Causation Inappropriate at Pleading Stage and Plaintiffs Satisfied PSLRA (Private Securities Litigation Reform Act of 1995) Standard for Lead Plaintiff New York Federal Court Holds

Plaintiffs filed a putative class action against AtriCure, Inc. alleging violations of the federal securities laws in connection with its initial public offering (IPO) for allegedly failing to disclose material facts in the company’s Registration Statement. Levine v. AtriCure, Inc., 508 F.Supp.2d 268, 270-71 (S.D.N.Y. 2007). Defense attorneys moved to dismiss plaintiff Levine’s claims in the class action complaint, and plaintiffs James Duncan and Jackie Byrd moved to be appointed lead plaintiffs; the district court denied the defense motion and granted the plaintiffs’ motion, id., at 270.

The only relevant facts for purposes of this article’s discussion are (1) Duncan purchased 200 shares of stock in October 2005 for an average of $12.85 and sold the stock in March 2006 when it was trading at $7.36; (2) Byrd purchased 100 shares of stock in August 2005 for $14.19 a share and sold most of her stock in May 2006 when the stock was $7.90, and the rest in December 2006 for $9.28 a share; and Levine purchased 250 shares of stock in August 2005 for $12 a share and sold them in November 2005 at $11.80 a share for a total loss of $50. Levine, at 271 and n.3. The defense motion to dismiss was based on the insignificant loss suffered by Levine and on the fact that he sold his shares prior to the publication of a Wall Street Journal article that purportedly misled class members into purchasing the company’s stock. Id., at 271.

Continue reading "Securities Class Action Defense Cases-Levine v. AtriCure: New York Federal Court Denies Defense Motion In Securities Fraud Class Action To Dismiss Claims Of Class Action Plaintiff On Ground That He Suffered No Loss" »

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

In Denying Class Action Certification Motion, Trial Court Erred in Examining Commonality from Perspective of Individual Class Member Claims rather than Overarching Conduct of Defendants Applicable to Entire Class California Court Holds

A wide array of plaintiffs filed a putative class action for injunctive and declaratory relief against various State of California defendants for failure to provide community living arrangements under California’s Lanterman Developmental Disabilities Services Act and alleging a “systemic failure of the state agencies and regional centers to provide proper oversight and enforce constitutional, statutory and regulatory mandates to place individuals in less restrictive community settings when appropriate.” Capitol People First v. Dep’t of Developmental Services, 155 Cal.App.4th 676, 66 Cal.Rptr.3d 300, 304-05 (Cal.App. 2007). Plaintiffs sought class action certification; defense attorneys opposed class action treatment on the ground that commonality did not exist, that plaintiffs were not adequate class representatives, and that a class action was not the superior means of resolving the issues in dispute. Id., at 305. The trial court agreed with defense counsel and denied class action certification; the Court of Appeal reversed and affirmatively instructed the trial court to grant plaintiffs’ motion for class action treatment.

California’s Lanterman Act, enacted in 1977, “establishes a comprehensive scheme for providing services to people with developmental disabilities” and provides that “[t]o the maximum extent feasible, services and supports should be available throughout the state to prevent the dislocation of persons with developmental disabilities from their home communities.” Capitol People, at 305 (citation omitted). The theme underlying the class action was that individuals were being institutionalized in violation of the Lanterman Act, and sought to enforce the right of developmentally disabled individuals “to live, with appropriate supports, in [their local] neighborhoods.” Id., at 308. The class action complaint challenged the State’s pattern and practice of “under-funding” of community services so as to require institutionalization, id., at 308-09. Importantly, ten institutionalized individuals and two organizations sought leave to intervene on the ground that the named plaintiffs’ interests were “hostile” to their own, and that “the relief they sought would impair the rights of those persons whose needs are best met in a developmental center.” Id., at 310. The trial court granted limited intervention, id.

In response to plaintiffs’ motion for class action certification, the trial court held that (1) commonality did not exist, (2) plaintiffs were not adequate class representatives, and (3) class action treatment was not the superior means of redress; rather, the fair hearing procedure provided under the Lanterman Act adequately redresses individual grievances. Capitol People, at 310. With respect to commonality, the appellate court held that the trial court failed to appreciate the difference between the “system relief” sought by the class action complaint and the “individual solutions to individual problems” that were at the heart of the interveners’ objections. Id., at 311-12. The trial court focused in “discrete wrongs,” and concluded that “common issues of fact would not predominate because the deficiencies, variables and pertinent lines of inquiry would be individualized.” Id., at 312. The Court of Appeal recognized that legal authority existed in support of the trial court’s holding, see id., at 312-13 and J.B. ex rel. Hart v. Valdez, 186 F.3d 1280 (10th Cir. 1999), but held that under California law “courts can take an aggregate approach to plaintiffs' claims,” id., at 313. Thus viewed, the question was not whether differences existed among the various claims of putative class members but rather whether the defendants utilized “common policies and practices generally applicable to all putative class members.” Id. The Court of Appeal held that commonality did exist, explaining at page 315: “The overarching theme is that there is a pattern and practice of failure to meet constitutional, statutory and regulatory mandates to provide services and place class members in less restrictive settings, and the systemic effect of this failure is to impinge plaintiffs' rights under state and federal law.” Such “systemic relief” could not be sought or obtained on a case-by-case basis. Id.

Continue reading "Class Action Defense Cases-Capitol People v. Dep’t of Developmental Services: California Appellate Court Reverses Court Order Denying Class Action Certification And Affirmatively Holds Class Action Treatment Warranted For Lanterman Act Claims" »

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

Local Rule Requiring Class Action Certification Motion be Filed Within 90 days of Class Action Complaint runs from Filing of First Class Action Complaint not from any Subsequent Amended Class Action Complaint and District of Columbia Federal Court Holds Contrary Interpretation to be “Untenable” and “Unreasonable”

Plaintiffs filed a putative class action against the Department of Commerce (DOC) and its Secretary for violations of Title VII alleging that the performance-review system resulted in systemic racial discrimination. Defense attorneys moved to dismiss the individual claims and to strike the class action allegations. The district court granted the motion in part, striking the class action claims. See Howard v. Gutierrez, 474 F.Supp.2d 41 (D.D.C. 2007). Plaintiffs sought reconsideration and certification of an interlocutory appeal. Howard v. Gutierrez, 503 F.Supp.2d 392, 393-94 (D.D.C. 2007). The district court denied the motion for reconsideration and refused to certify an interlocutory appeal.

With respect to the motion for reconsideration, the district court noted that the Federal Rules of Civil Procedure do not expressly authorize such motions and that they are “typically treat[ed]…as motions to alter or amend a judgment” under Rule 59(e). Howard, at 394. Reconsideration motions are addressed to the sound discretion of the court, are not “lightly” granted, and are not to be used to present arguments “that could have been advanced earlier.” Id. (citations omitted). With that background, the district court first rejected plaintiffs’ attempt to “rehash” arguments made previously with respect to their failure to file a motion for class action certification within 90 days of the filing of the class action complaint, and held that any new arguments in support of this old theme could have been raised earlier. Id. The district court concluded at page 394, “There has been no intervening change in controlling law, nor have plaintiffs advanced new evidence not previously available to them. Finding nothing in plaintiffs' motion that warrants revisiting its prior holding, the Court now reaffirms that the ninety-day period in Local Rule 23.1(b) applies from the date of the filing of the first complaint to assert class claims.”

Continue reading "Class Action Defense Cases-Howard v. Gutierrez: District Of Columbia Federal Court Denies Motion To Reconsider Ruling Striking Class Action Allegations Holding Delay In Seeking Class Action Certification Was Not Excusable" »

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

Class Action Certification of 48-State Class Proper because Sprint-Drafted Choice-of-Law Provision Selected Kansas Law to be Applied to Class Action Claims Illinois State Court Holds

Plaintiff filed a putative class action in Illinois state court against her wireless communications provider, Sprint, alleging various state law claims for relief each premised on the theory that early termination fees are unlawful penalties. Hall v. Sprint Spectrum L.P., 876 N.E.2d 1036 [Slip Opn., at 1-2 (Ill.App. 2007). The class action complaint alleged in part violations of Illinois's Consumer Fraud and Deceptive Business Practices Act and sought to prosecute a state-wide class action under the statute, but alleged further violations of other state consumer protection statutes and sought to prosecute a nation-wide class action as to those claims. Id., at 2. Defense attorneys opposed plaintiff’s motion for class action certification, but the trial court granted the motion. Id., at 1. The defense appealed, and the Illinois appellate court affirmed the order granting the lawsuit class action treatment.

The class action complaint alleged that plaintiff had entered into a one-year contract with Sprint for two separate lines and agreed to pay a $150 early termination fee if she canceled service within that year: Within the one-year period, Sprint canceled plaintiff’s service because of nonpayment but refused her request to cancel her contract unless she paid the amounts owed, including the early termination fee. Hall, at 1-2. Plaintiff paid the entire amount demanded by Sprint on one of her lines, including the $150 early termination fee, but she could not afford to pay the termination fee on the second line and “Sprint refused to cancel the account and stop the accrual of charges unless [she] paid the early termination fee for the second cell phone number.” Id., at 2. This amount was never paid, id. Instead, plaintiff filed her class action lawsuit challenging the early termination fees as “unlawful penalties.” Id. Ultimately, the trial court granted plaintiff’s request for class action certification of a 48-state class action, id.

Continue reading "Class Action Defense Cases-Hall v. Sprint: Illinois State Court Upholds Class Action Treatment Of Class Action Challenging Early Termination Fees Charged Cellular Phone Customers" »

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

District Court Erred in Denying Class Action Motion because Plaintiffs were Assignees of Original Plaintiffs, who were Members of the Class, and in Determining that Common Issues as to Damages did not Predominate Second Circuit Holds

Plaintiffs filed an antitrust class action lawsuit against certain initial public offering (IPO) underwriters alleging violations of the Sherman Act “by agreeing to charge all corporations conducting mid-size IPOs who used their services a fee equal to seven percent of the proceeds of the offering.” Cordes & Co. Fin. Services, Inc. v. A.G. Edwards & Sons, Inc., 502 F.3d 91, 94-95 (2d Cir. 2007). Plaintiffs’ assignees (Cordes) assumed control of the class action litigation and sought class certification, id.; defense attorneys opposed class action treatment arguing, inter alia, that Cordes were not adequate class representatives because they were not members of the class and that common issues did not predominate, id., at 95. Cordes presented an expert opinion that the class action was susceptible to common proof because a formula, “common to all class members,” could be utilized to determine “the difference between the fee actually paid and the ‘but-for fee’ - the fee that would have been charged to the putative class members in connection with the IPO in the absence of the alleged conspiracy.” Id., at 97. The defense expert countered that a preliminary inquiry must be made - viz., “the fee that the underwriter would have charged but for the conspiracy” - and that this would require “an individualized, plaintiff-by-plaintiff analysis of ten factors, including underwriter costs, price stabilization, and the risk of the offering.” Id. The district court agreed with defense counsel and denied the motion for class action certification, id., at 95. The Second Circuit reversed.

The issues on appeal were whether the district court properly determined the adequacy of representation issue and whether it properly analyzed the predominance requirement. Cordes, at 98. With respect to the Rule 23(a)(4) adequacy of representation test, the district court held that the putative class representatives did not fall within the scope of the class defined in the complaint, id., at 99. The Second Circuit noted, however, that the original class representatives “were indisputably members of the class they sought to represent,” and concluded that they could subsequently assign their “claims and interests in this litigation” to other parties who then could prosecute the class action. Id., at 99-100. Put simply, “By virtue of the assignments, [plaintiffs-assignees] do…possess the same interest [as the assignors] and thus may continue to assert a claim for the same injury shared by all members of the class.” Id., at 101. The bottom line is that Cordes were not precluded from acting as class representative solely because they are assignees. Id., at 103.

Continue reading "Antitrust Class Action Defense Cases-Cordes v. A.G. Edwards: Second Circuit Reverses Denial Of Class Action Certification In Antitrust Class Action Holding Assignees Could Serve As Class Representatives And Predominance Existed" »

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

Class Action Complaint Asserting Toxic-Torts Mass Action by Property Owners for Private Nuisance did not Warrant Class Action Certification because Individual Issues would Necessarily Predominate over Common Issues of Fact or Law Arkansas Supreme Court Holds

Plaintiffs filed a class action lawsuit in Arkansas state court against Georgia-Pacific and the City of Crossett seeking “damages and injunctive relief arising out of vapors, gasses, odors, and other forms of hazardous, noxious, toxic and/or harmful substances and contamination issued and emitted from the industrial wastewater treatment system that the defendants…have operated throughout the West Crossett community over a period of many years, and which harmful substances and contamination have migrated through the air to and into the property, homes and persons of the plaintiffs, where such substances and contamination have occasioned injury, harm and inconvenience.” Georgia-Pacific Corp. v. Carter, ___ S.W.3d ___ [Slip Opn., at 2] (Ark. October 11, 2007). The class action complaint alleged theories of negligence, gross negligence, nuisance, trespass, strict liability and damages, additionally sought injunctive relief. Id. Plaintiffs moved for class action certification of a class of property owners; defense attorneys argued class action treatment was not warranted in part because common issues did not predominate over individual issues and a class action was not the superior means of resolving the dispute. Id., at 1-2. The circuit court “certified for class-action treatment ‘the plaintiffs’ private nuisance claims against G.P.’” but “held in abeyance” whether to certify a class action against the City. Id., at 2-3. Defense attorneys appealed. The Arkansas Supreme Court reversed, holding that class action treatment was inappropriate.

The Arkansas Supreme Court noted that “in order for a class-action suit to be certified, the party seeking certification must establish each of the following six factors: (1) numerosity; (2) commonality; (3) predominance[;] (4) typicality; (5) superiority; and (6) adequacy.” Georgia-Pacific, at 6 (citation omitted). The Court disagreed with defense arguments that the circuit court failed to consider the predominance requirement, holding that it “specifically found” that predominance had been met. Id., at 6-7. It agreed, however, that class action certification was inappropriate. Arkansas “distinguish[es] between class actions involving mass-tort claims and toxic-tort claims,” id., at 8; “mass-tort actions present unique certification problems because they generally involve numerous individual issues as to the defendant’s conduct, causation, and damages,” id., at 9. These concerns are not as significant when the injuries arise from a “single, catastrophic event” - what the Arkansas Supreme Court described as a “mass-accident” case, as opposed to injuries that arise from “a series of events occurring over a considerable length of time and under different circumstances,” which the Court described as “toxic-tort or products-liability” cases, id., at 9.

Continue reading "Class Action Defense Cases-Georgia-Pacific v. Carter: Arkansas Supreme Court Reverses Certification Of Nuisance Class Action Against Georgia-Pacific Holding That Common Issues Did Not Predominate So Class Action Treatment Was Inappropriate" »

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

Kansas Class Representatives in Labor Law Class Action by Drivers Against FedEx Adequately Established Rule 23(b)(3) State-Wide Class Action for Misclassification of Drivers under Kansas Labor Laws and for Common Law Claims Against FedEx, and Rule 23(b)(2) Nationwide Class Action for Denial of ERISA Benefits Indiana Federal Court Holds

In 2005, the Judicial Panel on Multidistrict Litigation transferred numerous class action lawsuits to the Northern District of Indiana pursuant to 28 U.S.C. § 1407; ultimately, the MDL docket included 56 class action lawsuits filed in 30 states alleging that FedEx improperly classified drivers as independent contractors rather than employees and thus failed to pay wages due under state and federal wage statutes and failed to pay benefits due under ERISA. In re FedEx Ground Package Sys., Inc., Employment Prac. Litig., ___ F.Supp.2d ___ [Slip Opn., at 1-2] (N.D. Ind. October 15, 2007). The Kansas plaintiffs moved the federal court to certify a class action on their behalf, as well as a nationwide class action on behalf of the ERISA class, id., at 1. Defense attorneys opposed class action treatment, and submitted three expert reports purporting to show (1) “that FedEx Ground workers prefer to be independent contractors by a 52% to 20% margin,” id., at 8, (2) “that FedEx Ground delivery drivers are operating a business,” id., at 15, and (3) that the workers are independent contractors because there are “important variations in the contractors’ work,” id., at 20. Plaintiffs objected to the federal court considering these expert reports in deciding whether to certify a class action, and moved to strike the reports under Federal Rule of Evidence 702. Id., at 1-2. The district court denied plaintiffs’ motion to strike, but agreed that class action treatment was warranted.

The district court explained that the Kansas plaintiffs challenged the FedEx practice “of labeling its Ground and Home Delivery division drivers as independent contractors.” FedEx, at 22. According to the class action allegations, “the FedEx Operating Agreement signed by all FedEx drivers actually reserves to FedEx the right to exercise pervasive control over the method, manner, and means of the drivers’ work,” including “the drivers’ appearance and behavior, their pay and rates charged to customers, the vehicle they use and its appearance, their route and the number of packages they deliver each day, their delivery methods and mode of customer service, their hours of work, and their opportunity to increase their earnings.” Id., at 22-23. Class action treatment is further warranted, plaintiff argued, because “FedEx has a categorical policy of classifying its drivers as independent contractors” and because putative members of the proposed class action “share the same job title, signed the same nonnegotiable Operating Agreement, are paid under the same compensation formula, wear the same uniform, drive FedEx approved trucks bearing the FedEx logo, work exclusively for FedEx, and are all similarly integrated into FedEx’s operations.” Id., at 23. The class action sought rescission of the operating agreement and a declaration that defendant’s practices violated Kansas labor laws, id., at 30. Defense attorneys argued against class action treatment by arguing that numerous individualized factual inquiries exist, id., at 23.

Continue reading "FedEx Class Action Defense Cases-In re FedEx Ground: Indiana Federal Court Certifies Kansas Class Action Under Rule 23(b)(3) And Nationwide ERISA Class Action Under Rule 23(b)(2) In Labor Law Class Action By Drivers Against FedEx" »

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

Rule 23(f) Requires Plaintiffs Seek Interlocutory Review from First Denial of Motion for Class Action Certification because 10-Day Window for Appeal does not Commence with Every Denial of such a Motion First Seventh Circuit Holds

Plaintiffs filed six securities fraud class action lawsuits against Baxter International. Asher v. Baxter Int’l Inc., 505 F.3d 736 [Slip Opn., at 1] (7th Cir. 2007). The district court granted a defense motion to dismiss the consolidated class action lawsuits based on the “safe harbor” provision for forecasts and other forward-looking statements created by the Private Securities Litigation Reform Act of 1995 (PSLRA), id., but the Seventh Circuit reversed, holding that the district court erred in dismissing the class action complaint based on the allegations in the complaint. See Asher v. Baxter Int’l Inc., 377 F.3d 727 (7th Cir. 2004). It was the Seventh Circuit’s expectation “that discovery sufficient to make a prompt decision about the safe harbor would follow [the] opinion, for the safe harbor is supposed to be applied at an early stage.” Asher, at 2. Instead, the litigation devolved into “extended wrangling about who should be the ‘lead plaintiff’ under the 1995 Act, and thus which law firm would control the plaintiffs’ side of the litigation.” Id. In the face of the infighting, “the district court eventually held that none of the persons proposed as lead plaintiffs is satisfactory and that the suit therefore cannot proceed as a class action.” Id. The motions panel for the Seventh Circuit permitted plaintiffs to file an interlocutory appeal under FRCP Rule 23(f) from the denial of class action treatment, id., but the Circuit Court dismissed the appeal as untimely, id., at 10.

The Seventh Circuit explained at page 2 that the purpose of designating “lead plaintiffs” in class actions is “to counteract the dominance of lawyers over class-action suits.” Asher, at 2 (italics added). Specifically, “[T]he district judge should select a representative with a financial stake large enough to make monitoring of counsel worthwhile, and with the time and skills needed to make monitoring productive. The idea is that securities suits then will proceed in the interest of investors rather than the lawyers who appoint themselves to prosecute these actions.” Id. (italics added). (The Circuit Court’s observation and criticism may have been influenced by the criminal indictment of several securities fraud class action plaintiff lawyers - including Melvyn Weiss, David Bershad, Steven Schulman and William Lerach - most of whom have pleaded guilty to paying illegal kickbacks to individuals to serve as “lead plaintiffs” in securities fraud class action lawsuits.) According to the Seventh Circuit, “The principal substantive questions on appeal are (a) whether the City of Fayetteville Firemen’s Pension and Relief Fund (‘the Fund’) is unsuitable as a lead plaintiff because it learned about Baxter International’s supposed wrongs from a securities lawyer rather than from a business executive, and (b) whether ‘no one’ can be the answer to the question ‘who is the best representative of investors’? Perhaps, when all potential lead plaintiffs have shortcomings, the district judge must choose the least bad of a mediocre lot; after all, the 1995 statute refers to ‘the most adequate plaintiff’ among many, without setting a floor.” Asher, at 2 (italics added). While a district court may ensure “minimum standards of adequacy” under “adequacy” test of Rule 23(a)(4), in this case the lower court never made such an inquiry. Id., at 2-3.

Continue reading "Class Action Defense Cases-Asher v. Baxter International: Seventh Circuit Dismisses Appeal From Court Order Refusing To Certify Class Action As Untimely" »

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

California Court Holds that Putative Class Action Alleging Violations of State’s Unfair Competition Law, False Advertising Law and Consumers Legal Remedies Act Fails for Lack of Actual Reliance and Lack of Standing Where Plaintiff Purchased Products for the Purpose of Filing Class Action

In a case with broad implications to class action lawsuits, plaintiffs filed an individual lawsuit in California state court against Threshold Enterprises and more than 30 other defendants alleging violations of the state’s unfair competition law (UCL), false advertising law (FAL) and Consumers Legal Remedies Act (CLRA) because its skin cream was a “misbranded or mislabeled drug.” Buckland v. Threshold Enterprises, Ltd., ___ Cal.App.4th ___, 2007 WL 2773497 (Cal.App. September 25, 2007) [Slip Opn., at 2]. Defense attorneys demurred to the complaint on the grounds that plaintiffs lacked standing to assert the various UCL, FAL and CLRA claims, id. at 3. The trial court sustained the defense demurrer to the complaint but granted plaintiffs leave to amend; plaintiffs refused to amend the complaint so the court entered judgments of dismissal and plaintiffs appealed. Id., at 2. The Court of Appeal affirmed, holding that .

Plaintiffs California Women’s Law Center and its executive director, Katherine Buckland, “seek[] to advance the civil rights of women and girls” and allege that the some skin creams and lotions sold by defendants contain progesterone or other chemicals regulated by the FDA but that defendants failed to provide adequate warnings in violation of FDA regulations. Buckland, at 2-3. Plaintiffs sought a preliminary injunction to enjoin Threshold from selling skin cream, id. at 3. Buckland admitted, however, that she did not suffer any personal injury but rather purchased the items for the express purpose of determining whether lawsuits could be filed based on the chemicals contained in them. Id. Threshold opposed the injunction on the grounds that plaintiff would not likely prevail on the merits and that the “balance of hardships” weighed against such relief. Id., at 3-4.

Continue reading "UCL Class Action Defense Issues-Buckland v. Threshold Enterprises: Plaintiff Who Buys Products For Purpose Of Filing Class Action Has Not Suffered Loss Supporting Dismissal Of UCL/CLRA Class Action California Court Holds" »

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

Interests of Plaintiffs in Class Action Conflicted with other Class Members, Warranting Certification of Subclass and new Hearing on Approval of Class Acton Settlement Second Circuit Holds

Plaintiffs filed a class action Merck-Medco managed Case, L.L.C., a/k/a Medco Health Solutions, Inc., a pharmaceutical benefits manager (PBM), and its former parent company Merck & Co. Inc. (collectively Medco) alleging violations of the Employee Retirement Income Security Act of 1974 (ERISA) for breach of fiduciary duties. Gruer v. Merck-Medco Managed Care, LLC, ___ F. 3d ___ (2d Cir. October 4, 2007) [Slip Opn., at 6]. Ultimately, the parties reached a tentative settlement of the class action. Important to our discussion, the class action settlement required Medco pay $42.5 million to class members, allocated primarily on a pro rata share of monies spent by each plan but reducing by 55% the share of certain plans because those plans could not have been injured directly by the conduct of Medco. Id., at 8. The district court approved the class action settlement, but the Second Circuit reversed and remanded holding that the lower court erred in failing to consider the conflict of interest between the purported representatives of the class action and other members of the class.

In very broad terms, plaintiffs in the class action complaint consisted of individuals, as beneficiaries of certain welfare benefit plans, and of trustees of welfare benefit plans. Gruer, at 4. The class action complaint alleged that Medco breached fiduciary duties under ERISA by “failing to act in their best interest in its capacity as a pharmaceutical benefits manager for the plans,” id., as set forth in the Note. A class action settlement was proposed, at which time certain entities sought leave to intervene and/or objected to the settlement. Id. The district court certified a class action, approved the settlement, awarded legal fees, and severed those cases in which ERISA plans opted out of the class action settlement, id.

Continue reading "Class Action Defense Cases-Gruer v. Merck-Medco: Second Circuit Reverses District Court Order Approving Class Action Settlement Holding Class Action Plaintiffs Were Not Representative Of Class" »

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

Trial Court Class Action Judgment Against FedEx for Labor Law Violations Generally Upheld but California State Appellate Court Reverses Attorney Fee Award as Excessive and because Multiplier Improperly Based on Same Facts that Triggered Entitlement to Fees

Plaintiffs filed a class action in California state court against FedEx Ground Package System, Inc. alleging violations of the state’s labor laws for failure to reimburse work-related expenses; the thrust of the class action complaint was that, “for the limited purpose of their entitlement to reimbursement for work-related expenses, [class members] were employees, not independent contractors.” Estrada v. FedEx Ground Package Sys., Inc., 64 Cal.Rptr.3d 327 330 (Cal.App. 2007). The trial court granted plaintiffs’ motion to certify the litigation as a class action, and a trifurcated trial followed during which (1) “the court found the drivers were employees within the meaning of Labor Code section 2802 (Phase I) , ordered FedEx to reimburse some (about $5 million, including prejudgment interest) but not all of their expenses (Phase II), granted most of the equitable relief sought by the drivers (Phase III), and ordered FedEx to pay the drivers' costs and attorneys' fees (about $12.3 million).” Id. Defense attorneys appealed and plaintiffs cross-appealed.

The Court of Appeal noted that this represented the third appeal in this case, and that it here considered defense challenges to the trial court order certifying the class action, the finding that the drivers were employees, the reimbursement findings, and the award of attorney fees. Estrada, at 330-31. The facts are quite detailed, and we do not repeat them here. See id., at 331-34. On the direct appeal, the Court of Appeal affirmed that the drivers were employees of FedEx, not independent contractors. Id., at 335. The appellate court noted that the California Labor Code does not define "employee" for purposes of section 2802 so the common law test applies, and explained at page 335 that under that test the question is “whether the principal has the right to control the manner and means by which the worker accomplishes the work” based on a number of factors including “(1) whether the worker is engaged in a distinct occupation or business, (2) whether, considering the kind of occupation and locality, the work is usually done under the principal's direction or by a specialist without supervision, (3) the skill required, (4) whether the principal or worker supplies the instrumentalities, tools, and place of work, (5) the length of time for which the services are to be performed, (6) the method of payment, whether by time or by job, (7) whether the work is part of the principal's regular business, and (8) whether the parties believe they are creating an employer-employee relationship.” (Citations omitted.) Under those factors, substantial evidence supported the finding that the drivers were “employees,” see id., at 336-37.

Next, the Court of Appeal affirmed that class action treatment was appropriate, holding that “it is clear that common issues - whether the drivers were employees and, if so, which expenses would be reimbursable - predominated.” Estrada, at 338. The appellate court affirmed also the trial court finding that FedEx failed to reimburse the drivers for all expenses required by law, see id., at 339.

Continue reading "Labor Law Class Action Defense Cases-Estrada v. FedEx: California State Court Upholds Class Action Judgment Against FedEx But Holds $14.4 Million Fee Award Must Be Reduced As Excessive" »

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

Class Action Plaintiff Lawyer’s Collusion with Plaintiff’s Counsel in Separate Fair Debt Collection Practices Act (FDCPA) Class Action Against Same Defendant is not Condoned but Remedy lies with Congress not with Disciplinary Bodies California Federal Court Holds

Plaintiff filed a putative class action against a debt collection agency and one of its employees alleging that letters sent to debtors violated the federal Fair Debt Collection Practices Act (FDCPA) and California’s state law equivalent, the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act). Guevarra v. Progressive Fin. Servs., Inc., 497 F.Supp.2d 1090, 1090-91 (N.D. Cal. 2007). The class action complaint originally sought “class-wide relief on behalf of all debtors who received the letter at issue here”; however, plaintiff’s counsel subsequently amended the class action allegations to seek relief solely on behalf of debtors of a single creditor. IKEA. Id., at 1091. Plaintiff’s counsel then asked the district court to certify the litigation as a class action, and admitted at oral argument that counsel was “coordinating with plaintiff’s counsel in a separate [class action] pending in the Central District of California concerning the same letter as the one at issue here.” Id. As the district court explained at page 1091, “Apparently, plaintiff’s counsel agreed with counsel in the [other class action] to divide up the class between the IDEA and non-IKEA creditors.” The district court refused to certify the litigation as a class action and issued an Order to Show Cause why plaintiff’s counsel should not be referred to the State Bar for disciplinary action. Id.

The district court denied the class certification motion “citing plaintiff's arbitrary distinction between IKEA and non-IKEA creditors and concluding that plaintiff's proposed definition is not ‘superior’ to other means available under FRCP 23(b)(3).” Guevarra, at 1091. The federal court explained at page 1091, “Because plaintiff's counsel appeared to have divided up the class in order to maximize attorney fees without significant benefit to their clients, the court ordered plaintiff's counsel to show cause why the court should not refer this matter to the State Bar of California and the Northern District's Standing Committee on Professional Conduct” (citations omitted). The court also concluded that the case relied upon by plaintiff’s counsel, Mace v. Van Ru Credit Corp., 109 F.3d 338 (7th Cir.1997), was in applicable because the Mace court merely refused to impose on counsel a duty to bring a class action “on behalf of the broadest possible class”; “Mace does not, however, condone post-suit collusion between counsel in separate actions in order to cut a class in two.” Id., at 1091.

Continue reading "FDCPA Class Action Defense Cases-Guevarra v. Progressive Financial: California Federal Court Holds Congress Must Address "Ethically Questionable" Conduct of Plaintiff's Counsel In Multiplying Class Action Litigation" »

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

Class Action Requirements of Rule 23 Implicitly Require District Court to Determine Whether Class Action Complaint Adequately Pleads an Ascertainable Class Fifth Circuit Holds

Plaintiffs filed a class action lawsuit against their homeowner’s insurance carrier for damages caused by Hurricane Rita, alleging inter alia that the insurer “systematically under-adjust[ed] damages claims by failing to account for the inevitable inflation in the price of labor and materials for home repair that follows from natural disasters.” John v. National Sec. Fire & Cas. Co., 501 F.3d 443, 2007 WL 2743633, *1 (5th Cir. 2007). The class action complaint alleged further that the insurer breached the terms of its insurance policies by “systematically failing to account for general contractors’ overhead profit…when repair required the exercise of two or more trades.” Id. Defense attorneys moved to dismiss the class action for failure to state a claim, and for failure to plead an ascertainable class, id. The district court agreed with the defense arguments and dismissed the fraud claim and the class action allegations; the Fifth Circuit granted interlocutory review to resolve the issue of whether the district court erred in dismissing the class action allegations. The Circuit Court affirmed.

Preliminarily, the Fifth Circuit rejected plaintiffs’ efforts to redefine their class action allegations. Specifically, the Circuit Court noted that on appeal plaintiffs’ proposed two separate classes, and that plaintiffs “do not argue in favor of certifying a unitary class, as they proposed in their amended complaint.” John, at *1. Because, however, the Circuit Court’s jurisdiction was limited to whether the district court properly dismissed the unitary class action allegations in the pleadings, the Court explained at page *1 that it “may not consider whether the court should have certified two separate classes that were never proposed to it.” (Citing La. Patients’ Comp. Fund Oversight Bd. V. St. Paul Fire &Marine Ins. Co., 411 F.3d 585, 588 (5th Cir. 2005).) The Fifth Circuit rejected also plaintiffs’ claim that “dismissal of a class allegation on the pleadings is never proper.” Id. The Circuit Court explained at page *1:

Continue reading "Class Action Defense Cases-John v. National Security: Fifth Circuit Upholds District Court Dismissal Of Class Action Allegations Because Class Action Complaint Failed To Plead An Ascertainable Class" »

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

Petition Seeking Review of Trial Court Order Denying Motion to Certify Class Action was Untimely thus Compelling Dismissal of the Petition for Lack of Jurisdiction

Plaintiffs filed a putative class action lawsuit in Illinois state court against The Mortgage Exchange alleging violations of the federal Telephone Consumer Protection Act of 1991 (TCPA) and the state’s consumer fraud and deceptive business practices arising out of defendant’s transmission of unsolicited advertisements via facsimile. CE Design, Ltd. v. The Mortgage Exchange, Inc., 872 N.E.2d 1056, 1057 (Ill.App. 2007). Plaintiffs moved the trial court for an order certifying the litigation as a class action; defense attorneys opposed the motion on the grounds, inter alia, that “issues such as the specific receipt of and consent to receive a facsimile transmission by each class member were not common issues.” Id., at 1057-58. On October 13, 2006, the trial court agreed with the defense and refused to certify a class action holding, also, that class action treatment was inappropriate because in enacting the TCPA Congress “envisioned individual, small claims litigation, not private class actions with potential recoveries in the millions of dollars.” Id., at 1058. Plaintiffs sought reconsideration of the denial of class certification, which the trial court denied on February 22, 2007. Plaintiffs sought leave to appeal the denial of class action treatment, and defense attorneys moved to dismiss plaintiffs’ petition for lack of jurisdiction. Id. The appellate court granted the defense motion holding that plaintiffs’ petition was untimely.

Under Illinois state court rules, plaintiffs’ petition had to be filed “within 30 days after the entry of the order”; plaintiffs acknowledge that they failed to meet this deadline but argued the time for filing the petition was tolled during the pendency of the motion for reconsideration, or alternatively that the motion for reconsideration was a “new motion” for certification of a class action. CE Design, at 1059. The appellate court rejected each argument. With respect to the tolling argument, the appellate court observed that “[t]here is no provision in the rule that allows a motion to reconsider an interlocutory order to extend the time for filing the petition for leave to appeal,” and that case law holds that the time period is not tolled. Id. (citations omitted). The court was unconvinced that motions to reconsider class certification orders should be an exception to this rule. Id., at1060.

Continue reading "Class Action Defense Cases-CE Design v. Mortgage Exchange: Illinois State Appellate Court Dismisses Petition Seeking Leave To Appeal Denial Of Class Action Treatment Agreeing With Defense That Petition Was Untimely" »

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

Motion to Dismiss Class Action Based on Rule 68 Offer of Judgment to Plaintiff Premature Because Court had not yet Ruled on Plaintiff Motion to Certify Class Action New York District Court Holds

Plaintiff filed a class action against her employer, Buth-Na-Bodhaige, for violations of the federal Fair Labor Standards Act (FLSA) arising out of its alleged failure to pay managers overtime and misclassification of its managers as “exempt” employees. Rubery v. Buth-Na-Bodhaige, Inc., 494 F.Supp.2d 178, 179 (W.D.N.Y. 2007). Plaintiff asked the court to conditionally certify a collective action under FLSA and to certify a class action, but the motions were stayed pending a ruling on certain dispositive motions. Id. Plaintiff then renewed her motions for class action treatment, and defense attorneys responded with a Rule 68 offer of judgment, id. Plaintiff did not accept the offer, and subsequently filed more than 50 consent forms executed by putative class members that authorized plaintiff to proceed on their behalf. Id. The defense argued that the offer of judgment divested the district court of jurisdiction over plaintiff’s FLSA claims and moved to dismiss the class action, id., at 179-80. The district court denied the motion.

The federal court explained that, because its jurisdiction is limited to actual cases and controversies, “[w]hen a defendant offers a plaintiff all of the relief she seeks, the plaintiff's personal stake in the litigation is vitiated, and the issues presented are no longer considered to be ‘live.’” Rubery, at 180 (citing Fox v. Board of Trustees of State University of New York, 42 F.3d 135, 140 (2d Cir.1994)). The complaint is therefore subject to dismissal because “there is no justification for taking the time of the court and the defendant in the pursuit of minuscule individual claims which defendant has more than satisfied.” Rubery, at 180 (quoting Abrams v. Interco Inc., 719 F.2d 23, 32 (2d Cir.1983) and citing Central States Southeast & Southwest Areas Health & Welfare Fund v. Merck, 433 F.3d 181, 197-198 (2d Cir.2005)). In the Second Circuit, district courts have held that a defense offer of judgment to pay damages in full warrants dismissal of the complaint even if the offer has been rejected. Id. However, this rule does not apply if the offer of judgment “fails to satisfy ‘all damages for all plaintiffs,’ such as where the amount owed to plaintiff is in dispute, or where additional plaintiffs have opted in and not been extended offers of judgment.” Id. Additionally, courts are “mindful of the inherent danger that motions to dismiss grounded on a Rule 68 offer may be wielded as a strategic weapon to frustrate the FLSA's very object-ensuring that every employee receives ‘a fair day's pay for a fair day's work.’” Id., at 180-81 (quoting A.H. Phillips v. Walling, 324 U.S. 490, 493 (1945))

In light of the guiding principles set forth in the court’s opinion, the district court concluded that the defense motion to dismiss was premature because it was made prior to the court’s decision on whether to grant class action status to the case. Rubery, at 181. Accordingly, it denied the motion without prejudice. Id.

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

Class Action Treatment of Labor Law Violation Claims not Warranted because Individual Issues Predominate over Common Issues thus Failing to Meet the Requirements of Rule 23(b)(3) California Federal Court Holds

Plaintiff filed a putative class action in California state court against her employer, SkyWest Airlines alleging violations of various state labor laws including failure to pay overtime and failure to provide and/or compensate for meal breaks. Blackwell v. SkyWest Airlines, Inc., ___ F.Supp.2d ___, Slip Opn., at 2 (S.D. Cal. August 30, 2007). Defense attorneys removed the action to federal court on the basis of the Class Action Fairness Act of 2005 (CAFA), id. Plaintiff filed a motion with the district court to certify the litigation as a class action, id., at 1, seeking to represent five classes, id., at 4; the district court agreed with defense attorneys that class action treatment would be inappropriate and denied the motion.

The district court readily concluded that the proposed classes, consisting of an estimated 2600 members, satisfied the numerosity requirement of Rule 23(a)(1), Blackwell, at 5-6, and that plaintiff had established the commonality requirement of Rule 23(a)(2) for each proposed class, id., at 6-9. The federal court additionally found that plaintiff would adequately represent the proposed classes within the meaning of Rule 23(a)(4), id., at 13-14. However, the typicality test of Rule 23(a)(3) proved more problematic. The district court agreed with defense attorneys that plaintiff lacked standing to pursue the class action claim alleging inaccurate wage statements under Labor Code § 226(a) because she failed to file her class action complaint within one year of her last wage statement. Id., at 10-11. The court further found that plaintiff failed to provide sufficient evidence to support her class action allegation based on voluntary shift trades, id., at 11-12.

Turning to the requirements of Rule 23(b), the district court noted that “[t]he Ninth Circuit has adopted an ‘extremely conservative view’ [with respect to Rule 23(b)(1)], requiring a finding that either ‘(1) rulings in separate actions would subject defendant to incompatible judgments requiting inconsistent conduct to comply with the judgment; or (2) a ruling in the first of a series of separate actions will “inescapably alter the substance of the rights of others having similar claims.”’” Blackwell, at 15 (citation omitted). The court agreed with defense attorneys that plaintiff failed to establish that either test had been met, id., at 15-16. The federal court next held that a Rule 23(b)(2) class action would be inappropriate because the monetary relief sought by the class action complaint was not “merely incidental to the injunctive relief sought.” Id., at 16.

Continue reading "Class Action Defense Cases-Blackwell v. SkyWest: California Federal Court Refuses To Certify Labor Law Class Action Against Airline" »

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

Trial Court Erred in Certifying Nationwide Class Action Against Merck Arising out of Sale of Vioxx because Class Action Treatment is not Superior to Other Avenues of Redress and because Defense Correctly Argued that Common Questions of Fact or Law do not Predominate New Jersey Supreme Court Holds

Plaintiff - “a joint union-employer Taft-Hartley trust fund” that “acts as a party to benefit contracts, a policy issuer, and a sponsor of health benefit plans that provide prescription drug coverage for its members and beneficiaries” and “is therefore a third-party payor, meaning that it makes payments to pharmaceutical companies for prescription medications for those for whom its benefit plans afford coverage” - filed a putative class action in New Jersey state court against Merck arising out of its manufacture and sale of Vioxx. Int’l Union of Operating Engineers Local No. 68 Welfare Fund v. Merck & Co., Inc., ___ A.2d __, Slip Opn., at 6 (N.J. Sept. 6, 2007). Specifically, the class action complaint alleged that Merck engaged in a “wide-ranging fraudulent marketing scheme” to sell Vioxx, with the class action alleging that Merck “marketed its product as a safer and more effective alternative to other traditional pain medications, thus driving the price of its product substantially higher than the price charged for similar medications.” Id., at 6-7. The class action further alleged that Merck continued to make these marketing representations “through an aggressive marketing campaign” after it knew that Vioxx “was neither more effective nor safer than other available products.” Id., at 7. Plaintiff filed a motion seeking certification of a nationwide class action against Merck; the trial court rejected defense attorney arguments against class action treatment and granted plaintiff’s motion. Id., at 4-5. The New Jersey Supreme Court reversed.

The interest plaintiff had in pursuing a putative nationwide class action is summarized below (see Note). “Central to plaintiff’s class action assertions is its argument that defendant engaged in a fraudulent marketing campaign that induced, or was intended to induce, all third-party payors to accord Vioxx preferred status in their formularies.” Merck, at 12-13. Defense attorneys argued that this “amounts to nothing more than a ‘fraud on the market’ theory that cannot be sustained in accordance with [New Jersey] law.” Id., at 13. The trial court order certifying a nationwide class action was affirmed by the New Jersey Appellate Division, id., at 4-5, but the Supreme Court reversed.

After summarizing New Jersey law on class actions, see Merck, at 14-18, and the findings of the trial court and appellate court on the topics of predominance and superiority, including choice of law, id., at 18-21, the Supreme Court turned to the defense arguments that predominance and superiority were not met, id., at 22. With respect to predominance, the defense conceded that there were “some common questions” in that “[Merck’s] marketing plan and withholding of adverse information did not vary as among potential consumers” and the “facts as they relate to the FDA warning letters or the drug’s eventual withdrawal from the market” were the same. Id., at 22. The Supreme Court explained, however, that in New Jersey the consumer fraud statute does not require a showing of reliance but does require a showing of an “ascertainable loss.” Id., at 23-24. While plaintiff urged the Court to consider generally that Merck’s marketing scheme was the same for all class members, the Supreme Court rejected this limited view of predominance, explaining at pages 26 and 27:

Continue reading "Vioxx Class Action Defense Cases-Int’l Union v. Merck: New Jersey Supreme Court Reverses Certification Of Nationwide Vioxx Class Action Holding That Common Questions Of Fact Or Law Do Not Predominate And Class Action Not Superior Means For Redress" »

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

Where Class Action Asserted Claims Under Both Agricultural Worker Protection Act (AWPA) and Fair Labor Standards Act (FLSA), District Court did not Abuse its Discretion in Certifying AWPA “Opt-Out” Class Action After Conditionally Certifying FLSA “Opt-In” Class Action Eleventh Circuit Holds

Plaintiffs, migrant workers hired under the H2-B non-immigrant visa program, filed a class action in Georgia federal court against Eller & Sons Trees alleging violations of the Migrant and Seasonal Agricultural Worker Protection Act (AWPA) and the Fair Labor Standards Act (FLSA). De Leon-Granados v. Eller & Sons Trees, Inc., ___ F.3d ___, 2007 WL 2456206, *1 (11th Cir. August 31, 2007). Plaintiffs sought class action treatment of their AWPA claims, but the district court denied the motion without prejudice; plaintiffs also sought preliminary certification of a class action under the FLSA, which the district court granted. Id. After conducting additional discovery, and after receiving only 5 “opt-in” requests from among the 1800 notices sent under the FLSA class action, plaintiffs again sought certification of a class action for the AWPA claims. Id. The district court granted the motion and certified a Rule 23(b)(3) “opt out” class action under the AWPA, id. Specifically, the district court certified a class action on behalf of more than 1,500 migrant workers admitted to the United States under the H-2B temporary foreign worker visa program, and sub-class of migrant workers who pledged collateral with Eller & Sons' agents in order to obtain employment. Id., at *2. Defense attorneys filed an interlocutory appeal but the Eleventh Circuit affirmed, holding that the district court did not abuse its discretion in granting plaintiffs’ motion for class action treatment.

Eller & Sons is a small Georgia company that provides reforestation and forestry services; most of its employees plant trees throughout the southern U.S. from December through February. Eller hires people from Guatemala, Honduras and Mexico under the H2-B non-immigrant visa program, and is required to pay hourly wages as determined by the State Workforce Agency (SWA). De Leon-Granados, at *1. The class action complaint alleges that Eller was to pay an average hourly rate of $8.32, well above the federal minimum wage rate, but that it failed to do so. Id. The defense objected to class action treatment, arguing that a collective action under the FLSA would be a superior method of addressing the AWPA claims, but the district court disagreed. Id., at *2. The district court further found that plaintiffs had satisfied the requirements for class actions under Rule 23, id. The appellate court reviewed that ruling for abuse of discretion, id.

Defense attorneys first argued that the AWPA claims were premised on violations of the FLSA and “must therefore be adjudicated as an opt-in collective action under 29 U.S.C. § 216(b) instead of an opt-out Rule 23(b)(3) class action.” De Leon-Granados, at *2-*3. Under the FLSA, class members must affirmatively elect to “opt in” to the class action, but under Rule 23(b)(3) “all qualifying class members become party-plaintiffs unless they opt out of the action.” Id., at *3 (citations omitted). After rejecting defense claims that “the workers' AWPA claims are truly FLSA claims in disguise,” the Eleventh Court concluded that the statutory language of the AWPA indicates Congressional intent to allow such claims to be brought as Rule 23 class actions. Id. The Circuit Court concluded at page *3, “If Congress intended § 216(b) to be the exclusive remedy for violations of the AWPA's wage payment provisions, it would have also said so.” It therefore held that the district court did not abuse its discretion in certifying an AWPA class action, id. (The author notes that there is case law holding that it is improper to certify “opt in” and “opt out” classes as part of the same action, but it does not appear that defense attorneys asserted this objection.)

Continue reading "FLSA Class Action Defense Cases-De Leon-Granados v. Eller & Sons: Eleventh Circuit Holds That Agricultural Worker Protection Act (AWPA) Class Action May Be Certified Independent Of FLSA Class Action Claims" »

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

As Matter of First Impression in Eighth Circuit, Plaintiff in FLSA Class Action must Establish that Other “Similarly Situated” Putative Class Members Desire to “Opt In” to the Lawsuit as a Prerequisite to Conditional Class Certification Minnesota District Court Holds

Two former truck drivers filed suit against regional package delivery company Rowland Express for violations of the federal Fair Labor Standards Act (FLSA), the Employee Retirement Income Security Act of 1974 (ERISA) and Minnesota and Iowa state law, alleging that Rowland improperly classified its drivers as independent contractors instead of employees, thereby denying them overtime pay. Parker v. Rowland Express, Inc., 492 F.Supp.2d 1159, 1162-63 and n.1 (D.Minn. 2007). Plaintiffs filed a motion requesting that the court conditionally certify a class action under FLSA (technically a “collective action”) so that other Rowland employees may be provided an opportunity to “opt in” to the putative class action. Id., at 1162. Defense attorneys opposed class action treatment, arguing Eleventh Circuit precedent that conditional class certification requires a showing that other class members desire to “opt in” to the lawsuit. The district court denied the motion, holding as a matter of first impression in the Eighth Circuit that conditional class action certification and notice to putative class members is not warranted absent evidence that other similarly situated class members wish to join the action.

The class action complaint alleged that Rowland previously classified its drivers as “employees” and paid them overtime, but that after it became affiliated with DHL it changed the classification of its drivers to “independent contractors” and ceased paying overtime. Parker, at 1162-63. After conducting limited discovery, plaintiffs moved for an order conditionally certifying a FLSA class action on the grounds that plaintiffs “are ‘informed and believe’ that other drivers worked in excess of 40 hours per week and did not receive overtime compensation.” Id., at 1163. Defense attorneys opposed class action treatment, arguing in part that plaintiffs “failed to show that other ‘similarly situated’ individuals desire to opt in to this litigation,” id.

After discussing FLSA class actions and the FLSA’s requirement that the other employees be “similarly situated” to the plaintiffs but failure to define that term, see Parker, at 1163-64, the district court described the two-stage process generally followed in determining whether the plaintiffs are “similarly situated” to other putative class members: the first stage, known as the “notice stage,” involves a preliminarily determination “usually based only on the pleadings and any affidavits which have been submitted” as to whether notice of the class action should be provided in order to give putative class members an opportunity to “opt in”; the second stage involves a more in-depth analysis by the court into whether the plaintiffs are in fact similarly situated to the putative class, id., at 1164. At the first stage, the plaintiffs’ burden “is not onerous” but neither is it “invisible,” id.

Continue reading "FLSA Class Action Defense Cases-Parker v. Rowland: Minnesota District Court Adopts Eleventh Circuit Holding That Conditional Class Action Certification Of FLSA Class Action Requires Proof That Other Class Members Want To Opt In" »

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

Because California’s Unfair Competition Law (UCL) Requires Compliance With State’s Class Action Statutes, UCL Representative Claims Must be Brought as Class Action Lawsuits California Court Holds, but PAGA (Private Attorney General Act) Representative Actions under Labor Code need not Satisfy Class Action Pleading Requirements

Plaintiff filed suit in California state court against his employer, Angelo Dairy, and others alleging, inter alia, that he was not paid overtime and did not receive meal and rest breaks required by law; the action purported to be a representative action under California’s Unfair Competition Law (UCL) and under the Private Attorney General Act (PAGA) contained in the state’s labor code. Arias v. Superior Court, ___ Cal.App.4th ___, 63 Cal.Rptr.3d 272, 273 (Cal.App. 2007). Defense attorneys moved to strike the representative claims on the ground that the complaint did not meet the requirements for pleading a class action, id. The trial court agreed and dismissed the complaint. The California Court of Appeal affirmed, holding that “the UCL requires that a representative claim be brought as a class action because the UCL requires compliance with the class action provisions” of state law, id.

The appellate court noted that while California’s UCL previously permitted a private party to file representative or class action lawsuits even if he or she had not suffered any injury, the passage of Proposition 64 in 2004 materially amended the UCL so that it “now requires that a plaintiff have suffered damages,” and additionally requires compliance with California’s class action statute, Code of Civil Procedure section 382, for representative actions. Arias, at 274. Section 382 “is the primary statutory authority for class actions in California,” id., at 275 (citations omitted). Thus, while plaintiff’s lawyer correctly noted that Proposition 64, on its face, “contains no requirement that a representative suit be brought as a class action,” the Court of Appeal held that Proposition 64 does “require[] that the claim comply with section 382, which is commonly understood to authorize class actions.” Id. Based on the appellate court’s statutory construction analysis, the amendments to the UCL occasioned by the passage of Proposition 64 necessarily require compliance with the requirements for pleading a class action under section 382 in order to pursue a representative action, id., at 275-78. It therefore affirmed the trial court order striking the UCL representative claims, holding that plaintiff “must amend his complaint to allege them either individually on his own behalf, or as a class action.” Id., at 278.

The Court of Appeal reached a different conclusion as to the PAGA claim, however, holding that “the Labor Code statute authorizing a private enforcement action is an exception to the class action requirement.” Arias, at 278. The appellate court explained at page 279 that “[b]oth the language of the PAGA and the express intent of the Legislature indicate that an aggrieved employee may bring an action on behalf of other employees without complying with the requirements of a class action.” Thus, representative actions under PAGA may be pursued without complying with the pleadings requirements applicable to class action complaints, id., at .279. The Court of Appeal therefore issued a writ of mandate directing the trial court to vacate its order dismissing the PAGA claims for failure to plead the requirements of a class action, id., at 280.

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

Federal Court Holds Least Sophisticated Debtor would be Misled by Language in Debt Collection Letter thus Entitling Plaintiff in FDCPA Class Action to Summary Judgment and Finds Fact Plaintiff was not Misled Irrelevant to its Decision or to Defense Motion to Decertify Class Action

Plaintiff filed a class action in California federal court against Arrow Financial Services alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and its state-law equivalent, California’s Rosenthal Act, in that debt collection letters sent by defendant failed to comply with the applicable laws. Gonzales v. Arrow Fin. Servs. LLC, 489 F.Supp.2d 1140, 1143 (S.D. Cal. 2007). The class action complaint was premised on the following language in defendant’s “form collection letters”: “Upon receipt of the settlement amount and clearance of funds, and if we are reporting the account, the appropriate credit bureaus will be notified that this account has been settled.” Id. Plaintiff alleged this violated the FDCPA and the Rosenthal Act because the debt underlying defendant’s collection effort had been charged off more than 7 years ago and “a credit bureau cannot report a debt charged off more than 7 years previously,” id. An unsophisticated consumer thus may be misled by the form letter into believing that “payment or nonpayment of the claimed debt may impact the consumer's credit reporting, when that is not true.” Id., at 1143-44. After the district court certified the lawsuit as a class action, defense and plaintiff attorneys filed cross-motions for summary judgment, and defense attorneys moved to decertify the class, id., at 1144. The district court denied both defense motions, and granted partial summary judgment in favor of plaintiff.

After summarizing the FDCPA and the “least sophisticated debtor” standard applied in the Ninth Circuit, Arrow, at 1146, a determination made by the court, not a jury, measured by an “objective standard,” id., and after setting forth the relevant section of the Rosenthal Act, id. (quoting Cal. Civil Code, § 1788.13(f)), the district court turned to the defense motion for summary judgment. Defense attorneys argued that the debt collection letters did not violate the FDCPA or the Rosenthal Act because the letters are not false or misleading – the letters did not “illegally threaten[] any action” or mislead or deceive anyone, and “Arrow does not have a policy to report debts such as plaintiff's debts to the credit bureaus and in no way seeks to use credit reporting as a means to illegally collect debts.” Id., at 1147. The defense also relied on plaintiff’s deposition testimony that (1) he knew he did not have to pay the debt and that Arrow would not report such a failure to credit bureaus, and (2) he was not confused by the letter he received from Arrow, id. The federal court noted that it had already found the letters to be misleading or deceptive because “without any explanation detailing what debts are likely to be reported or even if the subject debt is one that is reportable, ‘the least sophisticated debtor could likely believe his [or her] debt is reportable just because the letters indicate the credit bureaus will be notified’” and that even though the letters did not expressly threaten to contact credit bureaus they implied that “the status of the debt may have already been or may, at some later date, be submitted to the credit bureaus” and that such conduct “is actionable under the Act.” Id., at 1148 n.1.

Continue reading "FDCPA Class Action Defense Cases–Gonzales v. Arrow Financial: California Federal Court Holds Debt Collection Letter Violated FDCPA And California Rosenthal Act And Denies Defense Motion To Decertify Class Action" »

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

Putative Class Action Alleging False Advertising Against Manufacturer did not Warrant Class Action Treatment Because Proposed Class was Overly Broad, not Readily Ascertainable, Plaintiff was not an Adequate Class Representative, Commonality was not Shown as Individual Issues would Predominate over Common Questions, and Class Action Device was not Superior Method of Resolving Dispute California Appellate Court Holds

Plaintiff filed a putative class action in California state court against Mecta Corporation, the manufacturer of an electro-convulsive therapy (ECT) machine, alleging violations of the state’s Unfair Competition Law (UCL) based on false advertising. Akkerman v. Mecta Corp., Inc., 152 Cal.App.4th 1094, 62 Cal.Rptr.3d 39, 42 (Cal.App. 2007). Plaintiff filed a motion to certify the litigation as a class action; defense attorneys argued that class action treatment was inappropriate for a litany of reasons. The trial court agreed with defense attorneys and refused to certify a class action finding that plaintiff “did not establish the elements for class certification; did not adequately define an ascertainable class; did not show that he could represent it; and did not demonstrate a sufficient community of interest among the class members.” Id. Further, class action treatment was inappropriate because “[t]he factual issues pertaining to each class member's tort restitution claim predominate over common questions of law and fact for the class.” Id. The California Court of Appeal affirmed.

In 1999, plaintiff began receiving ECT treatments to address severe depression; plaintiff filed a putative class action against Mecta in federal court claiming that the electric shocks resulted in memory loss and impaired cognitive functioning. Akkerman, at 42. The class action claims alleged violations of California’s UCL, and the federal court remanded the class action causes of action to state court, id., at 43. Ultimately, the federal court ruled in favor of the defense on the remaining causes of action, id. Plaintiff also filed a state-court lawsuit against his doctor, id., at 42-43, but that, too, ultimately resulted in judgment for the defense, id., at 43. What remained, then, was plaintiff’s state-court UCL class action complaint against Mecta, which was premised on the allegations that his doctor “falsely represented” that the ECT treatments were “not harmful” based on “false information provided to him by Mecta.” Id., at 43-44.

Plaintiff’s motion for class certification defined the class as “all members of the public who have received shock treatment in California from MECTA devices after September of 1997.” Akkerman, at 44. The trial court agreed with the defense that class action treatment was not warranted, and “denied the motion ‘based on the inability to determine the class, and for failure to show other elements necessary for class certification.’” Id. Plaintiff then filed a motion asking the trial court to order hospitals that were not parties to the lawsuit to notify their patients that had received ECT treatments of the putative class action: the trial court initially granted the motion, but reversed that decision after an appellate court issued an alternative writ of mandate, id. Plaintiff appealed, arguing that the trial court erred in refusing to certify a class action and in refusing to order hospitals to give the pre-certification notice he requested. Each of these claims is reviewed for abuse of discretion, id.

Continue reading "UCL Class Action Defense Cases- Akkerman v. Mecta Corp.: California Court Upholds Denial Of Class Action Treatment For Class Action Complaint Premised On False Advertising/Unfair Competition Law (UCL) Violations" »

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

District Court Erred in Denying American Pipe Tolling to Individual Plaintiffs who had Filed Lawsuits Prior to Court Ruling on Class Certification Motion in Securities Class Action, because as Matter of First Impression Class Action Complaint Tolled Statute of Limitations even as to Claims by all Putative Class Members Regardless of Whether They had Filed Individual Lawsuits Second Circuit Holds

Hundreds of individual and class action lawsuits were filed in state and federal courts against WorldCom and various bond underwriters, each of which ultimately found their way to the United States District Court for the Southern District of New York. In re WorldCom Sec. Litig., 496 F.3d 245, 2007 WL 2127874, *1 (2d Cir. 2007). After the district court certified a class action, defense attorneys for certain bond underwriters moved to dismiss the individual actions on the ground that they were time-barred because they had been added as named defendants after the limitations period had expired, id. Plaintiffs argued that the limitations period was tolled as to later-named defendants even though they had filed individual actions prior to a court ruling on whether to certify a class action, id. The district court agreed with defense attorneys, ruling that the plaintiffs’ claims were not tolled. The Second Circuit reversed, holding that even though plaintiffs had filed their individual lawsuits prior to the district court’s ruling on class certification, their claims were tolled under American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), during the pendency of the class action litigation.

The district court summarized the facts underlying this litigation as follows: “For many years, WorldCom grew by acquisitions. By 1998, it had acquired more than sixty companies in transactions valued at over $70 billion.... In early 2000, however, its attempt to acquire Sprint collapsed. During this period of acquisition-driven expansion, WorldCom had used accounting devices to inflate its reported earnings. Senior WorldCom management instructed personnel in the company's controller's office on a quarterly basis to falsify WorldCom's books to reduce WorldCom's reported costs and thereby to increase its reported earnings. When the pace of acquisitions slowed, it added new strategies to disguise a decline in its revenues. In 2002, however, the scheme collapsed.” In re WorldCom, Inc. Sec. Litig., 294 F.Supp.2d 392, 400 (S.D.N.Y. 2003). In April 2002, the first class action lawsuit was filed against WorldCom, and a few months later, on June 25, “WorldCom admitted publicly that it had previously issued false and misleading financial statements” and that “it had overstated earnings and had falsely reported ordinary costs as capital expenditures.” In re WorldCom, 2007 WL 2127874 at *2. Soon after making these admissions WorldCom filed bankruptcy. Id. These admissions spawned dozens of securities class action lawsuits - transferred in August 2002 to the Southern District of New York by the Judicial Panel on Multidistrict Litigation - and hundreds of individual lawsuits. Id. Between July 2002 and October 2003, more than 100 pension funds filed individual lawsuits against WorldCom in state courts; the actions were ultimately removed to federal court under 28 U.S.C. § 1452(a) by virtue of WorldCom’s bankruptcy filing; in May 2003, these individual actions were consolidated with the class actions id.

A state-court class action was filed on April 21, 2003, in Alaska state court against several underwriters of WorldCom bonds; the class action was removed to the Southern District of New York in August 2003, and the following month, on September 24, 2003, the class action complaint was amended to name additional bond underwriters as defendants, among these the “Caboto defendants,” for violations of § 11 of the Securities Act but these allegations were “not based on fraud, but rather on negligence and strict liability for registration statements containing untrue statements of material fact.” In re WorldCom, 2007 WL at *3.

Continue reading "Class Action Defense Cases-In re WorldCom: Second Circuit Reverses Judgment In Favor Of Defense Holding That Class Action Lawsuits Tolled Statutes Of Limitation For Claims By Putative Class Members Who Filed Individual Actions" »

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

Following Defense Judgment in Class Action Complaint for Aiding and Abetting Intentional Tort, California Court Affirms as to PayPal and Neovi Defendants but Holds Plaintiff is Entitled to Opportunity to Amend as to PaySystems and Ginix Defendants

Plaintiff filed a putative class action lawsuit in California state court against Neovi Data Corporation, Ginix, PaySystems and PayPal, alleging that they aided and abetted the operation of an illegal lottery. Schulz v. Neovi Data Corp., 152 Cal.App.4th 86, 60 Cal.Rptr.3d 810, 812-13 (Cal.App. 2007). The trial court sustained a demurrer to the second amended class action complaint without leave to amend, id., at 812. The appellate court affirmed the judgment as to Neovi and PayPal, but reversed as to Ginix and PaySystems, concluding that plaintiff should be given an additional opportunity to amend the class action complaint in an effort to state a claim against those defendants, id., at 812-13.

The second amended class action complaint alleged that defendant EZ Expo operated an Internet site that purportedly provided consumers the chance to “receive expensive electronic products for a fraction of the price” but requires that participants “pay[] a fee to enter a ‘matrix’” and that other consumers “join the ‘matrix’ after him.” Schulz, at 813. The class action alleged that to get a $5500, 50-inch plasma television at EZ’s website, a consumer “enters the plasma television matrix by purchasing the required three ‘E-books’ for $150” and their name is then “placed on the list of those eligible to receive the television.” Id. According to the class action complaint, “[W]hen 50 persons have each paid $150, the first person to enter will receive the plasma television ‘for free’ and his name is removed from the list.” Id. The appellate court explained at page 813 that once a participant gets the TV then “the second name on the list moves to the top and 50 more people need to enter for that person to receive the television.” Plaintiff alleged further that EZ “encourage[d] participants to recruit others to enter the matrix.” Id. The complaint alleged that the E-books themselves have “minimal” value and that EZ sold millions of dollars in E-books. Id.

Continue reading "Class Action Defense Cases-Schulz v. Neovi Data: California Court Affirms Defense Judgment In Class Action As To Certain Defendants But Grants Plaintiff Leave To Amend Class Action Claims Against Other Defendants" »

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

After Denying Motion to Certify Class Action on Grounds that Named Plaintiff would be an Inadequate Class Representative, New York District Court Denies Plaintiff's Lawyer Leave to Conduct Discovery to Identify New Class Representative and Dismisses Class Action Because Subject Matter Jurisdiction Under Class Action Fairness Act of 2005 (CAFA) no Longer Existed

Plaintiff filed a putative class action against Philips Electronics alleging design defects in certain television models that caused them to require repair after the expiration of the express warranty period; federal court jurisdiction existed solely because of the Class Action Fairness Act (CAFA). Falcon v. Philips Electronics North Am. Corp., 489 F.Supp.2d 367,368 (S.D.N.Y. 2007). Plaintiff moved the district court for an order certifying the litigation as a class action; the district court denied the motion, agreeing with defense attorneys that plaintiff was not an adequate representative of the class. Id. Plaintiff’s lawyers then sought further discovery in an effort to find an adequate representative of the class, id. The district court denied the motion and dismissed the class action for lack of jurisdiction.

The district court order refusing to certify a class action turned on the fact that the sole named plaintiff “could not be an adequate class representative, because, among other problems, she did not actually purchase the television in question and because after receiving it, she subsequently discarded it.” Falcon, at 368. Plaintiff’s lawyer sought discovery of the names of customers who complained about the television models identified in the class action complaint “in the hope that that will lead to identification of an adequate class representative.” Id. The district court refused to reopen discovery so plaintiff’s lawyer could go “fishing” for a new class representative, explaining at page 369:

Continue reading "CAFA Class Action Defense Cases-Falcon v. Philips Electronics: New York District Court Holds Plaintiff's Lawyer Not Entitled To Go "Fishing" For New Class Representative And Dismisses Class Action For Lack Of Jurisdiction" »

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

Class Action Complaint Alleging Damages from Sale of CCA-Treated Wood did not Warrant Class Action Treatment as Defense Showed Individual Defenses and Individual Damage Analyses would Predominate over Fact Questions Common to Class Illinois Court Holds

Plaintiffs filed a putative class action in Illinois state court against Home Depot alleging violations of the state’s unfair and deceptive business practices statutes arising out of its sale of outdoor products made with wood treated with chromate copper arsenate (CCA) on the theory that “all CCA-treated wood is defective because it leaches toxic chemicals, such as arsenic and chromium VI to the surface of the wood and to nearby soil.” Kitzes v. Home Depot, U.S.A., Inc., 872 N.E.2d 53, Slip Opn., at 1 (Ill.App. June 28, 2007). Plaintiffs’ moved the trial court to certify the litigation as a class action; defense attorneys opposed class action treatment. The appellate court affirmed.

The class action complaint alleged that Home Depot misrepresented that CCA-treated wood was safe for outdoor use. Kitzes, at 1-2. Plaintiffs’ class action certification motion was supported by an expert declaration claiming “a reasonably high degree of scientific certainty that CCA-treated wood used in outdoor settings leaches arsenic to the surface of the wood and the surrounding soil, regardless of factors such as use, location, age and sealant history (except for very recently sealed surfaces),” and an expert declaration that “proposed methodology for calculating the removal and replacement costs associated with pressure-treated lumber in residential settings in multiple states.” Id., at 2. Among the pieces of evidence submitted against class action treatment, defense attorneys introduced plaintiffs’ deposition testimony (1) that they still used the CCA-treated wood deck, and had wood replaced and treated several times, (2) that no one told them that the CCA-treated wood deck diminished the value of their property, and (3) that they had a fence built with wood that had been treated with arsenic. Id., at 2-3. Defense attorneys also submitted press releases from the Environmental Protection Agency concerning the industry’s decision to stop using CCA-treated wood, and stating:

Continue reading "Home Depot Class Action Defense Case-Kitzes v. Home Depot: Illinois Court Holds Denial Of Class Action Was Not Improper Because Individual Issues Would Predominate Over Common Questions Of Fact" »

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

As Matter of First Impression, Second Circuit Holds that American Pipe Tolling Applies to Putative Class Members of Class Action who File Individual Lawsuits Prior to Decision on Class Action Certification

Prior to the filing of putative class action lawsuits and within one year after plaintiffs discovered “the untrue statement or the omission,” see 15 U.S.C. § 77m, certain pension funds filed individual lawsuits against underwriters of WorldCom bonds under Section 11 of the federal Securities Act of 1933 alleging that they had purchased bonds based on registration statements that contained false and misleading information. In re WorldCom Sec. Litig., ___ F.3d ___, 2007 WL 2127874, *1 (2d Cir. July 26, 2007). Numerous putative class action lawsuits also were filed against WorldCom and its bond underwriters, including Caboto-Gruppo Intensa and Caboto Holdings Sim, and these alleged inter alia violations of Section 11, id. After the expiration of the one-year limitations period, the pension funds amended the individual complaints to add Caboto as party-defendants, id. Caboto defense attorneys moved to dismiss the individual actions as time-barred; plaintiffs countered that the class actions tolled the running of the statute of limitations. Id. The district court granted the defense motion, ruling that the class action complaints did not toll the limitations period because plaintiffs had filed suit before a decision on class certification in the class action lawsuits. Id. The Second Circuit reversed.

Briefly, WorldCom falsified financial records to paint an inaccurate picture of the company’s profitability, but in 2002 “the scheme collapsed.” In re WorldCom, at *2. A class action complaint was filed against WorldCom in April 2002, and numerous other class actions soon followed. More than 120 individual lawsuits also were filed against the company, all of which were removed to federal court based on WorldCom’s petition for bankruptcy protection. Id. By May 2003, the individual actions had been consolidated with the class action complaints, id. In October 2003, the district court certified a class action against WorldCom alleging securities violations; that class action complaint included Section 11 claims against Caboto and other bond underwriters. Id., at *3. In analyzing Caboto’s motion to dismiss the class action and individual claims, the district court found that the statute of limitations began to run no later than June 25, 2002, but that Caboto and certain other bond underwriters were not named as defendants until September 24, 2003 - three months after the expiration of the one year limitations period. Id., at *4.

Continue reading "WorldCom Class Action Defense Case: Second Circuit Holds Class Action Complaint Tolls Statute Of Limitations Of Putative Class Members Who File Individual Suits Prior To Certification Of Class Action" »

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

District Court Properly Denied Class Certification Motion on Grounds of Unmanageability because Literally Thousands of Individual Evidentiary Hearings would be Required Seventh Circuit Holds

Plaintiff filed a putative class action in Illinois federal court against State Farm alleging that it failed to pay insureds $10 as required by its insurance policies when car repairs render the insured’s vehicle unusable for at least one day but the insured does not rent a car during the repair period. Pastor v. State Farm Mut. Auto. Ins. Co., 487 F.3d 1042, 1043 (7th Cir. 2007). Defense attorneys argued against certification of a class action, and the district court agreed; plaintiff thereafter accepted an offer of judgment, and appealed the denial of class certification. Id. The Seventh Circuit affirmed, holding that class action treatment was not appropriate because common issues did not predominate over individual issues.

Plaintiff’s car windshield was damaged in an accident 11 years ago. Pastor, at 1044. Her auto insurer, State Farm, paid for the repairs, which were completed in about one hour, but it did not pay her an additional $10 pursuant to a provision in her policy that required State Farm to “pay you $10 per day if you do not rent a car while your car is not usable.” Id. The policy states that the “per day” entitlement period begins at the time of the accident or “if your car can run, when you leave it at the shop for agreed repairs,” and ends when the repairs are complete. Id. Plaintiff did not rent a car for the one-hour repair period and did not ask State Farm for the extra $10, but the class action complaint alleges that the insurer was contractually obligated “to notify her that she was entitled to the money,” id. The Circuit Court was harsh in its characterization of plaintiff’s claim, stating “there is nothing in the policy to suggest that upon receipt of a claim seeking reimbursement of one cost (the cost of repairing the windshield) the insurer must determine and inform the insured of any additional entitlement that the policy might confer on her, just in case its customers don't bother to read their insurance policies when they file claims under them.” Id. Despite this problem, just before the expiration of the 10-year statute of limitations period, plaintiff filed a putative class action in Illinois federal court seeking to represent all State Farm insureds who “received payments for claims for damage to their vehicles, did not rent a car, yet did not receive any payment pursuant to the $10 a day clause.” Id.

Continue reading "Class Action Defense Cases-Pastor v. State Farm: Seventh Circuit Affirms Refusal To Certify Class Action Holding Individual Fact Issues Predominate Over Common Questions Rendering Class Action Treatment Unmanageable" »

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

Plaintiff in FLSA Class Action Must Make “Some Factual Showing” that Similarly-Situated Requirement is met in order to Obtain Conditional Certification of Class Action Treatment Delaware Federal Court Holds

Plaintiff filed a labor law class action against TruGreen - a lawn and landscaping company that hires non-immigrants for seasonal work under the federal H-2B visa program - alleging violations of the federal Fair Labor Standards Act (FLSA) and various state law claims. Villanueve-Bazaldua v. TruGreen Ltd. Partners, 479 F.Supp.2d 411, 413 (D. Del. 2007). Plaintiff moved to conditionally certify a class action; defense attorneys objected to class certification on the ground that plaintiff was not “similarly situated” to the putative class members and that, in any event, the company was not legally required to reimburse the expenses underlying the class action claims. The district court agreed with the defense and refused to certify an FLSA class action.

The class action complaint alleged that he was “recruited” in Mexico and that TruGreen promised to pay him $11.34 per regular hour and $17.01 per overtime hour to work for the company, and that in reliance on these promises, plaintiff incurred the expense of obtaining an H-2B visa and of traveling to and from the U.S. TruGreen, at 413. “These expenses included the cost of obtaining a Mexican passport, a $100 visa application fee, a $100 visa issuance fee, a $6 border crossing fee, a $155 administrative fee paid to TruGreen's agent for processing the visa paperwork, and transportation expenses from the point of recruitment to the place of work in the United States.” Id. According to the class action allegations, these expenses constituted “de facto deductions from the first and last weeks of their wages, causing them to earn less than the wages required by the FLSA.” Id., at 413-14. Plaintiff argued that class action treatment was appropriate because Arriaga v. Florida Pacific Farms, 305 F.3d 1228 (11th Cir. 2002), holds that “visa and transportation costs incurred by foreign visa workers are de facto wage deductions from the workers' first and last weeks' wages for purposes of the FLSA” and because “all of TruGreen's H-2B workers present the same claim that the FLSA requires reimbursement of those costs up to the mandated FLSA wage level,” id., at 414. Defense attorneys opposed conditional certification of a class action arguing that (1) it is not required to bear the visa and transportation costs of its H-2B employees, (2) plaintiff is not “similarly situated” to the putative class members because TruGreen provided him with transportation back to Mexico, and (3) “certain H-2B workers did receive compensation for various incidentals arising from their temporary employment.” Id.

Continue reading "Class Action Defense Cases-Villanueve-Bazaldua v. TruGreen: Delaware Federal Court Denies Conditional Class Action Certification Of FLSA Class Action Holding Plaintiff Not "Similarly Situated" to Putative Class" »

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

Plaintiffs in Class Action/FLSA Collective Action Alleging Labor Law Violations Adequately Supported Motion for Conditional Certification under FLSA of Putative Class Including Non-New York Employees, but Limits Class to Telemarketers Rather than All Hourly Employees

Two plaintiffs filed a class action and FLSA (Fair Labor Standards Act) collective action lawsuit against telemarketing service provider Sutherland Global - which operated 9 call centers in New York, one in California and one in Virginia - alleging various state and federal labor law violations, after which 38 former telemarketing agents sought court approval to “opt in” to the class action/FLSA lawsuit as named plaintiffs. Sherrill v. Sutherland Global Servs., Inc., 487 F.Supp.2d 344, 346-47 (W.D.N.Y. 2007). Plaintiffs moved the court to conditionally certify an FLSA collective action and to provide notice to putative class members of their right to opt in, id., at 346. Defense attorneys did not oppose the motion, but requested the right to approve the notice, asked the federal court to limit the scope of the proposed class, and asked the federal court to set an “opt-in” deadline, id., at 351. The defense also requested that plaintiffs’ lawyer remove “inaccurate statements” from counsel’s website, but plaintiffs “voluntarily agreed to make the necessary corrections” rendering the issue moot, id. at 351 n.4. The district court granted plaintiff’s motion in part, agreeing with defense attorneys that notice should be sent only to current and former telemarketing agents rather than all Sutherland hourly employees, and

The class action/FLSA complaint alleged three labor law violations. First, that Sutherland’s timekeeping system automatically deducted 60 minutes for lunch from each employee’s daily pay, regardless of whether the employee took a lunch break or worked during part of their lunch break. Sherrill, at 347. The complaint further alleged that the workload and the pressure to meet performance goals required that telemarketing agents frequently work during lunch periods, and as part of their motion, plaintiffs submitted declarations supporting these allegations, id. Second, the class action alleged that Sutherland required its telemarketers to work “off the clock” by arriving 15-30 minutes before their scheduled shift but encouraging them not to “log on” until at or near their scheduled start time. Id. Finally, plaintiffs alleged - and in their motion introduced evidence supporting - that Sutherland improperly excluded commissions and bonuses in calculating its employees’ appropriate overtime rates, using instead the “regular rate of pay” for each employee “result[ing] in application of a lower overtime rate than would apply were commissions and bonuses properly included in the rate of pay,” id., at 348.

Continue reading "FLSA Class Action Defense Case-Sherrill v. Sutherland Global: New York Federal Court Holds Conditional Certification Of FLSA (Fair Labor Standards Act) Collective Action Warranted But Limits Scope Of Proposed Class" »

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

"Concept of Interest of Common Reliance" Applies to Class Action Alleging Violations of CLRA (Consumers Legal Remedies Act) and UCL (Unfair Competition Law) and Supports Certification of Class Action California Appellate Court Holds

Plaintiff filed a putative class action in California state court against Monier alleging violations of the state’s Consumers Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) arising out of its “failure to disclose that the color composition of its roof tiles would erode away, leaving bare concrete, well before the end of the tiles’ represented 50-year life.” McAdams v. Monier, Inc., 151 Cal.App.4th 667, 60 Cal.Rptr.3d 111, 112-13 (Cal.App. 2007), reh’g den. and opn. mod. (June 25, 2007). The class action complaint alleged that Monier warranted its roof tiles for 50 years, and represented that it had a permanent color glaze and required no care. McAdams, at 113. The class action claims were based on the allegation that, contrary to the above, Monier knew that the tiles lose their color “well in advance of their warranted 50-year useful life,” id. Plaintiff sought to prosecute a class action on behalf of a “CLRA” class, consisting of all people who own homes with Monier tile roofs or who paid to replace or repair such tiles, and an “ownership” class, consisting of people who own buildings other than homes with Monier tile roofs or who paid to replace or repair such tiles. Id., at 113-14. In denying plaintiff’s class certification motion, the trial court explained that each class member would be required to prove actual reliance, raising individual fact issues as to the particular representations relied on and the damage suffered, and that plaintiff claims were not “typical” of class because he purchased his tiles through a third party distributor rather than through Monier directly. Id., at 114. Plaintiff appealed, and the appellate court reversed.

The Court of Appeal first addressed class action certification under the CLRA, which is governed by Civil Code section 1781. The appellate court readily concluded that the class action complaint sufficiently alleged a violation of the CLRA, McAdams, at 115, the issue was whether the trial court correctly determined that individual issues predominated. The appellate court found, “The class action is based on a single, specific, alleged material misrepresentation: Monier knew but failed to disclose that its color roof tiles would erode to bare concrete long before the life span of the tiles was up.” Id. With respect to the trial court’s conclusion that class members must individually prove reliance and consequent damage, thus defeating commonality as required by section 1781(b)(2), the appellate court recognized the CLRA requires a plaintiff show both that the defendant’s statements were deceptive and that the representations caused them damage, id., at 116 (citation omitted), but held that under the facts of this case reliance by members of the putative class could be “inferred” based on the allegation that “Monier made a single, material misrepresentation to class members that consisted of a failure to disclose a particular fact regarding its roof tiles” when Monier allegedly knew “that the color composition of its roof tiles would erode to bare concrete well before the end of the tiles' represented 50-year life.” Id., at 117. The appellate court found that, if these allegations were true, the failure to make the requisite disclosure “would have been material to any reasonable person who purchased tiles in light of the 50- year/lifetime representation, or the permanent color representation, or the maintenance-free representation” so as to “permit an inference of common reliance among the class on the material misrepresentation comprising the alleged failure to disclose.” Id. The Court of Appeal further held that this conclusion meant plaintiff did not have to purchase his tiles directly from Monier in order to prosecute a CLRA class action claim against it on behalf of the class. See id., at 118-19.

Continue reading "Class Action Defense Cases-McAdams v. Monier: California Circuit Holds Class Action May Be Certified Based On "Inference" Of Reliance By Class Members So Trial Court Erred In Denying Motion To Certify Class Action" »

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

As Matter Of First Impression, 10-Day Deadline for Seeking Interlocutory Review of Court Order Refusing to Certify Class Action is Jurisdictional and District Court Cannot “Extend” Deadline by Vacating and Reentering its Order Eleventh Circuit Holds

Plaintiffs filed a putative class action against their employer, BellSouth, alleging a “pattern and practice of racial discrimination in promotions and compensation.” Defense attorneys opposed plaintiff’s motion to certify the lawsuit as a class action, and on September 19, 2006, the district court entered its order denying class certification. Jenkins v. BellSouth Corp., ___ F.3d ___, 2007 WL 1881294, *1 (11th Cir. July 2, 2007). On October 3, plaintiffs sought reconsideration of the order denying class action treatment, but on November 7 the court denied that request. Id. On November 24 plaintiffs asked the Eleventh Circuit for permission under FRCP Rule 23(f) to proceed with an interlocutory appeal of the class action certification order, but the Circuit Court dismissed the petition as untimely. Id. In response, plaintiffs asked the district court to “vacate and reenter” the order denying reconsideration, pleading that its petition in the Circuit Court was due November 22 (the day before Thanksgiving), that it attempted on November 21 to file its petition by overnight delivery, and that the package was delivered November 24 (the day after Thanksgiving). Id. The district court granted plaintiffs’ motion on March 5, 2007; specifically, the court “vacated its order of November 7, 2006, and reentered an identical order,” id. Plaintiffs filed their second Rule 23(f) petition on March 14, 2007, id.

The Eleventh Circuit stated that the issue presented had not been addressed previously in the circuit, explaining at page *1: “This petition presents an issue of first impression: whether a district court has the authority to circumvent the ten-day deadline for obtaining interlocutory review of an order denying class certification by vacating and reentering that order, after the aggrieved parties filed and this Court dismissed an untimely petition for an interlocutory appeal.” The Circuit Court held that “the district court lacked the authority to circumvent the ten-day deadline provided in Rule 23(f) by vacating and reentering its earlier order” and, accordingly, that plaintiffs’ petition was untimely, id. Accordingly, the Court dismissed the petition for lack of jurisdiction.

Continue reading "Employment Class Action Defense Cases-Jenkins v. BellSouth: Eleventh Circuit Holds District Court Cannot Avoid 10-Day Deadline For Seeking Interlocutory Review of Class Action Certification Order By Vacating And Reentering Order" »

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

Distributors of Dietary Supplements were not Adequate Class Representatives in Class Action Against Manufacturer Because Goal of Class is Disgorgement of Profits but Putative Class Representatives’ Self-Interest would be to Retain Profits Realized from Drug Sales

Plaintiffs filed a putative class action against Neways and others alleging inter alia unfair competition arising out of the sale of a dietary supplement without a prescription. Seastrom v. Neways, Inc., 149 Cal.App.4th 1496, 1499 (Cal.App. 2007). Defendant manufactured and distributed an oral spray called BioGevity as an anti-aging dietary supplement. Id. BioGevity contained HGH, which cannot be sold without a prescription, but defendant did not require a prescription to purchase the product, id. The class action complaint alleged that Neways and its independent distributors engaged in a pyramid sales scheme in which distributors could purchase BioGevity for $59-$66 per bottle, with a suggested retail price of $84.35-$94.40, and “keep the difference between the wholesale and retail prices on products they sold directly, and to commissions on the sale of products by distributors under them in the pyramid scheme.” Id. The putative class action alleged that some distributors had upwards of 8,800 “downline” distributors in the “pyramid” and made millions of dollars off the pyramid scheme, id. The court denied the motion of two distributors, acting as putative class representatives, to certify the lawsuit as a class action, and the Court of Appeal affirmed.

Following an investigation by the U.S. Attorney's Office into Neways' sale of BioGevity without prescriptions, “In September 2003 Neways pleaded guilty to knowingly selling approximately 100,000 bottles of a product that contained HGH in violation of [federal law] and to criminal forfeiture under sections 333(e)(3) and 853(a)(1).” Seastrom, at 1499-1500. The company also paid $1.75 million as part of a stipulated fine and forfeiture of profits from the sale of BioGevity; in return, the federal government agreed not to prosecute Neways distributors. Id., at 1500. In June 2003, just before Neways resolved the U.S. Attorney’s investigation, an unfair competition lawsuit was filed against Neways by a Marc Lewis. Id. However, because Lewis had never purchased BioGevity, he lacked standing to prosecute the class action after California voters enacted Proposition 64, id.

Continue reading "Class Action Defense Cases-Seastrom v. Neways: California Appellate Court Affirms Order Refusing To Certify Class Action Because Putative Class Representatives Were Potential Defendants In The Same Action" »

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

Second Circuit Opinion in In re IPO Class Action Enunciating new Standards for Certification of Class Actions Warranted Reconsideration of Order Certifying Class Action but not Decertification of Class Action because new Standards were met New York Federal Court Holds

Female employees filed a labor law class action against Willis Group and its affiliates alleging gender discrimination. Hnot v. Willis Group Holdings Ltd., 241 F.R.D. 204, 206 (S.D.N.Y. 2007). The district court granted plaintiffs’ motion to certify the litigation as a class action, see Hnot v. Willis Group Holdings Ltd., 228 F.R.D. 476 (S.D.N.Y. 2005); defense attorneys sought reconsideration of the class certification order and decertification of the class, arguing that under the Second Circuit opinion in In re Initial Pub. Offering Sec. Litig., 471 F.3d 24 (2d Cir.2006) (In re IPO) -- a summary of which may be found here -- which issued after the class action had been certified, plaintiffs failed to establish commonality under Rule 23(a), and that class action treatment was “inappropriate under Rule 23(b)(2),” 241 F.R.D. at 206. Specifically, the defense argued that a plaintiff is now required to do more than simply make “some showing” that the elements of Rule 23 have been met, id., at 207. The district court denied the defense motion, concluding that the requirements of Rule 23 had been met and that the lawsuit should properly proceed as a class action.

Plaintiffs filed their putative class action in 2001 “on behalf of a class of high-level female employees…alleging illegal employment discrimination on the basis of sex.” Hnot, at 206. In response to plaintiffs’ motion to certify a class action, defense attorneys argued that Rule 23(a)’s commonality requirement had not been satisfied. Id. Plaintiffs’ responded that “a common policy of vesting regional and local officers with unfettered discretion in making promotion and compensation decisions, result[ed] in discrimination against women in high level positions.” Id. (citation omitted). Each side submitted expert reports, which the district court considered as they pertained to the issue of commonality, id., and ultimately concluded that “plaintiffs' evidence was ‘certainly adequate to establish that whether or not Willis's promotion and compensation policies subject class members to discrimination is an issue common to all class members,’” id., at 207 (citing 228 F.R.D. at 483).

Continue reading "Class Action Defense Cases-Hnot v. Willis Group: New York Federal Court Denies Defense Motion To Reconsider Order Certifying Class Action Because New Second Circuit Authority Governing Class Action Certification Had Been Satisfied" »

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

Class Action Requirements of FRCP Rule 23 Satisfied in Class Action Complaint Allegation Violations of federal Truth in Lending Act (TILA), Bank’s TILA-Mandated Disclosure Statements Failed Adequately to Inform Borrowers of Loan Payment Schedule and Interest Rate, and Class Action Plaintiffs may seek Rescission and Attorney Fees, but not Statutory Damages, Wisconsin Federal Court Holds

Plaintiffs filed a putative class action against Chevy Chase Bank for violations of the federal Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq., in that the Bank allegedly failed to make the requisite disclosures in connection with adjustable rate mortgage loans. Andrews v. Chevy Chase Bank, FSB, 240 F.R.D. 612, 614 (E.D. Wis. 2007). Defense and plaintiffs’ counsel filed cross-motions for summary judgment, and plaintiffs moved the court to certify the litigation as a class action; the district court granted in part and denied in part each of the summary judgment motions, and granted class action status to the TILA complaint.

Plaintiffs secured a loan from Chevy Chase bank in June 2004 to refinance their Wisconsin home. Andrews, at 614. The Bank’s initial disclosures included a handbook on adjustable rate mortgages (ARMs), an ARM disclosure and a preliminary disclosure statement as required by TILA, id., at 615. Additional disclosures were provided at closing, including an Adjustable Rate Note (ARN), a Truth in Lending Disclosure Statement (TILDS) and an Adjustable Rate Rider (ARR), id. The class action complaint alleged that plaintiffs’ believed the interest rate and payments “were fixed for five years and became variable thereafter”; in fact, the payment was fixed but the interest rate was not. Id. As the district court explained at page 615, “The loan carried a discounted or ‘teaser’ interest rate of 1.950 percent, but that rate applied only to the first monthly payment, after which the interest rate increased every month according to a formula. As the interest rate increased, an ever increasing portion of the minimum monthly payment of $701.21 was needed to cover interest, and the minimum payment itself soon became insufficient to cover accrued interest.” The class action complaint alleged that the Bank’s disclosures failed to comply with TILA.

Continue reading "TILA Class Action Defense Cases-Andrews v. Chevy Chase: Wisconsin Federal Court Certifies Lawsuit As Class Action And Holds Lender Violated TILA And That Class Action Complaint May Seek Rescission And Attorney Fees" »

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

FDCPA Class Action Certified Over Defense Objection that Range of 100-500 Class Members does not Satisfy Numerosity and that Allegation that Debt Collection Letters Violate Federal Fair Debt Collection Practices Act (FDCPA) Presented Common Questions of Law and Fact Illinois Federal Court Holds

Plaintiff filed a putative class action against Check Brokerage Corp. alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) based on debt collection letters sent by the company. Day v. Check Brokerage Corp., 240 F.R.D. 414, 415 (N.D. Ill. 2007). The class action alleged that defendant’s letters violate the FDCPA in that they are “false, deceptive, or misleading as determined by the unsophisticated consumer standard and therefore in violation of 15 U.S.C. § 1692(e), (e)(2)(A), (e)(5), and (e)(10).” Id., at 416. The class action complaint also alleged that defendant “used unfair or unconscionable means to collect or attempt to collect a debt in violation of 15 U.S.C. § 1692(f) and (f)(1)” and that the notice concerning a consumer's right to dispute a debt failed to comply with 15 U.S.C. § 1692(g)(a), id. Plaintiff moved the court to certify the litigation as a class action; defense attorneys argued that class action treatment was inappropriate because neither numerosity nor commonality had been met. Id., at 415. The district court disagreed.

The class action complaint was premised upon four debt collection letters defendant sent to plaintiff concerning a $20 debt. Day, at 416. The first letter advised Day that his $20 check had not cleared, that he now owed $65 (which included a “return check charge” of $25 and a “bank charge to merchant” of $20), and that additional fees may be imposed if payment is not made promptly and it was in his "‘best interests to clear this check immediately,’ despite the notification at the end of the letter that Day had thirty days to dispute the validity of the debt.” Id. The second letter “suggest[ed] you give this matter your immediate attention" and quoted Illinois Commercial Code § 3-806 about liability for dishonored checks. Id. The third letter “demand[ed] the $65.40 and stat[ed], ‘WE MUST HAVE YOUR PAYMENT NOW!!’” The letter also warned plaintiff that he could be liable for additional amounts. Id. Finally, the fourth letter stated, "THIS CHECK REMAINS UNPAID! WE ARE, THEREFORE, GOING TO SHOW YOU HOW MUCH IT COULD COST SHOULD IT GO TO LITIGATION." This letter included reference to warrants for arrest and adverse credit reports, and ended, "Common sense would dictate that this check be paid at this point. THE AMOUNT DUE, INCLUDING THE CHECK AND SERVICE CHARGES TO THIS POINT, IS $65.40." Id.

Continue reading "Class Action Defense Cases-Day v. Check Brokerage: Illinois Federal Court Holds That Class Action Rule 23(a)(1) Numerosity Test Does Not Require Exact Number And Debt Collection Letters Presented Common Questions Of Fact And Law" »

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

Rule 23(b)(3) Superiority Class Action Requirement not met Where Financial Impact on Defendant for Technical Violation of FACTA (Fair and Accurate Credit Transactions Act) would be Disproportionate to any Harm to the Class California Federal Court Holds

Within hours of purchasing an item at Cost Plus with her credit card, plaintiff filed a putative class action alleging a technical violation of the federal Fair and Accurate Credit Transactions Act (FACTA) in that her receipt truncated her credit card number but failed to omit the expiration date of the card. Spikings v. Cost Plus, Inc., Case No. CV-06-8125-JFW (C.D. Cal. May 25, 2007) [Slip Opn., at 1-2]. Plaintiff filed a motion for certification of class action treatment; defense attorneys objected arguing in part that the prerequisite Rule 23(b)(3) finding of superiority did not exist thus barring class action certification. Id., at 2. The district court agreed with the defense and refused to certify the litigation as a class action.

FACTA requires that no more than the last 5 digits of a credit card number be shown on customer receipts, and that the expiration date of the credit card not be disclosed on the receipt. 15 U.S.C. § 1681c(g). Plaintiff purchased an item at Cost Plus on December 19, 2006, and within four (4) business hours filed her putative class action complaint. Spikings, at 2. Plaintiff served the class action complaint on December 26, 2006, defendant deleted the expiration date from credit card receipts in all but three of its stores by January 11, 2007, and completed the process of deleting the expiration date from all customer credit card receipts by January 29, 2007. Id. Nonetheless, plaintiff pursued the class action, alleging that defendant’s violation of FACTA was “willful” within the meaning of 15 U.S.C. § 1681n, thus entitling the class to statutory damages of $100-$1000 per violation, as well as punitive damages and attorney fees. Id. Plaintiff also moved the court to certify the litigation as a class action, id., at 1.

Continue reading "FACTA Class Action Defense Cases-Spikings v. Cost Plus: Certification Of Class Action Rejected For Technical Violation Of Fair And Accurate Credit Transactions Act Because Class Action Treatment Would Subject Defendant To Disproportionate Liability" »

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

Putative Class Action Alleging FACTA Violation for Inclusion of Credit Card Expiration Date on Customer Receipts did not Warrant Class Action Treatment Because Rule 23(b)(3) Superiority Requirement not Satisfied California Federal Court Holds, Particularly as Defendant’s Act in Correcting the Violation Immediately on Receipt of Plaintiff’s Complaint Established its Good Faith and “Nullified Any Deterrence Benefit”

Plaintiff filed a putative class action against International Coffee & Tea alleging that it violated the Fair and Accurate Credit Transactions Act (FACTA) because it provided customers with credit card receipts that included the last five digits of the credit card and the card’s expiration date. Soualian v. International Coffee & Tea, LLC, Slip Opn., at 1 (C.D. Cal. June 11, 2007). Plaintiff filed a motion to certify the litigation as a class action; defense attorneys objected that Rule 23(b)(3)’ superiority test had not been met. Id. The district court agreed and refused to permit the litigation to proceed as a class action.

FACTA provides that “no person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number of the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” 15 U.S.C. § 1681c(g)(1). Plaintiff’s putative class action sought to represent “the class of individuals who made purchases at Defendant’s stores…and who received receipts on which Defendant printed more than the last five digits of the person’s credit card or debit card number, or on which Defendant printed the expiration date of the person’s credit or debit card.” Soualian, at 1. The district court outlined the elements required for class certification under Rule 23(a), but focused its analysis on whether Rule 23(b)(3) had been satisfied, id.

Continue reading "FACTA Class Action Defense Cases-Soualian v. International Coffee & Tea: California Federal Court Denies Plaintiff’s Motion To Certify Class Action In Fair And Accurate Credit Transactions Act (FACTA) Suit" »

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

Allegedly Wrongful Denial of Insurance Policy Benefits Satisfies Commonality and Typicality Requirements for Class Action Treatment, and While Rule 23(b)(1) and (b)(2) Classes Would not be Certified, Louisiana Federal Court Holds that Rule 23(b)(3) Class Action Treatment was Warranted

Plaintiff filed a breach of contract class action against her health insurer arising out of the denial of insurance benefits allegedly due and owing under a cancer insurance policy. Doiron v. Conseco Health Ins. Co., 240 F.R.D. 247, 249 (M.D. La. 2007). The class action complaint alleged that the cancer policy required the insurer to pay benefits directly to the insured if certain terms and conditions of the policy were met. Id. Plaintiff’s husband was diagnosed with cancer in March 2001 and underwent treatment, but he died in December 2001. Plaintiff submitted documentation to the insurer, but it only paid a portion of the insured’s claim. Id. Plaintiff filed as a putative class action on the grounds that "she, and the members of the Sub-Classes she seeks to represent, were and will continue to be denied claims for benefits for certain charges they commonly and typically incurr(ed), and which claims Conseco consistently deny(ied), for their radiation treatment and/or chemotherapy treatment." Id. Plaintiff moved the court to certify the lawsuit as a class action; defense attorneys objected to class action treatment insisting that case-by-case inquiries would be required, thus defeating commonality and typicality, and that none of the subparts of Rule 23(b) could be satisfied. The district court concluded that Rule 23(a) had been satisfied, and that a Rule 23(b)(3) class could be certified.

With respect to numerosity, defense conceded that the class consisted of at least 200 members, and the district court observed that in the Fifth Circuit a class of 100-150 members is generally deemed sufficient to satisfy the numerosity requirement; accordingly, the court found that Rule 239(a)(1) had been satisfied. Doiron, at 251.

Continue reading "Class Action Defense Cases-Doiron v. Conseco Health: Louisiana Federal Court Agrees With Defense That Rule 23(b)(1) and (b)(2) Class Action Could Not Be Certified But Certifies Class Action Against Health Insurer Under Rule 23(b)(3)" »

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

Federal Court Refuses to Exercise Supplemental Jurisdiction over State Law Wage and Hour Class Action Claims Because of Substantial Variance in State Laws and Conflict with FLSA (Fair Labor Standards Act) Opt-In Provision

Employees filed a putative class action in Connecticut federal court against Metropolitan Property alleging that the employer failed to pay overtime in violation of the federal Fair Labor Standards Act (FLSA) and Connecticut state labor laws. Neary v. Metropolitan Prop. & Cas. Ins. Co., 472 F.Supp.2d 247, 248 (D. Conn. 2007). The class action complaint included causes of action for a class action claim under FRCP Rule 23(b)(3) “for violation of state wage and hour laws ‘in each state in which each [p]laintiff worked’ (Count 4),” as well as “a class action claim under [FRCP Rule 23(b)(1)] for violation of state wage and hour laws ‘of the various states in which [p]laintiffs worked’ (Count 5).” Id. Defense attorneys moved to dismiss these class action claims on the grounds that the state law opt-out claims presented an irreconcilable conflict with the FLSA’s opt-in requirement. Id., at 249. The district court agreed.

Plaintiff’s class action complaint alleged that defendant insures vehicles nationwide and engaged in the practice of classifying field adjusters, field appraisers and outside adjusters as exempt from overtime in violation of the FLSA “and the wage and hour laws of the various states in which [p]laintiffs performed work for [d]efendant.” Neary, at 249. Plaintiff purported to bring the class action on behalf of a nationwide class alleging that certification was appropriate under Rule 23(b)(3). Id., at 249-50. The defense moved to dismiss Counts 4 and 5 of the class action complaint “pursuant to the Rules Enabling Act, 28 U.S.C. § 2072(b), on the basis that the class action procedures in Rule 23 irreconcilably conflict with Section 216(b) of the FLSA which expressly limits the scope of representative lawsuits seeking overtime pay to individuals who affirmative opt-in to the action.” Id., at 250. The district court granted the defense motion, but not for the reasons advanced.

Continue reading "Class Action Defense Cases-Neary v. Metropolitan Property: Connecticut Federal Court Grants Defense Motion In FLSA Class Action To Dismiss Class Action Claims Based On State Wage And Hour Laws" »

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

Federal Court Rejects Defense Constitutional Objection to Certification of Class Action and Holds Rule 23(b)(3) Predominance Test Satisfied in Class Action Premised on Minnesota Consumer Fraud Laws and Common Law for Unjust Enrichment because Minnesota’s Contacts with Non-Resident Class Members were Significant Enough to Permit Application of Minnesota Law to all Class Action Claims

Plaintiffs filed a class action against Allianz Life Insurance alleging consumer fraud claims arising out of the marketing of certain annuity products to senior citizens. Mooney v. Allianz Life Ins. Co., __ F.Supp.2d __ (D. Minn. May 10, 2007) [Slip Opn., at 2]. Plaintiffs moved for certification of a class action; defense attorneys objected in part on the grounds that predominance did not exist under Rule 23(b)(3) because of choice-of-law and conflicts-of-law issues. Id. The district court denied class action treatment, concluding that “because Plaintiffs had not performed the conflicts-of-law and choice-of-law analyses required by the Eighth Circuit’s opinion in In re St. Jude Medical, Inc., 425 F.3d 1116, 1120-21 (8th Cir. 2005), the Court was unable to determine whether class-wide questions of law predominate, or whether class-wide treatment is superior to other means of resolving this controversy.” Id. The court otherwise found that all of the class action requirements of Rule 23(a) had been met, id. Plaintiffs and defense filed supplemental briefing on the predominance issue, and the federal court certified a class action as requested.

Rule 23(b)(3) requires that “questions of law or fact common to the members of the class predominate over any questions affecting only individual members.” Plaintiffs argued that this test was met because Minnesota’s consumer fraud statutes and common law regarding unjust enrichment constitutionally may be applied to the claims of each class member; defense attorneys countered that “the law of each class member’s home state must be applied and therefore individualized questions of law predominate.” Mooney, at 3. According to the defense, applying Minnesota law to the claims of out-of-state residents is unconstitutional; alternatively, the defense argued that Minnesota’s choice of law rules required that the claims of each class member be examined under the laws of the states in which the class members lived. Id. The district court rejected the defense arguments and granted class certification.

Continue reading "Class Action Defense Cases-Mooney v. Allianz Life: Minnesota Court Certifies Class Action Holding Class Action Premised On State Consumer Fraud Laws And Common Law Unjust Enrichment Could Be Applied To Non-Resident Class Members" »

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

To Invoke Presumption of Reliance in Securities Fraud Class Action Based on Fraud on the Market Doctrine, Plaintiff must Establish Loss Causation at Time of Motion to Certify Class Action Fifth Circuit Holds

Plaintiffs filed a securities fraud class action against telecommunications provider Allegiance Telecom and others alleging violations of section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 based on an inaccurate statement concerning the number of line installations during the first three quarters of 2001 and a drop in stock price following a restated line count announced during the fourth quarter of that year. Oscar Private Equity Inv. v. Allegiance Telecom, Inc., 487 F.3d 261, 2007 WL 1430225, *1 (5th Cir. May 16, 2007). Plaintiffs’ lawyer moved to certify the litigation as a class action, advancing a “fraud on the market” theory to establish reliance by class members; defense attorneys objected to class action treatment, arguing that the restatement was not the cause of a drop in the stock price, id. The district court relied on the “fraud on the market” theory, rejected defense arguments, and certified a class action as requested. Id. The Fifth Circuit granted the defense leave to file an interlocutory appeal and reversed. The Circuit Court summarized its holding as follows: “We vacate the certification order and remand, persuaded that the class certified fails for wont of any showing that the market reacted to the corrective disclosure. Given the lethal force of certifying a class of purchasers of securities enabled by the fraud-on-the-market doctrine, we now in fairness insist that such a certification be supported by a showing of loss causation that targets the corrective disclosure appearing among other negative disclosures made at the same time.” Id. (italics added).

The details of the events that precipitated the filing of the class action complaint are set forth in the Note, below. The Fifth Circuit explained: “This dispute turns on whether the certification order properly relied upon the fraud-on-the-market theory. This theory permits a trial court to presume that each class member has satisfied the reliance element of their 10b-5 claim. Without this presumption, questions of individual reliance would predominate, and the proposed class would fail. Oscar, at *2 (footnotes omitted) (italics added). Under the fraud on the market theory, “Reliance is presumed if the plaintiffs can show that ‘(1) the defendant made public material misrepresentations, (2) the defendant's shares were traded in an efficient market, and (3) the plaintiffs traded shares between the time the misrepresentations were made and the time the truth was revealed.’” Id. (citation omitted). In the Fifth Circuit, it is insufficient for a plaintiff to show that defendant made a material misstatement; rather, “proof that the misstatement actually moved the market” is required, id., at *3. The Circuit Court explained at page *3:

Continue reading "Class Action Defense Cases-Oscar v. Allegiance: Fifth Circuit Holds That Loss Causation Must Be Established To Certify Securities Fraud Class Action And Criticizes Efficient Market Theory" »

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

Plaintiffs in Class Action Alleging Failure to Pay Overtime in Violation of Federal Fair Labor Standards Act (FLSA) Demonstrated that they were “Similarly Situated” to Putative Class Members thus Supporting Court Order Granting Motion to Conditionally Certify Lawsuit as a Class Action and to Provide Notice to Class Members Kansas Federal Court Holds

Plaintiffs filed a class action complaint in Kansas federal court against their employer, Heartland Services, alleging failure to pay overtime in violation of the federal Fair Labor Standards Act (FLSA). Bishop v. Heartland Services, Inc., 242 F.R.D. 612, 613 (D. Kan. 2007). Plaintiffs filed a motion requesting the court to certify the lawsuit as a class action and to authorize notice to putative class members, id.; defense attorneys opposed the motion on the grounds that (1) the class involved only 21 people, and (2) “there has been no indication of interest by other potential class members,” id., at 614. The district court held that the employees were similarly situated with the putative class sufficient to warrant notice to the class of conditional certification of a class action.

Under the FLSA, class action treatment is governed by 29 U.S.C. § 216(b), which provides: “An action to recover the liability prescribed in either of the preceding sentences may be maintained...by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.” However, the statute fails to define the critical phrase, “similarly situated.” The district court noted that the Tenth Circuit has adopted the “ad hoc” method for determining whether the employee seeking class action treatment is “similarly situated” to members of the putative class, Bishop, at 613 (citing Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1105 (10th Cir. 2001)). The “ad hoc” method allows the district court to make a preliminary “notice stage” determination, which “‘require[s] nothing more than substantial allegations that the putative class members were together the victims of a single decision, policy, or plan.’” Id., at 614 (citation omitted). The district court explained that “[t]his standard is a lenient one,” id., and that while Thiessen suggests that “substantial allegations” are sufficient, plaintiffs in the current case “presented limited evidence in support of their claims.” Id. After the court “conditionally” certifies the lawsuit as a class action for purposes of notice, then the parties complete discovery and present evidence to support “a stricter ‘similarly situated’ standard.” Bishop, at 614 (citing Thiessen, 267 F.3d at 1102-03).

In analyzing plaintiffs’ motion for conditional certification of a class action, the district court held that plaintiffs’ allegations - viz., that all putative class members are employees with “same or similar job titles” who performed “same or similar job duties” at the same Kansas facility and were paid under a common Employee Compensation Agreement - adequately established that plaintiffs were similarly situated for purposes of notice stage conditional class action certification. Bishop, at 614. The court rejected defense arguments that the class was too small - allegedly consisting of only 21 people - because the defense failed to provide admissible evidence supporting its claim, id. The court rejected defense claims that “there has been no indication of interest by other potential class members” on the same ground, id. Accordingly, the court granted plaintiffs’ motion to conditionally certify the lawsuit as a class action and approved notice to putative class members, id., at 614-15.

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

Uncertainty as to Whether Seventh Circuit will Hold that Class Action Under TILA (Truth-in-Lending Act) may seek Rescission Warrants Stay of Proceedings Pending Appeal Wisconsin Federal Court Holds

Plaintiff filed a class action against Chevy Chase Bank alleging various violations of the federal Truth-in-Lending Act (TILA). Ultimately, the district court extended by three years the borrowers’ rescission period based on its finding that the bank materially violated TILA, and certified the litigation as a class action “leaving the decision as to whether to actually seek rescission to each individual class member.” Andrews v. Chevy Chase Bank, FSB, 474 F.Supp.2d 1006, 1007 (E.D. Wis. 2007). Defense attorneys sought appellate review of the class action certification order under FRCP Rule 23(f), and the Circuit Court permitted the appeal, id. The defense thereafter sought a stay of the trial court proceedings pending appeal; the district court granted the request.

The district court applied the standard balancing test applicable to stay requests in the Seventh Circuit: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” Andrews, at 1007 (citation omitted). The bulk of the court’s order is devoted to an analysis of the First Circuit’s opinion in McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir. 2007), which held that class actions seeking rescission are inappropriate under TILA. Id., at 1007-10. Not surprisingly, the district court found it unlikely that the defense would prevail on appeal with respect to the class certification order, id., at 1110.

However, the federal court recognized that the Seventh Circuit may well accept the reasoning of its sister circuit in McKenna, and recognized further the likelihood that it “defined the class too broadly” in that the district court failed to “take into account that TILA prohibits certain borrowers from rescinding.” Andrews, at 1110. The court decided to grant the defense stay request because, even though it considered the irreparable injury/public interest factors to be “close,” in that both the plaintiffs and defense presented cogent arguments concerning prejudice, the court concluded that clarification as to whether a TILA class action can seek rescission tipped the scale in favor of the stay. Id.

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

Presumption of Reliance may be Applied in Fraud Class Action Lawsuit Where Defendant’s Omission is Primarily at Issue, and Existence of Individual Statute of Limitations Defenses does not Preclude Certification of Class Action Washington Federal Court Holds

Plaintiffs filed a putative class action against Carrier Corporation for misrepresentation, violation of Washington’s Consumer Protection Act (WCPA), unjust enrichment and breach of warranty alleging that the company “concealed a known defect in its high-efficiency condensing furnaces.” Grays Harbor Adventist Christian School v. Carrier Corp., ___F.Supp.2d ___ (W.D. Wash. May 1, 2007) [Slip Opn., at 2]. Plaintiffs moved to certify the lawsuit as a class action, id., at 1; defense attorneys opposed certification as a class action, primarily arguing that the commonality and superiority requirements of Rule 23(b)(3) had not been met, id., at 5. The district court certified the class action as requested, concluding that the requirements of FRCP Rule 23(a) and (b)(3) have been met.

The district court first addressed the requirements of Rule 23(a). Because the putative class consists of thousands of members, the court found that Rule 23(a)(1)’s numerosity requirement had been met. Grays, at 3. The federal court further found that the proposed class action “clearly” satisfied Rule 23(a)(2)’s commonality requirement, explaining at page 3:

Continue reading "Class Action Defense Cases-Grays v. Carrier: Washington Federal Court Rejects Defense Arguments Against Certification Of Class Action Holding The Presumption Of Reliance Applied In This Fraud Class Action" »

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

Trial Court Order on Motion for Judgment on the Pleadings in Fair Debt Collection/Unfair Competition Law Class Action Violated One-Way Intervention Rule but Remedy is Vacating of Order Rather than Barring Class Action to Proceed California Supreme Court Holds

Sandra Gonzalez filed a class action cross-complaint against Fireside Bank alleging inter alia violations of California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) for failing to comply with the statutory notice requirements for collection of a deficiency judgment on vehicle sales contracts. Fireside Bank v. Superior Court, 56 Cal.Rptr.3d 861, 2007 WL 1112020, *1 (Cal. April 16, 2007). Gonzalez moved for judgment on the pleadings, and for an order certifying her lawsuit as a class action. The bank objected to any ruling on the merits of the class action until after the court first ruled on the motion to certify a class action, arguing that the one-way intervention rule required that procedure be followed. The trial court promised to rule on the class action certification first, but instead it simultaneously granted both motions. The Supreme Court held that this was error, and vacated the order granting the motion for judgment on the pleadings.

Gonzalez purchased a vehicle for her father, obtaining dealer financing but intending that her father use and pay for the vehicle. Fireside, at *1. The sales contract was assigned to Fireside Bank, and the loan went into default so the bank repossessed the vehicle, id. The bank sent Gonzalez a notice advising her of her redemption rights but overstating the amount due by $2700. Id. The bank then filed a lawsuit against Gonzalez seeking a deficiency judgment; Gonzalez filed a cross-complaint alleging that the bank failed to comply with the Rees-Levering Motor Vehicle Sales and Finance Act (Rees-Levering) in that the bank’s notice of intent was defective, thereby precluding the bank from seeking a deficiency judgment. Id., at *2. In part, the cross-complaint alleged violations of Rees-Levering and of California’s unfair competition law (UCL), id. The bank conceded that the notice contained a mistake, attributing it to a “computer error” and admitting that 3,000 other borrowers also received inaccurate notices. Id. Gonzalez moved for judgment on the pleadings on the bank’s complaint; the bank opposed the motion arguing, in part, that “before obtaining a ruling on the motion Gonzalez must seek or forswear certification of a class . . . and the trial court should take the motion off calendar or deny it without prejudice until class issues, if any, were resolved.” Id. The trial court postponed ruling on the motion, id.

Gonzalez amended her cross-complaint to assert the Rees-Levering Act and UCL claims on behalf of “all persons who had received postrepossession [sic] notices from Fireside Bank on accounts started in California in which the listed redemption amount failed to subtract the credit for unearned finance charges,” and then moved the court to certify the action as a class action. Fireside, at *2. The bank opposed the motion, id. The trial court set the hearing on the motion to certify a class action for the same date as the hearing on the motion for judgment on the pleadings; in so doing, the court indicated that it would likely certify a class action. Id., at *3. The bank also objected to any ruling on the motion for judgment on the pleadings until after the class certification issue was resolved, id. The Supreme Court noted at page *3 that “The trial court assured counsel that it was ‘not going to rule’ on the motion for judgment on the pleadings ‘until I decide the issue of certification.’” Id. But the trial court issued orders not only granting the motion to certify a class action, but also granting the motion for judgment on the pleadings based on its finding that the bank had "failed to comply with the notice requirements under the Rees-Levering Act” and therefore the bank could not recover a deficiency judgment. Id.

Continue reading "Class Action Defense Cases-Fireside Bank v. Superior Court: California Court Reaffirms Importance Of One-Way Intervention Rule In Class Action Alleging Fair Debt Collection And Unfair Competition Violations" »

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

Federal Court Refuses to “Participate in Scheme” by Class Action Plaintiff Law Firm to Formulate Theory for Class Action Lawsuit and then Solicit “Stand-In Plaintiffs” to Serve as Class Representatives

Plaintiff filed a class action against Oreck Direct alleging unfair business practices in the advertisement and sale of its air purifiers. Bodner v. Oreck Direct, LLC, ___ F.Supp.2d ___, (N.D. Cal. April 25, 2007) [Slip Opn., at 1]. Plaintiff’s lawyer moved the court to certify the lawsuit as a class action and for appointment of lead plaintiff and lead counsel; defense attorneys opposed the motion. Id. The district court denied the motion, criticizing plaintiff’s law firm for formulating a class action lawsuit and then going in search of a class action plaintiff regardless of “the lack of a fitting plaintiff or the lack of ethical scruples.” Id., at 4.

Plaintiff alleges that he suffers from allergies and purchased an Oreck air purifier in reliance on defendant’s infomercial claiming that the product “would remove allergens, bacteria, dirt and dust from the air”; the thrust of his class action complaint is that the air purifier did nothing to alleviate his allergies. Bodner, at 1-2. The district court noted, however, that plaintiff did not even know what he was allergic to, had never been diagnosed or treated for allergies, frequently left open the window to his apartment, and was “exposed to allergens in other locations throughout the day,” id., at 2. Moreover, plaintiff’s air purifier was never tested to determine whether it performed as represented, id. The federal court also detailed that the class action had been formulated by plaintiff’s law firm before the firm “found” plaintiff, summarizing at page 2:

Continue reading "Class Action Defense Cases-Bodner v. Oreck: California Federal Court Refuses To Certify Class Action And Criticizes Ethics Of Plaintiff’s Counsel Westrup, Klick" »

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

As Matter of First Impression, if Class Action Complaint Alleges Less than $5 Million in Damages then Defense Bears Burden of Proving “Legal Certainty” that Jurisdictional Amount Required by CAFA (Class Action Fairness Act of 2005) is Satisfied Ninth Circuit Holds

Plaintiff filed a class action against her former employer in Oregon state court alleging violations of state labor laws and stating that the damages sought would not exceed $5 million. Lowdermilk v. U. S. Bank Nat'l Ass'n, 479 F.3d 994, 995 (9th Cir. 2007). Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA); plaintiff filed a motion to remand the class action to state court, arguing that the amount in controversy did not exceed $5 million based on the allegations in the class action complaint. The district court held that unless plaintiff’s $5 million limitation on the amount in controversy was made in bad faith, then it was bound by the limitation stated therein; accordingly, it remanded the class action on the ground that the defense had not demonstrated that the damages limitation had been made in bad faith so the amount in controversy did not meet the $5 million threshold required by CAFA, id., at 996. The Ninth Circuit granted the employer’s request for leave to appeal. Id. As a matter of first impression, the Ninth Circuit held that when a class action complaint specifically alleges less than $5 million in damages, then CAFA requires that “the party seeking removal must prove with ‘legal certainty’ that the amount in controversy is satisfied, notwithstanding the prayer for relief in the complaint.” Id.

The Ninth Circuit concisely summarized the issue as follows: “In this case we are called upon to resolve a question of first impression: Under the Class Action Fairness Act of 2005 . . ., when the plaintiff has pled damages less than the jurisdictional amount, what must the defendant prove in order to remove the case to federal court?” Lowdermilk, at 995-96. The Circuit Court began its analysis by noting that the defense bears the burden of establishing removal jurisdiction, id., at 997 (citing Abrego Abrego v. Dow Chemical Co., 443 F.3d 676, 685 (9th Cir. 2006) (per curiam)), and that it was not disputed that CAFA's minimal diversity and numerosity requirements had been met, id.

The class action complaint sought damages “in total, less than five million dollars” plus attorney fees. Lowdermilk, at 997-98. The defense submitted evidence that the damages will exceed $5 million, and argued additionally that attorney fees should be included in determining the amount in controversy. Id., at 998. The Ninth Circuit began its analysis by rejecting defense claims that plaintiff failed to specify an amount in controversy; rather, it held that this case presented the precise situation reserved in Abrego Abrego – “What proof must the defendant adduce to contradict the plaintiff's claim that her damages are less than the jurisdictional amount?” Id. It answered this question of first impression by requiring “that where the plaintiff has pled an amount in controversy less than $5,000,000, the party seeking removal must prove with legal certainty that CAFA's jurisdictional amount is met.” Id., at 1000.

Continue reading "CAFA Class Action Defense Cases-Lowdermilk v. U.S. Bank: Ninth Circuit Holds Class Action Fairness Act (CAFA) Requires Defense Prove Certainty of Jurisdictional Amount For Removal When Class Action Claims Less Than $5 Million" »

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

FDCPA Class Action Claim Belonged to Bankruptcy Estate and Settlement of Individual Claim Appropriate because Trustee could not Prosecute Class Action Ohio Federal Court Holds

After a law firm filed an action to collect a debt from her, plaintiff filed a putative class action against the law firm alleging violations of the federal Fair Debt Collection Practices Act (FDCPA). Griffith v. Javitch, Block & Rathbone, LLP, 358 B.R. 338, 340 (S.D. Ohio 2007). Shortly thereafter, plaintiff and her husband filed a Chapter 7 bankruptcy petition in the federal court for the Southern District of Ohio, staying the underlying action, and plaintiff listed the class action as a contingent claim her creditor, Great Seneca Financial Corporation, but did not separately list her class action against the law firm. Id. The bankruptcy trustee determined that it was a no-asset case, and plaintiff and her husband received a bankruptcy discharge in October 2004; less than a month later, the underlying lawsuit was reopened. Id. The parties jointly requested a stay pending a decision by the federal Court of Appeals for the Sixth Circuit in a case concerning “several defenses to an FDCPA suit that are raised by [the law firm] here on essentially identical factual allegations,” id. (citing Todd v. Weltman, Weinberg & Reis, 434 F.3d 432 (6th Cir. 2006). The underlying class action again became active in June 2006.

Defense attorneys moved for dismissal or summary judgment, arguing that the class action claim belonged to the bankruptcy trustee because it was not properly listed on the bankruptcy petition schedules; accordingly, the defense argued, plaintiff lacked standing to prosecute the class action. Griffith, at 340. Plaintiff countered that a “class action claim” had been listed on the petition, and advised the court that the bankruptcy trustee would be filing a formal abandonment of the claim so that her class action could proceed; instead, the trustee advised plaintiff’s lawyer that it would not be in the best interests of the bankruptcy estate to abandon the claim. Id. The court issued an order to show cause why the complaint should not be dismissed for lack of standing, but the defense motions were held in abeyance pending further bankruptcy court proceedings. Id. The trustee moved to reopen the bankruptcy case, and to hire plaintiff’s lawyer to prosecute the class action on behalf of the estate. Id.

Continue reading "Class Action Defense Cases-Griffith v. Javitch: Ohio Court Holds Debtor’s Federal Fair Debt Collection Practices Act (FDCPA) Class Action Claim Belongs To Bankruptcy Trustee And Approves Settlement Of Individual Claim" »

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

Defense Motion to Strike Class Action Allegations Must be Denied Pending Further Discovery to Develop Facts Needed to Evaluate Commonality and Superiority Requirements for Class Action Certification Iowa Federal Court Holds

This class action – Rios v. State Farm Fire & Cas. Co., 469 F.Supp.2d 727 (S.D. Iowa 2007) – has a tortured procedural past. The initial class action complaint was filed in Iowa state court in August 2004. Defense attorneys removed the class action to federal court on the basis of diversity jurisdiction, but the federal court remanded the action to state court for failure to establish the $75,000 threshold. See Varboncoeur v. State Farm Fire & Cas. Co., 356 F.Supp.2d 935 (S.D. Iowa 2005). Plaintiffs then filed a motion to amend the complaint so as to seek certification of a nationwide class, whereas the original complaint alleged only a statewide class action. Defense attorneys again removed the class action to federal court, this time on the basis of the Class Action Fairness Act of 2005 (CAFA); the federal court again remanded the action, holding that until the state court ruled on the motion to amend, the federal court lacked jurisdiction. Rios, at 730. Once the state court granted the motion to amend the class action complaint, defense attorneys removed the class action to federal court under CAFA. Id.

Plaintiffs filed a putative class action alleging that State Farm paid homeowner's insurance policy benefits for roof repairs by paying the insured the cost of a roof “overlay” upfront, but withholding the balance of the policy benefits otherwise available to cover the cost of a roof “tear-off” until the insured had actually completed such repairs. Rios, at 731. As the district court explained at page 731, “For example, if a policyholder incurred roof damage that was covered under the policy, and the total replacement cost of the roof damage was $3,000.00, then under the standard policy, State Farm would only pay the policyholder the cost to overlay the roof (hypothetically $1,800.00) upfront, and withhold the rest of the replacement cost (hypothetically $1,200.00), i.e., tear-off costs plus depreciation, until actual repairs were made on the roof.” This provided a financial benefit to the insurer, because “[i]f the policyholder did not make the tear-off repairs within the two-year time period provided under the policy, then State Farm would not have to pay the $1,200.00 tear-off costs to the policyholder.” Id.

Continue reading "State Farm Class Action Defense Cases-Rios v. State Farm: Iowa Federal Circuit Denies Defense Motion To Strike Nationwide Class Action Allegations From Complaint" »

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

Maryland Federal Court Redefines Class to Address Typicality Concerns In Federal Real Estate Settlement Procedures Act (RESPA) Class Action and then Certifies Class Action Alleging Illegal Kickbacks and Payment of Unearned Fees Under RESPA

Plaintiffs filed a class action in Maryland state court against various defendants alleging that they charged excessive fees in connection with mortgage brokerage, title or settlement services and would pay referral fees in violation of the federal Real Estate Settlement Procedures Act (RESPA); defense attorneys removed the class action to federal court. Benway v. Resource Real Estate Serv., LLC, 239 F.R.D. 419, 421 (D. Md. 2006). Plaintiffs moved to certify the lawsuit as a class action; defense attorneys objected that commonality, typicality and adequacy did not exist under Rule 23(a), and that the motion failed to establish that the requirements of Rule 23(b). Id., at 422. The district court granted the motion but limited the scope of the class action. Specifically, the court certified a class action on behalf of “All borrowers who entered into mortgage loan transactions using the services of Resource Real Estate where the HUD-1 Settlement Statement, or other documents in the loan file, included a charge for or payment to Clipper City Settlement Services, Inc.” Id., at 427.

The class action complaint alleged that Resource Real Estate Services provides real estate title and mortgage loan closing services and that Millard Rubenstein is its majority owner and its Managing Member, that Access One Mortgage Group provides mortgage broker services, and that Resource and Access One formed an affiliated business arrangement (ABA) called Clipper City Settlement Services “to appear on mortgage closing documents as an entity which had performed title work or settlement services.” Benway, at 421. The class action alleged “Resource and Access One conducted a scheme to extract referral fees from borrowers using ABAs like Clipper City”; specifically, Access One would refer borrowers to Resource for title work and Resource would perform the title work, but “the loan closing documents would attribute that work to Clipper City, and the fees charged for the work would exceed the customary fees charged by Resource.” Id. Plaintiffs also allege that Resource “would channel a portion of the fees collected by Clipper City to Access One as a referral reward, without notifying the borrower.” Id.

Continue reading "RESPA Class Action Defense Cases-Benway v. Resource Real Estate Services: Maryland Federal Court Rejects Defense Arguments And Certifies Class Action Under RESPA (Real Estate Settlement Procedures Act)" »

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

Class Action Certification of Slab Case Insurance Claims Against Homeowners’ Insurer Inappropriate Because Individual Proof Issues Exist in Each Case so the Claims Fail to Satisfy the Typicality Requirement for Class Actions Under Rule 23 Mississippi Federal Court Holds

Plaintiff filed a class action against her homeowners insurance carrier, State Farm, alleging that after Hurricane Katrina totally destroyed her home, State Farm had improperly denied coverage “on the grounds that the destruction of the insured property was caused solely by water in the form of storm surge flooding, a peril excluded under the terms of the policy at issue.” Guice v. State Farm Fire & Cas. Co., Civil Action No.1:06CV001 LTS-RHW (S.D. Miss. March 22, 2007) [Slip Opn., at 1]. Plaintiff moved the court to certify a class action against State Farm on behalf of homeowners whose properties fall within the category of “slab cases” – viz., homes where Hurricane Katrina left only the foundation. Id. The district court denied plaintiff’s motion, id., at 2, and plaintiff requested reconsideration of the class action certification issue, id., at 1. The district court denied plaintiff’s motion, reaffirming that the slab cases against State Farm are not appropriate for class action treatment.

The federal court began its analysis by noting that the practical effect of granting plaintiff’s motion would be “entry of judgment as a matter of law for the liability limits application to the ‘slab cases’ under the State Farm homeowners policies that applied to those properties.” Slip Opn., at 1. However, while at the time of the first class action certification motion none of the individual “slab case” lawsuits against State Farm had been tried, the federal court now had the benefit of having presided over three such cases, explaining at page 2:

Continue reading "State Farm/Hurricane Katrina Class Action Defense Cases—Guice v. State Farm: Mississippi Federal Court Rejects Effort To Certify “Slab Case” Class Action Against State Farm Due To Lack Of Typicality" »

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

Fifth Circuit Holds that District Court’s Erroneous Definition of “Deceptive Acts” Resulted in Mistaken Application of Presumption of Reliance in Certifying Class Action Against Banks, Necessitating Reversal of Class Certification Order

After Enron’s collapse in 2001, dozens of class action and individual lawsuits were filed against numerous defendants for violations of Section 10(b) of the Securities Exchange Act of 1924 and Rule 10b-5; more than 30 of these actions were consolidated in the district court for the Southern District of Texas and Regents of the University of California was named lead plaintiff. Regents of the Univ. of Cal. v. Credit Suisse First Boston (USA), Inc., 482 F.3d 372 (5th Cir. 2007) [Slip Opn., at 3]. “Years of discovery have ensued, and tens of millions of documents have been produced.” Id. In 2006, the district court granted plaintiff’s motion to certify the litigation as a class action, id., at 3-4. Defense attorneys sought and received permission from the Fifth Circuit to file an interlocutory appeal, id., at 2; the Circuit Court reversed.

As the Circuit Court admitted, the facts of this case are “difficult to detail” so we simply quote the Court’s broad summary: “Plaintiffs allege that defendants Credit Suisse First Boston (“Credit Suisse”), Merrill Lynch & Company, Inc. (“Merrill Lynch”), and Barclays Bank PLC (“Barclays Bank”) (collectively “the banks”) entered into partnerships and transactions that allowed Enron Corporation (“Enron”) to take liabilities off of its books temporarily and to book revenue from the transactions when it was actually incurring debt. The common feature of these transactions is that they allowed Enron to misstate its financial condition; there is no allegation that the banks were fiduciaries of the plaintiffs, that they improperly filed financial reports on Enron’s behalf, or that they engaged in wash sales or other manipulative activities directly in the market for Enron securities.” Slip Opn., at 2. In essence, the class actions alleged that the banks knew Enron executives were manipulating financial information to inflate the company’s stock price to maximize their personal compensation. Id.

In certifying the class action, the district court concluded that a “deceptive act” under Rule 10b-5(c)3 includes participation in a “transaction whose principal purpose and effect is to create a false appearance of revenues,” and that Rule 10b-5(a)’s prohibition of any “scheme . . . to defraud” creates joint and several liability for individuals who commit deceptive acts in furtherance of such a scheme. Slip Opn., at 3. At the Fifth Circuit explained, “The court’s theory of scheme liability considerably simplified finding commonality among the plaintiffs with respect to loss causation. The court stated that ‘a reasonable argument can be made that where a defendant knowingly engaged in a primary violation of the federal securities laws that was in furtherance of a larger scheme, it should be jointly and severally liable for the loss caused by the entire overarching scheme, including conduct of other scheme participants about which it knew nothing.’” Id., at 3-4. The district court also concluded that plaintiffs could rely on “classwide presumptions of reliance for omissions and fraud on the market” because it believed the banks breached a “duty not to engage in a fraudulent ‘scheme,’” and concluded that plaintiffs need not demonstrate market efficiency or reliance to invoke the fraud-on-the market presumption of reliance under Rule 10-5(a) or (c), believing this to be required only for claims under Rule 10-5(b). Id.

Continue reading "Enron Class Action Defense Case-Regents v. Credit Suisse: Certification Of Securities Class Action Seeking $40 Billion Overturned By Fifth Circuit Because Classwide Presumption Of Reliance Did Not Apply" »

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

CPLR 901(b) Precludes Antitrust Class Action Lawsuits Because Treble Damages Award Under the Donnelly Act is a Penalty New York Court of Appeals Holds

Plaintiff filed a putative class action against various defendants seeking damages under New York’s antitrust statute (the Donnelly Act) and deceptive practices statute, and an unjust enrichment theory, alleging that defendants overcharged tire manufacturers for chemicals used in the processing of rubber for tires. Based on the Donnelly Act, the class action complaint prayed for treble damages, costs and attorney fees. Sperry v. Crompton Corp., ___ N.E.2d ___, 2007 WL 527726 (N.Y. February 22, 2007) [Slip Opn., at 2-3.]. Defense attorneys moved to dismiss the class action. The trial court granted the motion, holding that “CPLR 901(b), which precludes a class action to collect a penalty unless specifically authorized by statute, barred the Donnelly Act claim.” Id., at 3. The lower court dismissed the remaining counts on grounds not relevant here. The New York Court of Appeals affirmed.

Plaintiff argued that a treble damages award under the Donnelly Act did not constitute a penalty within the meaning of CPLR 901(b), citing both New York law and federal case law that treble damages in antitrust actions “are primarily remedial in nature.” Sperry, at 3-4. The Court of Appeals disagreed. The High Court found it “evident” that the Legislature intended the penalty exception in CPLR 901(b) to preclude class action relief “where individual plaintiffs were afforded sufficient economic encouragement to institute actions (through statutory provisions awarding something beyond or unrelated to actual damages), unless a statute expressly authorized the option of class action status.” Id., at 9. The Court explained at page 9, “This means sense, given that class actions are designed in large part to incentivize plaintiffs to sue when the economic benefit would otherwise be too small, particularly when taking into account the court costs and attorneys’ fees typically incurred.”

Continue reading "Class Action Defense Cases-Sperry v. Crompton: New York Law Precludes Class Action Lawsuits That Seek To Collect Penalties Unless Expressly Allowed By Statute" »

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

As Matter of First Impression, Class Action Treatment for Rescission Claims Under TILA (Truth in Lending Act) is not Proper First Circuit Holds

Plaintiffs filed a putative class action in Massachusetts federal court against First Horizon Home Loan alleging that it violated the federal Truth in Lending Act (TILA) and its state law equivalent, the Massachusetts Consumer Credit Cost Disclosure Act (MCCCDA) by failing to accurately disclose to borrowers their statutory rescission rights. McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 420 (1st Cir. 2007). Plaintiffs moved for class certification; defense attorneys objected that class action treatment was inappropriate. Id. The district court certified a class that included borrowers who had refinanced or paid off their loan with First Horizon, id., at 420-21. The First Circuit granted a defense request for interlocutory review of “an appeal that requires us to explore, for the first time, the crossroads at which class-action rules intersect with the rescission provisions of [TILA] and [MCCCDA].” Id., at 420. The Circuit Court concluded that “the district court lacked the authority to certify a class of residential borrowers who might potentially be eligible for rescissionary relief.” Id.

The First Circuit began by summarizing TILA’s and the MCCCDA’s statutory scheme, McKenna, at 421-22, and noted that while the class action complaint sought rescissionary relief under the MCCCDA, the parties agreed that “TILA supplies the applicable rules of decision,” id., at 422. The Circuit Court then addressed the “flagship claim” of defense attorneys that “as a matter of law, class actions for rescission are unavailable under the TILA,” id. The Court noted that central issue before it – “whether TILA claims focused on rescission are maintainable in a class-action format” – is a matter of first impression in the First Circuit. Id., at 423. The Fifth Circuit, however, has held that “rescission class actions are not maintainable under the TILA.” Id. (citing James v. Home Constr. Co. of Mobile, Inc., 621 F.2d 727, 731 (5th Cir. 1980)). The theory behind this line of cases is that “rescission claims, unlike damages claims, are not subject to any aggregate statutory cap and, therefore, rescission class actions, if permitted, could easily render a creditor insolvent.” Id. (citation omitted). The First Circuit recognized that some district courts have certified TILA class actions seeking rescission, but followed James based on its conclusion that “Congress did not intend rescission suits to receive class-action treatment.” Id. The Circuit Court’s statutory intent analysis is well worth reading. See id., at 423-27.

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

Post-Class Action Complaint Tender of Amount Sought by Class Action Plaintiff does not Render Claim Moot or Deprive Federal Court of Subject Matter Jurisdiction Georgia Court Holds

Plaintiff filed a putative class action against his credit insurance coverage carrier, Protective Life, alleging that it refused to refund unearned premiums for early termination of insurance coverage. Bishop's Prop. & Investments, LLC v. Protective Life Ins. Co., 463 F.Supp.2d 1375, 1376 (M.D. Ga. 2006). The credit insurance in question involved vehicle loans: in return for a single premium, Protective Life promised to make the loan payments in the event of the insured's death or disability. In plaintiff's case, he purchased a vehicle with a 72-month loan term, but he paid off the loan in only 11 months. Id. Because the loan had been paid in full, the insurance policy terminated. The class action alleged that insureds who paid off their loans early were entitled to refunds of the "unearned premiums." Id., at 1376-77. After the filing of the class action complaint, defendant tendered a refund to plaintiff, which he refused to accept. Id., at 1376. Defense attorneys then moved for summary judgment arguing that, despite his refusal to accept the check, the tender mooted plaintiff's claim thereby depriving the court of subject matter jurisdiction over the class action. Id. Under the defense theory, Protective Life "issued a check for the total amount of unearned premiums owed to Plaintiff under its credit insurance policy," and that tender divested the federal court of jurisdiction because "Plaintiff's personal claims became moot the moment [Protective Life] 'refunded in full the unearned premiums that [Plaintiff] claims are due.'" Id., at 1377. The district court denied the motion.

The district court phrased the issue at page 1377 as follows: "Under what circumstances does a legal controversy for Article III purposes continue to exist in a class action after the named plaintiff's individual claims become moot?" The court recognized that generally the claims of the class representative must be "live" not only at the time the class action is filed but at the time of class certification as well; if it is not, then "the court lacks a justiciable controversy" and the class action must be dismissed. Id. (citation omitted). The district court provided a concise explanation behind the purpose of the rule at pages 1377 and 1378:

Continue reading "Class Action Defense Cases-Bishop's v. Protective Life: Georgia Federal Court Denies Defense Motion To Dismiss Class Action Based On Defense Tender Of Damage Check To Class Representative" »

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

Voluntary Payment Doctrine did not Apply where Plaintiff Could only get Copies of Hospital Records through Service Company and Plaintiff is an Adequate Class Representative if her Agent Requests and Pays for Hospital Records Illinois Court Holds

Plaintiff filed a putative class action against Smart Corporation, a company which contracted with hospitals to place its own employees on site to retrieve and copy hospital medical records for patients, alleging that it overcharged hospital patients for such services in violation of common law, Illinois' Inspection of Hospital Records Act and Consumer Fraud and Deceptive Business Practices Act, and claiming also unjust enrichment. Ramirez v. Smart Corp., ___ Ill.App.3d ___ (Ill.App. February 16, 2007). Plaintiff's lawyer sought class certification, and defense attorneys moved for summary judgment. Slip Opn., at 1-2. The trial court granted the defense motion and denied class certification.

Plaintiff had suffered an injury and received treatment at a hospital. As part of her workers compensation claim, plaintiff's lawyer sought her hospital records. Smart retrieved and copied the records - consisting of 6 pages - and sent a bill for $34.78 itemized as follows: a basic fee of $15 and a $1 per page copy fee bringing the total photocopy charge to $21, a retrieval/search fee of $10, and shipping/handling fee of $3.78. Ramirez, at 2. Plaintiff's law firm paid the bill before plaintiff reviewed it. Id., at 3. The trial court denied class certification and granted the defense motion for summary judgment. The court refused to certify a class action because it found plaintiff to be an inadequate class representative in that her lawyer had reviewed and paid the bill, not the plaintiff. Id., at 4. The court granted summary judgment in favor of the defense holding that plaintiff's claims were barred by the voluntary payment doctrine, and additionally finding that the charges were not deceptive or unfair within the meaning of the Consumer Fraud Act and that plaintiff could not seek damages under the Hospital Records Act because that statute allows a patient to compel production of hospital records. Id.

Continue reading "Class Action Defense Cases-Ramirez v. Smart Corp.: Illinois State Court Affirms In Part And Reverses In Part Summary Judgment In Favor Of Defense In Class Action Against Hospital Record Retrieval/Copy Service" »

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

Whether Lender Violated TILA, RESPA or State's Consumer Loan Act Irrelevant to Determination of Class Certification Motion because Plaintiffs Adequately Alleged such Violations Washington Federal Court Holds

Plaintiffs filed a class action against their lender NovaStar Mortgage for violations of Washington's Consumer Protection Act (CPA) alleging that it failed to disclose it paid mortgage brokers a yield spread premium (YSP) in connection with their loans; the class action complaint was premised on NovaStar's purported failure to provide written disclosures required by the federal Real Estate Settlement Procedures Act (RESPA), the federal Truth in Lending Act (TILA), Washington's Consumer Loan Act (CLA), and the plaintiffs' deeds. Pierce v. NovaStar Mortgage, Inc., 238 F.R.D. 624, 625 (W.D. Wash. 2006). In response to plaintiffs' first motion to certify the lawsuit as a class action, the district court agreed with defense attorneys that plaintiffs had failed to demonstrate numerosity or typicality as required by Rule 23(a) and also failed to establish the predominance and superiority elements required by Rule 23(b); it therefore denied the motion, but did so without prejudice. Id. On plaintiffs' renewed motion for class certification, the court rejected defense objections and granted the motion.

By way of background, to establish a violation of the CPA one must prove "(1) an unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) that impacts the public interest; (4) and causes injury to the plaintiff in his or her business or property; and (5) such injury is causally linked to the unfair or deceptive act." Pierce, at 626 (citation omitted). A plaintiff may satisfy the first two elements by proving that the act in question is a per se unfair trade practice: "A per se unfair trade practice exists when, by statute, the Legislature declares an unfair or *627 deceptive act in trade or commerce and the statute has been violated." Id., at 626-27 (citations omitted). Under Washington law, "[a] violation of the CLA . . . is explicitly deemed a violation of the first and second elements of the CPA," id., at 627 (citation omitted). In denying the first motion for class certification, the district court believed that "verbal disclosures and independent knowledge of the YSP were relevant to determining whether NovaStar violated the CPA." Id., at 626. Plaintiffs' lawyers disagreed, arguing in the renewed motion that "verbal disclosures are irrelevant to class certification because they seek to establish a per se violation of the Consumer Protection Act by proving that NovaStar violation the Consumer Loan Act." Id.

Continue reading "Pierce v. NovaStar-Class Action Defense Cases: Washington Federal Court Certifies Truth-In-Lending/Real Estate Settlement Procedures Act Class Action Against NovaStar Mortgage Based On Failure To Disclose Yield Spread Premiums (YSPs)" »

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

California Court Surprisingly Holds that Under Certain Circumstances Plaintiffs need not be Members of Class to Serve as Class Representatives and that, as Matter of First Impression, Rescission Under TILA (Truth-in-Lending Act) is a Personal Remedy Unsuitable for Class Action Treatment

Plaintiffs filed a putative class-action lawsuit against their lender alleging inter alia violations of the federal Truth In Lending Act (TILA) arising from the lender’s failure to disclose certain closing fees charged in connection with refinance loans. LaLiberte v. Pacific Merc. Bank, 147 Cal.App.4th 1. 53 Cal.Rptr.3d 745, 746 (Cal.App. 2007). Defense attorneys demurred to the class-action complaint on the ground that the class allegations failed to establish commonality; the trial court agreed but granted plaintiffs leave to amend. After extensive motion practice, plaintiffs filed a third amended class-action complaint seeking to represent a single class of borrowers who obtained loans after November 20, 2002. Id., at 746-47. Defense attorneys again demurred, this time on the ground that because the putative class representatives secured their loans in April 2002, they were not members of the class they sought to represent. Id., at 747. The trial court agreed, and sustained the demurred to the class action allegations without leave to amend. Id. as a matter of first impression, the California appellate court affirmed the trial court's order, holding that rescission under TILA was not suitable for class action treatment.

Under California law, “An order sustaining demurs to class action allegations ‘is appealable to the extent that it prevents further proceedings as a class action.’” LaLiberte, at 747 (citation omitted). In this case, two standards of review apply on appeal. The first involves the independent judgment exercised by an appellate court in reviewing an order sustaining a demurrer; the second involves whether the trial court abused its discretion in denying leave to amend. Id., at 747-48 (citations omitted). The trial court had relied upon Payne v. United California Bank, 23 Cal.App.3d 850 (Cal.App. 1972), in support of its conclusion that plaintiffs lacked standing to sue on behalf of the proposed class because they were never members of that class. See id., at 748. The Court of Appeal disagreed, holding that La Sala v. American Sav. & Loan Ass’n, 5 Cal.3d 864 (Cal. 1971), was more on point. Id.

Continue reading "TILA Class Action Defense Cases-LaLiberte v. Pacific Mercantile Bank: As Matter Of First Impression California Court Holds That Rescission Under Federal Truth-In-Lending Act (TILA) Not Suitable For Class Action Treatment" »

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

District Court did not Abuse its "Broad Discretion" in Certifying Nationwide Sex Discrimination Class Action Against Wal-Mart Creating "the Largest Certified Class in History" Ninth Circuit Holds

In June 2001, plaintiffs filed a putative class action against Wal-Mart in the San Francisco federal court alleging sex discrimination in the payment of wages and in promotions. In April 2003, plaintiffs moved to certify a nationwide class action on behalf of 1.5 million former and present female employees “employed in a range of Wal-Mart positions - from part-time, entry-level, hourly employees to salaried managers.” Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. February 06, 2007) [Slip Opn., at 1340]. Defense attorneys argued that the requirements of Rule 23 had not been satisfied, stressing in particular several problems inherent in litigating a class of record size. More than a year later, in an 84-page decision handed down in June 2004, the district court rejected all but one of the defense arguments and, save for that one point, certified the class action as requested by plaintiffs. Both sides appealed, but the Ninth Circuit affirmed the district court order in all respects.

Plaintiffs’ motion sought certification of a nationwide class action on behalf of “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.” Dukes, at 1340. Wal-Mart stressed the “‘historic’ nature of Plaintiffs’ motion, inasmuch as it concerns a class of approximately 1.5 million women who work or worked in one or more of Wal-Mart’s 3,400 stores in 41 regions at any time since 1998.” Id. The district court recognized Wal-Mart’s concerns but concluded that “while the class size was large, the issues were not unusual.” Id. The Ninth Circuit summarized the district court’s order at page 1341 as follows:

On June 21, 2004, the district court issued an eighty-four-page order granting in part and denying in part Plaintiffs’ motion for class certification. [Citation.] With respect to Plaintiffs’ claims for equal pay, the district court granted Plaintiffs’ motion as to issues of alleged discrimination and all forms of requested relief. With respect to Plaintiffs’ promotion claim, the court’s finding was mixed. The court certified the proposed class as it related to issues of alleged discrimination (including liability for punitive damages) as well as injunctive and declaratory relief. However, the court denied Plaintiffs’ request for certification with respect to backpay because data relating to challenged promotions were not available for all class members.

On appeal, Wal-Mart focused its attack on three points: (1) that the commonality and typicality requirements of Rule 23(a) had not been satisfied, (2) that the class action complaint primarily sought monetary relief thus barring certification under Rule 23(b)(2), and (3) that the district court order prejudiced its ability to respond to individual claims. Dukes, at 1341. Plaintiffs, in turn, argued that the district court erred in limiting backpay relief. Id. The Ninth Circuit held that the district court did not abuse its discretion in certifying the nationwide class.

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