Class Action Defense Blog

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.

Continue reading "Microsoft WGA Class Action Defense Cases–Johnson v. Microsoft: Washington Federal Court Dismisses All Class Action Allegations In Class Action Complaint And Requires Plaintiffs Pay Defense Fees Incurred Opposing Withdrawn Class Certification Motion" »

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., ___ F.3d ___, 2009 WL 4642631, *1 (5th Cir. December 21, 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.

Continue reading "RESPA Class Action Defense Cases–Mims v. Stewart Title: Fifth Circuit Reverses Class Action Certification Of RESPA Claim Holding Individual Issues Predominate" »

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., ___ F.3d ___ (8th Cir. January 5, 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).

Continue reading "Bayer Class Action Defense Cases–In re Baycol: Eighth Circuit Affirms Injunction Against State Court Deciding Class Action Certification Motion Because Federal Court Rejected Class Action Treatment Of Identical Claims By Different Plaintiffs" »

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.

Continue reading "Class Action Defense Cases–Menagerie Productions v. Citysearch: California Federal Court Grants Class Action Certification Of Nationwide Class Action Challenging Charges For Pay-Per-Click Advertising" »

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., ___ F.Supp.2d ___ (M.D. Fla. September 30, 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