Class Action Defense Blog

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

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

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

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

Posted In: Class Action Court Decisions

Following Removal of Class Action to Federal Court under CAFA (Class Action Fairness Act), Plaintiffs Decision to Amend Complaint to Eliminate Class Action Allegations did not Destroy Federal Court Jurisdiction because Jurisdiction is Determined at Time of Removal and is not Affected by Subsequent Events Seventh Circuit Holds

Plaintiffs filed a putative class action in Wisconsin state court against Burlington Northern Santa Fe Railway Company and Burlington Northern Santa Fe Corporation alleging that defendants’ “failure to inspect and maintain a railroad trestle caused the town to flood in July 2007, damaging their property.” In re Burlington Northern Santa Fe Railway Co., 606 F.3d 379, 379-80 (7th Cir. 2010). Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act); plaintiffs then amended the complaint to remove the class action allegations and the district court remanded the matter to state court on the ground that without the class action allegations federal court jurisdiction was lacking under CAFA. Id., at 379. Id. Defense attorneys sought leave to appeal the remand order; the Seventh Circuit granted the petition and reversed.

The Seventh Circuit noted that “the parties battled extensively over jurisdiction” in the district court. In re Burlington, at 380. Defense attorneys argued diversity jurisdiction existed because the joinder of the non-diverse individual employee defendants was fraudulent, but the district court found it to be tactical rather than fraudulent. Id. The district court agreed, however, that jurisdiction existed under CAFA, and denied plaintiffs’ first motion to remand. Id. Plaintiffs thereafter sought and obtained leave of court to amend the complaint to remove the class action allegations. Id. The federal court also considered the motion to amend to be “an implied motion to remand the case, which it granted.” Id. In the district court’s view, because the amended complaint did not contain any class action allegations, jurisdiction under CAFA no longer existed. Id.

Continue reading "CAFA Class Action Defense Cases–In re Burlington Northern: Seventh Circuit Reverses Remand Of Former Class Action Holding Jurisdiction Under Class Action Fairness Act (CAFA) Determined At Time Of Removal Not After Amendment Of Complaint To Eliminate" »

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

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

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

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

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

Posted In: Class Action Court Decisions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted In: Class Action Court Decisions

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

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

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

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

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

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

Nine class actions – two each in the Central and Northern Districts of California, and one each in the Eastern and Southern Districts of California, the Northern District of Illinois, the District of Minnesota, and the Northern District of Texas – were filed against various Chase defendants arising out of home equity lines of credit. In re JP Morgan Chase Bank Home Equity Line of Credit Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 7, 2010) [Slip Opn., at 1]. According to the allegations under the class actions, “Chase improperly suspended or reduced plaintiffs’ respective home equity line of credit accounts and, relatedly, used inappropriate automated valuation models in assessing the value of the underlying properties.” Id. Attorneys for plaintiffs in seven of the class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of Illinois or, alternatively, in the Northern District of California. Id. Plaintiff and defendants in the Minnesota class action supported the motion; plaintiff in the Northern District of California class action supported centralization in that district instead of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that it “will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.” Id. The Judicial Panel also agreed that the Northern District of Illinois was the appropriate transferee court because “Defendants and almost all plaintiffs support centralization in this district” and because it “provides a convenient forum.” Id., at 2. Accordingly, the Panel transferred all class actions pending outside of Illinois to that district. Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

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

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

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

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

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

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

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

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

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

Posted In: Arbitration, Class Action Court Decisions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

District Court Properly Remanded Class Action to State Court on Ground that Variable Life Insurance Policy Constituted a “Security” Within the Meaning of Exception to Federal Court Jurisdiction under CAFA (Class Action Fairness Act) Seventh Circuit Holds

Plaintiff filed a putative class action against the issuer of his life insurance policy, Lincoln National Life Insurance, alleging that it breached the terms of certain of its variable life insurance policies. Lincoln Nat’l Life Ins. Co. v. Bezich, ___ F.3d ___ (7th Cir. June 25, 2010) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, “Each month, Lincoln deducts cost-of-insurance charges from the accounts of its policyholders…[that] are not determined based on expected mortality, as promised by the policy.” Id., at 1-2. Defense attorneys removed the class action to federal court, asserting jurisdiction under the Class Action Fairness Act (CAFA), id., at 2. However, the district court remanded the class action to state court on the ground that CAFA provides an exception for class actions “that solely involves a claim . . . that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security (as defined under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)) and the regulations issued thereunder).” Id. (citing § 1332(d)(9)(C)). Defendant filed a petition with the Seventh Circuit seeking permission to appeal the district court’s remand order. Id., at 1-2. Lincoln National Life argued “that its petition raises a ‘novel and important issue’ under CAFA: ‘whether contract claims grounded in the traditional insurance features of variable life insurance policies, as opposed to those related to their security features, qualify under the securities exception to CAFA.’” Id., at 2. Because the Seventh Circuit agreed with the district court’s conclusion that § 1332(d)(9)(C) required remand, it dismissed the appeal for lack of jurisdiction. Id.

The Circuit Court explained that Lincoln allowed the holders of single variable life insurance policies to “allocate money between a General Account, which accumulates value from premium payments, and a Separate Account, an investment account whose value varies depending on the performance of the investments selected.” Bezich, at 2-3. The policyholder may place 100% of his or her funds in either the General or Separate Account, or may split the funds between the accounts in any percentage they desire. Id., at 3. “The Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940,” id. (citation omitted). The class action challenges the insurance charges deducted from both the General and Separate Account based on the percentage of funds in each account. Id. Defense attorneys argued that the appeal should be accepted because “no court of appeals has ever considered the application of CAFA to this type of variable life insurance policy.” Id.

Continue reading "CAFA Class Action Defense Cases–Lincoln National Life v. Bezich: Seventh Circuit Court Dismisses Appeal For Lack Of Jurisdiction Holding Variable Life Insurance Policy Was A "Security" Within Meaning Of Exception To CAFA Jurisdiction" »

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

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

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

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

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

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

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

Two class actions – one in the Georgia and one in Virginia – were filed against Capital One Financial and its wholly-owned subsidiary, Capital One Bank (USA) based on the claim that Capital One “unilaterally increased interest rates on customers’ credit card accounts without notice.” In re Capital One Bank Credit Card Interest Rate Hike Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 11, 2010) [Slip Opn., at 1]. Two additional class actions – one in California and another one in Georgia – were treated as potential tag-along cases, id., at 1 n.1. Attorneys for the Virginia class action plaintiffs filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of Virginia, where their class action was pending. Id., at 1. Plaintiffs in the Northern District of Georgia class action supported the motion, id. Capital One opposed centralization of the class actions, or requested that the Judicial Panel delay ruling on the motion until the Georgia district court had ruled on the dispositive motions pending before it, Id. Specifically, defense attorneys had filed motions for summary judgment in each of the Georgia class actions, id., at 1-2. Alternatively, Capital One requested centralization in the Northern District of Georgia, id., at 1. The Judicial Panel granted the motion to centralize the class action lawsuits, rejecting defendants’ request to await decisions on the Georgia summary judgment motions because one had been filed only recently and because the California class action suggested that multidistrict litigation would still remain irrespective of the Georgia federal court’s rulings. Id., at 2. The Judicial Panel agreed, however, that the Northern District of Georgia was the appropriate transferee court because “[t]he first-filed actions are pending [there]” and because in one of those cases “discovery has begun and a motion for summary judgment is pending.” Id. Accordingly, the Panel transferred all class actions pending outside of Georgia to that district. Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Verizon’s Decision to Enter into Proposed Class Action Settlement of Class Action Alleging Violation of FACTA (Fair and Accurate Credit Transactions Act) while Clarification Act was Pending before Congress did not Allow Verizon to Back Out of Settlement After Passage of Clarification Act Third Circuit Holds

Plaintiffs filed two putative class actions against Verizon Wireless, one in Pennsylvania and one in Tennessee, alleging that it violated the Fair and Accurate Credit Transactions Act (FACTA), which prohibits merchants in credit or debit card transactions from providing consumers at point of sale with a printed receipt that displays more than the last five digits of the card or its expiration date; specifically, the class action complaint alleged that plaintiffs received a receipt that contained the expiration date of their credit or debit card. Ehrheart v. Verizon Wireless, ___ F.3d ___ (3d Cir. June 15, 2010) [Slip Opn., at 3; Dissenting Opn., at 7-8]. The parties entered into a proposed class action settlement; at the time, the Credit and Debit Card Receipt Clarification Act of 2007 (the Clarification Act) was pending before Congress, and if it passed then plaintiffs’ claims would fail as a matter of law because the Clarification Act insulated merchants from liability for claims based solely on the failure to redact expiration dates during the time period that subsumed plaintiffs’ claims. Slip Opn., at 3-4. The parties moved the district court for preliminary approval of the proposed class action settlement, which the district court granted on April 22, 2008. Id., at 4. The Clarification Act was signed into law on June 22, 2008, and six days later Verizon filed a motion to vacate the approval of the class action settlement. Id. The district court granted Verizon’s motion, and subsequently granted Verizon’s motion for judgment on the pleadings. Id. In vacating its approval of the class action settlement, the district court explained that the Clarification Act applied to any lawsuit that was not yet final and so it applied to the instant class action lawsuit because the proposed class action settlement had not yet received final approval. Dissenting Opn., at 12. “Because Congress eliminated the plaintiffs’ cause of action, the District Court reasoned, it had to vacate its preliminary approval of the Settlement Agreement.” Id. In the district court’s view, “no class action settlement can be fair, adequate or reasonable when Congress has determined that such relief is unfair and unreasonable.” Id., at 13. Plaintiffs appealed, and the Third Circuit reversed.

The Third Circuit explained that “the District Court lost sight of three important points” in granting Verizon’s motion to vacate preliminary approval of the class action settlement: “First, there is a restricted, tightly focused role that Rule 23 prescribes for district courts, requiring them to act as fiduciaries for the absent class members, but that does not vest them with broad powers to intrude upon the parties’ bargain. Second, a strong public policy exists, which is particularly muscular in class action suits, favoring settlement of disputes, finality of judgments and the termination of litigation. Third, our jurisprudence holds that changes in the law after a settlement is reached do not provide ground for rescission of the settlement.” Ehrheart, at 5 (footnote omitted).

Continue reading "FACTA Class Action Defense Cases–Ehrheart v. Verizon Wireless: Third Circuit Court Reinstates Preliminary Approval Of Class Action Settlement Holding Passage Of Clarification Act Did Not Allow Defendant To Withdraw From Settlement Agreement" »

Posted In: FCRA Class Actions, Class Action Court Decisions

Judicial Panel Grants One Plaintiff’s Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 in Central District of California, Rejecting Competing Request of Plaintiff in Different Class Action to Centralize Lawsuits in Eastern District of Louisiana

Eleven class actions – five in California, three in Louisiana, and one each in the Middle and Southern Districts of Florida and in West Virginia – were filed against various Toyota Motor entities arising out of product defect liability claims: “Each of the actions…asserts economic damages on behalf of certain classes and/or individuals stemming from an alleged defect in certain Toyota vehicles that causes sudden, unintended acceleration.” In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Prac., & Prods. Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 9.2010) [Slip Opn., at 1, 2] . At least 100 additional class actions also had been filed, and were treated as potential tag-along cases. Id., at 1 n.1. Attorneys for plaintiffs in one of the California class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Central District of California, where their class action was pending. Id., at 1. Attorneys for plaintiffs in one of the Louisiana class actions filed a competing motion with the Panel requesting centralization of the class actions in the Eastern District of Louisiana, where their class action was pending. Id. The Judicial Panel observed, “Though these cases have attracted an unusual amount of publicity to the Panel’s work, in all relevant aspects, the issues here are neither dramatically different nor more complex than those we regularly resolve.” Id. The responses filed with the Panel were, literally, all over the map: the defendants, together with plaintiffs in the other California class actions and in 8 of the tag-along cases, supported centralization in California; plaintiffs in 5 other tag-along cases supported centralization in Louisiana; plaintiffs in other pending and tag-along cases supported centralization but argued in support of any of 15 other transferee courts. Id. The Panel also received conflicting briefs as to whether to include personal injury and wrongful death cases within the scope of any centralization order. Id., at 2. Additionally, the Panel noted additional concerns raised by various parties, such as “whether one judge or a particular judge would have the necessary time and resources to handle such a complex, multi-faceted MDL” or whether “the individual personal injury cases might become sidetracked by larger, more complex class action economic loss cases.” Id. The Panel recognized that “[t]hese are absolutely legitimate concerns,” but nonetheless believed that “the federal judiciary is well equipped to handle this litigation under Section 1407.” Id.

The Judicial Panel granted the motion to centralize the class action lawsuits, explaining at page 2: “The cases involve common questions of fact. No doubt, centralization under Section 1407 will eliminate duplicative discovery; prevent inconsistent pretrial rulings, including with respect to class certification; and conserve the resources of the parties, their counsel, and the judiciary. Consequently, centralization will create convenience for the parties and witnesses and will promote the more just and efficient conduct of this litigation.” In re Toyota, at 2. The Panel also opted to include the personal injury and wrongful death cases with the economic damage cases, explaining that this ruling was without prejudice to “any later-filed motion to vacate a conditional transfer order in this docket,” because even though “the personal injury and wrongful death claims will require considerable individual discovery in addition to the common discovery in each case,” the Panel was “confident that the transferee judge can design the kind of distinct discovery tracks often employed to address these concerns.” Id. In considering the appropriate transferee court, the Panel agreed that the Central District of California was most appropriate because “Toyota maintains its United States corporate headquarters within this district, and relevant documents and witnesses are likely located there” and because “[f]ar more actions are pending there than in any other district.” Id., at 3. Accordingly, the Panel ordered all of the class actions pending outside the Central District of California be transferred to that district, id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Party to Arbitration Clause Governed b y FAA (Federal Arbitration Act) may not be Compelled to Arbitrate Class Action Claims where Arbitration Clause is Silent on Class Action Arbitration Supreme Court Holds

Plaintiff AnimalFeeds is a company that “supplies raw ingredients, such as fish oil, to animal-feed producers around the world”; “AnimalFeeds ships its goods pursuant to a standard contract known in the maritime trade as a charter party.” Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., ___ U.S. ___ (April 27, 2010) [Slip Opn., at 1]. Defendants are various “shipping companies that serve a large share of the world market for parcel tankers—seagoing vessels with compartments that are separately chartered to customers wishing to ship liquids in small quantities.” Id. The charterers – like plaintiff – “typically select the particular charter party that governs their shipments”-- not the shipowners. Id., at 2. And the contracts here at issue contained an arbitration clause that was silent as to the availability of class action relief in any arbitration, id. After a Department of Justice criminal investigation uncovered an illegal price-fixing conspiracy among the defendants, plaintiff filed a class action complaint in federal district court alleging antitrust violations. Id., at 2-3. The Judicial Panel on Multidistrict Litigation eventually consolidated the class action with similar class action lawsuits brought by other charterers. Id., at 3. The parties agreed that plaintiff must arbitrate the antitrust dispute, and plaintiff served defendants with a demand for class action arbitration in New York. Id. Defendants argued that class action relief was unavailable under the arbitration clause because “[a]ll the parties agree that when a contract is silent on an issue there’s been no agreement that has been reached on that issue”; the parties agreed to submit the question of class arbitration to a panel of three arbitrators. Id., at 3-4. The arbitrators disagreed and concluded that class action relief could be had under the arbitration clause. Id., at 4. Defendants moved the district court to vacate the arbitrators’ award; the district court agreed with defendants that the arbitrators’ decision constituted a “manifest disregard” of federal maritime law and accordingly vacated the award. Id., at 4-5. The Second Circuit reversed on the ground that “because [defendants] had cited no authority applying a federal maritime rule of custom and usage against class arbitration, the arbitrators’ decision was not in manifest disregard of federal maritime law.” Id., at 5. The Supreme Court granted certiorari “to decide whether imposing class arbitration on parties whose arbitration clauses are ‘silent’ on that issue is consistent with the Federal Arbitration Act (FAA), 9 U. S. C. §1 et seq.” Id., at 1. The High Court reversed.

Continue reading "Class Action Arbitration Defense Cases–Stolt-Nielsen v. AnimalFeeds: Supreme Court Holds Federal Arbitration Act (FAA) Requires Agreement To Arbitrate Claims Brought As Class Action" »

Posted In: Arbitration, Class Action Court Decisions

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted In: Class Action Court Decisions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Class Action Challenging Monthly Fees Imposed by Satellite TV Provider not Subject to Arbitration on Individual Basis because Class Action Waiver in Arbitration Provision was Unenforceable Georgia Federal Court Holds

Plaintiff filed a putative class action in a Georgia federal court against his satellite television provider, DirecTV, alleging breach of contract and unjust enrichment, and seeking an accounting as well as injunctive and declaratory; specifically, the class action complaint alleged that DirecTV “collect[ed] excessive ‘tax’ charges and improperly billed lease fees” in connection with the satellite television service, and sought to prohibit it from collecting or billing customers “for taxes in excess of those actually due and owing.” Jones v. DirecTV, Inc., 667 F.Supp.2d 1379, 1380-81 (N.D.Ga. 2009). As part of the service, plaintiff signed a written customer agreement; “DIRECTV mails any amendments to the terms of the initial customer agreement with subsequent billing statements when necessary.” Id., at 1380. Plaintiff signed up for service with DirecTV in 2002, and received a copy of the customer agreement, which “stated that customers should immediately cancel their service should they choose to reject the terms of the agreement and that use of the DIRECTV service without rejection constitutes acceptance.” Id. In May 2007, plaintiff received an amended agreement (the April 2007 agreement) containing an arbitration clause with a class action waiver provision. Id. The arbitration provision provided that “if the class action waiver provision is unenforceable, then the entire arbitration clause is also unenforceable.” Id., at 1381. In May 2007, plaintiff obtained two DirecTV receivers, signing an “equipment lease addendum” that “expressly incorporated the April 2007 agreement, specifically the agreement’s arbitration provisions.” Id., at 1380. Defense attorneys moved the district court to compel arbitration of plaintiff’s individual claims in light of the class action waiver in the agreement’s arbitration clause. Id., at 1380-81. The federal court denied the motion.

The district court recognized that the Federal Arbitration Act (FAA) “dictates that binding arbitration clauses in written agreements are enforceable in federal court.” Jones, at 3181 (citation omitted). But it also noted that “such a clause may be invalidated under any applicable state law that governs contracts generally, including ‘fraud, duress, or unconscionability.’” Id. The court concluded that, under Georgia law, the class action waiver in the arbitration clause was unconscionable. Id., at 1381-82. Plaintiff (and the other class members) stood to recover but “a very small amount” – the class action challenged monthly lease fees of $4.99 and sales taxes of $0.80. Id., at 1382. Moreover, “the arbitration provision leaves the determination of whether to award fees for attorneys and expert witnesses to the chosen arbitrator,” making it unlikely that an individual would choose to pursue arbitration. Id. The district court concluded, therefore, that “the remedies available to the plaintiff and members of the proposed class are effectively foreclosed.” Id. Accordingly, the class action waiver was unenforceable, rendering the entire arbitration clause unenforceable (as provided by the agreement). Id. The district court therefore denied the motion to compel arbitration. Id.

Posted In: Arbitration, Class Action Court Decisions

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

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

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

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

Broad Release Language in Prior Nationwide Class Action Settlement did not Preclude Instant Class Action Lawsuits because Class Representative in Nationwide Class Action was not Adequate Representative of Instant Class and because Class Actions were not Premised on “Identical Factual Predicate” Ninth Circuit Holds

Plaintiffs filed separate putative class action lawsuits in Washington state court against Sprint alleging violations of the state’s Business & Occupation Tax (“B&O tax”) and Consumer Protection Act (“CPA”), as well as breach of contract and unjust enrichment; specifically, the class action complaints alleged that Sprint unlawfully passed the B&O tax on to consumers. Hesse v. Sprint Spectrum LP, 598 F.3d 581 (9th Cir. 2010) [Slip Opn., at 3845, 3849-50]. According to the allegations underlying the class action complaints, Sprint included “a separate line item labeled ‘Washington State B&O Tax Surcharge’” on customer invoices, id., at 3850; however, “Washington law specifies that the B&O tax must be collected from a business as part of its ‘operating overhead’ rather than imposed as a separate ‘tax[] upon purchasers or customers,” id., at 3849-50 (citation omitted). Defense attorneys removed the class actions to federal court, and the moved to dismiss the class action complaints. Id., at 3850. The district court granted the motion with respect to all class action claims “predicated on the B&O Tax Statute,” finding that the claims were preempted by the Federal Communications Act; however, the court otherwise denied the motion to dismiss. Id. Eventually, the class action complaints were consolidated, and the district court certified the litigation as a class action. Id. Sprint answered the class action complaint and then moved for summary judgment on the grounds that the claims were “barred by a [nationwide class action] settlement between Sprint and its customers approved by a Kansas state court in 2006” known as the Benny Settlement. Id. The district court granted the motion, concluding that the prior class action settlement barred the present lawsuit. Id., at 3849. The Ninth Circuit reversed.

The Circuit Court explained that the Benny Settlement resolved several class actions that had been filed “in various state courts and then dismissed and refilled in Kansas state court in 2005 for the purposes of settlement.” Hesse, at 3850. One of those class actions challenged Sprint’s practice of imposing surcharges to “recoup federal regulatory fees” – defined in the class action settlement agreement “to include only specified fees imposed to recover the cost of compliance with federally mandated programs” – in violation of consumer protection laws, and alleging breach of contract and unjust enrichment. Id., at 3850-51. Plaintiffs in the present class action did not dispute that they were members of the class covered by the Benny Settlement and that they did not opt out of that class, id., at 3851. The question was whether the instant class action claims were barred by the broad release language of the Benny Settlement.

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Posted In: Class Action Court Decisions

Class Action Complaint Alleging Homebuilder Inflated Purchase Price of New Homes and Loaned Money to High Foreclosure Risk Purchasers Failed to Adequately Allege Damages so Plaintiff Lacked Standing to Prosecute Class Action Claims California Federal Court Holds

Plaintiff filed a putative class action against various Pulte Home entities arising out of her purchase from Pulte of a newly-constructed single-family residence; the class action complaint alleged that Pulte – which both manufactures homes and provides financing for their purchase – induced plaintiff to obtaining financing through Pulte by “provid[ing] significant financial incentives” to her and others, without disclosing that they would not otherwise qualify for a home loan and were at high risk of foreclosure. Kaing v. Pulte Homes, Inc., ___ F.3d ___ (N.D.Cal. February 18, 2010) [Slip Opn., at 1-3]. According to the allegations underlying the class action complaint, plaintiff was told she would receive a $75,000 reduction from the home’s $575,000 sales price if she financed through Pulte, and that she would not receive this discount if she went to a different lender, id., at 3. The class action alleges that “Pulte knew from appraisals on other homes in the subdivision, that the house was worth less than $500,000” but that the Pulte-selected appraiser “inflated” the value to $518,000 – proving it was not worth $575,000 and that the $575,000 sales price plus $75,000 discount were “phony numbers from the start.” Id. Plaintiff ultimately paid $518,000 for the home, and financed the purchase with Pulte, but that “she ‘would not have and could not have qualified for her loan’ if she had been working with a ‘lender acting in good faith in an arms-length transaction.’” Id. The class action complaint alleged violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA), as well as negligent misrepresentation and breach of an implied covenant of good faith and fair dealing. Id., at 5. Defense attorneys moved to dismiss the class action complaint for lack of standing, id., at 1. The district court granted the motion.

In ruling on the motion to dismiss, the district court observed that while plaintiff had alleged monthly income of “less than $3500,” she “has not indicated that she has been unable to make her regular payments on the mortgage, nor does she allege that she has been harmed by any of the terms in the loan documents to which she is a party.” Kaing, at 3-4. Rather, the thrust of her class action complaint was that Pulte had failed to “provide Plaintiff with any disclosure that Defendants had sold houses, and would sell houses in the future, to unqualified and high foreclosure-risk buyers” or that “they had sold houses, and planned to sell houses in the future, to investors who would not occupy the houses or to owners who were not financially qualified.” Id., at 4. In essence, the complaint alleged that Pulte’s “questionable loan practices” increased the risk of foreclosure which, in turn, “had a ‘devastating’ impact on the value and desirability of the neighborhoods.” Id. Plaintiff alleges “her home decreased in value by over 50%.” Id., at 5.

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Posted In: Class Action Court Decisions

Class Action Complaint Against Halliburton Alleging Violations of Securities Laws did not Apply Wrong Legal Standard in Ruling on Class Action Certification Motion and Properly Denied Class Action Treatment because Plaintiff Failed to Establish Causation Seventh Circuit Holds

Plaintiff filed a putative class action against Halliburton and David Lesar (its COO and then CEO during the class period alleging violations of various federal securities laws; specifically, the class action complaint alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as well as Rule 10(b)-5. The Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co., ___ F.3d ___, 2010 WL 481407, *1 (5th Cir. February 12, 2010). According to the allegations underlying the class action complaint, defendant was liable for securities fraud violations under a “fraud-on-the-market” theory, alleging that false statements had been made concerning “(1) Halliburton's potential liability in asbestos litigation, (2) Halliburton's accounting of revenue in its engineering and construction business, and (3) the benefits to Halliburton of a merger with Dresser Industries.” Id. Plaintiff moved the district court to certify the litigation as a class action; defense attorneys opposed class action treatment. Id. The district court denied the motion, holding that the Rule 23’s requirements for certification of a class action had not been met. Id. Specifically, in order to obtain class certification “Plaintiff was required to prove loss causation, i.e., that the corrected truth of the former falsehoods actually caused the stock price to fall and resulted in the losses.” Id. The district court denied certification because it found that plaintiff had failed to establish the necessary “causal relationship,” id. The Fifth Circuit affirmed.

Plaintiff argued on appeal “that the district court applied an erroneous standard for loss causation and required it to prove more than is required under law.” Halliburton, at *1. The Circuit Court disagreed. The Court explained,

In the case of a putative class, a plaintiff may create a rebuttable presumption of reliance under the fraud-on-the-market theory by showing “that (1) the defendant made public material misrepresentations, (2) the defendant's shares were traded in an efficient market, and (3) the plaintiffs traded shares between the time the misrepresentations were made and the time the truth was revealed.”… A defendant may rebut the presumption “by ‘[a]ny showing that severs the link between the alleged misrepresentation and either the price received (or paid) by the plaintiff, or his decision to trade at fair market price[.]’”

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

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

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

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

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

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

Class Action Challenging NCAA Requirement that Student Athletes Allow NCAA to use Likeness, Without Compensation, Adequately Pleaded Antitrust Violations California Federal Court Holds

Two separate class action lawsuits, one by Edward O’Bannon and one by Craig Newsome, were filed against the National Collegiate Athletic Association (NCAA) and the Collegiate Licensing Company (CLC) alleging violations of the Sherman Act, as well as state law claims for unjust enrichment and accounting. O’Bannon v. National Collegiate Athletic Ass’n, ___ F.Supp.2d ___ (N.D.Cal. February 8, 2010) [Slip Opn., at 1]. The class actions were consolidated with other class actions containing similar claims. Id., at 4. According to the allegations underlying the class action complaints, plaintiffs competed as student athletes at their respective universities, and were at that time governed by the “rules and regulations of NCAA.” Id., at 2. The class actions alleged that the NCAA’s rules and regulations violate the Sherman Act because Form 08-3a, which the NCAA requires student athletes to sign, provides: “You authorize the NCAA [or a third party acting on behalf of the NCAA (e.g., host institution, conference, local organizing committee)] to use your name or picture to generally promote NCAA championships or other NCAA events, activities or programs.” Id., at 2-3. Moreover, NCAA Bylaw Article 12.5.1.1 authorizes the NCAA (and certain others) to “use a student-athlete's name, picture or appearance to support its charitable or educational activities or to support activities considered incidental to the student-athlete's participation in intercollegiate athletics,” id., at 3. This constitutes anticompetitive conduct, the class actions alleged, because the NCAA essentially “requires student athletes to ‘relinquish all rights in perpetuity to the commercial use of their images, including after they graduate and are no longer subject to NCAA regulations.’” Id. Plaintiffs alleged that they “[did not] consent to these agreements and that they [did] not receive compensation for the use of their images.” Id. Defense attorneys moved to dismiss the class actions; the district court found that the Newsome class action allegations were inadequate to state claims, but that the O’Bannon class action adequately alleged violations of the Sherman Act.

The district court began by analyzing the Sherman Act claims in the O’Bannon class action. See O’Bannon, at 5. The court concluded that each of the elements required to state a claim: specifically, the class action complaint adequately alleged an “agreement among Defendants and their purported co-conspirators,” id., at 6, an “unreasonable restraint of trade” under the “rule of reason,” id., at 7-11, and an impact on interstate commerce, id., at 11. Further, the claim was not time barred because the “continuing violation” doctrine tolled the statute of limitations. Id., at 11-12. O’Bannon also had standing to prosecute the class action claim, id., at 12-13, in part because his complaint alleges that “Defendants’ actions have deprived him of compensation for the use of images of himself from his collegiate career” and that his injury is “traceable to Defendants’ conduct, which includes, but is not limited to, NCAA’s rules and regulations,” id., at 13. The Newsome class action complaint, however, failed to state a claim under the Sherman Act because it failed to adequately allege an unreasonable restraint of trade. See id., at 13-14. Newsome’s fault was in filing a “truncated version of the O’Bannon [class action] complaint” that failed to adequately “plead a relevant market.” Id., at 14.

Continue reading "NCAA Class Action Defense Cases–O’Bannon v. NCAA: California Federal Court Denies Motion To Dismiss Antitrust Class Action Holding Student Athlete Claims Adequately Pleaded Sherman Act Claim" »

Posted In: Class Action Court Decisions

District Court Erred in Granting Employee’s Motion for Summary Judgment in Class Action Alleging Failure to Pay Overtime under Federal Fair Labor Standards Act (FLSA) because Auto Damage Adjusters Exercise Sufficient Discretion and Independent Judgment to Fall Within FLSA’s Administrative Exemption District of Columbia Circuit Holds

Plaintiffs filed a putative class action against their employer, Government Employees Insurance Corporation (GEICO) alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, the class action complaint alleged that defendant misclassified its automobile insurance policy damage adjusters as “exempt” and therefore failed to pay them overtime wages due under the FLSA. Robinson-Smith v. Government Employees Ins. Co., 590 F.3d 886, 887-88 (D.C. Cir. 2010). According to the allegations underlying the class action complaint, “GEICO employs at least three categories of personnel at varying levels of responsibility who may service a given automobile claim: the liability adjuster, the auto damage adjuster and the auto damage appraiser.” Id., at 888. The liability adjuster is at the “high” end of the responsibility scale, and the damage appraiser is at the “low” end of the responsibility scale. Id. “GEICO considers the former exempt as an administrative employee under the FLSA (and thus not entitled to overtime wages) but not the latter.” Id. The issue in this class action concerned the middle group of employees. The parties filed cross-motions for summary judgment on the issue of whether the damage adjusters were administrative employees exempt from overtime pay under the FLSA; the district court used the Department of Labor’s “short test” and “held that GEICO’s auto damage adjusters do not exercise ‘sufficient’ discretion and independent judgment to qualify for the exemption[.]” Id. Accordingly, the district court ruled in favor of plaintiffs, id. GEICO appealed – “arguing that the undisputed fact that the adjusters exercise ‘some discretion’ means that they are exempt from overtime pay as administrative employees under the FLSA” – and the District of Columbia Circuit reversed. Id.

The Circuit Court explained that a GEICO damage adjuster, on average, “handles more than 1,000 claims per year, totaling over $2.5 million.” Robinson-Smith, at 888. We do not here summarize the detail outlined in the court’s opinion concerning the job responsibilities of damage adjusters. Briefly, we note that while GEICO’s damage adjusters utilize software to assist them in estimating repair costs, they are also responsible for determining when to declare a vehicle a total loss. Id., at 888-89. Additionally, the adjuster “makes decisions that are not dictated by the software…, such as interviewing insureds about pre-existing damage, determining whether damage was caused by a covered event and recommending that payment be withheld on a claim if the damage did not result from a covered loss.” Id., at 889. Further, total loss determinations may account for 20-30% of an adjuster’s workload, and “can involve thousands of dollars in additional liability for GEICO.” Id. In fact, about 30% of the total loss claims involve further negotiation between the adjuster and the insured, and “the adjuster generally has full authority to settle a claim within his limits ($10,000 for a Level I adjuster or $15,000 for a Level II adjuster) if he can justify his decision within GEICO guidelines and based on his experience.” Id.

Continue reading "FLSA Class Action Defense Cases–Robinson-Smith v. GEICO: D.C. Circuit Court Holds GEICO Properly Classified Auto Damage Adjusters As Exempt From Overtime Pay Under FLSA" »

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

District Court Erred in Compelling Arbitration on Individual Basis of Class Action Claims because Texas Choice of Law Provision was Unenforceable and Class Action Waiver in Mandatory Arbitration Clause was Unenforceable under California law Ninth Circuit Holds

Plaintiffs filed a putative class action against Dell alleging product liability claims involving laptop computers; specifically, the class action complaint asserted various California state law claims “predicated on the allegation that Dell designed, manufactured, and sold defective notebook computers.” Omstead v. Dell, Inc., ___ F.3d ___ (9th Cir. February 5, 2010) [Slip Opn., at 2101, 2104-05]. According to the allegations underlying the class action complaint, plaintiffs had purchased notebook computers through Dell’s website, id., at 2105. As part of those purchases, “plaintiffs were required to accept a written agreement titled ‘U.S. Terms and Conditions of Sale’” (the “Agreement”). Id. In pertinent part, the Agreement stated that Texas law governed any dispute among the parties, and that any dispute between the customer and Dell “shall be resolved exclusively and finally by binding arbitration” and that the parties waived any right “to join or consolidate claims by or against other customers, or arbitrate any claim as a representative or class action,” id., at 2105-06. Defense attorneys moved to stay the class action and to compel arbitration of the plaintiffs’ individual claims based on an arbitration clause (which contained the class action waiver) in the Agreement. Id., at 2105, 2106. The district court granted the defense motion, id., at 2106. Plaintiffs, however, refused to comply with the arbitration order, so the district court dismissed the lawsuit based on plaintiffs’ failure to prosecute. Id., at 2105, 2106. Plaintiffs appealed the dismissal and the district court’s order compelling arbitration. Id., at 2105. The Ninth Circuit reversed.

Reviewing the district court order for an abuse of discretion, the Ninth Circuit first held that plaintiffs’ action should not have been dismissed for failure to prosecute the lawsuit. See Omstead, at 2107 et seq. Plaintiffs did not cause unreasonable delay of the lower court proceedings, id., at 2107-08, and they advised Dell and the district court of their interest in prosecuting the lawsuit as a class action and of their belief that the order compelling arbitration “was fatal to their action” and therefore requested “the district court to enter an order that would permit appellate review of the arbitration issue,” id., at 2108. In essence, the Circuit Court agreed with plaintiffs that the arbitration order placed them in an untenable position – prosecute the claims individually (which plaintiffs insisted that they lacked the financial means to do), or permit the court to dismiss the lawsuit and then pursue an appeal. Id., at 2108-09. The Ninth Circuit therefore exercised its discretion to treat the district court’s order of dismissal under Rule 41(b) as a voluntary dismissal with prejudice under Rule 41(a)(2), and turned to the merits of whether the class action claims should have been ordered to arbitration. Id., at 2109.

Continue reading "Class Action Defense Arbitration Cases–Omstead v. Dell: Ninth Circuit Court Reinstates Class Action Complaint And Reverses District Court Order Compelling Arbitration Of Class Action Claims On Individual Basis" »

Posted In: Arbitration, Class Action Court Decisions

District Court Properly Granted Summary Judgment in Favor of Defense in Class Action Arising from Mexican Airline Collection of Tourism Tax from Exempt Individuals because Airline Deregulation Act Preempted Class Action Claims Ninth Circuit Holds

Plaintiff filed a putative class action in California state court against Mexican airline Aerovias De Mexico alleging state law claims for breach of contract, breach of implied covenant and unjust enrichment claims; specifically, the class action complaint challenged a tourism tax collected by the airline for the Mexican government on the grounds that plaintiff was exempt from the tax. Sanchez v. Aerovias De Mexico, S.A. De C.V., 590 F.3d 1027, 1028 (9th Cir. 2010). According to the allegations underlying the class action, “Mexico levies a tourism tax [of approximately $22 per person]…on airline passengers traveling into Mexico on international flights.” Id. Individuals who are citizens or residents of Mexico are exempt from the tax, as are “diplomats, children under the age of two, and those staying in Mexico for less than twenty-four hours,” id. The class action alleged that plaintiff was exempt from the tax because even though she is “a citizen and resident of California,” she holds dual citizenship and is also a citizen of Mexico. Id. Plaintiff alleged that the airline “breached contractual obligations by improperly collecting the tax, and by failing to disclose that the tourism tax was not due from exempt passengers and that exempt passengers are entitled to a refund”; the class action complaint does not allege that plaintiff advised the airline that she was a Mexican citizen or that she requested a refund of the tax. Id. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), and then moved for summary judgment on the grounds that class action’s claims were preempted by the Airline Deregulation Act of 1978 (ADA). Id. The district court agreed, concluding that the allegations underlying the class action “relate[d] to the airline’s ‘price[s], route[s], or service[s],’” within the meaning of the statute, and that “Aeromexico had no contractual obligation to advise passengers about the tax or their right to a refund.” Id. In ruling on the motion, the district did not address plaintiff’s request under Rule 56(f) for a continuance in order to conduct discovery. Id., at 1028-29. Plaintiff appealed, and the Ninth Circuit affirmed.

The Circuit Court explained, [Plaintiff’s] principal argument is that no federal law preempts her state law claims based on breach of contract.” Sanchez, at 1029. Plaintiff’s theory is that “by purchasing a ticket, she and Aeromexico entered into a contract whereby Aeromexico became obliged not to collect a tax that was not due from exempt passengers.” Id. According to plaintiff, the ADA preemption clause does not “prevent the states from enforcing contracts between airlines and their passengers,” and that the tax is not part of the “price, route, or service of an air carrier” within the meaning of the statute because it is “a fee separate and apart from the fare for air transportation that has no economic effect on ‘price.’” Id. The Ninth Circuit disagreed, holding that “a state law or enforcement action is ‘related to’ a ‘price, route, or service’ if it ‘as a connection with or reference to’ a ‘price, route, or service,’” id., at 1030 (citation omitted). Plaintiff’s claim was preempted because “[t]he ticketed price included the tourism tax and other fees and surcharges.” Id. The Ninth Circuit then noted at page 1030, “The real question here is whether Aeromexico made a contractual commitment to advise passengers about the Mexico tourism tax, not to collect it from exempt passengers, and to refund that portion of the price attributable to the tax.” The Court found no evidence that defendant assumed such an obligation, id., at 1030-31. Accordingly, it affirmed the judgment of the district court. Id., at 1031.

Continue reading "Class Action Defense Cases–Sanchez v. Aerovias De Mexico: Ninth Circuit Court Affirms Dismissal Of Class Action Complaint Holding Class Action Claims Preempted By Airline Deregulation Act" »

Posted In: Class Action Court Decisions

Judicial Panel Grants Defendant’s Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. — 1407, Over Objection of Plaintiffs in All Four Affected Class Actions, and Transfers Class Actions to Northern District of Illinois for Pretrial Purposes

Four class actions –one each in the Northern and Central Districts of California, the Northern District of Illinois and the Eastern District of Michigan – were filed against KFC Corp. and Yum! Brands. In re Kentucky Grilled Chicken Coupon Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 4, 2009) [Slip Opn., at 1]. According to the allegations under the class actions, “one or both defendants reneged on a promotion for a new product line of grilled chicken at KFC establishments.” Id. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of Illinois. Id. Plaintiffs in each of the class actions opposed centralization but urged, if the Judicial Panel granted the motion, that the class action lawsuits be coordinated in the Central District of California. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, rejecting plaintiffs’ argument that “alternatives to centralization, including informal coordination of discovery, are preferable, given that there are only four constituent actions and the issues are relatively straightforward.” Id. On the contrary, the Judicial Panel found that the class actions involved common fact questions and that centralization “will serve the convenience of the parties and witnesses and promote the just and efficient conduct of the litigation” in that it “will eliminate duplicative discovery, prevent inconsistent pretrial rulings (including with respect to class certification), and conserve the resources of the parties, their counsel and the judiciary.” Id. The Panel also concluded that the Northern District of Illinois was the appropriate transferee court as the first-filed class action was brought there and the Chief Judge presiding over that class action “has the time and experience to steer the litigation on a prudent course.” Id. Accordingly, the Panel transferred all class actions pending outside of Illinois to that district. Id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Complaint Alleging TILA Violations for Failing to Disclose “Key Terms” Associated with Negative Amortization/Option ARM Loan Satisfied Rule 23 Requirements for Class Action Certification California Federal Court Holds

Plaintiff filed a class action against U.S. Financial Funds, with whom she had refinanced her home loan, alleging violations of the federal Truth in Lending Act (TILA) and asserting various California statutory and common law claims; specifically, the class action complaint challenged disclosures made by defendant “in connection with the terms of a residential mortgage product that was sold to Plaintiff.” Lymburner v. U.S. Financial Funds, Inc., ___ F.3d ___ (N.D.Cal. January 22, 2010) [Slip Opn., at __]. According to the allegations underlying the class action complaint, plaintiff refinanced her home loan in 2006, obtaining an Option ARM loan. Id., at 1-2. The initial payments due on the loan reflected a “substantially discounted initial interest rate,” and while the interest rate could adjust monthly, the minimum monthly payment was fixed for five years. Id., at 2. U.S. Financial served as plaintiff’s mortgage broker and originated the loan, id. The loan documents disclosed the maximum interest rate that would be charged, as well as the maximum “unpaid principal that might result from negative amortization.” Id. The class action complaint alleged that just before her retirement in October 2006, defendant contacted her and advised that it could reduce her monthly mortgage payment to $700; plaintiff agreed to the loan without realizing that the principal amount owing on the loan could increase. Id. (The loan documents inflated plaintiff’s income; she initialed this page of the loan application and asserted that “the higher numbers did not strike her as being incorrect.” Id.) When plaintiff received her first bill and discovered the 9% interest rate and negative amortization, she tried to refinance the loan and made two mortgage payments before successfully refinancing her loan in April 2007. Id., at 2-3. The class action alleged that the failure to disclose “the key terms of the loan” violated TILA and constituted fraud under California’s Unfair Competition Law (UCL). Id., at 3. Plaintiff’s counsel moved to certify the litigation as a class action. Id., at 1, 3. The district court initially indicated that it planned to grant class action treatment, but ordered the parties to meet and confer concerning the proposed definition of the class because the court believed it to be inadequate. Id., at 1. Based on a joint letter proposing a new definition of the class, the federal court granted the motion for class action certification. Id.

The district court began by analyzing the adequacy of the proposed definition of the class, which focused on whether the loan documents disclosed that the interest rate “may” change (instead of “will” change), and that negative amortization “may” result (instead of “will” result). See Lymburner, at 4-5. The court held that the proposed class is ascertainable, particularly given that defendant used only one set of loan documents. Id., at 5. The federal court concluded at page 5 that “class membership can be ascertained by looking at the documents, particularly in light of the joint revised class definition.” The numerosity test in Rule 23(a)(1) for class action certification was met because the class contained at least 100 members, id., at 5. The district court also rejected defense challenges to the commonalty test in Rule 23(a)(2) because plaintiff’s class action was not premised on any representations made to her orally but, rather, on the disclosures contained in the written loan documents. Id., at 5-6. And the court rejected defendant’s claim that plaintiff’s claims were not “typical” as required by Rule 23(a)(3) because of differences in the remedies available to class members. Id., at 6-7. “Plaintiff’s claims are based on loans issued by Defendant allegedly without proper disclosures.” Id., at 7. Further, there was no evidence that defendant treated plaintiff differently or that her loan documents were materially different from those of other class members. Id. Accordingly, the typicality requirement was satisfied. Id. Finally, the court held that plaintiff satisfied the adequacy of representation test of Rule 23(a)(4). See id., at 7-8.

Continue reading "TILA Class Action Defense Cases–Lymburner v. U.S. Financial: California Federal Court Grants Class Action Treatment To TILA/UCL Class Action Complaint Holding Requirements Of Rule 23 Satisfied" »

Posted In: Class Action Fairness Act (CAFA), Class Action Court Decisions, RESPA/TILA Class Actions

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

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

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

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

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

Class Action Claim that Chase Breached Home Equity Line of Credit (HELOC) Agreement by Freezing Account based on Estimated Property Value Established by “Automated Valuation Model” Survived Defense Motion to Dismiss, as did Class Action Claim for Unjust Enrichment based on Chase Charging Customer an Annual Fee for a HELOC that the Customer could no longer Draw Against California Federal Court Holds

Plaintiff filed a putative class action against Chase Manhattan Bank, with whom she had a home equity line of credit (HELOC), alleging breach of contract and unjust enrichment. Yakas v. Chase Manhattan Bank, U.S.A., N.A., ___ F.Supp.2d ___ (N.D.Cal. January 25, 2010) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, plaintiff obtained the HELOC from Chase in April 2004; at that time, plaintiff’s property appraised for $718,000, and she obtained a $71,750 line of credit. Id., at 2. The agreement allowed Chase to reduce or freeze the line of credit if “[t]he value of the Property declines significantly below its original appraised value for purposes of this Credit Account,” the agreement failed to define “significantly” or to describe the manner in which subsequent property valuations would be made. Id. The agreement further required plaintiff to pay a “non-refundable annual fee” during the “Draw Period,” but failed to define the “Draw Period” and the parties disputed the meaning of the term. Id. In any event, plaintiff paid the annual fee each April through 2008, id. Finally, the Agreement provided that Delaware would govern any disputes between the parties, id., at 4. Chase froze plaintiff’s HELOC in December 2008, “stating that the valuation of plaintiff’s property no longer supported her line of credit.” Id., at 3. Chase based this determination on its use of an “Automated Valuation Model” (AVM), which estimated that the value of the Property had dropped to $674,000; in the district court’s words, “How the AVM model worked is a mystery on the present record.” Id. The following April, Chase again charged plaintiff an annual fee. Id. The thrust of plaintiff’s class action was that (1) Chase was required to obtain a valuation from a licensed appraiser in order to reduce or freeze HELOC agreements, rather than using the AVM, and (2) the AVM was unreliable. Id., at 3-4. Defense attorneys moved to dismiss the class action complaint. Id., at 1. The district court denied the motion.

The district court began with the class action’s breach of contract claim. See Yakas, at 5. The class action complaint alleged that Chase violated the terms of the HELOC agreement in three ways. First, by “fail[ing] to obtain an appraisal by a licensed appraiser prior to suspending her line of credit,” as required by the “court of dealing” among the parties. Id. Defense attorneys countered that Chase “was not limited to any specific valuation method and that using an AVM was not a breach of the agreement.” Id., at 5-6. The district court held that the class action claim survived, explaining at page 6: “Though defendant’s arguments are plausible, they do not prove that plaintiff has failed to state a breach-of-contract claim. It may well be that a licensed appraiser was not required (without so holding), but that does not translate to an allowance of an AVM, much less a mystery AVM whose particulars are totally a secret.” Second, plaintiff alleged that the AVM was unreliable. Id., at 6. Again, at the pleading stage, the district court found plaintiff’s allegations sufficient to survive defendant’s motion to dismiss, id., at 6-7. And third, that Chase should have prorated her 2008 annual fee once it suspended her account, and should not have billed another annual fee in April 2009 because she could no longer “draw” on her account. Id., at 7. Defendant countered that plaintiff’s argument was premised on a drafting error in the document, id., at 8. The federal court held that the defense arguments were “better suited for a motion for summary judgment or trial — not a motion to dismiss,” and that for pleading purposes the class action “alleged sufficient facts with regards to the annual fee to make her claim plausible.” Id.

Continue reading "HELOC Class Action Defense Cases–Yakas v. Chase: California Federal Court Denies Defense Motion To Dismiss Class Action Holding Class Action Complaint Adequately Alleged Breach Of Contract And Unjust Enrichment" »

Posted In: Class Action Court Decisions

Class Action Challenging Secret Revenue-Sharing Payments in Purchase of Mutual Funds Fell Within Scope of “Covered Class Actions” under SLUSA (Securities Litigation Uniform Standards Act of 1998) and was Properly Dismissed because State-Actions Exception did not Apply Sixth Circuit Holds

Plaintiff filed a putative class action against various Nationwide Life Insurance entities on behalf of employee-participants in his employer’s “deferred compensation plan” alleging breach of fiduciary duty and unjust enrichment; the class action complaint alleged that Nationwide received “revenue-sharing payments from the mutual funds in which the § 457 plan invested its participants' individual funds” and that “Nationwide implemented a scheme under which it would receive revenue-sharing payments from mutual funds and mutual fund advisors based upon a percentage of assets invested from the § 457 plans into the mutual funds.” Demings v. Nationwide Life Ins. Co., ___ F.3d ___, 2010 WL 364335, *1 (6th Cir. February 3, 2010). According to the allegations underlying the class action complaint, in selecting which mutual funds to use in the § 457 plans, Nationwide would not include a mutual fund in the plan unless it agreed to participate in this revenue-sharing scheme. Id. The thrust of plaintiff’s class action “was that plan participants, not Nationwide, were entitled to any revenue-sharing payments because such profits were directly derived from the assets of plan participants.” Id. Defense attorneys moved to dismiss the class action complaint on the ground that it was barred by the Securities Litigation Uniform Standards Act of 1998 (SLUSA), which prohibits certain “covered class action” lawsuits. Id., at *1-*2. Plaintiff admitted that his lawsuit was a “covered class action” within the meaning of SLUSA, but argued that it did not allege “fraud” or “deception in connection with the purchase or sale of any security,” id., at *2. The district court disagreed, finding that “although [plaintiff] did not specifically use the words ‘untrue statement’ or ‘omission’ in his complaint, the substance of his claim was that Nationwide misrepresented a relationship with mutual fund advisors or, at a minimum, failed to disclose material facts about the relationship.” Id. Accordingly, the district court dismissed the class action, id. The Sixth Circuit affirmed.

The Circuit Court began by observing that plaintiff’s theory on appeal differed from his theory in the district court: “[Plaintiff] Demings does not now dispute that his proposed class-action suit was a covered state-law class action that would generally be precluded under SLUSA's terms. Instead, he argues that his suit fits within the ‘state actions’ exception to SLUSA preclusion.” Demings, at *1 (citation omitted). This is the only argument plaintiff raised on appeal, and it formed the foundation of plaintiff’s claim that the district court therefore erred in denying him leave to amend his class action complaint. Id., at *3. The Sixth Circuit explained SLUSA’s state-actions exception does not “preclude a State or political subdivision thereof or a State pension plan from bringing an action involving a covered security on its own behalf, or as a member of a class comprised solely of other States, political subdivisions, or State pension plans that are named plaintiffs, and that have authorized participation, in such action.” Id., at *4 (citation omitted). The Circuit Court held that this exception did not apply for two reasons. First, even though plaintiff is a sheriff, he is not “a state, political subdivision thereof, or a state pension plan bringing a suit on its own behalf.” See id., at *4-*5. Second, the class action was not “brought on behalf of a class comprised solely of other states, political subdivisions, or state pension plans that were named plaintiffs, and that had authorized participation, in such action.” See id., at *5-*8. In this regard, the Sixth Circuit held that the language of SLUSA requires that the State “authorize” its participation at the time the class action was filed, id., at *8. Accordingly, the state-actions exception did not apply, and the district court properly concluded that the class action was barred by SLUSA. Id. Accordingly, the Circuit Court affirmed the judgment of the district court, id.

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

Putative Class Action Against American Airlines Asserting Claims under Montreal Convention based on Flight Delays caused by Weather Dismissed without Leave to Amend because Two Year Limitations Period Expired Texas Federal Court Holds

On December 17, 2009, plaintiff filed a putative class action against American Airlines for alleged violations of the Convention for the Unification of Certain Rules for International Carriage by Air (“Montreal Convention”), which “provides for compensation to consumers in international air carriage by air for delay of passengers or their baggage or cargo as well as personal injury and death”; specifically, the class action complaint alleged that on December 29, 2006, plaintiff and approximately 2,000 to 33,000 other class members, all airline passengers, “were delayed over 3 hours” and that some of the class members, including plaintiff, were “confined to AA aircraft on the ground for extended periods of time and affected by related actions of AA.” Dickson v. American Airlines, Inc., ___ F.Supp.2d ___ (N.D.Tex. January 28, 2010) [Slip Opn., at 1-2]. According to the allegations underlying the class action, plaintiff, along with his wife and child, “suffered inconveniences and damages at the hands of defendant when they were passengers on an airplane operated by defendant in late December 2006 as part of their trip from San Francisco to the country of Belize when, due to weather conditions, their flight was diverted from Dallas/Fort Worth International Airport to Austin, Texas.” Id., at 2. The class action complaint further alleged that adverse weather conditions caused plaintiff and his family to be “confined in the aircraft for over eight hours,” and that more than 2,000 other AA passengers on 120 other flights were also confined to aircrafts that day, while as many as 33,000 on 1100 other AA flights suffered delays of at least 3 hours.” Id., at 2-3. Because of the 2 year statute of limitations on Montreal Convention claims, the class action alleged that the limitations period was tolled by the filing of other class actions against defendant, id., at 3-4. Defense attorneys moved to dismiss the class action on the grounds, inter alia, that the statute of limitations period had expired and was not tolled, and that the Montreal Convention does not provide for recovery of damages based on "inconvenience, emotional and physical distress and injury, deprivation of liberty" based on flight delays. Id., at 4. The district court granted defendant’s motion and dismissed the putative class action complaint without leave to amend.

The district court first considered the statute of limitations argument, and found that the limitations period had not been tolled. See Dickson, at 6-16. We do not discuss the Montreal Convention in detail; suffice it to say that the federal court concluded that “by the express language of the Convention” a lawsuit must be filed within 2 years; thus, “The time element expressed in the Convention is not a limitation provision but is a part of the definition of the right to recover damages based on the provisions of the Convention.” Id., at 9 (citations omitted). Based on this holding, the federal court found it unnecessary to address defendant’s other arguments. However, the district court did address plaintiff’s request for leave to amend. The court denied leave to amend under Rule 15(a)(2) of the Federal Rules of Civil Procedure, concluding that “[t]he court cannot think of anything worthwhile that would be gained by giving plaintiff an opportunity to file an amended complaint, and declines to do so.” Id., at 18. Accordingly, the district court dismissed the putative class action complaint. Id.

Posted In: Class Action Court Decisions

District Court Properly Dismissed Securities Fraud Class Action because, though Plaintiffs Adequately Alleged Falsity (Contrary to District Court Finding), Class Action Failed to Meet Pleading Requirements of Private Securities Litigation Reform Act (PSLRA) for Scienter Eleventh Circuit Holds

Plaintiffs-shareholders filed a putative class action against Jabil Circuit – “a publicly traded electronics and technology company headquartered in St. Petersburg, Florida” – and certain of its officers and directors alleging violations of securities laws. Edward J. Goodman Life Income Trust v. Jabil Circuit, Inc., ___ F.3d ___, 2010 WL 154519, *1 (11th Cir. January 18, 2010). According to the allegations underlying the class action complaint, Jabil violated its corporate policy of requiring stock options to be exercised at a price “at least equal to fair market value” by backdating options “to a day where the trading price was lower than that on the actual date it is issued, resulting in an instant paper gain to the issuee.” Id. The allegations of backdating in the class action complaint “rely almost exclusively on circumstantial evidence…to show that stock option grants to executives were backdated”; the complaint failed to “identify any particular transaction or scheme of backdating or specific recipients of such a scheme.” Id. The Securities and Exchange Commission had conducted an informal investigation into Jabil’s stock option practices; moreover, Jabil itself reviewed its stock option practices and concluded that an accounting error “resulted in an overstatement of earnings by $54.3 million [from 1996 to 2005], forcing Jabil to restate its earnings for each of those years.” Id., at *2. However, Jabil denied purposely backdating stock options to directors and $49 million of the restated amount was attributable to non-executive employee compensation expenses. Id. Defense attorneys moved to dismiss the class action complaint on the grounds that it failed to meet the heightened pleading requirements established by the Private Securities Litigation Reform Act (PSLRA). Id., at *1. The district court granted the motion and plaintiffs appealed, id. The Eleventh Circuit affirmed.

The Eleventh Circuit began its analysis with the observation that backdating options “is not itself illegal under the securities laws, nor is it improper under accounting principles.” Jabil, at *1. Allegations of improper backdating appeared in the Wall Street Journal, after which Jabil raised its third quarter projections for fiscal year 2006. Id., at *2. The class action complaint alleges that Jabil made this announcement “in order to divert attention from the allegations concerning backdating, and that Jabil knew that the factual bases for its improved forecasts were false even at the time it made the projections.” Id. But these allegations relied on confidential witnesses, and only one confidential source identified anyone as having “specific knowledge” of the allegations asserted therein. Id. The district court dismissed the first amended class action complaint without prejudice, but defense attorneys challenged the second amended class action complaint also for failure to meet the pleading requirements of the PSLRA. Id. “[T]he district court held that the shareholders failed to adequately plead falsity of the allegedly fraudulent statements, failed to raise a sufficient inference of scienter on the part of [plaintiffs], and failed to plead enough facts to show loss causation.” Id., at *3. The Eleventh Circuit began its analysis with the class action’s fraud claim under section 10(b) of the Securities Exchange Act and Rule 10b-5. Id. The Circuit Court did not address loss causation because it concurred with the lower court’s finding that the class action failed to adequately allege scienter. Id.

Continue reading "PSLRA Class Action Defense Cases–Carr v. Gateway: Eleventh Circuit Affirms Dismissal Of Securities Fraud Class Action For Failure To Adequately Allege Scienter Under PSLRA’s Heightened Pleading Requirements" »

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

In Class Action Against Sprint Challenging Wireless Telephone Roaming Charges, Whether District Court Erred in Granting Defense Motion to Compel Arbitration of Plaintiff’s Individual Claims Pursuant to Mandatory Arbitration Clause with Class Action Waiver Warranted Certification to Florida Supreme Court because of Uncertainty in Intermediate Appellate Court Opinions Eleventh Circuit Holds

Plaintiff filed a putative class action in Florida federal court against Sprint Solutions and Sprint Spectrum for violations of Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) and for breach of contract and negligent misrepresentation; specifically, the class action complaint alleged that Sprint “charg[ed] improper roaming fees for calls placed within Sprint's coverage areas.” Pendergast v. Sprint Nextel Corp., 592 F.3d 1119, 2010 WL 6745, *1, *11 (11th Cir. 2010). The class action complaint improper prayed for monetary damages, as well as declaratory and injunctive relief, and estimated plaintiff’s individual damages to be $20.00. Id. Defense attorneys moved to compel arbitration of plaintiff’s claims on an individual basis, seeking to enforce a mandatory arbitration clause and class action waiver in the Terms and Conditions of plaintiff’s service agreement. Id. The district court granted Sprint’s motion, concluding that under Florida law the arbitration clause and class action waiver were valid, and ordered plaintiff to pursue arbitration of his individual claim, id. Plaintiff appealed; he did not contest the arbitration clause itself but, rather, challenged the class action waiver as procedurally and substantively unconscionable. Id. Further, “because Plaintiff's contract provides the arbitration and class action waiver clauses are not severable, Plaintiff claims the arbitration clause fails because the class action waiver is unenforceable.” Id. The Eleventh Circuit expressed doubt as to the correct application of state law in this case because of a conflict among decisions in the Florida intermediate appellate courts. Accordingly, the Circuit Court, at page *22, certified the following questions to the Florida Supreme Court:

(1) Must Florida courts evaluate both procedural and substantive unconscionability simultaneously in a balancing or sliding scale approach, or may courts consider either procedural or substantive unconscionability independently and conclude their analysis if either one is lacking?

(2) Is the class action waiver provision in Plaintiff's contract with Sprint procedurally unconscionable under Florida law?

(3) Is the class action waiver provision in Plaintiff's contract with Sprint substantively unconscionable under Florida law?

(4) Is the class action waiver provision in Plaintiff's contract with Sprint void under Florida law for any other reason?

Continue reading "Class Action Defense Cases–Pendergast v. Sprint: Eleventh Circuit Certifies To Florida Supreme Court Questions Concerning Validity And Enforceability Of Class Action Waiver In Cellular Service Provider’s Mandatory Arbitration Clause" »

Posted In: Arbitration, Class Action Court Decisions

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

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

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

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

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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C.§ 1407 and Selects Movant’s Alternative Transferee Forum Over Competing Request of Other Common Class Action Defendant

Twelve (12) class actions – three in Ohio, two in the Central and Northern Districts of California and one in the Southern District of California, and one in Illinois, Louisiana, Minnesota and Missouri – were filed against Apple and AT&T “arising from the advertising and marketing of multimedia message service (MMS) functionality of Apple’s iPhone 3G and 3GS supported by AT&T’s 3G network.” In re Apple iPhone 3G & 3GS “MMS” Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 3, 2009) [Slip Opn., at 1, 2]. According to the allegations under the class actions, “Apple and AT&T have engaged in deceptive marketing with respect to the availability of MMS functionality on the iPhone 3G and 3GS.” Id., at 2. Defense attorneys for AT&T filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of Ohio or the Eastern District of Louisiana. Id., at 1. Plaintiffs in the class actions pending in the Northern and Southern Districts of California supported consolidation but argued for transfer to the Northern District of California. Id. Plaintiffs in the other nine class actions supported centralization in the Eastern District of Louisiana (though at oral argument one of the Ohio class action plaintiffs requested centralization in Ohio). Id. Common defendant Apple also supported centralization in Ohio, id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that this “will eliminate duplicative discovery; prevent inconsistent pretrial rulings, particularly with respect to class certification issues; and conserve the resources of the parties, their counsel and the judiciary.” Id., at 2. The Panel also determined that the Eastern District of Louisiana was the appropriate transferee court because “[m]ost plaintiffs and the moving defendant, in the alternative, support centralization in this district” and the assignment will be “to an experienced transferee judge who is not currently presiding over another multidistrict litigation docket.” Id. Accordingly, the Panel transferred all class actions pending outside of Pennsylvania to that district.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Complaint that was Non-Justiciable for Failure of Original Plaintiffs’ Claims was Properly Dismissed Following Addition of New Plaintiffs because Defense Tender of Full Payment Prior to Amendment Adding New Plaintiffs as Class Representatives Mooted their Claims Fifth Circuit Holds

Plaintiffs filed a putative class action against Fidelity National Financial and others “alleging that Ticor Title Insurance Company…had overcharged them to record documents related to their residential real estate closings and that the other Defendants were also liable under theories of vicarious liability.” Murray v. Fidelity Nat’l Financial, Inc., ___ F.3d ___, 2010 WL 143454, *1 (5th Cir. January 15, 2010). However, it turned out plaintiffs had not conducted business with Ticor Title but, rather, “had dealt with a third party that promoted itself as ‘Ticor Title of San Antonio,’ despite having no authority to act for any of the Defendants.” Id. Accordingly, plaintiffs moved the district court to amend their class action complaint to add two additional plaintiffs (the Murrays) as class representatives on the ground that the Murrays had conducted business with Defendant Chicago Title Insurance Group. Id. While that motion was pending, Chicago Title tendered the Murrays a check in full payment of their individual claim; the district court nonetheless granted plaintiffs’ motion and added the Murrays as named representatives for the putative class. Id. The new group of plaintiffs thereafter filed an amended class action complaint, id. Defense attorneys moved to dismiss the class action complaint on the ground that the Murrays’ claims had been rendered moot by Chicago Title’s tender; defendants moved also for summary judgment on the grounds that the original plaintiffs “failed to establish any case or controversy against any Defendant, because none of the Defendants handled Original Plaintiffs’ real estate transactions.” Id. The federal court granted the defense motions, id. The Murrays appealed the dismissal of their claims against Chicago Title, and the Fifth Circuit affirmed.

The Murrays argued that because Rule 15(a)(2) requires plaintiffs to inform defendants of the names of proposed class representatives, this “provides defendants the opportunity to ‘pick off’ would-be class representatives by tendering the amount claimed individually by the plaintiff, thereby effectively preventing the original plaintiffs from amending a complaint to add other plaintiffs who better represent the interests of the putative class.” Murray, at 1. Relying on its decision in Zeidman v. J. Ray McDermott & Co., 651 F.2d 1030 (5th Cir. 1981), the Circuit Court held that “As a general principle, a purported class action becomes moot when the personal claims of all named plaintiffs are satisfied and no class has been certified.” Murray, at 2 (citing Zeidman, at 1045). The Court observed at page *2, “In such a case there is no plaintiff (either named or unnamed) who can assert a justiciable claim against any defendant and consequently there is no longer a ‘case or controversy’ within the meaning of Article III of the Constitution.” Id. (citations omitted). And while the Fifth Circuit has “recognized a limited exception to this general principle” where a plaintiff’s claims have been “prematurely mooted” by the defendant. Id. (citations omitted). More specifically, the Circuit Court explained at page *2:

Foreshadowing the concerns raised by the Murrays, the [Zeidman] court noted “that in those cases in which it is financially feasible to pay off successive named plaintiffs, the defendants would have the option to preclude a viable class action from ever reaching the certification stage.” [Citation.] The court ultimately held “that a suit brought as a class action should not be dismissed for mootness upon tender to the named plaintiffs of their personal claims, at least when ... there is pending before the district court a timely filed and diligently pursued motion for class certification.” [Citation.]

Continue reading "Class Action Defense Cases–Murray v. Fidelity: Fifth Circuit Affirms Dismissal Of Class Action Complaint Holding Defense Tender Mooted New Plaintiffs’ Individual Claims" »

Posted In: Class Action Court Decisions

District Court Abused its Discretion in Denying OSC for Contempt against Absent Class Member who Filed Lawsuit against Party Released under Class Action Settlement because Class Member’s Individual Claims Fell Within Scope of Release in Class Action Settlement Agreement Eleventh Circuit Holds

In May 2003, a group of physicians filed a putative nationwide class action Blue Cross and Blue Shield Association, and its member plans, alleging conspiracy and aiding and abetting under the Racketeer Influenced and Corrupt Organizations Act (RICO); the class action complaint prayed for declaratory and injunctive relief, and sought monetary damages. Thomas v. Blue Cross & Blue Shield Ass'n, ___ F.3d ___, 2010 WL 174765, *1 (11th Cir. January 20, 2010). According to the allegations underlying the class action complaint, defendants had “engaged in a conspiracy to improperly deny, delay, and/or reduce payments to physicians, physician groups, and physician organizations by engaging in several types of allegedly improper conduct.” Id. The parties negotiated a class action settlement on behalf of a nationwide class, which eventually secured the approval of the district court. Id. The class action settlement required members of the class “release the Blue Cross plans from all claims arising out of or related to matters referenced in the class action and settlement agreement,” id., at *1-*2. Thus, as part of the class action settlement, “[t]he district court permanently enjoined the releasing parties from filing or prosecuting ‘any or all Released Claims against one or more Released Parties,’” and “expressly retained jurisdiction as to matters relating to the interpretation, administration, and consummation of the settlement agreement, and the enforcement of extant injunctions.” Id., at *2. In January 2008, plaintiff Dr. Robert Kolbusz, a physician at the Center for Dermatology and Skin Cancer, and the Center filed a lawsuit in Illinois against Health Care Service Corporation (the “Corporation”) for breach of contract, tortious interference with contractual relationships and prospective economic advantage, and defamation; in part, the Kolbusz complaint “alleged that the Corporation had made false statements to his patients regarding its reasons for refusing to pay for medical services that he had rendered.” Id. Under the class action settlement, Kolbusz is a releasing party and the Corporation is a released party; however, while Kolbusz was a member of the class, he failed to timely object to or opt out of the class action settlement. Id. The Corporation filed a motion with the district court alleging that the Kolbusz complaint violated the permanent injunction and sought an OSC for contempt against Kolbusz. Id., at *3. The district court concluded that the tortious interference and defamation claims were not barred by the class action settlement, but found that the breach of contract fell within the scope of the class action release and ordered Kolbusz to drop the claim within 20 days to avoid being held in contempt. Id. Both parties appealed. The Eleventh Circuit dismissed Kolbusz’s appeal for lack of jurisdiction “because the decision to afford Kolbusz 20 days to withdraw his claim of breach of contract is not a final or otherwise appealable order,” and reversed the district court’s determination that Kolbusz’s tort claims were not barred by the class action settlement. Id., at *1.

Continue reading "Class Action Defense Cases–Thomas v. Blue Cross: Eleventh Circuit Reverses Denial Of OSC For Contempt Against Absent Class Member Seeking To Prosecute Individual Claims Released As Part Of Class Action Settlement" »

Posted In: Class Action Court Decisions

District Court Erred in Dismissing Antitrust Class Action because Allegations in Class Action Complaint were Sufficient to “Plausibly Suggest” an Agreement Among Defendants in Violation of Sherman Act Second Circuit Holds

Several class actions were filed in various state and federal courts against numerous defendants, including Sony BMG Music Entertainment, EMI, Universal Music Group Recordings, Warner Music Group and others, alleging violations of Section 1 of the Sherman Act; specifically, the class action complaint alleged “a conspiracy by major record labels to fix the prices and terms under which [Digital Music] would be sold over the Internet.” Starr v. Sony BMG Music Entertainment, ___ F.3d ___ (2d Cir. January 13, 2010) [Slip Opn., at 2-3.] Ultimately, the Judicial Panel on Multidistrict Litigation centralized 28 class actions in the Southern District of New York, and plaintiffs eventually filed a Second Consolidated Amended Complaint that “brought claims under Section 1 of the Sherman Act and state antitrust and unfair and deceptive trade practices statutes. It also brought state common law claims for unjust enrichment.” Id., at 6-7. According to the allegations underlying the class action complaint, “Defendants produce, license and distribute music sold as digital files (‘Digital Music’) online via the Internet (‘Internet Music’) and on compact discs (‘CDs’),” and they together “control over 80% of Digital Music sold to end purchasers in the United States.” Id., at 3. Certain named defendants launched a service called “MusicNet”; others launched a service called “Duet” that was later renamed as “pressplay.” Id. The class action complaint alleged that “defendants signed distribution agreements with MusicNet or pressplay and sold music directly to consumers over the Internet through these ventures (the ‘joint ventures’),” and that “[b]oth the joint ventures and the Recording Industry Association of America (‘RIAA’) provided a forum and means through which defendants could communicate about pricing, terms, and use restrictions.” Id. Moreover, “[t]o obtain Internet Music from all major record labels, a consumer initially would have had to subscribe to both MusicNet and pressplay, at a cost of approximately $240 per year,” and “[b]oth services required consumers to agree to unpopular Digital Rights Management terms (‘DRMs’).” Id. Defense attorneys moved to dismiss the class action complaint for failure to meet the pleading requirements enunciated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Starr, at 3, 7. The district court granted the motion, id., at 7. The Second Circuit reversed, concluding that the non-conclusory allegations in the class action complaint were adequate to survive the defense motion to dismiss. Id., at 2.

The Circuit Court summarized the basis of the class action’s claims at page 4 as follows: “For example, pressplay prohibited consumers from copying more than two songs from any particular artist onto a CD each month. Music purchased from MusicNet and pressplay would often ‘expire’ unless repurchased: A MusicNet consumer would need to repurchase music each year and a pressplay consumer who unsubscribed would immediately lose access to all of the music he or she had purchased. MusicNet and pressplay also did not allow consumers to transfer songs from their computers to portable digital music players like the iPod. One industry commentator observed that MusicNet and pressplay did not offer reasonable prices, and one prominent computer industry magazine concluded that ‘nobody in their right mind will want to use’ these services. [Citation.]” The class action complaint also alleged that “dramatic cost reductions” realized by the individual defendants were not passed on to consumers “as would be expected in a competitive market.” Starr, at 4. Moreover, defendants allegedly entered into “Most Favored Nation clauses (‘MFNs’) in their licenses that had the effect of guaranteeing that the licensor who signed the clause received terms no less favorable than the terms offered to other licensors.” Id., at 5. Defendants allegedly hid these agreements “because they knew they would attract antitrust scrutiny.” Id. At bottom, the class action alleged “that defendants engaged in a continuing conspiracy to ‘restrain the availability and distribution of Internet Music, fix and maintain at artificially high and non-competitive levels the prices at which they sold Internet Music and impose unreasonably restrictive terms in the purchase and use of Internet Music’” and that plaintiffs “were injured by paying more for Internet Music and CDs than they would have in the absence of an illegal agreement.” Id., at 6.

Continue reading "Class Action Defense Cases–Starr v. Sony BMG: Second Circuit Reverses Dismissal Of Antitrust Class Action Holding Class Action Complaint’s Allegations Satisfied Twombly" »

Posted In: 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 Violations of California’s Unfair Competition Law (UCL) Properly Dismissed because Plaintiff Lacked Standing to Prosecute Class Action Claim California Appellate Court Holds

Plaintiff, the owner and operator of an auto body repair shop, filed a putative class action on behalf of California auto body repair shops against automobile insurers Allstate Insurance and Progressive Casualty Insurance California auto body repair shops for violations of California’s Unfair Competition Law (UCL) and the Cartwright Act, and for unjust enrichment, on the ground that the insurers paid class members “based on rates that were allegedly below their ‘actual repair rate.’” Webster v. Allstate Ins. Co., Case No. B211390 (Cal.App. January 11, 2010) [Slip Opn., at 1-2.] According to the allegations underlying the class action complaint, the insurers “unlawfully and unfairly steer customers away from plaintiff's business and towards direct repair providers (DRPs) who have a contractual relationship with defendants.” Id., at 2. The class action further alleged that defendants paid class members “‘artificially low’ rates for auto body work,” based on “unlawful and unfair surveys of body shop rates that include rates charged by DRPs who provide volume discounts to defendants.” Id. Defense attorneys moved to dismiss the class action complaint; the trial court granted the motion, holding that plaintiff lacked standing to pursue the class action’s UCL claim for injunctive relief. Id. Plaintiff appealed. The Court of Appeal, in an unpublished opinion, affirmed that plaintiff lacked standing to prosecute the UCL claim and held that “plaintiff failed to allege unlawful or unfair conduct within the meaning of the statute.” Id. It further affirmed the dismissal of the class action’s unjust enrichment and Cartwright Act claims and, accordingly, affirmed.

The Court of Appeal explained that the class action sought “an injunction prohibiting defendants from using negotiated rates in their surveys to determine the prevailing auto body rate in a geographic area, treble damages for violations of the Cartwright Act, attorney fees, interest and costs,” and prayed additionally for “disgorgement of all benefits wrongfully taken from plaintiff and the class in an amount that defendants have been unjustly enriched.” Webster, at 4. Plaintiff conceded, however, that he could recover restitution under the class action’s UCL claim, id. “The purpose of the UCL is to protect consumers and competitors from unfair competition in commercial markets for goods and services.” Id., at 4-5 (citation omitted). Plaintiff is neither a consumer nor a competitor of defendants, but argued “he has standing to pursue a UCL cause of action even though he is not eligible for restitution,” and that defendants “engaged in both unlawful and unfair business practices.” Id., at 5. The appellate court rejected both claims.

Continue reading "UCL Class Action Defense Cases–Webster v. Allstate: California Appellate Court Affirms Dismissal Of UCL Class Action Complaint Holding Plaintiff Lacked Standing And Conduct Not Violative Of UCL" »

Posted In: Class Action Court Decisions

Repeated Failure of Mass Action Plaintiffs to Respond to Discovery Questionnaires from Defense Attorneys Warranted Dismissal of those Plaintiffs with Prejudice District of Columbia Federal Court Holds

Plaintiffs, “citizens and domiciliaries of Ecuador,” filed a mass action complaint against various defendants “alleging physical harm and property damage stemming from the defendants’ contract with the United States government to spray pesticides in order to eradicate Colombian cocaine and heroin farms.” Arias v. DynCorp Aerospace Operations, LLC, ___ F.Supp.2d ___ (D.D.C. January 12, 2010) [Slip Opn., at 1.] Defense attorneys served questionnaires on the class members, seeking specific information related to the claims; some individuals failed to respond at all. Other plaintiffs, however, provided incomplete responses and repeatedly failed to do so. The parties jointly moved to dismiss from the litigation 425 plaintiffs who fell within two categories: “(1) plaintiffs who have provided sufficient information about the alleged date(s) of their exposure to the defendants’ spray but who did not disclose sufficient information about their location at the time of their exposure; and (2) plaintiffs who did not provide sufficient information about their alleged damages.” Id., at 1-2. Plaintiffs’ counsel argued that the dismissal should be without prejudice; defense attorneys urged the district court to dismiss the plaintiffs’ claims with prejudice. Id., at 1, 2. The district court granted the motion and dismissed the plaintiffs with prejudice.

Defense attorneys argued that the plaintiffs falling within the two groups at issue should be dismissed with prejudice because they “have been ‘given several chances to provide the information ordered by the Court but [have] failed to do so.’” Arias, at 2. Plaintiffs’ counsel disagreed, arguing that the plaintiffs “provided sufficient information regarding either exposure location or damages.” Id., at 2-3. After summarizing the rules governing dismissals under Federal Rules of Civil Procedure 37 and 41, see id., at 3-4, the district court summarized the history of the discovery requests and the various court orders violated by plaintiffs, see id., at 4-5. The federal court explained at page 5, “It has been over two years since the plaintiffs were first directed to complete the defendants’ questionnaires. Multiple orders have directed the plaintiffs to respond in full to the questionnaires, and the plaintiffs received three extensions of time in which to do so.” Plaintiffs’ counsel argued that the information provided, while incomplete, was adequate to allow defendants to “draw their own conclusions” as to the plaintiffs’ claims. Id., at 6. The district court disagreed: “The plaintiffs essentially are asking the defendants to draw conclusions based on incomplete information. If a plaintiff meant “my farm” rather than “the farm,” that plaintiff simply should have stated so in his questionnaire. Despite the plaintiffs’ ample opportunity to fill in the information gaps, they now turn to the defendants to do this work for them. This, however, is not the defendants’ duty.” Id.

Continue reading "Class Action Defense Cases–Arias v. DynCorp: District of Columbia Federal Court Dismisses With Prejudice Mass Action Plaintiffs Who Failed To Complete Defense Discovery Questionnaires" »

Posted In: Class Action Court Decisions

Class Action Settlement Approved by Trial Court Warranted Reversal because Notice to Absent Class Members was not Best Practicable under the Circumstances Ohio Appellate Court Holds

In August 2004, plaintiff filed a putative class action in Ohio state court against Carfax and Center for Auto Safety alleging violations of Ohio’s Consumer Sales Practices Act (as well as common law claims) based on the central allegation that Carfax failed to advise consumers that its reports “did not contain all information regarding vehicles’ histories.” West v. Carfax, Inc., 2009-Ohio-6857, 2, ¶2 (Ohio App. December 24, 2009). (Around the same time, nine other class actions were filed against Carfax in seven other states. Id.) Two years later, in September 2006, plaintiff and Carfax entered into a proposed class action settlement; the trial court gave preliminary approval to the class action settlement the following month. Id., at 2, ¶3. The court order “gave preliminary approval to the proposed settlement, certified a class, appointed [plaintiff] the class representative, and ordered that class members be notified of the proposed settlement in the manner specified therein.” Id. Several objections were filed to the proposed class action settlement, including objections by a group of class members who sought received leave to intervene, and objections by co-defendant Center for Auto Safety. Id., at 3, ¶4. The fairness hearing concluded with the trial court ordering further settlement negotiations, id. A revised class action settlement was reached, which the trial court approved after rejecting objections to the settlement and denying a request to compel discovery. Id., at ¶¶5-6. A group of objectors appealed the trial court’s order, supported by an amicus brief filed by the State of Ohio. Id., at ¶6. The Ohio Court of Appeals reversed.

Appellants advanced three challenges to the class action settlement: (1) that the notice procedure failed to “take reasonable steps to provide individual notice to all class members”; (2) that the trial court failed to require disclosure of “the likely redemption rate, and, in particular, information about the number of claims made”; and (3) that the trial court erred in denying their motion to compel discovery as to claims information. West, at 3-4, ¶¶ 8-10. The appellate court first addressed whether the trial court abused its discretion in approving the notice procedures at issue, see id., at 4, ¶ 11. The Court explained that due process requires only that “individual notice be given all class members ‘who are identifiable through reasonable effort’” and that it be the “‘best notice practicable.’” Id., at 5, ¶13 (citations omitted). “In this case, the class consisted of all persons purchasing a Carfax Vehicle History Report directly from Carfax in the United States prior to the date the trial court gave its preliminary approval to the settlement agreement: i.e., October 27, 2006. This class may include people extending as far back as 1996.” Id., at ¶15. The settlement approved by the court required “(1) individual email notice to email addresses of purchasers in the Carfax database extending back to October 27, 2003; and, (2) publication, one time each, in Investor’s Business Daily and USA Today.” Id. According to defense attorneys, Carfax sent more than 1.77 million emails, 92% of which were not rejected, and the two publications had a combined circulation of 2.7 million readers per day. Id.

Continue reading "Carfax Class Action Defense Cases–West v. Carfax: Ohio Appellate Court Reverses Trial Court Approval Of Class Action Settlement Holding Notice To Class Members Was Inadequate" »

Posted In: Class Action Court Decisions

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

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

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

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

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

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

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

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

UCL Class Action Alleging Apple iPod Created Unreasonable Risk of Hearing Loss Properly Dismissed for Failure to State a Claim because while iPod was Capable of Causing Hearing Loss it was Consumer Behavior that Proximately Caused Injury rather than iPod’s Design Ninth Circuit Holds

Plaintiffs filed a putative class action against Apple alleging inter alia violations of California’s Unfair Competition Law (UCL); specifically, the class action complaint alleged that Apple’s iPod “is defective because it poses an unreasonable risk of noise-induced hearing loss to its users.” Birdsong v. Apple, Inc., 590 F.3d 955 (9th Cir. 2009) [Slip Opn., at 16867, 16870.] Federal court jurisdiction was premised on the Class Action Fairness Act (CAFA). Id., at 16872 n.1. The class action originated in Louisiana, but it was transferred to California and a California resident was added as a putative class representative in the third amended class action complaint. Id., at 16871. According to the allegations underlying the class action complaint, the iPods were sold with “detachable ‘earbud’ headphones” (but other headphones and audio devices could be used for playback), and were capable of “producing sounds as loud as 115 decibels.” Id., at 16870. Each iPod can with a warning concerning the risk of hearing damage, id., at 16870-71. The class action alleged that iPod’s ability to produce 115 decibels was a “defect” that constituted a “breach of the implied warranty of merchantability and fitness for a particular purpose,” id., at 16870. Defense attorneys moved to dismiss the third amended class action complaint for failure to state a claim and on the ground that plaintiffs lacked standing to prosecute the class action’s UCL claim. Id. The district court granted the motion and dismissed the class action. Id., at 16871-72. The Ninth Circuit affirmed.

The Circuit Court first summarized California law concerning the implied warranty of merchantability. See Birdsong, at 16872-73. The district court dismissed that class action claim based on its determination that it was the manner in which a consumer used the iPod, not its design, that created the risk of hearing loss. Id., at 16873. The Ninth Circuit agreed, explaining at page 16873 that “the iPod has an ‘ordinary purpose of listening to music,’ and nothing [plaintiffs] allege suggests iPods are unsafe for that use or defective.” While iPods are capable of playing music at loud volumes, and capable of playing music for 12-14 hours before the batteries need to be recharged or replaced, the bottom line is that “users have the option of using an iPod in a risky manner, not that the product lacks any minimum level of quality.” Id.

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

Class Action Alleging Violations of Federal Securities Laws based on Oil Company’s “Proved Reserves” Estimates in Public Offering Documents Warranted Dismissal because Cautionary Language Warned Reasonable Investor of Risk of Lower Reserves Texas Federal Court Holds

Plaintiff filed a putative class action against Cano Petroleum (an independent oil and natural gas company) and individual officers and directors of Cano, as well as defendants involved in the underwriting of Cano’s secondary public offering, alleging violations of federal securities laws; specifically, the class action complaint alleged that the documents issued in connection with the secondary public offering contained material misrepresentations in violation of Sections 11, 12 and 15 of the Securities Act of 1933. Truk Int’l Fund LP v. Wehlmann, ___ F.Supp.2d ___ (N.D.Tex. December 3, 2009) [Slip Opn., at 2-3.] According to the allegations underlying the class action complaint, defendants’ disclosures concerning Cano’s “proved reserves” were significantly overstated. Id., at 3-4. The class action further alleged that only one month after the secondary public offering, Cano’s CEO announced that the company’s proved reserves had declined by roughly 20%. Id., at 4-5. Following that announcement, Cano’s stock price fell “sharply and immediately.” Id., at 5. Defense attorneys moved to dismiss the class action on various grounds, see id., at 5-6. The district court granted the motions.

The district court began by summarizing public information relevant to the motion, see Truk, at 7-13, as well as the applicable standards governing the defendants’ motions, see id., at 13-15, and the relevant provisions of the Securities Act, see id., at 15-20. Focusing on the central allegations underlying the class action claims, see id., at 20-23, the district court first held that “[t]he cautionary statements in the Offering Documents made clear that the proved reserve numbers stated in the documents were estimates as of June 30, 2007, and that a large number of factors could cause the estimates to be lower if recalculated as of the date of the offering,” id., at 23. The new estimates had been based on a new estimate provided June 30, 2008, and were the result of circumstances that the Offering Documents warned could lead to a reduction in the proved reserves estimate. Id., at 24. In the federal court’s view, “a reasonable investor would know from reading the cautionary language in the Offering Documents that an investment in Cano was risky and that a part of that risk was in the uncertainty as to the quantity of proved reserves.” Id., at 28. Accordingly, the court granted the motions to dismiss the class action claims. Id., at 28, 30-31. The court also denied leave to amend, noting that “the nature of the pleading deficiencies suggest that repleading would be futile” and that “defendants should not be subjected to further costs of litigation.” Id., at 30.

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

Class Action Complaint Alleging Securities Fraud Failed to Adequately Plead Misrepresentation or Scienter under Heightened Pleading Requirements Established by Private Securities Litigation Reform Act (PSLRA) New Jersey Federal Court Holds

Plaintiffs filed a putative class action against Heartland Payment Systems and others alleging violations of federal securities laws; specifically, the class action complaint alleged that defendants concealed information and/or made affirmative misrepresentations that were material to the value of the company’s stock and that plaintiffs suffered damage because the company’s stock value declined almost 80%. In re Heartland Payment Systems, Inc. Securities Litig., U.S.D.C. Case No. 09-1043 (D.N.J. December 7, 2009) [Slip Opn., at 1, 3.] According to the allegations underlying the class action complaint, Heartland “provides bank card payment processing services to merchants” and “maintains millions of credit and debit card numbers on its computer network.” Id., at 1. In 2008, Hackers managed to steal 130 million credit and debit card numbers from Heartland. Id., at 2. At the time of the theft, the company believed hackers had targeted solely the “payroll manager application” which “does not contain data on cardholders’ credit and debit card accounts” but rather “internal corporate information such as employees’ names, addresses, social security numbers, and other confidential information.” Id. Heartland did not discover the full extent of the breach until January 2009, at which time it “immediately notified the U.S. Department of Justice, the U.S. Secret Service, and the credit card companies who account numbers had been stolen,” and soon thereafter “publicly disclosed the theft.” Id. Following the public disclosure, Heartland’s stock price dropped dramatically, id. Plaintiffs filed their class action complaint on the theory that company statements concerning the adequacy of its security systems were fraudulent because the company was “aware that Heartland had poor data security and had not remedied the problem.” Id., at 3. Defense attorneys moved to dismiss the class action on the grounds that it failed to satisfy the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA), id. The district court granted the motion.

The district court explained that the PSLRA requires a plaintiff “to plead the ‘who, what, when, where, and how’ of the allegedly fraudulent statements.” In re Heartland, at 3-4 (citing Institutional Investors Group v. Avaya Inc., 564 F.3d 242, 252 (3d Cir. 2009). Moreover, the PSLERA “requires that the complaint ‘state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.’” Id., at 4 (citation omitted). The federal court agreed with defense attorneys that the class action complaint failed to adequately allege a material misrepresentation, see id., at 5-11. The court agreed further that the class action failed to adequately plead the requisite scienter to support the class action claims. See id., at 11-13. The district court therefore found it unnecessary to address defendant’s loss causation argument. See id., at 5, 13-14. The court dismissed the class action complaint without leave to amend, concluding that “further specificity would not cure the Complaint’s deficiencies,” id., at 14.

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

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. — 1407, Over Objection of One Group of Class Action Plaintiffs, but Transfers Class Actions to Central District of California

Seven class actions were filed in seven different district courts – the Central and Northern Districts of California, the Southern District of Florida, the Northern District of Georgia, the District of New Jersey, the Eastern District of Pennsylvania, and the Western District of Washington – against various DirecTV challenging its early cancellation fee policies. In re DirecTV, Inc., Early Cancellation Fee Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 9, 2009) [Slip Opn., at 1]. According to the allegations under the class actions, “defendants commit their customers to minimum programming terms without their knowledge or consent and unlawfully charge an early termination fee if the customer cancels service prior to the expiration of that programming term.” Id. Attorneys for plaintiffs in three of the class actions (Florida, Georgia and Washington) filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Western District of Washington; plaintiffs in the Pennsylvania class action and the New Jersey class action supported the motion. Id. Plaintiffs in the Central District of California class action supported the motion but proposed their district as the appropriate transferee court; plaintiffs in the Northern District of California class action opposed centralization. Id. Defense attorneys opposed centralization but alternatively argued for transfer of the class actions to the Central District of California, id. The Judicial Panel granted the motion to centralize the class action lawsuits, rejecting the arguments of the plaintiffs in the Northern District of California. Id., at 1-2. The Judicial Panel decided that the Central District of California was the appropriate transferee court, where DirecTV was headquartered. Id., at 2. Accordingly, the Panel transferred all class actions pending outside of the Central District of California to that district. Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Settlement Properly Approved by District Court but Ambiguity in Scope of Release Required Remand for Clarification Second Circuit Holds

Plaintiffs filed a class action in New York federal court against the City of New York and various other defendants that “challenged policies adopted by the New York City Administration for Children's Services (‘ACS’) relating to the removal of children from their homes in cases of abuse and neglect.” People United For Children, Inc. v. The City of New York, ___ F.3d ___, 2009 WL 4576113, *1 (2d Cir. December 8, 2009). According to the allegations underlying the class action complaint, defendants’ conduct constituted “violations of due process, equal protection, and parental, privacy, cultural, and religious rights,” and constituted discrimination “under the New York State and United States Constitutions.” Id. The class action complaint prayed for declaratory and injunctive relief, and for monetary damages. Id., at *2. Ultimately, the district court granted plaintiffs’ motion to certify the litigation as a class action. Id. Following two years of negotiations, the parties agreed upon a proposed class action settlement that won the preliminary approval of the district court. Id., at *3. At the fairness hearing, the district court gave final approval to the class action settlement over the objection of one of the named plaintiffs (Jones) and the objections of a member of the putative class. Id., at *1, *3. In part, the district court concluded that Jones had effectively “opted out” of the class, removed her as a class representative, and concluded that it need not consider her objections to the proposed settlement. Id., at *1. The objectors appealed the order approving the class action settlement, id. The Second Circuit agreed that the district court should not have concluded Jones had “opted out” of the class, but it found the error to be harmless and therefore affirmed.

We do not here summarize the notice provided to the class or the objections leveled against the class action settlement. See McReynolds, at *4-*6. The central issues on appeal were (1) whether Jones had “opted out” of the class and (2) whether the district court should have ignored her objections to the proposed settlement. Id., at *6. With respect to the first issue, the Second Circuit held that the district court erred because Jones had simply objected to the proposed settlement, and stated as much at the fairness hearing. Id., at *7. The Circuit Court explained at page *7, “Despite Jones' clear indication that she did not intend to opt out of the class action and her invocation of her right to object under the ‘rules,’ the District Court nevertheless found that Jones had opted out of the class because she ‘can't have it both ways.’ In so finding, the District Court erred in two ways: first, the finding that Jones elected to opt out of the class action was a clearly erroneous finding of fact; and, second, the court's conclusion that Jones opted out of the class by reason of her objection to the class settlement was an error of law.” The error was harmless, however, because Jones’ objections had been raised by other members of the putative class and so had been considered (and rejected) by the district court. See id., at *8-*9.

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Posted In: Class Action Court Decisions

District Court Order Compelling Production of Discovery Protected by Attorney-Client Privilege on Grounds Privilege had been Waived not Appealable because Collateral Order Doctrine does not Extend to such Orders Supreme Court Holds

Plaintiff Carpenter filed a lawsuit against his employer, Mohawk Industries, in a Georgia federal court alleging violations of various labor laws; specifically, plaintiff alleged that he was wrongfully terminated for informing the company’s human resources department that Mohawk was employing illegal aliens. Mohawk Industries, Inc. v. Carpenter, ___ U.S. ___, 130 S.Ct. 599, 2009 WL 4573276, *3 (December 8, 2009). At the time, plaintiff did not know that a putative class action lawsuit (“Williams”) had been filed against Mohawk that accused it of “conspiring to drive down the wages of its legal employees by knowingly hiring undocumented workers in violation of federal and state racketeering laws.” Id. According to the allegations underlying plaintiff’s individual lawsuit, Mohawk fired him after he refused to be pressured into retracting his accusation. Id. Plaintiffs in the Williams class action learned of the Carpenter lawsuit, and “sought an evidentiary hearing to explore Carpenter's allegations.” Id. The company opposed the motion, characterizing Carpenter’s accusations as “pure fantasy” and by attacking Carpenter in its explanation of his termination. Id. At the same time, Carpenter was seeking discovery of company documents concerning the meeting with company employees and counsel that preceded his termination; Mohawk opposed the discovery request in Carpenter on the grounds that it sought information protected by the attorney-client privilege. Id., at *4. The district court in Carpenter concluded that the attorney-client privileged had been waived based on the disclosures made in the Williams action concerning the grounds for Carpenter’s termination. Id. Defense attorneys appealed the court’s order or, in the alternative, sought mandamus relief; the Eleventh Circuit dismissed the appeal for lack of jurisdiction as the order was not appealable, and denied the petition for writ of mandate. Id. The Supreme Court granted certiorari “to resolve a conflict among the Circuits concerning the availability of collateral appeals in the attorney-client privilege context.” Id.

We do not discuss the Supreme Court’s analysis in detail, as we are concerned here only with its holding. (Interested readers may find the entire text of the Supreme Court opinion below.) In brief, the High Court summarized the “final decision” jurisdiction of Courts of Appeal, and the “‘small class’ of collateral rulings that, although they do not end the litigation, are appropriately deemed ‘final.’” Mohawk Industries, at *5 (citation omitted). The Supreme Court explained, “That small category includes only decisions that are conclusive, that resolve important questions separate from the merits, and that are effectively unreviewable on appeal from the final judgment in the underlying action.” Id. (citation omitted). But the Court expressed concern that the “small class” of cases fitting within this exception be interpreted so as to swallow the general rule. Id. And the High Court concluded that “collateral order appeals are not necessary to ensure effective review of orders adverse to the attorney-client privilege,” id., at *6. The Court explained that its holding turned not on the importance of the interest sought to be protected “in the abstract,” but rather “whether deferring review until final judgment so imperils the interest as to justify the cost of allowing immediate appeal of the entire class of relevant orders.” Id. In this regard, the Court noted that it “routinely require[s] litigants to wait until after final judgment to vindicate valuable rights, including rights central to our adversarial system.” Id. (citations omitted). Here, too, the Supreme Court held that “post-judgment appeals generally suffice to protect the rights of litigants and assure the vitality of the attorney-client privilege.” Id.

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Posted In: Class Action Court Decisions

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. — 1407, Unopposed by Class Action Plaintiffs, and Transfers Class Actions to Eastern District of New York

Seven class actions – five in the Southern District of New York, and one each in the Eastern District of New York and Eastern District of Texas – were filed against various Sony entities “arising from the performance of the ‘optical block’ of second generation Sony WEGA SXRD rear projection HDTV televisions.” In re Sony Corp. SXRD Rear Projection Television Marketing, Sales Practices & Products Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 9, 2009) [Slip Opn., at 1]. According to the allegations under the class actions, “this major component of the subject televisions is inherently defective, causing yellow stains, green haze and other color anomalies that interfere with the television’s display.” Id. Defense attorneys for Sony Corp. of America, Sony Electronics Inc., and Sony Corp. filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of New York or, alternatively, in the Southern District of California. Id. None of the class action plaintiffs opposed Sony’s motion or opposed transfer of the class actions to the Eastern District of New York. Id. The Judicial Panel granted Sony’s motion and agreed that the Eastern District of New York was the appropriate transferee court, id., at 1-2. Accordingly, the Panel transferred all class actions pending outside of the Eastern District of New York to that district. Id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Illinois Appellate Court Holds Motion to Compel Arbitration of Individual Claims in Class Action Complaint Alleging Violations of Various Consumer Protection Laws, based on Arbitration Clause Containing Class Action Waiver, Properly Denied because Agreement Required Disputes be Heard by National Arbitration Forum which no Longer Conducted Consumer Arbitrations

Plaintiffs filed a putative class action in Illinois state court against Gateway, Intel, Hewlett-Packard and others alleging inter alia violations of various California and Illinois consumer protection statutes; specifically, the class action complaint challenged defendants’ marketing of computers equipped with Intel’s Pentium 4 processor. Carr v. Gateway, Inc., ___ Cal.App.4th ___ (Ill.App. November 24, 2009) [Slip Opn., at 1.] According to the allegations underlying the class action complaint, defendants “have engaged in conduct which is likely to mislead, and has misled, the public through the suppression and concealment from the public of the material fact that there is no benefit to consumers in choosing the Pentium 4 over the Pentium III and that the Pentium 4 is less powerful and slower than the Pentium III and/or the AMD Athlon processors.” Id., at 1-2. The class action also alleged that defendants “made or disseminated misleading statements regarding the power and speed of the Pentium 4.” Id., at 2. Counts IV, V and VI of the class action complaint alleged violations of California’s Consumers Legal Remedies Act (CLRA) and Unfair Competition Law (UCL), and of Illinois’ Consumer Fraud and Deceptive Business Practices Act (the Act); these claims were ultimately severed from the class action complaint and they are the claims at issue in this opinion. Id. Defense attorneys moved the circuit court to dismiss the class action complaint, or to stay the class action and compel plaintiff to arbitrate his individual claim based on an arbitration clause that contained a class action waiver. Id., at 1, 2-3. After holding an evidentiary hearing, id., at 3-4, the court denied the motion on the grounds that arbitration clause “was not a part of the sales contract that was entered into by the parties” and, in any event, would be unenforceable as unconscionable, id., at 4. The Illinois Supreme Court then issued its opinion in Barbara's Sales, Inc. v. Intel Corp., 227 Ill.2d 45 (2007), see id., at 4-5. (This Blog’s article discussing that opinion may be found here.) The circuit court reaffirmed its order, and Gateway appealed. The appellate court affirmed.

The appellate court began its analysis by observing that the lower court denied Gateway’s motion to compel “primarily on its finding that the Agreement was not a part of the contract for the purchase of the Gateway computer.” Carr, at 6. If the arbitration clause was part of the contract, it called for any disputes to be “resolved exclusively and finally by arbitration administered by the National Arbitration Forum (NAF) and conducted under its rules,” id. However, during the pendency of the appeal, “the NAF has ceased administering consumer arbitrations.” Id. Noting that it could “affirm the circuit court's order on any basis in the record,” the appellate court analyzed” the impact the unavailability of the NAF has upon the validity of the arbitration provision.” Id. Gateway argued that section 5 of the Federal Arbitration Act (FAA) provides a “method” exists for selecting “an alternative arbitration forum” under its contract with consumers, id., at 6-7. The appellate court rejected this claim, finding that “the specific designation of the NAF as the exclusive arbitration forum is an integral part of the arbitration clause in the Agreement.” Id., at 7. Because NAF was no longer available to resolve consumer disputes under the Agreement, and because the FAA “cannot be used to reform the arbitration provision,” the appellate court affirmed the circuit court’s order denying Gateway’s motion to compel arbitration. Id., at 8.

Posted In: Arbitration, 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

Class Action Seeking Monetary and Injunctive Relief Arising from Theft of Personal Information, Allegedly Creating “Increased Risk” of Identity Theft Requiring Monitoring of Credit, Dismissed for Lack of Standing because Putative Class Representative did not Allege his Information was Stolen or had been used or Disclosed so Plaintiff Failed to Establish Injury-in-Fact Missouri Federal Court Holds

Plaintiff filed a putative class action against Express Scripts for negligence, breach of contract, violations of various “data breach notification laws” and violations of Missouri’s Merchandising Practices Act, arising out of the theft of its customers’ personal identification information; the class action complaint alleged that “inadequate security measures in relation to its computerized database system allowed unauthorized persons to gain access to confidential information of Express Scripts members contained in the database, with such information including names, dates of birth, Social Security numbers, and prescription information.” Amburgy v. Express Scripts, Inc., ___ F.Supp.2d ___ (E.D.Mo. November 23, 2009) [Slip Opn., at 1, 3.] Plaintiff filed the class action in federal court, asserting jurisdiction under the Class Action Fairness Act of 2005 (CAFA), id., at 3. According to the allegations underlying the class action complaint, the criminals who stole the information advised Express Scripts “that they would make public the confidential information obtained through the breach if Express Scripts did not pay a certain amount of money to them.” Id., at 2. Express Scripts advised its customers of the security breach, id. The class action alleged that the theft placed class members “at an increased risk of becoming victims of identity theft crimes, fraud, abuse, and extortion,” and that class members would be required to spend “considerable time and money to protect themselves” from injury. Id. Defense attorneys moved to dismiss the class action complaint on the grounds that plaintiff lacked standing and that the class action failed to state a claim for relief. Id., at 3. The district court granted the motion.

The federal court noted, “Database breaches appear to provide the basis for a new breed of lawsuits, and especially class action lawsuits, in which plaintiffs allege, as here, that the database handlers’ negligence in developing and maintaining security measures have resulted in otherwise personal and confidential information being compromised, thereby increasing the risk of identity theft for those individuals whose information was so compromised. The remedies sought in these actions vary, but generally include costs for credit monitoring, costs for closing and opening financial accounts, and damages for emotional distress.” Amburgy, at 5. The district court observed that federal courts have reached different conclusions as to whether individuals have Article III standing to prosecute such lawsuits, though the “recent trend” has been to find that standing exists based on a Seventh Circuit decision in Pisciotta v. Old Nat’l Bancorp., 499 F.3d 629 (7th Cir. 2007). See id., at 5-7. But the court explained at page 7, “because the requirement of standing is firmly rooted in the Constitution and is not subject to whim, the undersigned is reluctant to look to a ‘recent trend’ when analyzing whether or not a party has standing to sue in federal court.” Accordingly, it examined the standing issue with fresh eyes.

Continue reading "Class Action Defense Cases–Amburgy v. Express Scripts: Missouri Federal Court Dismisses Theft Of Personal Information Class Action Complaint For Lack Of Standing Because Plaintiff’s Information And Identity Not Stolen" »

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

District Court did not Err in Dismissing Class Action Complaint Against Dredging Contractors seeking Monetary and Injunctive Relief for Damages Caused by Hurricane Katrina because Defendants Acted Pursuant to Government Contracts under Act of Congress and were Entitled to Government-Contractor Immunity Fifth Circuit Holds

Plaintiffs filed a putative class action against the federal government and thirty-two others (the Contractor Defendants) “who dredged the Mississippi River Gulf Outlet to recover damages sustained during Hurricane Katrina.” Ackerson v. Bean Dredging LLC, 589 F.3d 196, 2009 WL 4066679, *1 (5th Cir. 2009). According to the allegations underlying the class action complaint, “[The] Contractor Defendants’ dredging activities caused environmental damage to protective wetlands in the Mississippi River Gulf Outlet (MRGO). The Plaintiffs also alleged that the MRGO project caused an amplification of the storm surge in the New Orleans region during Hurricane Katrina, undermining the levees and flood walls along the MRGO and the Industrial Canal that breached and flooded St. Bernard Parish and Orleans Parish. The Plaintiffs asserted claims against the Contractor Defendants for negligence, breach of implied warranty, concealment, and violation of environmental-protection laws and sought a myriad of damages and an injunction to prevent future dredging activities.” Id., at *2. The federal government moved to dismiss the class action claims against it for failure to exhaust administrative remedies; the district court granted the motion and plaintiffs did not appeal that ruling. Id. Defense attorneys for the dredging companies moved to dismiss the class action claims against the Contractor Defendants on the grounds that they had government-contractor immunity. Id. “The district court dismissed the claims against the dredgers because it determined that the defendants acted pursuant to contracts with the United States government under authority granted by an act of Congress.” Id., at *1. Further, the district court denied plaintiffs’ request to conduct discovery “calling the request a ‘fishing expedition,’” and denied plaintiffs’ request to file an amended class action complaint as “futile.” Id., at *2. The Fifth Circuit affirmed.

The Fifth Circuit reviewed the district court’s order de novo. Ackerson, at *3. It held that “the Contractor Defendants are entitled to government-contractor immunity under Yearsley.” Id. We do not discuss the Fifth Circuit’s opinion in detail as the author finds its holding to be compelled by well-settled case law, as detailed in the Court’s opinion. See id., at *3-*5. The Circuit Court also held that the district court did not err in dismissing the class action complaint with prejudice, see id., at *5, and that the lower court did not err in denying plaintiffs’ request to file an amended class action complaint because “Plaintiffs' proffered amendment does not go beyond the conclusory allegation that the Contractor Defendants activities somehow violated various laws and regulations at some unspecified time and place,” id., at *6. Finally, the Fifth Circuit held that the district court did not err in denying plaintiffs’ request to conduct discovery, id., at *7. Accordingly, the Circuit Court affirmed the district court order dismissing the class action complaint. Id.

Posted In: Class Action Court Decisions

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. — 1407, Supported by All Responding Parties Despite Disagreement over Appropriate Transferee Court, but Transfers Class Actions to District of New Jersey

Five class actions – two in the Central and one in the Eastern Districts of California and one each in the District of New Jersey and the Eastern District of New York – were filed against General Mills alleging false advertising claims arising out of its “labeling of its Cheerios cereals, and, specifically, claims that eating Cheerios can lower a person’s cholesterol.” In re Cheerios Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 9, 2009) [Slip Opn., at 1]. Plaintiffs in the Eastern and one of the Central District of California class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of California. Id. All responding parties supported pretrial coordination, but plaintiffs in the New York class action urged for transfer of the class actions to that district, and common defendant General Mills argued for transfer of the class actions to the District of New Jersey. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, but agreed with defense attorneys that the District of New Jersey was the appropriate transferee court, id. The Panel explained that one of the class action lawsuits already was pending in that district and that “[the judge] presiding over that action[] has the time and experience to steer this litigation on a prudent course.” Id., at 1-2. Accordingly, the Panel transferred all class actions pending outside of Pennsylvania to that district. Id., at 2.

Posted In: Multidistrict Litigation, 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.)

Continue reading "FACTA Class Action Defense Cases–Pezl v. Amore Mio: Illinois Federal Court Denies Class Action Certification/Grants Defense Summary Judgment In FACTA Class Action Because FCRA Does Not Cover Corporations" »

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

Class Action Challenging Advertisement of “Free” Phones may Proceed as Putative Class Action Despite Arbitration Clause Containing Class Action Waiver because under California Law Class Action Waiver Rendered Arbitration Clause Unconscionable Ninth Circuit Holds

Plaintiffs filed a putative class action against AT&T Mobility challenging its “offer of a ‘free’ phone to anyone who signs up for its service” because AT&T “charges the new subscriber sales tax on the retail value of each ‘free’ phone.” Laster v. AT&T Mobility LLC, 584 F.3d 849 (9th Cir. 2009) [Slip Opn., at 14387, 14390.] Defense attorneys moved to compel plaintiffs to arbitrate their claims individually, rather than as part of a class action, pursuant to an arbitration clause that requires arbitration of disputes and prohibits class actions. Id., at 14390. Plaintiffs argued that because federal jurisdiction was predicated on diversity, California law governed the district court’s interpretation of the arbitration clause and, under California law, “both the arbitration clause and the class action waiver [were] unconscionable, hence, unenforceable.” Id. The district court denied AT&T’s motion based on the Ninth Circuit opinion in Shroyer v. New Cingular Wireless Services, Inc., 498 F.3d 976 (9th Cir. 2007). Id., at 14390-91. On appeal, defense attorneys argued that the arbitration clause was distinguishable from the one at issue in Shroyer because “this arbitration clause provides for a ‘premium’ payment of $7,500…if the arbitrator awards the customer an amount greater than [AT&T’s] last written settlement offer,” id., at 14391. Defense attorneys also argued that “the Federal Arbitration Act (FAA) preempts California’s unconscionability law.” Id. The Ninth Circuit found the provision for a premium payment did not sufficiently distinguish the case from Shroyer and that the FAA does not preempt California law; accordingly, the Circuit Court affirmed the district court order.

Plaintiffs executed a Wireless Service Agreement with AT&T and received free cell phones by agreeing to a 2-year contract. Laster, at 14391. However, AT&T charged plaintiffs $30 in sales tax for the phones, calculated by using the full retail value of the phones. Id., at 14391-92. As noted above, the Agreement contained an arbitration clause that required arbitration of disputes and barred class actions. Id., at 14392. Plaintiffs filed suit in California federal court alleging that AT&T’s advertisement for a free phone was fraudulent; AT&T thereafter amended the Agreement to include the “premium payment clause” and, later still, moved to compel plaintiffs to arbitrate their claims on an individual basis, not as a class action, based on the revised arbitration clause. Id. The district court denied the motion, holding that the class action waiver in the arbitration clause rendered it unconscionable under California law and that the FAA did not preempt California law regarding unconscionability. Id.

Continue reading "AT&T Class Action Defense Cases–Laster v. AT&T Mobility: Ninth Circuit Affirms District Court Order Denying Motion To Compel Arbitration Of Class Action Claims On Individual Basis Holding Class Action Waiver Unconscionable" »

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted In: Class Action Court Decisions

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

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

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

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

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

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

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

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

Posted In: Class Action Court Decisions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Posted In: Class Action Court Decisions

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

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

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

Posted In: Arbitration, Class Action Court Decisions

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

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

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

Posted In: FCRA 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.”

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

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

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

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

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

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

Class Action Alleging Violations of FCRA (Fair Credit Reporting Act) Properly Dismissed because Mailer Constituted “Firm Offer” within Meaning of FCRA Third Circuit Holds

Plaintiff filed a putative class action against State Farm Mutual Automobile Insurance Company alleging violations of the federal Fair Credit Reporting Act (FCRA); specifically, the class action complaint alleged that State Farm obtained credit information in order to send out “prescreened offers” but that it did so in violation of the FCRA. Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 2009 WL 3163553, *2 (3d Cir. 2009). According to the allegations underlying the class action complaint, in November 2004 State Farm asked Experian for plaintiff’s consumer credit report without his consent, and that he did not learn about it until April 2006, “when he received a copy of his consumer credit report from Experian.” Id. State Farm claimed that it obtained plaintiff’s credit report for a “permissible purpose” within the meaning of the FCRA, and “used it to select [plaintiff] to receive materials pertaining to insurance products that he might qualify for and/or be interested in.” Id. The mailer sent to plaintiff stated that it was a “prescreened offer,” and invited him to contact State Farm for a quote in order to determine whether switching to State Farm as his auto insurance carrier could save him money. Id. The mailer also contained a “prescreen & opt-out notice,” id. The class action alleged that the mailer is nothing more than “an invitation to call State Farm to find out about the various insurance products that State Farm might attempt to sell”; in other words, “the State Farm mailing is nothing more than promotional material soliciting him to contact State Farm regarding its various insurance products and that it is therefore not the kind of firm offer of insurance that would legitimize State Farm's access to his credit report under federal law.” Id., at *2. Defense attorneys moved to dismiss the class action; the district court granted the motion as to all claims in the class action complaint, id. The Third Circuit affirmed.

The class action alleged that State Farm intentionally or negligently obtained plaintiff’s credit report under false pretenses and without a permissible purpose, and sent an offer of insurance that failed to include the “clear and conspicuous” disclosures required by the FCRA. Gelman, at *2. The complaint sought declaratory and injunctive relief, id. The district court granted State Farm’s motion to dismiss the class action because it found that the mailer “constituted an offer of insurance under the FCRA,” that “the FCRA does not provide for a private right of action to recover for disclosures that are contrary to provisions of the FCRA,” and that “the FCRA does not provide private litigants declaratory and injunctive relief.” Id. We do not here summarize the Circuit Court’s discussion of the legal background behind the FCRA, see id., at *3-*4. The Circuit Court began its legal analysis by addressing the district court’s conclusion that State Farm’s mailer satisfied the FCRA because the offer of insurance need not have “value” to the consumer. Id., at *4. Plaintiff’s theory was premised “exclusively” on the Seventh Circuit opinion in Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), which held that a “firm offer” under the FCRA “must have sufficient value for the consumer to justify the absence of the ... protection of his privacy.” Id. (quoting Cole, 389 F.3d at 726). (The Third Circuit’s summary of Cole may be found at pages *4 and *5 of its opinion.)

Continue reading "FCRA Class Action Defense Cases–Gelman v. State Farm: Third Circuit Affirms Dismissal Of Class Action Complaint Holding Mailer Constituted “Firm Offer” Within Meaning Of Fair Credit Reporting Act (FCRA)" »

Posted In: FCRA Class Actions, Class Action Court Decisions

District Court Erred in Refusing Motion to Stay Class Action Against Bank and Compel Arbitration of Individual Claim based on Arbitration Clause with Class Action Waiver because Class Action Waiver, and Cost-Sharing Provision, of Arbitration Clause did not Render Provision Unconscionable Eighth Circuit Holds

Plaintiff filed a putative class action in Missouri state court against Chase Bank alleging that it had imposed penalties on credit card holders and that it had violated Missouri’s Merchandising Practices Act (MMPA); in essence, the class action complaint alleged that Chase improperly increased the interest rate charged on credit card balances. Cicle v. Chase Bank USA, 583 F.3d 549, 2009 WL 3172157, *1 (8th Cir. 2009). According to the allegations underlying the class action complaint, plaintiff’s credit card with Chase initially “carried a 7.99% annual percentage rate (APR) on unpaid balances,” but then “increased dramatically, to 25.99%.” Id. When asked about the increase, the Bank responded that “a credit agency had reported her as past due on an unrelated loan or account, so Chase increased the APR from the 7.99% ‘Preferred Customer Pricing’ rate.” Id. Defense attorneys removed for the class action to federal court under CAFA (Class Action Fairness Act of 2005) and on the ground of federal question jurisdiction under the National Bank Act (NBA). Id. The Bank then asked the district court to stay the class action to compel plaintiff to arbitrate her individual claim pursuant to the terms of the arbitration clause in her Cardmember Agreement, which included a class action waiver. Id. The district court denied the defense motion, concluding that the class action waiver and the provisions for cost-sharing were unconscionable under Missouri law, id., at *3. The Eighth Circuit reversed, holding that the class action waiver was neither substantively nor procedurally unconscionable.

The Cardmember Agreement contained an arbitration clause, governed by the Federal Arbitration Act (FAA), that required arbitration on an individual basis of any dispute with the bank; specifically, the arbitration clause contained a class action waiver, prohibiting the cardmember from bringing “a class action or other representative action” and precluding the cardmember from being “part of any class action or other representative action.” Cicle, at *1-*2. The arbitration was to be binding, and covered “any claim, dispute or controversy by either you or us against the other, or against the employees, parents, subsidiaries, affiliates, beneficiaries, agents or assigns of the other, arising from or relating in any way to the Cardmember Agreement, any prior Cardmember Agreement, your credit card Account or the advertising, application or approval of your Account (‘Claim’).” Id., at *2. The arbitration clause provided an exception for small claims court matters, id. With respect to costs, the arbitration clause provided that the Bank would pay for the filing fee (up to $500) and, “if there is a hearing, we will pay any fees of the arbitrator and arbitration administrator for the first two days of that hearing.” Id. The agreement provided that all other fees would be “allocated in keeping with the rules of the arbitration administrator and applicable law,” and that each side otherwise would be responsible for their own attorney fees and costs, regardless of whether they prevailed, unless the arbitrator orders otherwise based on “any applicable law.” Id. Reviewing the district court’s decision de novo, see id., at *3, the Eighth Circuit reversed its refusal to enforce the arbitration clause.

Continue reading "Arbitration Class Action Defense Cases–Cicle v. Chase: Eighth Circuit Reverses Denial Of Bank Motion To Compel Arbitration Of Plaintiff's Class Action Claims On Individual Basis Holding Class Action Waiver Enforceable" »

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

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Despite Certain Plaintiff and Defense Objections, and Transfers Actions to Southern District of Florida

Five class actions – two in California and Florida, and one in New Jersey – were filed against various defendants – including Wachovia Bank, Bank of America and Citibank – “relating to industry-wide bank posting policies and procedures” surrounding overdraft fees. In re Checking Account Overdraft Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2009) [Slip Opn., at 1, 2]. According to the allegations under the class actions, the various defendant banks had implemented policies and procedures “relating to the imposition of overdraft fees…on their customer’s checking accounts in a manner to maximize these fees.” Id., at 2. Plaintiffs in one of the Florida class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of Florida, id., at 1. Plaintiffs in the New Jersey class action and defendants Wachovia and Bank of America supported the motion, but Bank of America argued for transfer to the Western District of North Carolina. Id. Plaintiffs in the California class actions and defendant Citibank opposed the motion and if the motion were granted argued for centralization in the Northern District of California. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, explaining at page 2: “While there will be some unique questions of fact from bank-to-bank, these actions share sufficient factual questions relating to industry-wide bank posting policies and procedures to warrant centralization of all actions in one MDL docket.” The Panel also agreed that the Southern District of Florida was the appropriate transferee court “because (1) two of the involved actions before the Panel are pending there, and (2) this district has the capacity to manage this MDL proceeding.” Id., at 2. Accordingly, the Panel transferred the class actions centralized in the Southern District of Florida. Id., at 2-3.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Complaint Against Amazon Challenging Shipping and Handling Fees Satisfied Rule 23 Requirements for Class Action Treatment California Federal Court Holds

Plaintiff filed a putative class action against Amazon.com alleging violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA); specifically, the class action complaint alleged that Amazon, in addition to receiving “a sales commission and a percentage of the sales price for each item sold,” charged shipping and handling fees to buyers “without input from Marketplace Sellers” even though it was the sellers who “took care of packaging and shipping products.” Baghdasarian v. Amazon.Com, Inc., 258 F.R.D. 383, 385 (C.D. Cal. 2009). According to the allegations underlying the class action complaint, Amazon failed to disclose to buyers that it kept a portion of the shipping and handling fees and this act was “fraudulent” within the meaning of the UCL and CLRA, id. Plaintiff decided not to seek class action treatment of the class action complaint’s CLRA claim, but moved for class action certification of the UCL claim. Id. Plaintiff argued that the lawsuit satisfied the requirements for class action certification under Rule 23(b)(3), id., at 386. Defense attorneys opposed class action treatment, but the district court granted the motion.

The district court first held that plaintiff had standing to prosecute the class action. See Baghdasarian, at 386-87. Specifically, the federal court held that plaintiff had standing to prosecute the class action’s UCL claim, rejecting defense arguments that plaintiff had not suffered any economic harm because he “received the benefit of his bargain.” See id., at 386-87. The court also had little difficulty in finding that the requirements of Rule 23(a) for class action certification had been met. Id., at 388-89. The court also found that the class action requirements for certification under Rule 23(b)(3) had been met. The federal court readily found that the predominance test had been satisfied, see id., at 389-90, and also concluded that a class action would be “the most efficient way to resolve the claims of all class members, especially since the individual claims are small and economically unfeasible to litigate individually,” id., at 390, thus satisfying the superiority prong of Rule 23(b)(3). Accordingly, the district court granted plaintiff’s motion for class certification, see id., at 391.

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

Class Action Alleging Defendants’ Greenhouse Gas Emissions Contributed to Global Warming thereby Increasing Ferocity of Hurricane Katrina Improperly Dismissed because Plaintiffs had Standing to Assert Class Action’s Nuisance, Trespass and Negligence Claims and these Claims did not Present Nonjusticiable Political Questions Fifth Circuit Holds

Plaintiffs filed a putative class action against numerous defendants seeking damages arising from Hurricane Katrina; the class action complaint, filed on behalf of property owners on the Mississippi Gulf coast, alleged that “defendants’ operation of energy, fossil fuels, and chemical industries in the United States caused the emission of greenhouse gasses that contributed to global warming, viz., the increase in global surface air and water temperatures, that in turn caused a rise in sea levels and added to the ferocity of Hurricane Katrina, which combined to destroy the plaintiffs’ private property, as well as public property useful to them.” Comer v. Murphy Oil USA, Inc., 585 F.3d 855 (5th Cir. 2009) (Slip Opn., at 1). The class action complaint sought “compensatory and punitive damages based on Mississippi common-law actions of public and private nuisance, trespass, negligence, unjust enrichment, fraudulent misrepresentation, and civil conspiracy.” Id., at 2. Defense attorneys moved to dismiss the class action on the grounds of that plaintiffs lacked standing and that the class action claims constituted “nonjusticiable political questions.” Id. The district court granted defendants’ motion and dismissed the class action, id. The Fifth Circuit reversed as to the nuisance, trespass and negligence, concluding that plaintiffs had standing and that the claims do not “present nonjusticiable political questions,” but affirmed the dismissal of the class action’s remaining claims. Id., at 3.

The Circuit Court spent a considerable amount of time on the question of standing, see Comer, at 3-17, but we do not here discuss that aspect of the opinion in detail. We note only that the Fifth Circuit concluded that the class action’s “nuisance, trespass and negligence claims…clearly satisfied the…constitutional minimum standing requirements” because “[t]hese state common-law tort claims, in which plaintiffs allege that they sustained actual, concrete injury in fact to their particular lands and property, can be redressed by the compensatory and punitive damages they seek for those injuries.” Id., at 7-8. The question, then, was “whether any of those claims present a nonjusticiable political question, as the district court believed they did.” Id., at 17. Based on its lengthy analysis, see id., at 18-34, the Circuit Court held that these class action claims could proceed “[b]ecause those claims do not present any specific question that is exclusively committed by law to the discretion of the legislative or executive branch” and accordingly “they are justiciable,” id., at 17. Again, we do not summarize that detailed legal analysis here. Interested readers may find the entire text of the Fifth Circuit opinion below. We simply set forth the Circuit Court’s conclusion, at pages 34 and 35 of the opinion, which states:

Continue reading "Class Action Defense Cases–Comer v. Murphy Oil: Fifth Circuit Reinstates Class Action Alleging Global Warming Exacerbated Damage Caused By Hurricane Katrina" »

Posted In: 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.

Continue reading "Class Action Defense Cases–Somers v. Apple: California Federal Court Denies Class Action Certification Of Rule 23(b)(3) Class In Indirect Purchaser Antitrust Class Action But Reserves Ruling On Class Action Treatment Under Rule 23(b)(2)" »

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.

Continue reading "Class Action Defense Cases–Castaneda v. Burger King: California Federal Court Severely Limits Scope Of Class In ADA Class Action Holding Commonality/Typicality Not Met For Stores Not Frequented By Named Plaintiffs" »

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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Objections of Class Action Plaintiffs, and Transfers Actions to Southern District of New York

Four class actions – one each in Kentucky, Louisiana, Massachusetts and New York – were filed against various defendants including Merrill Lynch arising out of “allegations that Merrill Lynch and/or its employees made misrepresentations or omissions in the context of the sale of auction rate securities (ARS) and manipulated the auctions for ARS in order to prevent auction failures.” In re Merrill Lynch & Co., Inc., Auction Rate Securities (ARS) Marketing Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action lawsuits, “Merrill Lynch failed to disclose that (1) ARS were not cash alternatives similar to money market funds, and (2) the ARS sold by Merrill Lynch were only liquid because, at the time of sale, Merrill Lynch and other broker-dealers artificially supported and manipulated the market to maintain the appearance of liquidity and stability.” Id., at 1-2. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of New York; plaintiffs in the class actions pending outside of that district opposed the motion. Id., at 1. The Judicial Panel rejected the objections to pretrial coordination and granted the motion to centralize the class action lawsuits, finding that “Centralization under Section 1407 will eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel and the judiciary.” Id. The Panel also agreed that the Southern District of New York – “where the first-filed has been pending for over a year” – was the appropriate transferee court. Id., at 2. Accordingly, the Panel ordered all class actions outside of the Southern District of New York transferred to that district, id., at 34.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Alleging Breach of Annuity Contract for Failure to Pay Promised Interest Rate Failed Entitling Defense to Summary Judgment on Class Action Complaint Tennessee Federal Court Holds

Plaintiff filed a putative class action against AIG Annuity Insurance Company alleging breach of contract; specifically, the class action complaint alleged that AIG failed to pay the amount of interest promised under the annuity contract. Cirzoveto v. AIG Annuity Ins. Co., 625 F.Supp.2d 623, 625 (W.D. Tenn. 2009). According to the allegations underlying the class action complaint, plaintiff purchased an annuity “designed and issued by AIG Annuity and sold by Union Planters Bank” that was to pay 4.6% interest and that “all expenses, including anticipated interest credited to an annuity owner's contract, were considered when determining the initial base rate of interest.” Id. Defense attorneys moved for summary judgment on the ground that it complied with the terms of the annuity contract because the contract expressly disclosed that the 4.6% interest rate was for the first year only, and that it was guaranteed to be at least 2% thereafter. Id. Further, plaintiff had signed an “Owner Acknowledgement Form” confirming that he had “read and understood the disclosures regarding, among other contract features, the payment of interest rates and assessment of withdrawal charges.” Id. Further, contrary to the allegations in the class action complaint, the contract set forth a “Withdrawal Charge Schedule” setting forth the charges for “early withdrawals,” id.; plaintiff, however, had withdrawn all funds within 18 months of obtaining the annuity, id., at 626. The district court granted AIG’s motion and entered judgment in its favor on the class action complaint.

The district court found that AIG did not breach the annuity contract with plaintiff because, contrary to the class action's allegations, the contract did not "expressly or implied" guarantee plaintiff a 4.6% interest return for the life of the annuity. Cirzoveto, at 626. With respect to the breach of contract claim, plaintiff argued that AIG breached the “reasonable expectation” that the higher interest rate would be paid beyond the first year, but the federal court held that such personal opinions cannot trump the clear and unambiguous language of the contract. Id., at 627. Further, plaintiff “failed to produce substantial evidence that he has suffered damages,” because plaintiff cashed out less than 18 months after purchasing the annuity and “was entitled to receive only the value of the premiums he had paid, less any previous withdrawals he made from the annuity.” Id. In other words, he was entitled to receive only a refund of premium, which is “exactly what he received.” Id., at 627-28

Continue reading "Class Action Defense Cases–Cirzoveto v. AIG: Tennessee Federal Court Grants Defense Motion For Summary Judgment Against Claims Asserted In Class Action Alleging Breach Of Contract" »

Posted In: Class Action Court Decisions

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

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

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

Continue reading "Class Action Defense Cases–Sher v. Raytheon: Florida Federal Court Grants Class Action Status To Class Action Complaint Alleging Toxic Tort Liability For Ground Contamination" »

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.

Continue reading "ADA Class Action Defense Cases–Ault v. Walt Disney World: Florida Federal Court Dismisses ADA Class Action For Lack Of Standing Holding Class Action Did Not Seek "Access" But "Human Dignity" Through New Technology" »

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

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

Thirteen (13) class actions – four in California, four in the Eastern District of New York, three in Colorado and one in the Southern District of New York and the Western District of Pennsylvania – were filed against various defendants including various Oppenheimer entities. In re Oppenheimer Rochester Funds Group Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 17, 2009) [Slip Opn., at 1]. The class actions shared a common basis: “All actions share factual questions relating to (1) the operation of municipal bond markets and their liquidity, (2) the impact of market conditions on the types of assets held in the funds, (3) the risks inherent in certain types of holdings, including tobacco bonds and inverse floaters, (4) whether these types of investments were properly disclosed prior to October 2008, and/or (5) whether the concentration of these and other allegedly risky investments was contrary to the fundamental investment objectives and representations of the Oppenheimer municipal bond funds. Although four different municipal bond funds are involved in these thirteen actions, the investment strategies and public disclosures are similar and all funds are overseen by a common investment manager and distributor/underwriter. Thus, regardless of which municipal bond fund is involved in each action, all actions can be expected to focus on a number of common defendants and/or witnesses.” Id., at 2. Defense attorneys for various Oppenheimer defendants filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern or Eastern District of New York, id., at 1. The responses by plaintiffs in the various class actions were all over the map – some opposed the motion, while others supported the motion but requested centralization in Colorado, California, Pennsylvania. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, id., at 2. The Panel also selected the District of Colorado as the appropriate transferee court because “RBSW is headquartered in Atlanta, a significant amount of discovery is likely to take place in that district.” Id. Accordingly, the Panel transferred the Ohio class action to Georgia. Id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Plaintiffs’ Amendment to Class Action Complaint Following Removal under Class Action Fairness Act (CAFA) Defeated CAFA Jurisdiction Warranting Remand of Lawsuit to State Court Wisconsin Federal Court Holds

Plaintiffs filed a putative class action in Wisconsin state court against various defendants seeking “damages resulting from a flash flood that inundated plaintiffs’ homes in the town of Bagley, Wisconsin in 2007.” Irish v. Burlington Northern Santa Fe Railway Co., 632 F.Supp.2d 871, 872 (W.D. Wis. 2009). Defense attorneys removed the class action to federal court on grounds of diversity even though two of the defendants shared Wisconsin citizenship with the plaintiffs, arguing that the Wisconsin-resident defendants were fraudulently joined to defeat diversity, and also asserting removal jurisdiction under the Class Action Fairness Act (CAFA). Id., at 872-83. “Plaintiffs’ moved to remand the case to state court, arguing that joinder was not fraudulent and that their suit was not subject to the Class Action Fairness Act.” Id., at 873. The district court determined that the joinder was not fraudulent but that CAFA removal jurisdiction existed, id. Plaintiffs sought and obtained leave to amend their class action complaint, “disavowing their class action allegations and seeking relief for only the named plaintiffs.” Id. The district court then remanded the class action to state court on the ground that it “no longer had subject matter jurisdiction under the Class Action Fairness Act.” Id. Defense attorneys moved the district court to reconsider its remand order, arguing that because CAFA jurisdiction existed at the time of removal, it could not be taken away by subsequent amendment “even if the case was no longer a class action.” Id. The district court granted reconsideration but again held that the case had to be remanded to state court.

As a preliminary procedural matter, the district court noted that defendants also filed a notice of appeal from the remand order with the Seventh Circuit. Irish, at 873. For reasons we do not discuss here, the district court concluded that it retained jurisdiction over the matter to reconsider its remand order. See id., at 873-74. Turning to the merits, the district court noted that the reconsideration motion was primarily directed at “[the] decision to remand the suit on the basis of a post-removal amendment of the complaint.” Id., at 874. The district court rejected the argument that “for the purpose of determining whether subject matter jurisdiction exists in a case removed from state court under [CAFA], the court is bound by the allegations of the original complaint and may not consider any later amendments.” Id., at 875. The court reaffirmed its holding that “the dismissal of plaintiff's class action claims eliminated the ground for the court's grant of diversity jurisdiction under the Class Action Fairness Act.” Id., at 876.

Continue reading "CAFA Class Action Defense Cases–Irish v. Burlington: Wisconsin Federal Court Reaffirms Order Remanding Class Action To State Court Holding Post-Removal Amendments Destroyed CAFA Removal Jurisdiction" »

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

Class Action Failed to Allege Violation of California’s Unfair Competition Law (UCL) based on Merchant’s Refusal to Redeem Gift Card for Cash because California Law gives Merchant Option Whether to Redeem (So Long as Gift Card Value Less than $10) California Federal Court Holds

Plaintiff filed a putative class action in California state court against McDonald’s alleging violations of California’s Unfair Competition Law (UCL) and unjust enrichment. Marilao v. McDonald's CORP., 632 F.Supp.2d 1008, 1009-10 (S.D. Cal. 2009). According to the allegations underlying the class action complaint, plaintiff sought “to redeem a gift card he received for cash instead of dining at McDonald's, but was told…that he could not receive cash for his gift card.” Id., at 1010. The class action complaint further alleged that “McDonald's gift cards provide…‘[t]he value on this card may not be redeemed for cash ... unless required by law.’” Id. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), id., at 1009-10. McDonald’s then moved to dismiss the class action for failure to state a claim, id., at 1010. The district court granted the motion and dismissed the class action with leave to amend.

With respect to the class action’s UCL claim, plaintiff alleged that McDonald’s conduct violated California Civil Code § 1749.5(b)(1), which provides that “[a]ny gift certificate sold after January 1, 1997, is redeemable in cash for its cash value, or subject to replacement with a new gift certificate at no cost to the purchaser or holder.” Marilao, at 1011. However, California Civil Code § 1448 provides, “If an obligation requires the performance of one of two acts, in the alternative, the party required to perform has the right of selection, unless it is otherwise provided by the terms of the obligation.” In this case, then, the district court reasoned, McDonald’s had the option of “either redeeming a gift card in cash for its cash value or by replacing a gift card with a new card at no cost to the purchaser or holder.” Marilao, at 1011. The statute relied upon by plaintiff does not compel a contrary finding, so McDonald’s did not violate § 1749.5(b)(1) by refusing to redeem plaintiff’s gift card for cash. Id., at 1011-12. The court stressed that the class action did not implicate § 1749.5(b)(2), added in 2007, which requires merchants to redeem gift certificates with a cash value of less than $10, id., at 1012. The federal court also agreed with defense attorneys that plaintiff lacked standing to assert the class action’s UCL claim because he had not suffered injury in fact, or lost money or property, as a result of the allegedly unfair act. Id., at 1012. The court explained at page 1013, “Plaintiff did not expend money on his gift card, as he alleges that he received it as a gift…. Plaintiff does not allege that he lost money or property, as his gift card still retains its value to redeem it for McDonald's products. Plaintiff also does not sufficiently allege that he has been denied money to which he has a cognizable claim, as Plaintiff is not entitled to redeem his McDonald's gift card for cash whenever presented to McDonald's under § 1749.5(b)(1). Accordingly, the Court concludes that Plaintiff fails to sufficiently allege his standing to bring a claim under the UCL.”

Continue reading "UCL Class Action Defense Cases–Marilao v. McDonald’s: California Federal Court Dismisses Class Action Alleging McDonald’s Legally Required To Redeem Gift Cards For Cash But Grants Leave To Amend Class Action Complaint" »

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

District Court Erred in Denying Motion to Dismiss Class Action because California Statute Regarding Armenian Genocide was Preempted by Foreign Affairs Doctrine Ninth Circuit Holds

In December 2003, plaintiff filed a class action against various defendants on behalf of “persons of Armenian descent who claim benefits from insurance policies issued by” two of the defendants; the class action complaint sought damages for breach of contract and breach of the implied covenant of good faith and fair dealing, among other claims. Movsesian v. Victoria Versicherung AG, 578 F.3d 1052, 1055 (9th Cir. 2009). The class action complaint followed California’s enactment of Code of Civil Procedure section 354.4 in 2000, which “provide[d] California courts with jurisdiction over certain classes of claims arising out of insurance policies that were held by ‘Armenian Genocide victim[s]’” and which “extend[ed] the statute of limitations for such claims until December 31, 2010.” Id., at 1054. The Ninth Circuit noted that “Section 354.4 was modeled after §§ 354.5 and 354.6, which extended the statute of limitations until 2010 for Holocaust-era insurance claims and World War II slave labor claims, respectively…. Both of these sister statutes have been found unconstitutional, because they interfered with the national government's foreign affairs power.” Id., at 1054-55 (citations omitted). Defense attorneys moved to dismiss the class action complaint on the grounds that the class members lacked standing and that Section 354.4 was unconstitutional because it “violated the due process clause of the United States Constitution and was preempted under the foreign affairs doctrine.” Id., at 1055. The district court held that the statute was not preempted and accordingly allowed certain claims in the class action to remain. Id. The Ninth Circuit reversed.

The Circuit Court summarized the case at page 1053 as follows: “Section 354.4 of the California Code of Civil Procedure extends the statute of limitations until 2010 for claims arising out of life insurance policies issued to ‘Armenian Genocide victim[s].’ [Citation.] The primary issue in this appeal is whether § 354.4 interferes with the national government's conduct of foreign relations. We conclude that it does, and accordingly, we hold that the California statute is preempted. The district court's order denying the Rule 12(b)(6) motion to dismiss is reversed.” After summarizing the de novo standard of review, see id., at 1055-56, the Ninth Circuit analyzed the constitutionality of § 354.4 under the foreign affairs doctrine. The Circuit Court explained at page 1056, “This case presents the issue whether § 354.4 of the California Code of Civil Procedure interferes with the national government's power to conduct foreign affairs.” After a detailed analysis, that we do not summarize here, see id., at 1056-60, the Ninth Circuit concluded that “there is an express federal policy prohibiting legislative recognition of an ‘Armenian Genocide,’” id., at 1060. The Circuit Court next turned to whether the statute “clearly conflicts with the presidential foreign policy prohibiting legislative recognition of an Armenian Genocide,” and concluded that it did because it uses the phrase, “Armenian Genocide.” See id., at 1060-61.

Continue reading "Class Action Defense Cases–Movsesian v. Victoria Versicherung: Ninth Circuit Reverses Denial Of Motion To Dismiss Class Action Holding California Statute Regarding Armenian Genocide Unconstitutional" »

Posted In: Class Action Court Decisions

District Court Properly Granted Defense Motion for Summary Judgment as to Commute Time and Preliminary Activities Time, but Issue of Fact Existed as to Whether Postliminary Activity of Daily Transmissions to Employer Warranted Compensation Ninth Circuit Holds

Plaintiff filed a putative class action against his employer, Lojack, alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, the class action complaint alleged that defendant failed to compensate its installation technicians for “time they spent commuting to worksites in Lojack's vehicles and for time spent on preliminary and postliminary activities performed at their homes.” Rutti v. Lojack Corp., Inc., 578 F.3d 1084, 1086-87 (9th Cir. 2009) (footnote omitted). According to the allegations underlying the class action, most installation and repair work was performed on location, and plaintiff was “required to travel to the job sites in a company-owned vehicle.” Id. Lojack paid its installation technicians on an hourly basis, and plaintiff was paid “for the time period beginning when he arrived at his first job location and ending when he completed his final job installation of the day.” Id., at 1086. Plaintiff alleged, however, that he was not compensated for “off-the-clock” activities that he “performed before he left for the first job in the morning and after he returned home following the completion of the last job,” and that “Lojack required technicians to be ‘on call’ from 8:00 a.m. until 6:00 p.m. Monday through Friday, and from 8:00 a.m. until 5:00 p.m. on Saturdays,” during which time they had to “keep their mobile phones on and answer requests from dispatch to perform additional jobs, but they were permitted to decline the jobs.” Id. (footnote omitted). Defense attorneys moved for summary judgment; the district court granted the motion, “holding that [plaintiff’s] commute was not compensable as a matter of law and that the preliminary and postliminary activities were not compensable because they either were not integral to [plaintiff’s] principal activities or consumed a de minimis amount of time.” Id. Plaintiff appealed, id., at 1087. The Ninth Circuit affirmed in part, agreeing that plaintiff’s commute time and preliminary activities were not compensable, but reversed and remanded with respect to plaintiff’s “postliminary activity of required daily portable data transmissions,” id., at 1086.

The Ninth Circuit first held that the time plaintiff spent commuting was not compensable. See Rutti, at 1088-93. The Circuit Court explained that, under the Employee Commuting Flexibility Act, 29 U.S.C. § 254(a)(2), an employer may require an employee to commute in a company vehicle. See id., at 1088-90. Further, the Court held that the conditions placed by defendant on plaintiff’s use of the company vehicle did not render his commute time compensable. See id., at 1090-92 (citing Bobo v. United States, 136 F.3d 1465 (Fed. Cir. 1998), and Adams v. United States, 471 F.3d 1321 (Fed. Cir. 2006)). And finally, the Ninth Circuit held that California law did not require Lojack to compensate plaintiff for his commute time in the company’s vehicle. See id., at 1092-93. Accordingly, the Circuit Court affirmed the district court’s conclusion “that [plaintiff] is not entitled to compensation for the time spent commuting to and from his job sites in a vehicle provided by Lojack under either 29 U.S.C. § 254(a)(2) or California law.” Id., at 1093.

Continue reading "FLSA Class Action Defense Cases–Rutti v. Lojack: Ninth Circuit Affirms Defense Summary Judgment In FLSA Class Action Except As To One Claim Seeking Compensation For Postliminary Activities" »

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

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

Two class actions – one in Georgia and one in Ohio – were filed against various defendants including RBS Worldypay arising out of “an unauthorized intrusion into RBSW’s computer system.” In re RBS Worldpay, Inc., Customer Data Security Breach Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 9, 2009) [Slip Opn., at 1]. According to the allegations under the class actions, the intrusion meant that various personal information (including Social Security numbers) of more than one million holders of gift cards and payroll cards was allegedly compromised.” Id. Defense attorneys for RBS Worldpay filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of Georgia; plaintiffs in the Georgia class action supported the motion. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Northern District of Georgia was the appropriate transferee court because “RBSW is headquartered in Atlanta, a significant amount of discovery is likely to take place in that district.” Id. Accordingly, the Panel transferred the Ohio class action to Georgia. Id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

As a Matter of First Impression, in the “Med-Pay” Automobile Insurance Context, the “Made Whole” Rule does not Include Liability for Attorney Fees California Supreme Court Holds

Plaintiff filed a putative class action in California state court against auto insurance company, 21^st Century Insurance, alleging violations of the state’s Unfair Competition Law (UCL), conversion, unjust enrichment and declaratory relief. 21^st Century Ins. Co. v. Superior Court, 47 Cal.4th 511, 518-19 (Cal. 2009). According to the allegations underlying the class action complaint, plaintiff was injured in a car accident; her auto insurance policy, issued by 21^st Century, “included first party, no-fault medical payment (med-pay) insurance coverage in case of an accident,” and she received $1,000 under this provision. Id., at 518. Plaintiff filed suit against the driver of the other vehicle and settled that lawsuit for $6,000, “which sum represented her total damages. In obtaining the settlement, she incurred approximately $2,000 in attorney fees and costs,” id. Her insurer sought reimbursement of the $1,000 previously paid under the policy; the parties ultimately agreed on the return of $600 by plaintiff, which represented the insurer’s pro rata share of attorney fees expended by the insured in pursuing the third party. Id., at 519. Plaintiff then filed her class action against 21^st Century, alleging that “21st Century could not lawfully require any reimbursement under its policy terms because she had not been made whole by the third party damages settlement ($6,000) and medical payments received from the insurer ($1,000) when her attorney fees of $2,106.50 were included as part of her made whole recovery.” Id. Defense attorneys demurred to the complaint on the ground that California law does not require an insurer to include attorney fees or costs in its made-whole calculation. Id., at 520. The trial court rejected this argument, but the Court of Appeal granted defendant’s petition for writ relief and reversed, holding that attorney fees fall under the “common fund doctrine.” Id. The California Supreme Court granted plaintiff’s petition for review. The Court explained, “The narrow issue before us in this writ proceeding is whether the made-whole rule includes liability for all the attorney fees insureds must pay in order to obtain medical payment compensation from a third party tortfeasor.” Id., at 518. It held that “although the made-whole rule applies in the med-pay insurance context, and the insured must be made whole as to all damages proximately caused by the injury, liability for attorney fees is not included under the made-whole rule.” Id. Rather, “[t]hose fees instead are subject to a separate equitable apportionment rule (or pro rata sharing) that is analogous to the common fund doctrine,” id. The Court therefore affirmed the appellate court decision requiring dismissal of the class action.

The California Supreme Court explained at page 518, “Insurance policies typically have, and her policy did have, a provision requiring her to reimburse her insurer for monies she recovered from a third person that duplicated her recovery under her policy. Underlying these provisions, the basic idea is that insureds should not recover the same amount twice, once from their insurance company and again from a third party. In sum, insureds are entitled to be ‘made whole’ from the insurance proceeds and tort recovery, but they are not entitled to a double recovery.” The Supreme Court’s holding is fully summarized above, and we do not discuss it further. We note, however, that the Court stressed the limited application of its decision: “Our analysis is limited to auto insurance med-pay cases. The reason is that automobile insurance coverage may differ in scope from coverage under other liability policies or homeowner's property insurance that may or may not have reimbursement provisions, insurer participation requirements, or definitions that apply only to the particular insurance policy terms.” 21^st Century, at 518 n.1.

Posted In: Class Action Court Decisions

Class Action Alleging RESPA Violations by Home Builder for Offering Discount on Closing Costs for use of Affiliated Lender Properly Dismissed because Mere Offering of such an Option does not Violate RESPA or HUD Regulations Eleventh Circuit Holds

Plaintiffs filed a putative class action against home builder D.R. Horton and its affiliated mortgage lender, DHI Mortgage, alleging violations of the federal Real Estate Settlement Procedures Act (RESPA). Yeatman v. D.R. Horton, Inc., 577 F.3d 1329, 1329 (11th Cir. 2009). According to the allegations underlying the class action complaint, plaintiffs agreed to purchase a home built by D.R. Horton and agreed to finance the home through its affiliate because the purchase agreement gave them “the option of receiving a discount on their closing costs on the house, provided they used DHIM as their mortgage lender.” Id., at 1329-30. The purchase agreement did not require plaintiffs to use DHIM as their lender, id., at 1330. Defense attorneys moved to dismiss the class action on the ground that the offer to discount closing costs if purchasers used an affiliate did not violate RESPA; the district court agreed, concluding that “the mere offering of an option of a discount on closing costs does not violate [RESPA],” and that it also did not violate the regulations promulgated by the Department of Housing and Urban Development (HUD) “prohibiting arrangements where consumers are required to use a specified service in order to buy another service or product.” Id. (citations omitted). Id., at 3-4. Accordingly, the district court granted defendants’ motion and dismissed the class action with prejudice. Id., at 1329. Plaintiffs appealed, and the Eleventh Circuit affirmed. The sum total of the Circuit Court’s analysis was, “We have considered the briefs and the well-reasoned opinion of the district court. We conclude that the district court properly dismissed [plaintiffs’] complaint with prejudice.” Id., at 1330. It therefore affirmed the dismissal of the class action, id.

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

Class Action Complaint Alleging Securities Fraud Violations Arising from Disclosures Concerning Drug under Development Failed to State Claims under Section 10(b) of the Securities Exchange Act of 1934 or Rule 10b-5 New York Federal Court Holds

Plaintiffs filed a putative class action against French pharmaceutical company Sanofi-Aventis and certain individual defendants alleging violations of the Securities Exchange Act of 1934; specifically, the class action complaint alleged that defendants misrepresented facts concerning the company’s “research activities and attempt to market a drug called ‘rimonabant’ used to treat obesity and related illnesses.” In re Sanofi-Aventis Sec. Litig., ___ F.Supp.2d ___ (S.D.N.Y. September 25, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, during the approval process the FDA sent Sanofi an approval letter for the drug’s use in connection with obesity, but a non-approval letter with respect to the drug’s use as a smoking cessation aid.” Id., at 2-3. Additionally, the FDA expressed concern “that use of rimonabant in treating obesity might be associated with higher rates of suicidality and other mood disorders.” Id., at 3. However, defendants’ disclosures allegedly failed to disclose the scope of the FDA’s concerns. Id., at 4. Defense attorneys moved to dismiss the class action complaint. Id., at 1. The district court granted the motion and dismissed the class action complaint.

With respect to the class action’s claims under Section 10(b) and Rule 10b-5, the federal court noted that “the complaint must explain why the allegedly misleading misstatements were fraudulent in order to satisfy the pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure.” In re Sanofi-Aventis, at 5 (citation omitted). Based on the court’s analysis, the class action failed to identify any material misstatements or omissions sufficient to state a securities fraud claim. See id., at 5-10. Moreover, the class action complaint failed to satisfy the scienter requirement. See id., at 10-13. And because plaintiffs failed to “establish a primary violation of the securities laws,” the claims under Section 20(a), seeking to impose liability on the individual defendants, failed as a matter of law. Id., at 13. Accordingly, the district court granted defendants’ motion and dismissed the class action complaint without leave to amend. Id., at 14.

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

Class Action Complaint Alleging AT&T Violated State Consumer Protection Laws Concerning Advertising of Premium Cell Phone Properly Dismissed as to False Advertising and Declaratory Relief Claims but UCL, CLRA and Fraud Claims Improperly Dismissed California Appellate Court Holds

Plaintiffs filed a putative class action against AT&T Wireless alleging violations of various state consumer protection laws; specifically, the class action complaint was “based upon AT&T‟s marketing and sale of premium cell phones that operated on a wireless network that AT&T allegedly modified in a manner that rendered those premium cell phones essentially useless.” Morgan v. AT&T Wireless Services, Inc., 177 Cal.App.4th 1235 (Cal.App. 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, AT&T sold the Sony Ericsson T68i as a premium cell phone that “could make and receive calls around the world and had other advanced technologies”; at the time, however, AT&T knew that “it had no intention to continue to support and service the T68i” and modified its wireless system so as to render the phone “worthless.” Id., at 3. AT&T also allegedly sought to “surreptitiously ‘phase out’ these worthless premium phones without paying any compensation to the purchasers, or providing them with a new phone of equal capabilities and compatible with the changes made to their system,” id. The original class action complaint was 13 pages long and alleged violations of California’s Unfair Competition Law (UCL), False Advertising Law, Consumers Legal Remedies Act (CLRA), fraud and declaratory relief; the third amended class action complaint contained the same claims for relief but had “morphed” into a 47-page long pleading “after the trial court sustained AT&T‟s successive demurrers on the ground that the complaint lacked the requisite specificity.” Id., at 2. The trial court again sustained AT&T’s demurrer to the class action complaint because “plaintiffs’ theory of recovery [was] obscured by extraneous allegations in the third amended complaint” and because “plaintiffs still failed to identify with particularity any actionable misrepresentations made by AT&T.” Id. The Court of Appeals affirmed in part and reversed in part, sending the class action back for further proceedings.

We do not here summarize the allegations in each variation of the class action complaint. See Morgan, at 3-13. Nor do we summarize the theories underlying the class action’s claims for relief. See id., at 13-17. In ruling on AT&T’s demurrer, the trial court observed that the class action complaint “included so much extraneous matter that it was difficult to determine what plaintiffs’ theory was, and which allegations supported that theory.” Id., at 18. The trial court concluded, “In sum, no CLRA damages claim is stated because no CLRA notice was given. Plaintiffs‟ argument that pre-suit notice provided to [AT&T] as required by the CLRA may be provided 2 years into the case, with the filing of an amended complaint, is rejected. No fraud claim is stated because plaintiffs do not allege what specific misrepresentation was made to them that they relied on and were injured by. At most, a UCL or FAL claim might be found amongst the foliage, but plaintiffs have not identified where.” Id., at 19. Because plaintiffs had “failed to identify with particularity any actionable misrepresentation by AT&T” after four attempts to do so, and because plaintiffs had not identified how the class action complaint may be amended to rectify this deficiency, the trial court sustained the demurrer without leave to amend. Id.

Continue reading "AT&T Class Action Defense Cases–Morgan v. AT&T: California Appellate Court Reinstates Class Action Against AT&T Holding Class Action Complaint Sufficiently Alleged UCL, CLRA and Fraud To Survive Demurrer" »

Posted In: Class Action Court Decisions

Judicial Panel Grants Plaintiffs’ Requests for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs or Common Defendants, and Transfers Actions to Eastern District of Pennsylvania

Ten (10) class actions – eight in New Jersey, one in New York and one in Pennsylvania – were filed against various defendants alleging antitrust violations; specifically, the class action complaints allege “price fixing in a claimed nationwide market for blood reagent products and seek recovery under federal antitrust law” In re Blood Reagents Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 17, 2009) [Slip Opn., at 1, 2]. Twenty (20) related class actions were treated as potential tag-along cases, id., at 1 n.1. Plaintiffs’ lawyers in three of the New Jersey class actions filed two motions with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the District of New Jersey. Id., at 1. The motion for consolidation was not opposed, but the parties proposed various venues for transfer. Responding plaintiffs in other New Jersey class actions supported the motion; responding parties in Pennsylvania class actions, supported the motion but requested transfer to Pennsylvania; responding parties in Texas class actions, together with class actions pending in other states, requested transfer to Texas; still other responding parties requested transfer to Illinois or South Carolina. Id., at 1-2. Certain common defendants requested centralization in Georgia, id., at 2. The Judicial Panel granted the motion to centralize the class action lawsuits and decided on the Eastern District of Pennsylvania as the appropriate transferee court. Id.

Posted In: Multidistrict Litigation, 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 Improperly Removed to Federal Court under CAFA (Class Action Fairness Act) because Declaration of Plaintiff’s Counsel in Unrelated Lawsuit Against Different Defendant was Insufficient to Establish $5 Million Amount in Controversy and, in Any Event, did not Constitute an “Other Paper” within Meaning of Removal Statute, Warranting Remand of Class Action and Award of Attorney Fees and Costs for Frivolous Removal Washington Federal Court Holds

Plaintiff filed a putative class action in Washington state court against Motricity alleging violations of Washington’s Consumer Protection Act; specifically, the class action complaint alleged that defendant “facilitated placing unauthorized charges for mobile content on customers’ bills.” Rynearson v. Motricity, Inc., 626 F.Supp.2d 1093, 1095 (W.D. Wash. 2009). Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act); plaintiff moved to remand the class action to state court (Rynearson I). Id., at 1094-95. Defense attorneys argued that “the estimate of the cost of injunctive relief was sufficient to establish the amount in controversy requisite for jurisdiction,” and at oral argument added that “removal would also be appropriate based on the damages sought by Plaintiff because of a declaration filed by Plaintiff's counsel in a separate case,” id., at 1095. The district court remanded the class action to state court, id. Defense attorneys then removed the class action to federal court again (Rynearson II), this time arguing that while it had removed the class action previously, it now sought “to remove this action based on new and previously unknown grounds.” Id.¸ at 1096. Specifically, the second removal was based on the declaration of plaintiff’s counsel (Edelson) in a different matter that, according to defense counsel, constituted an “other paper” for removal purposes. Id. Plaintiff’s lawyer moved the district court to reassign Rynearson II to the court that had handled Rynearson I, and sought an OSC re contempt and sanctions, in addition to remand. Id. The district court denied the OSC, but remanded the class action and awarded plaintiff fees and costs. Id., at 1094-95.

In order to establish the $5 million threshold of removal jurisdiction under CAFA, defense attorneys argued that the declaration plaintiff’s counsel in an unrelated case showed that the amount in controversy had been met. Rynearson, at 1096. In explaining why that declaration was “new and previously unknown” when it had been relied on in Rynearson I, defense counsel claimed that this was true because Motricity had been unaware of the declaration at the time it had filed its first notice of removal. Id., at 1096-97. The district court was unimpressed. First, the Court held that the “other paper” may not be a pleading filed in an unrelated case “where the litigants are entirely different.” Id., at 1097. Accordingly, it had no bearing on Rynearson II. Id., at 1098. Second, while it was admittedly “perplexed by Motricity’s description of the Edelson declaration as ‘new and previously unknown,’” it found that defendant’s conduct did not rise to the level of civil contempt. Id. However, the federal court did find that defendant’s conduct warranted an award of attorney fees and costs, as there was no legal authority supporting defendant’s broad use of the phrase “other paper” to include documents filed in other actions. Id., at 1098-99. In the district court’s view, “Defendant's argument in support of removal was frivolous and unsupported by caselaw or a plain reading of the removal statute.” Id., at 1099. Accordingly, the federal court again remanded the class action to state court, and awarded plaintiff attorney fees and costs. Id.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, 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,

Continue reading "FDCPA Class Action Defense Cases–Hicks v. Client Services: Florida Federal Court Denies Motion To Decertify Class Action Holding De Minimis Recovery Does Not Defeat Rule 23(b)'s Superiority Requirement" »

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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by New York Class Action Plaintiffs, and Transfers Class Actions to Southern District of Florida

Three class actions – two in Florida and one in New York – were filed against various defendants, including various Banco Santander entities and HSBC entities, alleging securities laws violations; specifically, the class action complaints allege that “defendants failed to perform adequate due diligence before investing money from their fund, Optimal Multiadvisors, Ltd., and some of its sub-funds with Bernard L. Madoff’s investment firm, Bernard L. Madoff Investment Securities LLC (BLMIS).” In re Optimal Strategic U.S. Equity Fund Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 11, 2009) [Slip Opn., at 1]. Defense attorneys for Banco Santander filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of Florida; plaintiffs in the Florida class actions and attorneys for various HSBC defendants either supported or did not oppose the motion. Id. Plaintiffs in the New York class action opposed centralization, and argued alternatively for transfer to the Southern District of New York. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that “the nature of the due diligence that defendants conducted prior to investing fund assets in BLMIS, all actions will likely focus on a significant number of common events, defendants, and/or witnesses.” Id. The Panel also agreed that the Southern District of Florida was the appropriate transferee court because “[c]ommon defendant Banco Santander International is headquartered in that district and two actions are already pending there, including the first-filed action.” Id. Accordingly, the Judicial Panel ordered the New York class action transferred to the Southern District of Florida, id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Filed in State Court Against Defendant and Co-Defendant Debtor in Bankruptcy Removable to Federal Court under CAFA (Class Action Fairness Act) because Co-Defendant Sued in Violation of Automatic Stay and because Co-Defendant’s Bankruptcy does not Preclude Defendant from Removing Class Action to Federal Court Third Circuit Holds

Plaintiffs filed a putative class action against JEVIC Transportation and its parent company, Sun Capital Partners, alleging labor law violations; specifically, the class action complaint alleged that defendants violated New Jersey’s WARN Act which, “[l]ike its federal counterpart, …requires advance notice of a plant closing under certain circumstances.” Brown v. JEVIC, 575 F.3d 322, 325 (3d Cir. 2009). JEVIC had filed for bankruptcy protection, and the class action was filed as an adversary proceeding in the United States Bankruptcy Court, id. One week later, and despite the automatic stay afforded by the bankruptcy proceeding, plaintiffs filed a class action in New Jersey state court against JEVIC and Sun Capital Partners. Id. Defense attorneys for JEVIC removed the state court class action to federal court under the Class Action Fairness Act (CAFA); the district court remanded the class action sua sponte on the grounds that the automatic stay precluded the debtor’s petition for removal. Id. Defense attorneys for Sun Capital then removed the state court class action to federal court under CAFA; the district court again remanded the class action, ruling that “[w]hen an action is initiated after the filing of a Chapter 11 petition, in violation of the accompanying stay, removal is not available.” Id., at 325-26. The Third Circuit granted Sun Capital’s petition for leave to appeal the remand order, id., at 326. The Circuit Court explained at page 325, “In this appeal implicating the Class Action Fairness Act of 2005, we consider whether a defendant is precluded from removing a class action to federal court because a co-defendant is in bankruptcy. We hold that it is not.”

The Third Circuit began its analysis by noting that Sun Capital bore the “heavy burden” of establishing federal court jurisdiction. Brown, at 326 (citation omitted). Central to the Circuit Court’s analysis was the fact that Sun Capital was not in bankruptcy, so the district court’s reliance “on cases dealing with debtor defendants who attempted to remove actions” were inapplicable. Id. Also central to its analysis was the fact that the state court class action against JEVIC was improper because it was filed in knowing violation of the automatic stay, so plaintiffs had “improperly joined JEVIC in the [state court class action], [and] that joinder cannot prevent Sun from removing the action.” Id. In essence, plaintiffs fraudulently joined JEVIC in the state court class action. Id., at 326-27. The Third Circuit summarized its holding at page 327: “In sum, because [plaintiffs] had no reasonable basis to believe that JEVIC was amenable to suit, we hold that JEVIC was a fraudulently joined party and its status as a Defendant could not be used to defeat otherwise proper federal jurisdiction.” (The Third Circuit also held that the district court erred in remanding the class action to state court because JEVIC had never been served with legal process and therefore was not properly before the district court. See id., at 327. We do not here analyze that aspect of the Circuit Court's opinion.) Accordingly, the Circuit Court reversed the district court order remanding the class action to state court, id., at 329.

Continue reading "Class Action Defense Cases–Brown v. JEVIC: Third Circuit Reverses Order Remanding Class Action To State Court Holding Class Action Properly Removed Under Class Action Fairness Act Despite Fact Co-Defendant Was In Bankruptcy" »

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

District Court did not Err in Granting Summary Judgment on Class Actions’ Claims Alleging Antitrust Violations in the Form of Unlawful Tying Arrangements in the Sale of Undeveloped Properties because Challenged Conduct did not Adversely Affect Competition in the Market Ninth Circuit Holds

Plaintiffs filed four separate putative class actions against several defendants alleging “that various realtors representing developers tied the sale of undeveloped lots to services and commissions for developed property in violation of the federal and state anti-trust laws.” Blough v. Holland Realty, Inc., 574 F.3d 1084, 1087 (9th Cir. 2009). According to the class action complaints, “Buyers entered into agreements with homebuilders to purchase developed lots (an undeveloped lot with a newly-constructed home) in different subdivisions in the Boise, Idaho area. Realtors represented the developers of the subdivisions in allocating lots to the homebuilders. The price of the developed lot that Buyers paid to the homebuilders included a commission (or referral fee) for Realtors, typically calculated as a percentage of the total price of the developed lot. It is apparently the custom in Idaho for the seller, rather than the buyer, to pay the commission owed to the listing agent and to the selling agent (the agent assisting the buyer's search for a property) when a transaction closes. Buyers claim the Realtors engaged in a per se unlawful tying arrangement when they tied the sale of undeveloped lots (the tying product) to their services and commissions on the sale of developed lots (the tied product).” Id., at 1088. Plaintiffs’ lawyer moved the district court to certify the litigation as a class action: the district court granted class action treatment for purposes of class-wide adjudication of the tying claim. Id. The district court “identified the tying product as sales of undeveloped lots and the tied product as Realtors' services, i.e., commissions, with regard to sale of developed lots.” Id. As the Circuit Court explained, “The class consists of those who: (1) bought undeveloped lots in subdivisions where Realtors had the exclusive right to market lots on behalf of the developer; (2) were required to build a house on the lot in order to buy the lot; and (3) were required to pay Realtors a commission based on the cost of the lot plus the actual or estimated cost of the house in order to buy the lot.” Id. Defense attorneys for the realtors moved for summary judgment, and plaintiffs sought additional discovery “into other members of the class to determine whether any of them wanted to buy the services of a listing agent from someone other than Realtors.” Id. The district court denied plaintiff’s request for further discovery “on the ground that they had shown no plausible reason to believe that other members of the class (unlike themselves) would want to purchase the tied product from anyone else,” and granted defendants’ motion for summary judgment “concluding that Buyers failed to show that the alleged tying practice ‘affects a not insubstantial volume of commerce in the tied product market.’” Id. (citation omitted). The Circuit Court explained at pages 1086-87, “Applying the doctrine of ‘zero foreclosure,’ the district court granted summary judgment to the realtors because there is no market for listing and referral services among potential buyers of newly-constructed houses, thus no competition in the tied market to be harmed.” Plaintiffs appealed, and the Ninth Circuit affirmed.

Continue reading "Class Action Defense Cases–Blough v. Holland Realty: Ninth Circuit Affirms Summary Judgment Of Antitrust Class Action Claims Because There Was No Adverse Effect On Competition In The Tied Product Market" »

Posted In: Class Action Court Decisions

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.

Continue reading "FedEx Class Action Defense Cases–Babineau v. Federal Express: Eleventh Circuit Affirms Denial Of Class Action Treatment Of Putative Labor Law Class Action Claims Holding Rule 23(b)(3)’s Predominance Requirement Not Met" »

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

District Court Erred in Dismissing Class Action Complaint Alleging Violations of Fair Credit Reporting Act (FCRA) on Ground that Plaintiff had not Suffered any Actual Injury because FCRA Allows for Recovery of Statutory Damages for Willful Violations Without Showing of Actual Injury Sixth Circuit Holds

Plaintiff filed a putative class action against Telecheck Services and others alleging violations of the federal Fair Credit Reporting Act (FCRA); specifically, the class action complaint alleged that defendants – “a group of foreign corporations who provide check-verification services” – “failed to account for a 2002 change in the numbering used by the Tennessee driver’s license system, leading their systems to reflect incorrectly that many Tennessee consumers…were first-time check-writers.” Beaudry v. Telecheck, ___ F.3d ___ (6th Cir. August 28, 2009) [Slip Opn., at 1, 2]. According to the allegations underlying the class action complaint, defendants’ actions constituted a “willful failure to provide accurate information [and] entitled the class members to ‘declaratory relief, injunctive relief, statutory damages, punitive damages, attorneys’ fees, costs and expenses.’” Id., at 2. Defense attorneys moved to dismiss the class action complaint on the grounds that (1) plaintiff “failed to allege that she had been injured by a FCRA violation,” and (2) “that the statute of limitations had run.” Id. The district court dismissed the class action , holding that plaintiff “had not alleged any injury and that the statute does not authorize courts to grant injunctive relief.” Id. Plaintiff appealed. The Sixth Circuit stated at page 1, “Because FCRA’s private right of action does not require proof of actual damages as a prerequisite to the recovery of statutory damages for a willful violation of the Act, we reverse.”

The Circuit Court began by summarizing the FCRA, and the differences between negligent violations of the FCRA and willful violations of the FCRA. See Beaudry, at 2-3. Of particular relevance is the fact that willful violations allow a party to recovery statutory damages without showing actual injury. Id., at 4-5. Defense attorneys nonetheless argued that the FCRA requires a showing of some form of “consequential damages” – in this case, however, plaintiff “‘has not…had a check rejected or any other transaction terminated as a result of a TeleCheck recommendation’; nor has she ‘suffered any harm with respect to the availability of credit.’” Id., at 4. The Sixth Circuit disagreed, noting that the FCRA “imposes no such hurdle on willfulness claimants.” Id. Rather, the FCRA allows for the recovery of either actual damages (in the event the violation was negligent) or statutory damages as fixed by Congress (in the event the violation was willful). Id., at 5-6. Accordingly, the district court erred in dismissing the class action complaint on the ground that plaintiff had not suffered any actual injury, id., at 9. The Circuit Court therefore reversed the district court order and remanded the class action for further proceedings. Id., at 10.

Continue reading "FCRA Class Action Defense Cases–Beaudry v. Telecheck: Sixth Circuit Reverses Dismissal Of FCRA Class Action Holding Private Right Of Action Under FCRA Does Not Require Proof Of Actual Damages" »

Posted In: FCRA Class Actions, Class Action Court Decisions

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by California Class Action Plaintiffs, and Transfers Class Actions to Southern District of New York

Ten class actions – nine in New York and one in California – were filed against various Citigroup entities alleging securities laws violations “by misleading investors about the nature of Citigroup’s investments and the company’s financial condition.” In re Citigroup Inc. Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 7, 2009) [Slip Opn., at 1]. Specifically, the class action complaints alleged that the Citigroup defendants made “material misstatements or omissions in Citigroup’s disclosures about the company’s holdings in and exposures to subprime-related assets.” Id., at 2. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of New York; attorneys for the California class action plaintiffs opposed the motion. Id., at 1. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Southern District of New York was the appropriate transferee court because Citigroup is headquartered in that federal district and because nine of the ten class actions “are already pending in the Southern District of New York before one judge who is also presiding over related derivative and ERISA litigation.” Id., at 2. Accordingly, the Panel ordered the California class action transferred to the Southern District of New York, id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Properly Removed to Federal Court under Class Action Fairness Act (CAFA) because Defendants Adequately Established $5 Million Amount in Controversy and because Plaintiffs Failed to Establish that Local Controversy Exception or Home-State Controversy Exception Applied Massachusetts Federal Court Holds

Plaintiffs filed a putative class action in Massachusetts state court against GMAC Mortgage and various other defendants challenging defendant’s mortgage foreclosure practices; specifically, the class action complaint alleges GMAC violated Massachusetts state law in connection with its foreclosure proceedings because “the foreclosed mortgages had not been validly assigned to the foreclosing banks at the time the foreclosure actions were undertaken.” Manson v. GMAC Mortgage, LLC, 602 F.Supp.2d 289, 291-92 (D. Mass. 2009). Plaintiffs’ class action seeks to represent some 1000 people, all residents of Massachusetts residents, “whose primary residence was foreclosed by a power of sale...by a defendant that did not contemporaneously possess a written assignment of the underlying mortgage at the time the Notice of Sale was served” or “who face a pending foreclosure initiated by a defendant that did not have a written assignment of the underlying mortgage when the Notice of Sale was served and/or when a Right to Cure notice was sent.” Id., at 292. According to the allegations underlying the class action complaint, “the defendant banks and law firms knew that the foreclosures violated: (i) the Statute of Frauds…; (ii) the statutory notice and sale requirements…; and (iii) the common-law duty of good faith and diligence.” Id. Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act), id. Plaintiffs moved to remand the class action to state court on the grounds that the $5 million amount-in-controversy had not been shown and that CAFA’s “local controversy” or “home-state controversy” exceptions required that the district court “decline jurisdiction.” Id. The district court denied plaintiffs motion, concluding that the class action had been properly removed.

The federal court began by noting that CAFA, inter alia, creates federal jurisdiction over class actions with minimal diversity where the combined amount in controversy exceeds $5 million and the class action involves 100 members or more. GMAC, at 293. Plaintiffs conceded that minimal diversity was present and that the putative class contained more than 100 members, but insisted that it was not “reasonably probable” that the amount in controversy exceeded $5 million at the time of removal. Id. (In this regard, the district court observed that the time of removal was the relevant inquiry because “[e]vents subsequent to removal that reduce the amount in controversy do not divest a federal court of CAFA jurisdiction.” Id., at 293 n.5 (citing Coventry Sewage Assocs. v. Dworkin Realty Co., 71 F.3d 1, 6 (1st Cir. 1995)).) Under plaintiffs’ analysis, the class action seeks primarily injunctive and declaratory relief, and each class members’ monetary damage is approximately $1200; thus, the amount in controversy is only $1.2 million. GMAC, at 293. Defense attorneys countered that a total of 3,934 loans were “referred for foreclosure” during the putative class period, with 1,048 of these loans proceeding to foreclosure and 48 foreclosed properties being sold to third parties for more than $15 million. Id., at 293-94. GMAC argued that this fact went directly to “plaintiffs’ contingent claim that defendants may be liable for the collective replacement value of the homes that were foreclosed.” Id., at 294 n.8. In the alternative, defense attorneys argued that “the actual amount assessed foreclosed borrowers in costs and fees was approximately $8,000 per transaction,” not the $1200 figure provided by plaintiffs, which would make the amount in controversy approximately $8 million. Id., at 294. The district court found defendant’s evidence sufficient to meet the amount in controversy test, id.

Continue reading "CAFA Class Action Defense Cases–Manson v. GMAC Mortgage: Massachusetts Federal Court Denies Motion To Remand Class Action To State Court Holding Class Action Removable Under CAFA" »

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

Class Action Improperly Removed to Federal Court (Twice) because Defendant Failed to Establish $5 Million Amount in Controversy Required by Class Action Fairness Act (CAFA) and Basis for Defendant’s Removal of Class Action Warrants Sanctions Sua Sponte California Federal Court Holds

Plaintiff filed a putative class action in California state court against Motricity alleging violations of every conceivable statute, including the kitchen sink (see NOTE), arising from Motricity’s alleged act of billing for unwanted mobile content. Walker v. Motricity Inc., 627 F.Supp.2d 1137, 1139-40 (N.D. Cal. 2009). According to the allegations underlying the class action complaint, Motricity “allegedly operates mobile transaction networks to help companies develop, deliver and bill for ‘mobile content’ services to compatible mobile devices in California and the nation,” including such services as “customized ring tones, premium text messages, and sports score reports,” and is purportedly “able to reach and bill millions of wireless subscribers nationwide and has registered thousands of transactions and processed thousands of dollars in California over recent years.” Id., at 1139. Plaintiff alleges that Motricity billed her for “unwanted mobile content services on her cellular telephone bill in the form of premium text messages” that she did not authorize, leading to the filing of her class action. Id., at 1139-40. But plaintiff’s act of excessive pleading was more than matched by defendant’s act in response. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), but the district court granted plaintiff’s motion to remand the class action on the ground that Motricity failed to show the requisite $5 million amount in controversy. Id., at 1139, 1140. Defense attorneys again removed the class action to federal court under CAFA “just fifteen days later,” based on a declaration filed by plaintiff’s counsel in an unrelated action which (Motricity alleged) set forth a ratio for revenue that would (if applied in this case) meet the $5 million threshold for removing class actions under CAFA. Id., at 1140. Plaintiff again moved to remand it to state court. Id. The district court granted plaintiff’s motion, and awarded sanctions for frivolous removal of the class action.

After summarizing CAFA and noting the removing party’s burden of demonstrating that removal jurisdiction exists, see Walker , at 1140-41, the federal court observed that Ninth Circuit authority establishes “different burdens of proof for establishing removal jurisdiction in the CAFA context, depending on what has been pled in the complaint,” id., at 1141. If the class action complaint specifically alleges the amount of damages at issue, then it must appear to a “legal certainty” that the amount prayed for is incorrect; in other words, “If the complaint alleges specific damages in excess of the jurisdictional minimum, then the amount in controversy is presumptively satisfied unless it appears to a ‘legal certainty’ that the claim is actually for less than the jurisdictional minimum, whereas if the specific damages are less than the statutory minimum, it must be shown to a legal certainty that the amount in controversy exceeds that minimum for removal.” Id., at 1141 (citation omitted). But if the complaint does not specify the amount in controversy, then “then the court must look beyond the facts of the complaint and apply the preponderance of the evidence standard.” Id. (citations omitted). In its initial order granting plaintiff’s motion to remand the class action to state court, the district court noted that the class action complaint is silent as to the amount in controversy so Motricity was required to show that the amount in controversy exceeded $5 million. Id., at 1141-42. Because it failed to meet that burden, the court remanded the class action to state court. Id.

Continue reading "Class Action Defense Cases–Walker v. Motricity: California Federal Court Remands Class Action To State Court Holding CAFA’s Amount In Controversy Requirement Not Met And Sanctions Defendant For Removal" »

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, 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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, but Transfers Class Actions to District not Mentioned by Any of the Parties, the District of Massachusetts

Two class actions – one in Missouri and one in New York – were filed against various defendants, including Forest Laboratories and Forest Pharmaceuticals alleging that defendants “engaged in false and misleading promotion of Celexa and Lexapro for pediatric or adolescent use and sought to induce physicians and others to prescribe Celexa or Lexapro by providing them with various forms of illegal remuneration.” In re Celexa & Lexapro Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 19, 2009) [Slip Opn., at 1-2]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of New York; plaintiffs in the New York class action supported the motion, and plaintiffs in the Missouri class action ultimately did not object to transfer to the Eastern District of New York. Id., at 1. Plaintiffs in a potential tag-along class action pending in the Southern District of New York requested transfer to that district, id. The Judicial Panel granted the motion to centralize the class action lawsuits but selected the District of Massachusetts as the appropriate transferee court. Id. The Panel explained at page 2, “The two qui tam actions that apparently spawned the actions now before the Panel are pending in the District of Massachusetts. Also, centralization in this district permits the Panel to assign the litigation to an experienced judge who is not presently overseeing another multidistrict litigation docket and who has a caseload relatively favorable for this assignment.”

Posted In: Class Actions In The News, Multidistrict Litigation, Class Action Court Decisions

Class Action Complaint Adequately Pleaded Claims Against Individual Defendants Arising out of Alleged “Mortgage Foreclosure Rescue Scam” but Defendants’ Counterclaims for Fraud were Barred by Doctrine of Res Judicata Maryland Federal Court Holds

Plaintiffs filed a putative class action against Metropolitan Money Store and others alleging that they were “involved in a mortgage foreclosure rescue scam”; specifically, the class action complaint alleged that plaintiffs were “homeowners with substantial equity in their homes, but who were nevertheless facing foreclosure” which “made them targets of Defendants’ promise of credit repair and foreclosure avoidance, which, in actuality, involved fraudulent representations and transactions designed to siphon off the equity in the homeowners’ homes, thus leaving them in a far worse position than before.” Proctor v. Metropolitan Money Store, 645 F.Supp.2d 464 (D.Md. 2009) [Slip Opn., at 1]. Eventually, plaintiffs filed a second amended class action complaint and renewed their motion for class action certification. Id., at 1-2. The class action complaint at issue alleged fraud, RICO, RESPA, Maryland’s PHIFA, and gross negligence. Id., at 2-3. Defendants opposed class action treatment, and defense attorneys for two of the individual defendants again moved to dismiss the class action complaint and filed counterclaims against plaintiffs for “fraud, fraudulent concealment, negligent misrepresentation, fraudulent misrepresentation, and civil conspiracy to commit mortgage fraud.” Id., at 2. Plaintiffs moved to dismiss the counterclaims against them. Id. The district court denied class action treatment and plaintiffs appealed. Id. The district court granted plaintiffs’ motion for class certification but did not discuss its reasoning in the order discussed by this article. See id., at 37. With respect to the motions to dismiss, the federal court denied defendants’ motion to dismiss the class action claims against them, but granted plaintiffs’ motion to strike defendants’ counterclaims.

We do not here focus on the district court’s analysis of the class action claims against the individual defendants. See Proctor, at 4-. For our purposes, it is sufficient to note that the federal court found the class action complaint pleaded fraud with the requisite particularity, see id., at 4-10, that it adequately pleaded causes of action for RICO violations, see id., at 11-23, that it adequately pleaded violations of RESPA, see id., at 24-28, and the PHIFA, see id., at 28-32, and that it adequately pleaded a claim for gross negligence, see id., at 32-34. We focus instead on defendants’ counterclaims against plaintiffs. It is important to note that the federal court dismissed the counterclaims on the ground that they were barred by the doctrine of res judicata. See id., at 35-37. Specifically, defendants had “filed a lawsuit against [plaintiffs’] attorneys arising from the transactions that form the basis of this litigation in the Circuit Court for Montgomery County on June 18, 2008 for the same or substantially similar claim[s] they now assert against the Plaintiffs.” Id., at 35. And while plaintiffs technically were not parties to that action, they were in privity with their attorneys and defendants “received a full and fair opportunity in state court to present their claims,” id., at 35-36. Defendants were now seeking to relitigate those claims, id., at 36-37, which resulted in a final judgment on the merits adverse to defendants, id., at 37. Accordingly, the district court granted plaintiffs’ motion to dismiss the counterclaims, finding them barred by the doctrine of res judicata. Id., at 37.

Posted In: Class Action Court Decisions

District Court Erred in Dismissing Class Action because Class Action’s State Law Claims Alleging Snapple’s Use of Term “All Natural” was Deceptive were not Impliedly Preempted by Federal Nutrition Labeling and Education Act Third Circuit Holds

Plaintiff filed a putative class action in New Jersey state court against Snapple Beverage Corporation alleging inter alia violations of the state’s Consumer Fraud Act; specifically, the class action complaint alleged that plaintiff purchased a Snapple beverage advertised as “All Natural” when in truth the beverage “contained high fructose corn syrup (‘HFCS’), an ingredient manufactured from processed cornstarch.” Holk v. Snapple Beverage Corp., 575 F.3d 329 (3rd Cir. 2009) [Slip Opn., at 1, 5-6]. According to the allegations underlying the class action complaint, “the FDA has acknowledged[] ‘[t]he word “natural” is often used to convey that a food is composed only of substances that are not manmade and is, therefore, somehow more wholesome.’” Id., at 5. The class action therefore alleged that use of the phrase “All Natural” was deceptive because the beverages contain HFCS. Id., at 6, 7. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id., at 7. Eventually, defense attorneys moved to dismiss the class action’s claims on the grounds that they were preempted by federal law, id. Ultimately, the only issue before the district court was “the claim that Snapple products containing HFCS were deceptively labeled ‘All Natural.’” Id. The district court agreed that plaintiff’s claims were preempted and dismissed the class action, id., at 7-8. The district court rejected the express preemption argument, but concluded that plaintiff’s claims were “impliedly preempted by the detailed and extensive regulatory scheme established by the [FDCA] and the FDA’s implementing regulations.” Id., at 8. The Third Circuit reversed.

The Third Circuit noted that Congress has regulated food and beverage labeling for more than 100 years.” Holk, at 3. The statute implicated by this class action is the Nutrition Labeling and Education Act (NLEA), enacted in 1990. Id., at 5. The Circuit Court also noted that there is “a presumption against preemption.” Id., at 11 (citation omitted). Additionally, health and safety issues, including the labeling and branding of food and beverage, has “traditionally fallen within the province of state regulation.” Id. (citation omitted). The federal government became involved in this field only 100 years ago, id., at 11-12. And finally, the Third Circuit held that Snapple’s arguments in the district court waived the express preemption ground as a basis for affirming the judgment on appeal, id., at 12-15, and that “field preemption” did not apply, id., at 15-22. So the Court turned to the issue of implied preemption.

Continue reading "Class Action Defense Cases–Holk v. Snapple: Third Circuit Reverses Dismissal Of Class Action Holding Class Action’s State Law Claims Regarding "All Natural" Label Not Preempted By Federal Nutrition Labeling And Education Act" »

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

Class Action Complaint Alleging Violation of Federal Odometer Act Survives Defense Motion to Dismiss because Class Action’s Claim under the Act Pleaded Fraud with Requisite Particularity New York Federal Court Holds

Plaintiffs filed a putative class action against Subaru of America alleging violations of the Federal Odometer Act and related state laws; specifically, the class action complaint alleged that Subaru manufactured vehicles “with defective odometers that deliberately overstated the vehicles’ mileage.” Vasilas v. Subaru of America, Inc., ___ F.Supp.2d ___ (S.D.N.Y. August 5, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, Subaru’s conduct resulted in “shortening the life span of the vehicles’ warranty coverage, decreasing the resale value of their automobiles, and penalizing plaintiffs with unwarranted ‘excessive mileage’ charges on leased automobiles.” Id. Defense attorneys moved to dismiss the class action on the grounds that the Odometer Act “is inapplicable to original factory-installed odometers which, regardless of their inaccuracy, are performing consistent with the manner that they were designed and manufactured to operate.” Id. The district court denied the motion, ruling that a claim for relief may be pursued for alleged violations of the Odometer Act.

The district court noted that the class action complaint did not allege that the odometers installed by Subaru were defective; rather, the gravamen of the class action was that “Subaru knowingly and purposefully (a) used, (b) installed or (c) had installed into the vehicle a device that biased, altered and inflated the mileage recorded on the vehicle’s odometer from the actual mileage traveled by the vehicle.” Vasilas, at 2. Further, when customers began complaining about possible inaccuracies in the mileage reported, “Subaru expressly, but falsely, represented to its customers that its odometers accurately recorded the actual mileage,” id. In considering Subaru’s motion to dismiss, the federal court noted that “a private plaintiff suing for violations of the Odometer Act must adequately plead that defendant acted with an intent to defraud,” id., at 3-4 (citation omitted), and that fraud must be pleaded with particularity under Rule 9(b), id., at 4.

Continue reading "Class Action Defense Cases–Vasilas v. Subaru: New York Federal Court Denies Motion To Dismiss Class Action For Violation Of Federal Odometer Act Holding Class Action Complaint Adequately Alleged Fraud" »

Posted In: Class Action Court Decisions

Class Action Alleging Improper Charges for Settlement Services Failed to State Claim under Real Estate Settlement Practices Act (RESPA) because Class Action Described an “Overcharge” Rather than a “Markup” or a “Fee Split” and Remaining Class Action State Law Claims Dismissed without Prejudice because Court Refused to Exercise Supplemental Jurisdiction over them New Jersey Federal Court Holds

Plaintiffs filed a putative class action against various North American Title entities alleging inter alia violations of the federal Real Estate Settlement Practices Act (RESPA) and the New Jersey Consumer Fraud Act; specifically, the class action complaint alleged that defendants charged improper fees in connection with the refinancing of residential mortgages. Tubbs v. North Am. Title Agency, Inc., 622 F.Supp.2d 207, 207-08 (D.N.J. 2009). According to the allegations underlying the class action complaint, defendants acted as closing agent when plaintiffs refinanced home loans that they had with Wachovia Bank, id., at 208. Among the closing costs charged by defendants was “release recording fee” of $150, but defendants “did not actually record the release of the mortgages”; instead, “Wachovia prepared and recorded the necessary documents…, and passed through to the borrower the $40 per mortgage recording fee charged by the County.” Id. Defense attorneys moved to dismiss the class action, and plaintiffs filed an amended class action complaint that largely tracked the original. Id., at 208-09. Defense attorneys again moved to dismiss the class action, id., at 209. The district court granted the motion.

The federal court explained that the gravamen of the class action’s RESPA claim was that defendants “violated RESPA by charging a settlement fee for which no services were performed.” Tubbs, at 209. Relying on Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384 (3d Cir. 2005), plaintiffs argued that defendants’ charge for recording a release was a “markup” prohibited by Section 8(b) of RESPA. Tubbs, at 209. But the district court explained that Santiago drew a distinction between a “markup” and an “overcharge,” which “occurs when the settlement service provider charges the consumer a fee, of which only one portion is a fee for the reasonable value of ‘services rendered.” Id. (citing Santiago, at 387). The distinction is important because under Santiago “the plain language of Section 8(b) does not provide a cause of action for overcharges.” Id., at 210 (citation omitted). Defendants did not actually engage in “fee splitting” because the fee charged by Wachovia “was not for the same settlement service.” Id. The district court explained at page 210 that the $40 fee charged by Wachovia was “not a fee for any service Wachovia was providing” but represented “the actual cost of recording the discharge with the Camden County Clerk’s office” and Wachovia “was passing on the county recording fee for the mortgage satisfaction as permitted by New Jersey Statute.” Further, the $25 fee charged by Wachovia was “for its work in preparing the mortgage satisfaction and arranging for its recording.” Id.

Continue reading "RESPA Class Action Defense Cases–Tubbs v. North American Title: New Jersey Federal Court Dismisses Class Action RESPA Claim And Dismisses Balance Of Class Action After Declining Jurisdiction Over Class Action’s State Law Claims" »

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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over the Objections of Class Action Plaintiffs, but Transfers Class Actions to Western District of Washington

Four class actions – two in Florida and one each in Michigan and Washington – were filed against various defendants, including Park West Galleries and Fine Art Sales, alleging “that defendants operated a fraudulent scheme to sell fake, worthless, or low-value artwork at shipboard auctions or in private sales through the use of phony appraisals and/or other sales-related documentation.” In re Park West Galleries, Inc., Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. August 11, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of Michigan; defense attorneys for the Holland America entities – “the only cruise line defendants” – did not oppose the motion, but the Panel noted that they were parties only in the Washington class action. Id. Plaintiffs in one of the Florida class actions and in the Washington class action opposed the motion, or requested transfer to the districts in which their respective class action was pending. Id. The Judicial Panel granted the motion to centralize the class action lawsuits but concluded that the Western District of Washington was the appropriate transferee court because “[that] action is measurably more advanced than the action pending in the Eastern District of Michigan, the forum favored by moving defendants.” Id. Accordingly, the Panel ordered the class actions outside of Washington transferred to the Western District of Washington. Id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Complaint Alleging RICO and State Consumer Protection Law Violations Arising from Sale of “Mill Bred” Puppies to “Unsuspecting Consumers” who Believed they were Acquiring the “Finest Available” Puppies Failed to State Claims Against Defendants Arizona Federal Court Holds

Plaintiffs filed a putative class action against Petland and Hunte Corporation, purportedly on behalf of a class of “residents of various states who bought a Petland puppy, alleging violations of Racketeer Influenced and Corrupt Organizations Act (RICO) [“predicated on alleged violations of the federal mail and wire fraud statutes”], conspiracy, violations of various state consumer protection laws, and violation of Ohio’s Consumer Sales Practices Act.” Martinelli v. Petland, Inc., ___ F.R.D. ___ (D.Ariz. August 7, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, Petland, “a large national retailer of pets,” and Hunte, which “supplies many of the puppies sold at Petland stores,” promised to sell puppies that were “bred under safe and humane conditions by a reputable breeder with proper canine husbandry practices” but were, instead, bred at a “puppy mill,” described by the class action complaint as “a dog breeding operation in which the health of the dogs is disregarded in order to maintain a low overhead and maximize profits.” Id., at 1. The class action alleged that, because of the manner in which they were bred, “their puppies were sick at the time of purchase or became ill shortly thereafter.” Id. The class action alleged a “scheme” to sell mill-bred puppies to “unsuspecting consumers” who believed they were buying “the finest available” puppies from USDA-approved “professional and hobby breeders who have years of experience in raising quality family pets.” Id., at 2. Plaintiffs also claimed that an 8-month investigation by the Humane Society “confirm[ed] Petland’s practice of misrepresenting and concealing the origin of puppy mill puppies.” Id. Defense attorneys moved to dismiss the class action, id., and the district court granted the motion but with leave to amend.

The federal court first addressed Petland’s motion. Petland, at 3. Defense attorneys argued the RICO and state consumer protection claims failed because “ (i) the alleged misrepresentations are mere puffery, rather than actionable statements of material fact, (ii) the allegations of non-disclosure…fail to state a claim for relief, and (iii) the allegations of fraud have not been pled with particularity.” Id. Also, Petland argued that the class action failed to allege injury or causation, and that as a matter of law the unjust enrichment claim failed. Id. The district court agreed. As to the RICO claim, plaintiffs argued that Petland failed to disclose the origins of its puppies, but plaintiffs failed to allege “that Petland has an independent duty to disclose to consumers the origin of Petland puppies.” Id. Similarly, the RICO claims predicated on alleged misrepresentations failed because plaintiffs failed to plead with particularity the manner in which the “finest available” statements were made. Id., at 4-6. The federal court further agreed that plaintiffs failed to adequately allege proximate cause for their alleged damages, id., at 6-8, and because “proximate causation is an essential element of claims brought under state consumer protection statutes,” id., at 8, the district court granted the motion to dismiss those class action claims as well, id., at 9. Finally, because the unjust enrichment claim is also premised on fraud, that claim failed as well, id.

Continue reading "Class Action Defense Cases–Martinelli v. Petland: Arizona Federal Court Dismisses RICO Class Action Alleging Sale Of "Mill Bred" Puppies As "Finest Available" But Grants Leave To Amend Class Action Complaint" »

Posted In: Class Action Court Decisions

Defense Motions to Dismiss Class Action Granted because Allegations in Class Action Complaint Failed to Meet Rule 9(b)’s Requirements for Pleading Fraud with Specificity and because Class Action’s Allegations Failed under Rule 12(b)(6) New York Federal Court Holds

Plaintiffs filed a putative class action against Merrill Lynch entities, Morgan Stanley entities, Citigroup entities, Charles Schwab entities and Wachovia entities, alleging inter alia violations of the Investment Advisers Act (IAA), the Sherman Antitrust Act, and New York’s General Business Law § 349; the class action complaint alleged that defendants violated state and federal laws by “engaged in ‘deceptive and misleading’ practices relating to a series of ‘Cash Sweep Programs’ that were offered as part of Plaintiffs’ brokerage accounts.” DeBlasio v. Merrill Lynch & Co., Inc., ___ F.Supp.2d ___ (S.D.N.Y. July 27, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action, defendants offered a “Cash Sweep Program” as a feature for brokerage accounts; the program gave customers “the option of having the balance of uninvested funds in their brokerage accounts…placed in — or, ‘swept’ into — other types of investments” so that they could “earn[] interest on the otherwise-uninvested funds in their brokerage accounts.” Id., at 2. While the programs initially swept balances “into money market mutual funds that provided interest rates of approximately five percent” with little profit to defendants, they “subsequently modified their respective Cash Sweep Programs in a deceptive manner in an attempt to capitalize on ‘an immense opportunity for their own profit,’” id., at 2-3. Put simply, the class action alleged that defendants “significantly increased their profits” while “dramatically reduc[ing] the yields paid to their clients on the clients’ uninvested cash,” id., at 3. Defense attorneys for moved to dismiss the class action. Id., at 1. The court granted defendants’ motions and dismissed the class action complaint.

The federal court began by analyzing the sufficiency of the class action’s fraud claims, noting that the case involves “classic fraud allegations” by focusing on defendants’ “deceptive and misleading ‘cash sweep’ programs.” DeBlasio, at 12. Accordingly, plaintiffs were required under Rule 9(b) to plead fraud with specificity, id., at 13, and this applied to each of the claims asserted in the class action save for plaintiffs’ § 349 claim, id., at 15. Plaintiffs’ complaint failed to meet this standard: “Plaintiffs make almost no effort to identify the place and time that the[] alleged misrepresentations were made to them, and Plaintiffs’ allegations regarding why the statements were materially misleading are deficient.” Id., at 16. Accordingly, the district court granted defendants’ motions to dismiss these claims, id., at 17, and dismissed the claims under Rule 12(b)(6) as well, see id., at 17 et seq. Put simply, the allegations in the class action failed to raise the claims against defendants from “conceivable” to “plausible.” Id., at 17-18. We do not here summarize the federal court’s detailed analysis, see id., at 17-46. Finally, the district court rejected plaintiffs’ request for leave to file an amended class action complaint because they failed to identify how any amendment would cure the deficiencies in the complaint. Id., at 46-47. Accordingly, the court granted the motion and dismissed the class action, id., at 47.

Posted In: Class Action Court Decisions

Class Action Complaint Satisfied Amount in Controversy and Minimal Diversity Requirements for Removal under Class Action Fairness Act (CAFA), but Remand Warranted because Plaintiffs Met Burden of Establishing Exception to Removal Jurisdiction in that Class Action Related Solely to Securities New York Federal Court Holds

Plaintiffs, the holders of mortgage-backed securities certificates issued by various trusts, filed a putative class action in New York state court against various Countrywide entities seeking declaratory relief; specifically, the class action complaint alleged inter alia that Countrywide violated the federal Truth-in-Lending Act (TILA). Greenwich Fin. Servs. Distressed Mtg. Fund 3, LLC v. Countrywide Fin. Corp., ___ F.Supp.2d ___ (S.D.N.Y. August 18, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, the Attorneys General for 7 states sued Countrywide in 2008 alleging violations of predatory lending laws; Countrywide settled those lawsuits with “a multistate settlement, requiring it to modify the terms of numerous mortgage loans that it currently services – including at least some of the loans it services on behalf of plaintiffs.” Id., at 2-3. Plaintiffs argued that the loan modifications caused them to suffer monetary damage, and that Countrywide was required to repurchase the loans that it modified “at a price equal to the unpaid principal and accrued interest thereon” in order to make plaintiffs whole. Id., at 2-3. Defense attorneys removed the class action to federal court; Countrywide argued that removal was proper under the Class Action Fairness Act of 2005 (CAFA), and further argued that the class action was removable “because plaintiffs’ claims raise substantial, disputed federal questions under the Truth-in-Lending Act [(TILA)],” id., at 1. Plaintiffs moved to remand the class action to state court. Id. The district court held that neither CAFA nor TILA provided subject-matter jurisdiction over the dispute and remanded the class action as requested.

The district court first examined whether removal jurisdiction existed under CAFA, which authorizes removal of class actions where the amount in controversy exceeds $5 million and where minimal diversity exists. Greenwich, at 4. (A more detailed discussion of CAFA may be found HERE.) Plaintiffs conceded that the requirements for removal had been met, but countered that their class action fell within an exception to removal – viz., a class action that “solely involves a claim…that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security.” Id. (quoting 28 U.S.C. § 1332(d)(9)(C)). The burden of establishing that the exception applied rests with plaintiffs, id. Relying on the Second Circuit decision in Estate of Barbara Pew v. Cardarelli, 527 F.3d 25 (2d Cir. 2008), the district court held that the class action fell squarely within the scope of the exception to CAFA removal jurisdiction, see Greenwich, at 4-8, and rejected Countrywide’s arguments to the contrary, see id., at 8-11.

Continue reading "Class Action Defense Cases–Greenwich v. Countrywide: New York Federal Court Remands Class Action To State Court Holding Class Action Complaint Fell Within Exception To CAFA (Class Action Fairness Act) Removal" »

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

Labor Law Class Action Seeking to Hold Individual Managers Liable for Wages due Employees Properly Dismissed as to Class Action Claims under Nevada State Law, but Improperly Dismissed as to Class Action Claims under Federal Fair Labor Standards Act (FLSA) Ninth Circuit Holds

Plaintiffs, former employees and their local union, filed a putative class action in Nevada state court against individual managers of the Castaways Hotel, Casino and Bowling Center alleging violations of state and federal labor laws; specifically, the class action complaint alleged that That the three individual managers – the Chairman and CEO, who had a 70% ownership interest in Castaways, the CFO, who had a 30% ownership interest in the Castaways, and the head of labor and employment matters for the Castaways – were personally liable for the state and federal labor law violations because “each defendant had custody or control over the ‘plaintiffs, their employment, or their place of employment at the time that the wages were due.’” Boucher v. Shaw, ___ F.3d ___ (9th Cir. July 27, 2009) [Slip Opn., at 9731, 9734-36]. According to the allegations underlying the class action, plaintiffs were not paid for their final pay period or were paid late, and were not paid for accrued vacation and holiday time. Id., at 9735. Plaintiffs had filed the lawsuit against the individuals because the Castaways was in Chapter 11 bankruptcy proceedings at the time the plaintiffs were fired, and subsequently went through a Chapter 7 liquidation. Id. Defense attorneys removed the class action to federal court, and moved to dismiss the class action complaint for failure to state a claim. Id., at 9736. The district court dismissed the class action because it found “that the defendants were not ‘employers’ under Nevada law, Local 226 lacks standing to bring a claim under Nevada law and the plaintiffs cannot maintain a cause of action under the Fair Labor Standards Act [(FLSA)] against the defendants.” Id. The Ninth Circuit affirmed in part, but reversed as to the class action’s FLSA claim.

The Ninth Circuit opened its opinion as follows: “This appeal raises three issues: (1) whether the Castaways’ individual managers can be held liable for unpaid wages under Nevada law; (2) whether the union has standing to raise the state law claim; and (3) whether the managers can be held liable under the Fair Labor Standards Act (FLSA).” Boucher, at 9734. Because the question of whether individual managers may be liable under Nevada law for unpaid wages was a matter of first impression, the Circuit Court certified the issue to the Nevada Supreme Court – the Nevada Supreme Court held that “individual managers cannot be held liable as ‘employers,’ and therefore that claim was properly dismissed by the district court.” Id., at 9734, 9737-38. That decision rendered moot the second issue on appeal, as it did not matter whether the local union had standing to raise a state law claim that did not exist. Id., at 9734-35. The issue became, then, whether individual managers may be held liable under the FLSA. Id., at 9735. 9738-39. This was not a matter of first impression in the Ninth Circuit. The Court noted at pages 9739 and 9740 that in Lambert v. Ackerley, 180 F.3d 997, 1011-12 (9th Cir. 1999) (en banc), the Ninth Circuit held:

Continue reading "FLSA Class Action Defense Cases–Boucher v. Shaw: Ninth Circuit Affirms Dismissal Of Labor Law Class Action Claims Against Individual Managers But Reverses As To Class Action's FLSA Claims Against Individuals" »

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

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

Nineteen (19) class actions – seven in the District of New Jersey; two in the Southern District of Texas; and one each in the Middle District of Alabama, the District of Arizona, the Eastern District of California, the Southern District of California, the Northern District of Florida, the Southern District of Florida, the District of Kansas, the Western District of Missouri, the Northern District of Ohio, and the Eastern District of Wisconsin – were filed against Heartland Payments Systems arising from an “electronic intrusion into Heartland’s processing system.” In re Heartland Payment Systems, Inc., Customer Data Security Breach Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of Texas; plaintiffs in four (4) class actions supported the motion, while plaintiffs in two (2) class actions requested centralization in the District of New Jersey, and other plaintiffs “variously support centralization in the aforementioned districts, the District of Kansas, or the Southern District of Florida, in the alternative.” Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Southern District of Texas was the appropriate transferee court, explaining that the parties believe relevant discovery is located in that district and that the district court judge “has the time and experience to steer this litigation on a prudent course.” Id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Approval of Class Action Settlement Required Reversal because (1) Record did not Support Trial Court’s Valuation of Class Claims, (2) Incentive Award of 44 Times Average Recovery of Class Members was Excessive, and (3) Trial Court could not Award Costs in Excess of Amount set forth in Class Notice without Further Notice to Class California Appellate Court Holds

Plaintiffs filed a putative class action in California state court against their employer, American Residential Services alleging labor law violations; the class action complaint alleged that defendant failed to pay minimum wage or overtime, and failed to provide meal and rest periods. Clark v. American Residential Services LLC, ___ Cal.App.4th ___, 96 Cal.Rptr.3d 441, 444 (Cal.App. 2009). Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), but the district court granted plaintiffs’ motion to remand the class action to state court. Id., at 445. Eventually, the parties negotiated a settlement of the class action whereby the two named plaintiffs would receive $25,000 each, and the 2360 class members would receive an average of $560 each. Id., at 444. Additionally, plaintiffs’ attorneys would receive $640,000 in fees and costs as part of the class action settlement, id., at 445. Following notice, 20 members of the putative class objected to the settlement on the grounds that they “worked at least two hours of unpaid overtime every workday, that they would be compensated for only about 1% of the total value of their claims, and that no evidence was presented to the court to justify the settlement.” Id., at 444. According to the objectors, class members would receive only $6 for each week that they had worked for defendant. Id., at 445. Plaintiffs’ counsel responded that the overtime claim had “absolutely no” value, id., at 453. The trial court approved the class action settlement, but the Court of Appeal reversed.

The Court of Appeal noted that its review of class action settlements was “limited in scope.” Clark, at 451. The objectors argued that the trial court apparently relied on plaintiffs’ counsel’s belief that the overtime claim had “‘absolutely no’ value” despite objectors’ counsel’s belief that this evaluation was based on a “staggering mistake of law.” Id., at 444. The appellate court agreed, concluding that the trial court “did not receive and consider sufficient information on a core legal issue, affecting the strength of the case for plaintiffs on the merits, to make the requisite independent assessment of the reasonableness of the terms of the settlement.” Id., at 451 (citation omitted). Additionally, the Court held that “the enhancement or incentive awards were excessive” and that the trial court erred in awarding costs in excess of the maximum amount set forth in the notice to the class, id. The appellate court rejected the argument that the objectors had to prove the settlement was unfair, holding at page 453 that “it is the trial court’s duty, whether or not there are objectors, to employ those factors to evaluate independently the fairness of a proposed settlement.” And in this case, “the record before the trial court…did not contain the information required for ‘an understanding of the amount that is in controversy and the realistic range of outcomes of the litigation.’” Id. (citation omitted). The Court of Appeal held that “the trial court is obligated, at a minimum, to determine whether a legitimate controversy exists on a legal point, if that legal point significantly affects the valuation of the case for settlement purposes.” Id., at 455.

Continue reading "Class Action Defense Cases–Clark v. American Residential: California Appellate Court Reverses Approval Of Class Action Settlement Holding Trial Court Lacked Sufficient Information And Amounts Approved Were Excessive" »

Posted In: 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

District Court did not Abuse its Discretion in Approving Class Action Settlement in Securities Fraud Class Action Filed in United States because Class Members with Claims in Canadian Class Actions were Provided Adequate Notice of the Right to Opt Out of the U.S. Class Action Settlement Eleventh Circuit Holds

Plaintiffs filed a class action against CP Ships, a container shipping company, and others alleging violations federal securities laws; 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.” In re CP Ships Ltd. Securities Litig., 578 F.3d 1306 (11th Cir. 2009) [Slip Opn., at 1]. Defendant is organized under the laws of Canada, headquartered in England, and operates in several countries; 80% of the company’s stock is traded on the Toronto Stock Exchange (TSX), and 20% is traded on the New York Stock Exchange (NYSE). Id. Additionally, “crucial headquarters activities – including the relevant operations and personnel that were central to the fraud (i.e. the accounting department and executive offices) – were located in Tampa, Florida.” Id. According to the allegations underlying the class action complaint, CP Ships acquired 9 business during a 10-year period, each with its own accounting system: the company eventually transitioned to a single accounting system, but later “announced that the transition had caused it to understate its operational costs” causing the stock price to drop by more than 20% on both the TSX and NYSE. Id. This class action complaint followed, as did lawsuits filed in Canada, id. Defense attorneys successfully moved to dismiss the U.S. class action on the grounds that the complaint failed to adequately plead scienter under the heightened pleading requirements established by the Private Securities Litigation Reform Act (PSLRA), but while plaintiffs’ appeal from that order was pending, the parties negotiated a class action settlement. Id. The district court approved the settlement over various objections, including the objections of an individual who was also a class member in a Canadian class action that “the settlement would prevent some members of the Canadian class from pursuing their action in Canada.” Id., at 1-2. All class members were given notice and an opportunity to opt out of the U.S. class action settlement, id., at 1. One of the objectors appealed, and the Eleventh Circuit affirmed.

The objector leveled a multi-prong attack against the class action settlement: (1) the district court lacked subject-matter jurisdiction over the claims of class members who purchased foreign stock, or at the very least, as a matter of comity, should have declined to exercise jurisdiction over the dispute, (2) that the notice was inadequate, and (3) that the terms of the settlement were not fair, reasonable or adequate. In re CP Ships, at 1. The Circuit Court began by considering de novo whether subject matter jurisdiction was present over the dispute. Id., at 2. The Court found that the objector failed to raise a factual challenge to jurisdiction, see id., at 2-3, and concluded that the facial challenge to jurisdiction failed because jurisdiction exists under the “conduct test,” see id., at 3-6. The Eleventh Circuit then readily rejected the objector’s challenge to the adequacy of the notice, id., at 7, and turned to the adequacy of the class action settlement.

Continue reading "Class Action Defense Cases–In re CP Ships: Eleventh Circuit Affirms Class Action Settlement Of Securities Fraud Class Action Holding Class Members Of Canadian Class Actions Could Opt Out" »

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

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.

Continue reading "Class Action Defense Cases–Fener v. Belo: Fifth Circuit Court Affirms Denial Of Class Action Treatment In Securities Fraud Class Action Holding Plaintiffs Failed To Establish Loss Causation" »

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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Objection of Class Action Plaintiffs, and Transfers Actions to Southern District of New York

Three class actions – two in New York and one in Pennsylvania – were filed against Citigroup and others alleging that “Citigroup entities and/or its employees made misrepresentations or omissions in the context of the sale of auction rate securities (ARS).” In re Citigroup, Inc., Auction Rate Securities (ARS) Marketing Litig. (No. II), ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of New York, id. Plaintiffs in one New York class action supported pretrial coordination of the class actions but opposed consolidation; plaintiffs in the Pennsylvania class action opposed the motion in its entirety. Id. The Pennsylvania plaintiffs’ argued “(1) the actions do not share sufficient questions of fact; (2) there are only a few actions involved in the litigation, making voluntary coordination among the parties preferable to formal centralization; and (3) centralization will only lead to delay of the actions,” but the Judicial Panel rejected these objections. Id., at 1-2. The Judicial Panel granted the motion to centralize the class action, finding that this will “eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the resources of the parties, their counsel and the judiciary.” Id., at 1. The Panel also agreed that the Southern District of New York was the appropriate transferee court, as it was “two actions have been pending [there] for over a year” and “Defendants are located in this district, which was the only suggested transferee district, and relevant documents and witnesses may be found there.” Id., at 2. Accordingly, the Judicial Panel ordered the class actions transferred to the Southern District of New York. Id., at 3.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Alleging Antitrust And State Law Violations Against Qualcomm Warranted Dismissal because Plaintiff Lacked Standing to Prosecute Clayton Act/Cartwright Act Antitrust Claims and Failed to Adequately Plead Damage Resulting from Defendant’s Conduct California Federal Court Holds

Plaintiff filed a putative class action against Qualcomm alleging inter alia violations of state and federal antitrust laws, as well as violations of California’s Unfair Competition Law and Unfair Practices Act; specifically, the class action complaint “challenged the lawfulness of Qualcomm’s licensing practices with respect to its intellectual property used for Code Division Multiple Access (‘CDMA’) wireless technology.” Lorenzo v. Qualcomm Inc., ___ F.Supp.2d ___ (S.D.Cal. August 10, 2009) [Slip Opn., at 1-2]. Defense attorneys moved to dismiss the class action; the district court granted the motion, finding in part that plaintiff lacked standing under the Clayton Act because his injury was “too remote from Qualcomm’s alleged antitrust violations” and because “the Complaint fails to allege sufficient facts to support a finding that Plaintiff’s alleged injury is inextricably intertwined with Qualcomm’s unlawful conduct so as to fit within the narrow exception to the market participant requirement.” Id., at 2. But the court gave plaintiff leave to file an amended class action complaint, which he did. Id., at 2-3. Defense attorneys again moved to dismiss the class action, id., at 3; the district court granted the motion without leave to amend but without prejudice.

After setting forth the standard of review, see Lorenzo, at 3-4, the district court turned to the issue of standing under the Clayton Act, id., at 4. Because the amended class action complaint, like the original complaint, alleged that “there are at least three intermediaries – CDMA chipset manufacturers, CDMA device manufacturers, and CDMA device vendors – between Plaintiff’s injury and the alleged antitrust violations,” id., at 5-6, plaintiff’s injury remained too remote to support a Clayton Act claim, id., at 6. The district court granted the motion to dismiss the unfair practice act claims because plaintiff’s allegations in the amended class action complaint were identical to those in the original complaint, id., at 7. And dismissed the unfair competition law claim because plaintiff lacked standing as he had not adequately alleged that he suffered any damage as a result of the alleged representations made by Qualcomm. Id., at 7-10. Accordingly, the district court dismissed the class action complaint without leave to amend. Id., at 11. However, as explained in the Note, it dismissed the action without prejudice, id.

Continue reading "Qualcomm Class Action Defense Cases–Lorenzo v. Qualcomm: California Federal Court Dismisses Antitrust Class Action Complaint Against Qualcomm For Lack Of Standing And Failure To Adequately Plead Damage" »

Posted In: Class Action Court Decisions

Antitrust Class Action Challenging Merger of Anheuser-Busch and InBev Fails as a Matter of Law because InBev could not Reasonably be Viewed as a “Potential Competitor” Prior to the Merger Missouri Federal Court Holds

Plaintiffs, characterizing themselves as “a group of Missouri beer consumers and purchasers,” filed a putative class action against Anheuser-Busch and InBev NV/SA challenging the proposed merger of the companies; the class action complaint alleged that “the merger “violates Section 7 of the Clayton Act because it would eliminate InBev as a ‘perceived’ and ‘actual’ potential competitor” in the United States beer market. Ginsburg v. InBev NV/SA, ___ F.Supp.2d ___ (E.D. Mo. August 3, 2009) [Slip Opn., at 1]. The theory underlying plaintiffs’ class action was that, even though InBev was not yet in the U.S. beer market, its “position on the ‘periphery of the market’ is an important consideration by U.S. brewers in the pricing and marketing of their products” and absent the merger InBev would likely enter the U.S. beer market in competition with Anheuser-Busch. Id., at 3-4. Defense attorneys moved the district court for judgment as a matter of law. Id., at 1-2. The district court granted defendants’ motion, finding the class action’s theory too speculative, id., at 4-5. The district court concluded that, despite InBev’s position as an international industry leader, “no rational actor would have viewed InBev as a perceived potential competitor prior to the merger.” Id., at 6. In fact, “Plaintiffs have not identified any indicators that other U.S. beer brewers believed that InBev was poised to enter the United States beer market.” Id., at 9. Accordingly, the court granted defendants’ motion and entered judgment in favor of defendants on the class action. Id., at 12.

The district court also denied plaintiffs’ request for leave to amend the class action complaint. Ginsberg, at 12. The court denied leave to amend for two reasons. First, because the request was “contained in the conclusion to its Response, not as a separate Motion” and, accordingly, was improper. Id. Second, the district court denied the request “due to the extensive and lengthy briefing of all parties as to the legal basis for the claims asserted,” id.

Posted In: Class Action Court Decisions

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

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Rejects Request of Overwhelming Majority of Responding Parties for Transfer to Northern District of Illinois, and Transfers Actions to Eastern District of Pennsylvania as Requested by Moving Party

Nine class actions –three each in Illinois and Pennsylvania, and one each in the Eastern and Northern Districts of California, and the Southern District of West Virginia – were filed against Comcast and others alleging antitrust violations; specifically, the class action complaints allege that “Comcast improperly tied and bundled the lease of cable boxes to the ability to obtain premium cable services in violation of Section 1 of the Sherman Antitrust Act.” In re Comcast Corp. Set-Top Cable Television Box Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 17, 2009) [Slip Opn., at 1]. Plaintiffs in one of the Pennsylvania class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of Pennsylvania; defendants and plaintiffs in six of the class actions supported pretrial coordination but argued for transfer to the Northern District of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the moving party that the Eastern District of Pennsylvania was the appropriate transferee court, particularly as it was “Comcast is headquartered there, and relevant documents and witnesses will likely be located in that district.” Id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Claims Challenging Increases in Homeowner’s Insurance Premiums Properly Dismissed Except for One Aspect of Breach of Contract Claim Second Circuit Holds

Plaintiff filed a putative class action against his homeowner’s insurer, Chubb, alleging inter alia violations of New York’s Insurance Law and deceptive business practices act; the class action complaint alleged that Chubb violated the terms of the policy “by improperly increasing coverage and premiums without his consent and in excess of the [Consumer Price Index].” Spagnola v. Chubb Corp., ___ F.3d ___, 2009 WL 2231635, *1 (2d Cir. July 28, 2009). Defense attorneys moved to dismiss the class action; the district court granted the motion holding that “the coverage adjustments at issues were properly made pursuant to a mechanism established in the policy.” Id., at *2. The district court also dismissed the class action’s deceptive business practices act claim because “there were not sufficient facts to support a finding that the policy was ‘misleading in a material respect’ or that [plaintiff] or any other member of the putative class was injured as a result.” Id. Plaintiff appealed, and the Second Circuit affirmed in part and reversed in part.

Reviewing the district court’s order de novo, the Second Circuit first addressed whether the district court erred in dismissing the class action’s Insurance Law claim and deceptive business practices claim. Spagnola, at *2. *9. We note here only the Circuit Court’s conclusion that the district court did not err in dismissing these claims. See id., at *2-*4, *8-*9. The Court also had no difficulty in concluding that the district court did not err in dismissing plaintiff’s breach of contract claim based on a “failure to obtain consent” theory, see id., at *4-*5. But the Court agreed with plaintiff that the class action’s breach of contract claim should have survived the motion to dismiss to the extent it was based on the allegation that Chubb “increase[ed] his coverage amounts and premiums in a way that did not reflect current costs and values.” Id., at *5. Chubb conceded that the premium increases were not tied to the CPI but argued this fact was irrelevant, id., at *6; the Circuit Court disagreed, holding that for purposes of the motion to dismiss, Chubb’s arguments failed to adequately negate the class action’s allegation “that the annual increases were not based on current costs and values as required by the express terms of the policy.” Id. The voluntary payment doctrine did not aid defendant because it “does not apply…when a plaintiff made payments under a mistake of fact or law regarding the plaintiff's contractual duty to pay,” and for purposes of the motion to dismiss it was “too early in this case to conclusively answer that question.” Id., at *7 (citations omitted). Accordingly, the district court erred in dismissing this aspect of the breach of contract claim, id., at *8. In all other respects, however, the district court order was affirmed, id., at *9.

Posted In: 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

Class Action Alleging Target Improperly Collected Sales Tax on Sale of Hot Coffee “To Go” Properly Dismissed because Plaintiffs do not have Standing under California Statutory Scheme to Seek Reimbursement from Retailer of Sales Taxes Paid to State and Lack Standing to Directly or Indirectly Enjoin the Collection of Sales Taxes California State Court Holds

Plaintiffs filed a putative class action in California state court against Target alleging that it unlawfully collected sales taxes on purchases of coffee; the class action complaint sought reimbursement of the sales taxes paid by class members, and an injunction against the collection of such sales taxes in the future. Loeffler v. Target Corp., 173 Cal.App.4th 1229, 1234 (Cal.App. 2009). According to the allegations underlying the class action, Target “charged and collected sales tax” on purchases of “to go” and “take-out” hot coffee even though California law allegedly exempted these items from sales tax; accordingly, “plaintiffs suffered monetary loss.” Id., at 1237. “In California, retailers are obligated to pay sales taxes to the state on their gross receipts, subject to certain exemptions,” but they “may, however, seek sales tax reimbursement from their customers.” Id., at 1234. The allegations underlying the class action focused on the theory that Target “was not entitled to collect sales tax reimbursement on purchases of hot coffee ‘to go’ because sales tax was allegedly not due on such purchases.” Id. The class action alleged that Target's conduct violated California's Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA), id., at 1237-38. Defense attorneys demurred to the class action: Target argued that Article XIII, section 32 of the California Constitution “prohibits injunctions against the collection of state taxes and provides that refunds of taxes may only be recovered in a manner provided by the Legislature.” Id., at 1234. “The purpose of this constitutional provision is to ensure that governmental entities may engage in fiscal planning so that essential public services are not unnecessarily interrupted.” Id. The trial court agreed, sustained the demurrer without leave to amend, and dismissed the class action complaint. Id. The Court of Appeal affirmed.

The Court of Appeal explained that only a retailer – as the party who paid the tax – has standing to seek a sales tax refund. See Loeffler, at 1234-35. The California Legislature “has created a comprehensive system for sales tax and sales tax reimbursement refunds,” see id., at 1239-41, and under that scheme plaintiffs do not have standing to commence a sales tax refund suit. Id., at 1242. The appellate court rejected plaintiffs’ novel theory that they were not seeking to enjoin the State from collecting of sales taxes, merely to enjoin a retailer from collecting reimbursement of sales taxes. See id., at 1243-45. The Court of Appeal enunciated a bright-line rule that “a court may not directly or indirectly enjoin or prevent the collection of a sales tax.” Id., at 1235. Accordingly, it affirmed the trial court order dismissing the class action complaint, id., at 1250.

Posted In: Class Action Court Decisions

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.

Continue reading "FedEx Class Action Defense Cases–Babineau v. Federal Express: Eleventh Circuit Affirms Denial Of Class Action Certification Of Labor Law Class Action Holding District Court Acted Within Its Discretion" »

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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Agrees to Transfers Class Actions to District of South Carolina

Two class actions – one in California and one in South Carolina – were filed against various defendants, including LandAmerica and SunTrust Banks, “on behalf of individuals and entities that sought to enter into a Section 1031 tax-deferred exchange and entrusted money to facilitate the exchange with the qualified intermediary LandAmerica 1031 Exchange Services, Inc.” but who “lost their investment due to alleged misconduct by various defendants, including SunTrust, where most such funds were deposited.” In re Landamerica 1031 Exchange Serv., Inc., Internal Revenue Service § 1031 Tax Deferred Exch. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 12, 2009) [Slip Opn., at 1]. Plaintiffs in the South Carolina class action filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in that district or in the District of Nevada; plaintiffs in the California class action supported the motion, but while they did not oppose pretrial coordination in Nevada, they requested centralization either in South Carolina or California. Id. SunTrust also did not oppose centralization, but requested transfer to Georgia or Virginia, and three individual defendants supported transfer to Virginia. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the District of South Carolina was the appropriate transferee court because it was “nearer to SunTrust’s headquarters in Atlanta, Georgia, where relevant documents and witnesses are likely to be found.” Id., at 1-2. Accordingly, it ordered the class actions to be centralized in the District of South Carolina, id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Trial Court did not Err in Approving Class Action Settlement in Class Action Against Bank of America for Invasion of Privacy Arising from Sale of Customer Information to Third Party Marketers and “Clear Sailing Agreement” as to Attorney Fee Award to Class Counsel did not Invalidate Award California Appellate Court Holds

Plaintiffs filed a putative class action against Bank of America and related entities alleging inter alia invasion of privacy arising from the Bank’s alleged disclosure of “personal and confidential information to third party telemarketers and direct mail marketers for a fee, to enable them to market services to plaintiffs”; the class action was coordinated with two similar class actions against the Bank, and a consolidated class action complaint was filed in 2003. In re Consumer Privacy Cases, ___ Cal.App.4th ___, 96 Cal.Rptr.3d 127, 130 (Cal.App. 2009). The trial court certified a state-wide class action, but deferred ruling on plaintiffs’ request for nationwide class action treatment until additional discovery had been completed. Id. The parties negotiated a settlement of the class action in early 2007 that included a provision that the Bank would not oppose any request by class counsel for attorney fees and costs, provided that the request did not exceed $4 million. Id., at 130-31. The trial court rejected objections to the proposed settlement, and approved the class action settlement; the court additionally awarded $2.9 million in attorney fees and $110,000 in costs. Id., at 131. Four of the objectors appealed the court order, id., at 131-32. The Court of Appeal affirmed.

The appellate court first addressed the objectors’ challenge to the award of attorney fees. See In re Consumer Privacy, at 132 et seq. The appellants did not “challenge the total amount of the fee award” or claim that “the award was excessive”; rather, appellants argued “that any settlement process that purports, as here, to separately provide for fees is a legal fiction which is pernicious and unethical, and inherently unfair to class members.” Id., at 132. The class action settlement in this case involved what is referred to as a “clear sailing agreement” with respect to attorney fees, id. After a detailed analysis, that we do not summarize here, the California Court of Appeal rejected this challenge because the trial court did not shirk its obligation to carefully analyze the fee request and to make a reasonable award. See id., at 132-37. The appellate court also rejected the claim that the difference between the amount of attorney fees and costs awarded by the trial court and the $4 million “no challenge” amount somehow belonged to the class. See id., at 137-38. Put simply, there was no “surplus” to be additionally awarded to the class. Id., at 138. Finally, the appellate court rejected the claim that objectors were entitled to attorney fees and costs for prosecuting an unsuccessful appeal, holding that the appeal was of no benefit to the class. Id., at 138-39. Accordingly, the appellate court affirmed the trial court judgment in its entirety, id., at 139.

Posted In: 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.

Continue reading "Labor Law Class Action Defense Cases–Hernandez v. Vitamin Shoppe: California Court Affirms Order Barring Attorney In One Class Action From Contacting Class Members In Related Class Action After Class Conditionally Certified In That Action" »

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

Class Action Settlement Approved by Court Provided Procedure for Timely Submitting Claims for Benefits as part of Resolution of Labor Law Class Action, and Putative Class Member’s Negligence Claims against Class Action Defendant and Negligence/Malpractice Claims against Class Counsel Properly Dismissed because Defendant and Class Counsel Owed no Duty to Class Members to Ensure that they Timely Submitted Claims Forms California State Court Holds

A putative class action was filed in California state court against Allstate Insurance Company (the Sekly action) alleging that the company failed to pay overtime wages to its claims adjusters in violation of California’s Labor Code, and seeking damages and related penalties; several years later, “the parties in the Sekly action agreed to a class action settlement totaling $1.2 million.” Martorana v. Marlin & Saltzman, ___ Cal.App.4th ___, 96 Cal.Rptr.3d 172 (Cal.App. July 1, 2009) [Slip Opn., at 2-3]. The trial court approved the class action settlement, id., at 3. Plaintiff Ron Martorana was a member of the class and, id., at 2, and as “a senior claims adjuster for Allstate, …[he] was entitled to receive approximately $65,000 as his portion of the settlement provided that he submit a timely claim form,” id., at 3. However, because plaintiff filed to timely submit a claim form, he did not receive any of the settlement proceeds, id., at 2. Plaintiff filed suit against Allstate and against counsel for the class alleging that they were “negligent in failing to take action to contact [him] before the claim filing deadline to determine why he had not filed a claim form and to make sure that he was aware of the need to timely do so.” Id. Defendants demurred to the complaint, and the trial court sustained the demurrers and granted Allstate’s request for sanctions under Code of Civil Procedure section 128.7. Id. Plaintiff appealed, and the appellate court affirmed the dismissal of the lawsuit but set aside the award of sanctions.

Approval of the class action settlement followed the usual process: the trial court gave preliminary approval to the class action settlement and a claims administrator sent notice to each member of the class at their last known address; class members had 75 days to submit claim forms or to opt out of the class; and the trial court ultimately gave final approval to the class action settlement finding that it was “fair and adequate and . . . the result of arms length negotiations between the parties.” Martorana, at 3. Plaintiff does not dispute that he received the necessary paperwork; rather, he argued that he submitted an untimely claim form because of health problems. Id. His original complaint alleged negligence against Allstate, and negligence and malpractice against class counsel, id. According to plaintiff, “Allstate and Class Counsel owed a duty to the class as a whole to establish a settlement notice procedure whereby class members who had not responded to the notice would be contacted prior to the claim filing deadline to ascertain the reason why they had not submitted a timely claim form.” Id., at 4. The malpractice claim additionally alleged that “Class Counsel owed a duty to [plaintiff] individually to take reasonable steps to contact him about his failure to file a claim and to make sure that his claim form was timely submitted.” Id. The trial court sustained Allstate’s demurrer without leave to amend, and awarded $4,800 in sanctions because the lawsuit “was so completely devoid of merit that the court finds it was filed to harass, annoy, or vex Allstate.” Id. The trial court sustained the demurrer of class counsel with leave to amend as to the malpractice claim, but when class counsel demurred to the amended complaint, the court sustained the demurrer without leave to amend. Id., at 4-5. Put simply, the court found that class counsel owed, but did not breach, a duty of care to plaintiff. Id., at 5-6.

Continue reading "Class Action Defense Cases–Martorana v. Marlin & Saltzman: California Court Affirms Dismissal Of Claims Against Defendant And Class Counsel Arising From Class Action Settlement By Class Member Who Submitted An Untimely Claim" »

Posted In: 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.

Continue reading "Labor Law Class Action Defense Cases–Vinole v. Countrywide: Ninth Circuit Affirms Order Granting Defense Motion To Deny Class Action Treatment To Labor Law Class Action" »

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

Judicial Panel Grants Unopposed Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, and Transfers Actions to Southern District of New York

Thirty (30) individual and class action lawsuits were filed against Bank of America and other defendants arising out of “alleged misrepresentations and omissions made in the context of Bank of America’s acquisition of Merrill Lynch & Co., Inc.”; 28 of the lawsuits had been filed in New York, and one each in California and Kansas. In re Bank of America Corp. Securities, Derivative & Employee Retirement Income Security Act (ERISA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of New York; plaintiff in the Kansas action requested that the Judicial Panel “coordinate” rather than “consolidate” the lawsuits for pretrial purposes, but otherwise did not oppose the motion. Id. Plaintiffs in a potential tag-along action, filed in Delaware, urged the Panel to transfer the lawsuits to Delaware, id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Southern District of New York was the appropriate transferee court, particularly because “[m]ost of the 28 actions in this district are already pending before [a single judge], who has had an opportunity to become familiar with the contours of this litigation” and because “both Merrill Lynch and Bank of America have a significant presence in the Southern District of New York” so “[r]elevant documents and witnesses can thus be expected to be found there.” Id., at 2. As for the concerns of the Kansas plaintiff, the Judicial Panel directed her to present to the transferee judge her concerns “regarding the manner and extent of coordination or consolidation of her action with the pretrial proceedings in other actions.” Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Counsel Obtained Significant Benefit through Class Action Settlement Following 10-Year Litigation but Requested Multiplier was Excessive given Billing Rates of Class Counsel, Warranting Multiplier of 1.5 rather than 1.79 as Requested New York Federal Court Holds

Plaintiff filed a class action in New York state court against his automobile insurance company following its payment of insurance benefits that allegedly “did not reflect the amount that plaintiff, the insurance adjuster and the dealer had agreed upon. Steinberg v. Nationwide Mutual Ins. Co., 612 F.Supp.2d 219, 220-21 (E.D.N.Y. 2009). Defense attorneys removed the class action to federal court and the district court denied plaintiff’s motion to remand the class action to state court, id., at 221. According to the class action complaint, the insurer “subtracted a $563.17 ‘betterment’ charge reflecting the difference in value between the used engine and the new replacement engine.” Id., at 220. More specifically, the class action “alleged that this betterment deduction was not disclosed in or authorized by his insurance policy” and that the insurer “had taken betterment deductions from millions of insureds with policies similar to his since 1993.” Id. Ultimately the district court granted plaintiff’s motion to certify the litigation as a class action, id., at 221. The litigation dragged on for nearly a decade before it was finally settled, id., at 220. The settlement provides for the insurer to “pay 50% of the total betterment charges that it deducted from the automobile repair estimates of class members who submit valid claims.” Id., at 222. The insurer also agreed to modify its insurance forms, and to pay attorney fees and costs in an amount not to exceed $2.75 million. Id.

While federal courts have awarded attorney fees in class actions either by using the lodestar method or based upon a percentage of the common fund, the district court held that in this case “the latter method would be unworkable because the exact amount paid into the common fund is as yet undetermined.” Steinberg, at 222. Accordingly, the federal court used the lodestar method to determine the appropriate attorney fee award. Id. We do not go into detail in summarizing the court’s ruling. We note that, following its presentation of their lodestar figure, class counsel “requested that the Court exercise its discretion to increase the lodestar figure by applying a multiplier of 1.79 % to increase the total award of costs and fees to $2.75 million-the maximum amount consented to by Nationwide in the parties' Settlement.” Id., at 223. The district court agreed that class counsel had “achieved an excellent result for the class,” id., at 223-24. The district court also explained at page 224, “Here, the relationship between the requested fee and the Settlement is somewhat difficult to assess because it is not clear, ultimately, how much Nationwide will pay into the common fund. However, the Court notes with approval that the fee award will not be drawn from the common fund but will be paid directly by Nationwide. In this regard, the fee award, however substantial, will have no effect on the monetary relief afforded to class members.” Nonetheless, the court concluded that a multiplier of 1.79 “would be excessive” given that “the lodestar figure is already inflated due to the high billable rates proposed by [class counsel].” Id. Accordingly, it agreed to a multiplier of 1.5, id., at 224-25.

Posted In: 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.

Continue reading "FLSA Class Action Defense Cases–Haro v. City of Rosemead: California Court Dismisses Appeal From Denial Of Class Action Treatment Of FLSA Class Action Complaint And Reaffirms FLSA Actions Not Subject To Class Action Treatment" »

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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, but Transfers Actions to Western District of Oklahoma

Four class actions – two in Louisiana and one in Arizona and Georgia – were filed against various defendants, including Cox Enterprises, Cox Communications, Cox Communications Louisiana, Cox Communications New Orleans, and CoxCom (collectively “the Cox defendants”), together with an additional 14 potentially-related class action alleging antitrust violations; specifically, the class action complaints allege “that Cox improperly tied and bundled the lease of cable boxes to the ability to obtain premium cable services in violation of Section 1 of the Sherman Antitrust Act.” In re Cox Enterprises, Inc., Set-Top Cable Television Box Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2008) [Slip Opn., at 1 and n.1]. Defense attorneys for the Cox defendants filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Middle District of Georgia; plaintiffs in both class actions supported the motion. Id., at 1. Plaintiffs in two of the class actions and 5 of the potentially-related actions supported the motion but requested transfer to the Eastern District of Louisiana, while plaintiffs in the other two class actions and 2 of the potentially-related actions supported the motion but requested centralization in the Western District of Oklahoma, id. The Judicial Panel granted the motion to centralize the class action lawsuits but selected the Western District of Oklahoma as the appropriate transferee court, id., at 1-2. The Panel explained that “[a] potentially related action is pending in that district,” and that “Judge Robin J. Cauthron has the time and experience to steer this litigation on an expeditious course.” Id., at 1.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Labor Law Class Action Against Water Storage District Properly Dismissed by Trial Court because Water District Subject to Federal Labor Laws but not State Labor Laws California State Court Holds

Plaintiff filed a putative class action in California state court against his employer, Arvin-Edison Water Storage District (the District), alleging violations of California’s labor code; the class action complaint alleged that defendant failed to pay its employees overtime or to provide meal breaks required by California law. Johnson v. Arvin-Edison Water Storage District, 174 Cal.App.4th 729, 95 Cal.Rptr.3d 53, 55 (Cal.App. 2009). Defense attorneys demurred to the class action complaint on the grounds that “as a public entity, [defendant] is exempt from the subject wage and hour statutes.” Id. The trial court agreed and dismissed the class action, id. Plaintiff appealed, “argu[ing] that, contrary to the trial court's ruling, public employers are subject to the California wage and hour provisions at issue unless they are expressly made exempt.” Id. The California Court of Appeal affirmed the dismissal of the class action, finding that the District is a “municipal corporation” and therefore exempt from California labor laws. Id., at 55-56.

Plaintiff argued that “the [California] Legislature intended that water storage districts provide their employees with overtime and meal periods as required by [California law].” Johnson, at 55. The appellate court summarized the formation of the District and its compliance with the federal Fair Labor Standards Act (FLSA), see id., at 56, the Court observed that the facts were undisputed and the questions of law were subject to independent review, id. (citation omitted). And based on the appellate court’s detailed analysis, the Court concluded that the District is a public agency exempt from California’s labor laws. Id., at 57-62. Accordingly, it affirmed the trial court judgment and awarded costs on appeal to the District, id., at 62.

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

Class Action Settlement Calling for Bar Order, Wiping Out Corporate Officer’s Indemnification Agreement and Advancement of Attorney Fees from Company Properly Approved by District Court Eleventh Circuit Holds

Plaintiffs filed a class action against HealthSouth Corporation and others, including its former chairman and CEO Richard M. Scrushy, alleging securities fraud; the class action complaint was filed in March 2003, after “HealthSouth acknowledged that its previous financial statements had substantially overstated its income and assets.” In re HealthSouth Corp. Sec. Litig., 572 F.3d 854, 2009 WL 1675398, *1 (11th Cir. 2009). According to the several class action complaints that were filed, defendants violated the Securities Act of 1933 and the Securities Exchange Act of 1934. Id. Ultimately, the class actions were consolidated in the Northern District of Alabama, and a partial settlement was reached between HealthSouth and the lead plaintiffs whereby HealthSouth would pay $445 million in settlement. Id. Scrushy was not a party to the settlement (having been prohibited from the mediation as the alleged mastermind of the fraud), and the district court approved the settlement over his objections, id. In part, the settlement included a bar order that extinguished “[Scrushy’s] contractual claims against HealthSouth for indemnification of settlement payments he might make to the underlying plaintiffs and extinguishes his claims for advancement of legal defense costs.” Id.

The basis of the appeal is that, in 1994, “Scrushy and HealthSouth executed an agreement requiring HealthSouth to indemnify Scrushy to the fullest extent permitted by law.” In re HealthSouth, at *1. Specifically, the indemnity agreement “require[d] HealthSouth to indemnify Scrushy for any judgment or settlement in any action in which he is sued for actions taken as a director or officer of the company, if he acted in good faith and reasonably believed he was acting in the best interest of the company.” Id. The bar order, however, wiped out any indemnity obligations, id. Scrushy’s objection was premised on the fact that the bar order “extinguished valuable and enforceable rights to which Scrushy was entitled under his indemnification agreement with HealthSouth.” Id., at *2. But “[t]he Bar Order is reciprocal, extinguishing similar claims by the settling defendants.” Id., at *2 (footnote omitted). The Eleventh Circuit reviewed Scrushy’s challenges to the settlement bar order for an abuse of discretion, id., at *3.

Continue reading "Class Action Defense Cases–In re HealthSouth: Eleventh Circuit Affirms Class Action Settlement Of Securities Fraud Class Action Including Bar Order Impacting CEO’s Indemnity Agreement With Company" »

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

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

Summary Judgment in Telephone Consumer Protection Act (TCPA) Class Action Improper because Text Message may Constitute a “Call” within the Meaning of TCPA and because Triable Issues of Material Fact Exist as to Whether Defendants were “Affiliates” of Nextones.com and therefore Whether Plaintiff Consented to Receive Text Message Ninth Circuit Holds

Plaintiff filed a putative class action against Simon & Schuster, Inc. and ipsh!net Inc. alleging violations of the federal Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227; the class action complaint was filed after plaintiff received an unsolicited text message. Satterfield v. Simon & Schuster, Inc., 569 F.3d 946 (9th Cir. 2009) [Slip Opn., at 7329, 7332-33]. According to the allegations in the class action, plaintiff received the text message after she became a registered user of Nextones.com “in order to receive a free ringtone,” id., at 7333. Plaintiff had signed up at the request of her minor son, and his initials and first three letters of his last name, her email address, zip code, phone number and account information in order to sign up. Id., at 7333-34. Further, she affirmatively agreed to “receive promotions from Nextones affiliates and brands.” Id., at 7334. Plaintiff thereafter received a text message from Simon & Schuster, sent by ipsh!, promoting the sale of a new Stephen King novel, id. Plaintiff’s number was one of 100,000 cell phone numbers obtained by ipsh! from Mobile Information Access Company (MIA), the “exclusive agent for licensing the numbers of Nextones subscribers.” Id. Defense attorneys moved for summary judgment on the class action claims on the grounds that “(1) it had not used an ATDS [Automatic Telephone Dialing System], (2) [plaintiff] had not received a ‘call’ within the meaning of the TCPA, and (3) [plaintiff] had consented to the message and had not been charged for its receipt.” Id., at 7335. The district court granted the summary judgment “holding that (1) Simon & Schuster and ipsh! had not used an ATDS and (2) [plaintiff] had consented to receiving the message.” Id. The district court did not reach the issue of whether the text message was a “call” within the meaning of the TCPA, id. The Ninth Circuit reversed.

After summarizing the TCPA, the Ninth Circuit held that the district court erred in granting summary judgment because “there was a disputed issue of material fact as to whether the system Simon & Schuster used was an ATDS; (B) the text message was a ‘call’ within the meaning of the TCPA; and (C) [plaintiff] did not consent to the receipt of such a message, because Simon & Schuster is not an affiliate or brand of Nextones.” Satterfield, at 7336-37. First, the Circuit Court held that the district court erroneously limited an ATDS to a phone system that “produced, or called numbers ‘using a random or sequential number generator.’” Id., at 7337. Based on its analysis of the statute, the Ninth Circuit held that the relevant inquiry is “whether the equipment has the capacity ‘to store or produce telephone numbers to be called, using a random or sequential number generator,’” not whether it actually did so in the particular case at bar. Id., at 7337-38. So defined, the Court reversed summary judgment because it found “a genuine issue of material fact with regard to whether this equipment has the requisite capacity,” id., at 7338.

Continue reading "Class Action Defense Cases-Satterfield v. Simon & Schuster: Ninth Circuit Reverses Defense Summary Judgment In Class Action Holding Text Message Is A "Call" Under TCPA And Triable Issues Exist As To Class Action Plaintiff's Consent To Receive Text Message" »

Posted In: Class Action Court Decisions

Judicial Panel Grants Defense Request for Pretrial Coordination of 38 Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, and Transfers Actions to Northern District of Ohio even though Only One of the Class Actions was Pending in that District

Thirty-eight (38) class actions were filed against common defendant C.B. Fleet (Fleet) and various defendants alleging products liability claims; specifically, the class action complaints allege oral sodium phosphate solution-based (OSPS) products by Fleet were unsafe and caused personal injuries because they “high doses of OSPS products could lead to acute phosphate nephropathy, a type of kidney injury, and that Fleet knew of the risks associated with high doses of OSPS but downplayed or obscured those risks.” In re Oral Sodium Phosphate Solution-Based Products Liability Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 23, 2009) [Slip Opn., at 1, 2]. Defense attorneys for Fleet filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of Ohio – 13 of the class actions were pending in Arizona, 4 class actions were pending in Georgia, 3 class actions were pending in California, Colorado and Florida, and 2 class actions were pending in Minnesota, but only one lawsuit had been filed in the Northern District of Ohio. Id., at 1. As one might expect from the number of class actions involved, the view of responding plaintiffs ranged from full support to objections and requests for exclusion from any centralization order, see id., at 1-2. The Judicial Panel granted the motion to centralize the class action lawsuits, rejecting the argument by some plaintiffs that “their actions are too far advanced to warrant inclusion in the centralized proceedings.” Id., at 2. The Panel left to the discretion of the transferee court the resolution of such issues, id. The Judicial Panel also agreed that the Northern District of Ohio was the appropriate transferee court, even though only one action was currently pending in that district, and accordingly it ordered all other actions transferred to that district. Id., at 2-3.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Alleging Violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA) Properly Dismissed because Heightened Pleadings Requirements of Rule 9(b) for Fraud Applied to Allegations in Class Action Complaint and Plaintiff Failed to Allege Fraud with Requisite Specificity Ninth Circuit Holds

Plaintiff filed a putative class action in California state court against Ford Motor and certain dealerships (collectively “Ford”) alleging violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA); specifically, the class action complaint . Kearns v. Ford Motor Co., 567 F.3d 1120, 1122 (9th Cir. 2009). Defense attorneys removed the class action to federal court on grounds of diversity; the district court denied plaintiff’s motion to remand the class action to state court under the “local controversy exception” to the Class Action Fairness Act (CAFA). Id., at 1123. According to the allegations underlying the class action, Ford sells vehicles as either new, used, or Certified Pre-Owned (CPO) – “CPO vehicles are late model used vehicles, which Ford purports to put through a rigorous inspection process in order to certify that the vehicle's safety, reliability, and road-worthiness surpass non-certified used vehicles.” Id., at 1122. Ford sells CPA vehicles for more than it sells non-certified used vehicles, id., at 1122-23, and the class action alleged that Ford “acted illegally to increase sales of [its CPO] vehicles, in violation of the CLRA and UCL,” id., at 1122. Defense attorneys moved to dismiss the third amended class action complaint on the grounds that the UCL and CLRA claims were premised on allegations of fraud, and that the class action complaint failed to plead fraud with the particularity required by Rule 9(b). Id. The district court granted the motion to dismiss but gave plaintiff an additional opportunity to amend the class action complaint; plaintiff refused, believing that the complaint satisfied the requisite pleading requirements, and the district court dismissed the class action, id., at 1123-24. Plaintiff appealed, and the Ninth Circuit affirmed.

The gravamen of the class action complaint is that “Ford makes false and misleading statements concerning the safety and reliability of its CPO vehicles.” Kearns, at 1123. According to the class action, “by making such false statements, Ford conspires to mislead class members into believing that the CPO program guarantees a safer, more reliable, and more roadworthy used vehicle.” Id. Ford allegedly charges an additional $1,000 dollars for CPO vehicles, but fails to disclose that provides “very little oversight…over the certification process.” Id. The class action complaint further alleged “that Ford misrepresents (1) the quality of the complete repair and accident-history report; (2) the level of training of CPO technicians; and (3) the rigorous certification inspection.” Id. Plaintiff claims “the inspection is not rigorous; the warranty does not cover all components; and the CPO vehicles are not any safer, more reliable, or more roadworthy than a regular used vehicle.” Id.

Continue reading "Ford Class Action Defense Cases–Kearns v. Ford Motor: Ninth Circuit Affirms Dismissal Of Class Action Under California UCL/CLRA Holding Class Action Complaint Failed To Satisfy Rule 9(b)’s Heightened Pleading Requirements" »

Posted In: 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

Settlement of State Labor Law Class Action and Federal Law FLSA Claims by Putative Class Action Plaintiffs, Following Denial of Conditional Certification of FLSA Collective Action and Before any Other Plaintiffs Agreed to Opt-In to Litigation, Rendered Moot Appeal from Denial of Motion for Conditional Certification Despite Effort to Preserve Right to Appeal Ninth Circuit Holds

Plaintiffs Mentha Smith and Justin Gossett, former sales representatives of T-Mobile, filed a putative class action against T-Mobile USA purportedly on behalf of 25,000 workers alleging labor law violations; specifically, the class action complaint “alleged that T-Mobile willfully failed to pay its hourly employees for all the hours they worked, forcing employees to work ‘off the clock’ and denying pay for hours worked during breaks.” Smith v. T-Mobile USA Inc., ___ F.3d ___ (9th Cir. June 15, 2009) [Slip Opn., at 7129, 7132]. The class action alleged violations of the federal Fair Labor Standards Act (FLSA), and of California’s Labor Code and Unfair Competition Law (UCL), id., at 7132. The district court denied plaintiffs’ first motion for conditional class action treatment of the FLSA claims, id., at 7132-33. However, the district court “tolled the statute of limitations until discovery was complete and the court could rule on a second motion for conditional certification.” Id., at 7133. Ultimately, the district court denied plaintiffs’ second motion for class action “collective” treatment of the FLSA claims, and plaintiffs settled their individual claims with T-Mobile. Id. The settlement included resolution of any attorney fee claim by plaintiffs, id., at 7133-34. Before finalizing this settlement, plaintiffs advised the district court that they desired to preserve their right to appeal its denial of their motion for conditional certification of an FLSA collective action, and the district court signed a stipulated judgment that purported to preserve plaintiffs’ right to appeal. Id., at 7134. Plaintiffs appealed, and the Ninth Circuit dismissed the appeal as moot.

The Ninth Circuit explained, “We review de novo whether a case is moot and whether plaintiffs have standing.” Smith, at 7135 (citations omitted). The Circuit Court also noted the well-established rule that “The case or controversy requirement of Article III restricts federal court jurisdiction to ‘disputes capable of judicial resolution.’” Id. (citation omitted). And under Supreme Court authority, “Generally, when a party settles all of his personal claims before appeal, an appeals court must dismiss the appeal as moot unless that party retains a personal stake in the case that satisfies the requirements of Article III.” Id. (citations omitted). The Ninth Circuit noted that it had not yet resolved the issue of “whether a Rule 23 class action plaintiff who settles his individual claims can preclude mootness by affirmatively preserving his claim to appeal in the settlement agreement and then asserting a procedural right to represent a class.” Id., at 7135 (citations omitted). But it again found it unnecessary to resolve this issue “because here, structural distinctions between a FLSA collective action and a Rule 23 class action foreclose appellants’ claims of a continuing personal stake.” Id. Put simply, “A plaintiff seeking FLSA collective action certification does not have a procedural right to represent a class in the absence of any opt-in plaintiffs.” Id., at 7136. Because plaintiffs settled their individual claims before any putative members of the class elected to opt-in to the class action litigation, the Ninth Circuit dismissed the appeal as moot, “join[ing] our sister circuits in holding that a FLSA plaintiff who voluntarily settles his individual claims prior to being joined by opt-in plaintiffs and after the district court’s certification denial does not retain a personal stake in the appeal so as to preserve our jurisdiction.” Id., at 7135-36 (citing Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 915-19 (5th Cir. 2008); Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240, 1247-49 (11th Cir. 2003)). The Circuit Court therefore dismissed the appeal, id., at 7137.

Posted In: Employment Law 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 Plaintiff not Entitled to Attorney Fee Award under 42 U.S.C. § 1988 Following District Court Dismissal of Class Action as Moot because Plaintiff was not “Prevailing Party” within the Meaning of Supreme Court Authority Seventh Circuit Holds

Plaintiff filed a putative class action against Calumet City, Illinois, alleging that she suffered damage because the enforcement of a local ordinance interfered with her ability to sell real property that she owned in the City; the class action complaint alleged that “the ordinance violated her right to procedural due process and unreasonably restrained the alienability of her property.” Walker v. Calumet City, Illinois, 565 F.3d 1031, 1032 (7th Cir. 2009). Specifically, the class action complaint challenged the City’s Point of Sale (POS) ordinance, which provides that real property within the city limits “cannot be sold until it is inspected and deemed in compliance with city codes, a fee is paid, and transfer stamps are issued.” Id. In the normal course of events, while the class action complaint was pending, plaintiff’s property was inspected under the City’s Rental Dwelling Inspection (RDI) ordinance, which requires annual inspections of rental properties to ensure compliance with city health, zoning and building codes. Id., at 1033. The inspection of plaintiff’s property revealed “multiple areas…where repair was necessary”; plaintiff completed the required repairs, and the City “pronounced her property compliant with the City’s building and zoning codes.” Id. Defense attorneys then moved to dismiss the class action as moot because, since plaintiff’s property passed the RDI, “an inspection under the POS ordinance to check for the same violations would be redundant.” Id. Over plaintiff’s objection, the district court dismissed the class action as moot based on the City’s representations that it would not enforce the POS ordinance against plaintiff, id., at 1032, 1033. Plaintiff then moved for an award of attorney fees, arguing that she was the “prevailing party” 42 U.S.C. § 1988; defense attorneys countered that the class action had been dismissed as moot “prior to any judicial determination on the merits.” Id., at 1033. The district court agreed with plaintiff and awarded her $189,000 in attorney fees, id. The Seventh Circuit reversed.

The Circuit Court did not find this to be a difficult case because, while the “catalyst rule” for evaluating attorney fee awards had been used in the Seventh Circuit prior to 2001, the Supreme Court rejected that rule in Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, 532 U.S. 598 (2001), holding at page 606 that a party was not a prevailing party unless there was a “material alteration in the legal relationship of the parties.” Walker, at 1033-34 (citations omitted). This “alteration” in the relationship of the parties “must arise from a court order.” Id., at 1034 (citation omitted). The Seventh Circuit explained at page 1034, “In Buckhannon, the Supreme Court gave two examples of when a party should be considered prevailing: first, when ‘the plaintiff has received a judgment on the merits’; second, when the plaintiff has ‘obtained a court-ordered consent decree.’ [Citation.] In general, we have stated that ‘[i]t could not be clearer that a voluntary settlement by the defendant ... does not entitle a plaintiff to attorneys' fees.’ [Citation.]”

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Posted In: Class Action Court Decisions

Summary Judgment in Labor Law Class Action Turned on Issues of First Impression Recurrent in Federal Court Class Action Appeals, Warranting Referral of Questions Underlying Class Action to California Supreme Court for Resolution Ninth Circuit Holds

Plaintiff filed a putative class action against her employer, Bayer Pharmaceuticals, in California state court alleging labor law violations; specifically, the class action complaint asserted that Bayer misclassified pharmaceutical sales representatives (PSRs) as exempt employees, and accordingly failed to pay them overtime or provide them with meal breaks to which they would be entitled as non-exempt employees. D'Este v. Bayer Corp., 565 F.3d 1119, 1121-22 (9th Cir. 2009). Defense attorneys removed the class action to federal court, and the district court granted Bayer’s motion for summary judgment “finding that [plaintiff] was exempt under California's outside sales exemption”’ and based on that finding, the district court did not address whether Bayer also was correct in relying on the “administrative exemption” in its classification of PSRs. Id., at 1122. Plaintiff appealed, id., at 1122. The Ninth Circuit observed that “The question whether PSRs are exempt under California's outside salesperson and administrative exemptions is the central issue in multiple class action lawsuits in the Ninth Circuit as well as in other circuits.” Id. Accordingly, the Circuit Court – pursuant to Rule 8.548 of the California Rules of Court – certified two questions to the California Supreme Court, id., at 1120.

The Ninth Circuit summarized the relevant facts as follows. Bayer gave plaintiff a list of doctors and hospitals, as well as a list of products, for which she was responsible: “[Plaintiff’s] job was to communicate information about her Bayer products to her roster of doctors and seek their non-binding commitment to write prescriptions for those products. She was also responsible for communicating with hospitals in her territory to influence them to add the Bayer products for which she was responsible to their formularies.” D’Este, at 1121. Plaintiff was “trained on a message” and was required to “adhere closely to the information provided by Bayer about its products”; beyond this, however, “she had the freedom to develop her own strategy for communicating with and influencing doctors.” Id. Additionally, she “had flexibility regarding how she spent her day,” id., at 1122. Specifically, “[Plaintiff] developed her own schedule for meeting with the doctors on her list. She received little or no daily supervision, and saw her manager once every six to eight weeks.” Id. According to the class action complaint, plaintiff regularly worked more than 8 hours per day and more than 40 hours per week, id. For this, she received between $81,000 and $103,000 per year in compensation, id., at 1121. And plaintiff was “not required to keep or maintain set hours.” Id., at 1122.

Continue reading "Labor Law Class Action Defense Cases–D'Este v. Bayer: Ninth Circuit On Class Action Appeal Certifies Two Questions To California Supreme Court As Central Issues In Numerous Federal Court Class Action Appeals" »

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

Class Action Improperly Removed to Federal Court under Class Action Fairness Act (CAFA) because Defendant Failed to Adequately Establish that the $5 Million Amount in Controversy Requirement Eleventh Circuit Holds

Plaintiff filed a class action in Georgia state court against Bank of America and its wholly-owned subsidiary FIA Card Services (collectively “BofA”) alleging insurance fraud, unfair and deceptive acts, bad faith, and violations of the state’s Racketeer Influenced and Corrupt Organizations Act (RICO); the class action complaint was premised on the allegation that BofA “[sold] a bundled insurance product, known as Credit Protection Plus, to ineligible individuals.” Thomas v. Bank of America Corp., 570 F.3d 1280, 2009 WL 1636535, *1 (11th Cir. 2009). According to the class action, BofA’s credit protection plan provides benefits for various contingencies, including “credit life insurance, credit accident and sickness insurance, involuntary unemployment insurance, hospitalization, and unpaid family leave of absence.” Id. However, the class action complaint alleged that most benefits were conditioned on the customer being gainfully employed for at least 30 hours per week, and that BofA sold the product to individuals (such as plaintiff) who were not so employed. Id. Among the damages prayed for by the class action were treble damages and attorneys’ fees under RICO, id. The class action complaint did not identify the number of individuals in the proposed class or the amount of money sought as damages. Id. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id. However, because the class action complaint was silent on the amount of damages sought to be recovered, it fell to BofA to establish that the amount in controversy exceeded $5 million; it sought to meet this burden by presenting evidence that it collected more than $4.8 million from almost 78,000 customers during the class period, and that because plaintiff sought treble damages and attorney fees “the amount in controversy clearly exceeded $5,000,000.” Id. Plaintiff moved to remand the class action to state court on the grounds that the $5 million threshold had not been satisfied; the district court agreed, finding the $4.8 million inaccurate because the class action “did not allege that all of the Georgia Credit Protection Plus customers were entitled to relief for the entire amount of their Credit Production Plus fees.” Id. BofA appealed, and the Eleventh Circuit affirmed.

The Eleventh Circuit explained that under CAFA a class action is not removable until the defendant receives a document from the plaintiff “be it the initial complaint or a later received paper ... [that] unambiguously establish[es] federal jurisdiction.” Thomas, at *2 (citation omitted). The defendant then has 30 days to file a notice of removal, id. Here, however, the class action complaint does not unambiguously establish federal court jurisdiction under CAFA because it “provided no information indicating the amount in controversy or the number of individuals in the alternative classes.” Id. The Circuit Court concluded, therefore, that remand of the class action to state court was proper “because defendant has not shown the amount in controversy and the sizes of the alternative classes by a preponderance of the evidence,” id. Accordingly, it affirmed the judgment of the district court. Id.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, 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

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

Six class actions – two in Massachusetts and one each in Connecticut, New Jersey, New York and Pennsylvania – were filed against Staples alleging violations of state and federal labor laws; specifically, the class action complaints allege that Staples failed to pay its assistant, operations and/or sales managers overtime pay under the federal Fair Labor Standards Act (FLSA) and/or various state wage and hour statutes. In re Staples, Inc., Wage & Hour Employment Practices Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 14, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the District of New Jersey or Massachusetts, id. No one opposed the motion; four groups of class action plaintiffs supported the selection of New Jersey, while plaintiffs in the other two class actions favored Connecticut. Id. In the end, all parties agreed on New Jersey as the appropriate transferee court, id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the District of New Jersey was the appropriate transferee court because “(1) this choice is supported by all parties at least in the alternative, and (2) this district is already presiding over a similar action against Staples which is in its final stages.” Id.

Posted In: Employment Law Class Actions, Multidistrict Litigation, 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 Alleging Violations of Federal Fair Housing Act (FHA) Claiming Insurer used “Undisclosed Factors” to Compute Credit Scores and, Based on those Scores, Increase Insurance Premiums of Minorities should not have been Dismissed because Class Action did not Challenge Credit Scoring Per Se and because Class Action Claims were not “Reverse-Preempted” by McCarran-Ferguson Ninth Circuit Holds

Plaintiff filed a putative class action against various Farmers Group entities alleging violations of the federal Fair Housing Act (FHA); specifically, the class action complaint alleged disparate impact race discrimination in that Farmers “used ‘a number of undisclosed factors’ to compute credit scores and price homeowners’ insurance policies.” Ojo v. Farmers Group, Inc., 565 F.3d 1175 (9th Cir. 2009) [Slip Opn., at 5700-01]. According to the class action, “Farmers charged minorities higher premiums for homeowners’ property and casualty insurance than the premiums charged to similarly situated Caucasians.” Id., at 5701. Defense attorneys moved to dismiss the class action under Rule 12(b)(1) for lack of subject matter jurisdiction and under Rule 12(b)(6) for failure to state a claim. Id. The district court granted the 12(b)(1) motion on the grounds that the class action claims were “reverse-preempted” by federal law. Id. The Ninth Circuit reversed finding two errors in the district court’s ruling: “First, the district court erroneously read [plaintiff’s] claim as challenging the practice of credit scoring per se. Second, the district court erroneously interpreted Texas state insurance law as permitting disparate impact race discrimination that results from credit scoring, thereby triggering McCarran-Ferguson reverse-preemption.” Id.

Plaintiff, an African-American resident Texas, filed suit after Farmers increased the insurance premium on his homeowner’s policy by 9% on the basis of “unfavorable credit information” revealed by Farmers’ automated credit scoring system. Ojo, at 5703. The class action complaint alleged that Farmers used various factors to target minorities for higher premiums than those charged to “similarly situated Caucasians.” Id. After discussing the McCarran-Ferguson Act which leaves the business of insurance to state law, see id., at 5704-06, and the federal Fair Housing Act (FHA) and Texas state law, see id., at 5706-08, the Ninth Circuit noted that Farmers sought to use Texas state law “as a shield against any scrutiny of its credit scoring practices,” id., at 5709. The Circuit Court rejected this attempt, explaining at page 5709 that the class action “does not challenge Farmers’ use of credit scoring per se”; rather, the class action complaint challenges only Farmers’ use of certain “undisclosed factors” as part of its credit scoring system. The Ninth Circuit agreed with plaintiff that he should have been given an opportunity to conduct discovery in an effort to learn the specific factors used by Farmers’ as part of its credit scoring system. Id.

Continue reading "Class Action Defense Cases–Ojo v. Farmers: Ninth Circuit Reverses Dismissal Of FHA Class Action Holding Class Action Claims Not Reverse-Preempted And Class Action Did Not Challenge Credit Scoring Per Se" »

Posted In: Class Action Court Decisions

Class Action Waiver in Arbitration Clause Unconscionable thereby Warranting Denial of Motion to Compel Plaintiff to Arbitrate Individual Claims rather than Pursue Labor Law Class Action Complaint California State Court Holds

Plaintiff, the general manager of an El Pollo Loco restaurant, filed a putative class action against El Pollo Loco alleging violations of California’s labor code; the class action complaint alleged inter alia that defendant misclassified its general managers as exempt when they “spent the majority of their time performing nonmanagerial tasks” and that it wrongfully denied its general managers overtime compensation and meal breaks. Olvera v. El Pollo Loco, Inc., 173 Cal.App.4th 447, 451 (Cal.App. 2009). As part of his employment, plaintiff received written materials that, in part, required that all work-related disputes be resolved through binding arbitration, governed by the Federal Arbitration Act (FAA). Id., 449-50. Class action litigation was prohibited, but the parties were permitted “to conduct discovery and bring motions in an arbitration as provided by the Federal Rules of Civil Procedure,” id., at 450. Defense attorneys moved to compel arbitration of the class action complaint as to plaintiff’s individual claims only, id., at 451. Plaintiff opposed the motion to compel arbitration, arguing that the arbitration clause was unconscionable; defense attorneys argued that the clause was not unconscionable because employees were not required to sign the acknowledgement form by which they were bound to the arbitration clause. Id., at 452. The trial court denied the motion to compel arbitration, concluding that the clause was both procedurally and substantively unconscionable. Id., at 453. Under California law, an order denying a motion t compel arbitration is an appealable order. Cal. Code Civ. Proc., § 1294. Defendant appealed, and the Court of Appeal affirmed.

After summarizing the relevant law regarding arbitration agreements, see Olvera, at 453-54, the appellate court turned first to the issue of procedural unconscionability. The Court of Appeal explained at page 454, “Procedural unconscionability focuses on oppression or unfair surprise, while substantive unconscionability focuses on overly harsh or one-sided terms.” (Citations omitted.) California courts view these two factors on a sliding scale: “The more procedural unconscionability is present, the less substantive unconscionability is required to justify a determination that a contract or clause is unenforceable. Conversely, the less procedural unconscionability is present, the more substantive unconscionability is required to justify such a determination.” Id., at 454 (citations omitted). The appellate court found that the arbitration clause was procedurally unconscionable because of (1) the unequal bargaining power between the employees and the employer, which “makes it likely that the employees felt at least some pressure to sign the acknowledgment and agree to the new dispute resolution policy” even if the company insists that they were not required to do so, and (2) agreement to the dispute resolution procedure was “not an informed decision” because the description of the dispute resolution policy “was totally inaccurate.” Id., at 455-56.

Continue reading "Class Action Defense Cases–Olvera v. El Pollo Loco: California Court Affirms Denial Of Motion To Compel Individual Arbitration Of Labor Law Class Action Holding Class Action Arbitration Waiver Unenforceable" »

Posted In: Arbitration, Employment Law Class Actions, Class Action Court Decisions

Trial Court Judgment in Class Action Alleging Starbucks Violated Labor Code by Sharing Tips with Shift Supervisors Required Reversal because California Law does not Prohibit Starbucks’ Shift Supervisors from Sharing in Tips California State Court Holds

Plaintiff filed a class action against Starbucks alleging violations of California’s Unfair Competition Law (UCL) and Labor Code; the class action complaint alleged that Starbucks alleged shift supervisors to participate in tip pools in violation of California law, specifically Labor Code section 351. Chau v. Starbucks Corp., 174 Cal.App.4th 688 (Cal.App. 2009) [Slip Opn., at 1-2]. The trial court certified the litigation as a class action, id., at 2. Starbucks moved to decertify the class, but the motion was denied. Id., at 6. Prior to trial, the court granted plaintiff’s in limine motion to exclude evidence that shift supervisors serve customers, finding that such evidence was “irrelevant” (though it did allow some evidence on the matter). Id., at 7. Ultimately, the trial court awarded the class $86 million as restitution based on its finding at the conclusion of a bench trial that plaintiff had proved the UCL claim. Id., at 2. Starbucks appealed. The Court of Appeal reversed, holding that Starbucks’ tip sharing policy did not violate California law: “The applicable statutes do not prohibit Starbucks from permitting shift supervisors to share in the proceeds placed in collective tip boxes.” Id. The Court explained that the tip-pooling practice challenged by the class action “concern[ed] an employer's authority to require equitable allocation of tips placed in a collective tip box for those employees providing service to the customer.” Id., at 2-3. The appellate court held at page 3, “There is no decisional or statutory authority prohibiting an employer from allowing a service employee to keep a portion of the collective tip, in proportion to the amount of hours worked, merely because the employee also has limited supervisory duties.” Accordingly, it reversed the trial court judgment.

Starbucks’ thousands of stores are staffed by baristas, shift supervisors, assistant store managers, and store managers. Chau, at 3. The Court of Appeal explained the differences between the store employees as follows: “Baristas are entry-level, part-time hourly employees responsible for customer service related tasks, such as working the cash register and making coffee drinks. Shift supervisors are also part-time hourly employees who perform all the duties of a barista, but are also responsible for some additional tasks, including supervising and coordinating employees within the store, opening and closing the store, and depositing money into the safe. A barista is eligible for promotion to shift supervisor after six months on the job. A store manager is a full-time salaried employee, and has the authority to recruit, hire, promote, transfer, schedule, discipline, and terminate baristas and shift supervisors. In some stores, a store manager is assisted by an assistant store manager, who is also a fulltime salaried employee.” Id., at 3-4. At trial, Starbucks introduced evidence that shift supervisors spend 90-95% of their time “performing the same jobs as baristas,” and that they had “no authority to hire, discipline, or terminate baristas.” Id., at 8. Moreover, shift supervisors are not considered “management” by the company, id. The trial court ruled against Starbucks because it found that shift supervisors “‘supervise’ and ‘direct’ the acts of other employees,” and that they were barred by California law to share in tip pools. Id., at 8-9.

Continue reading "Starbucks Class Action Defense Cases–Chau v. Starbucks: California Appellate Court Reverses $86 Million Class Action Judgment Against Starbucks Holding Labor Law Class Action Claims Failed" »

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

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

Two class actions – one in Central District of California and one in the Eastern District of California – were filed against Payless ShoeSource alleging violations of California’s Song-Beverly Act; specifically, the class action complaints allege that Payless “requests and records customers’ personal identification information in violation of California Civil Code § 1747.08.” In re Payless ShoeSource, Inc., California Song-Beverly Credit Card Act Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 9, 2009) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of California; plaintiffs in the class actions did not respond to the motion, and defense attorneys represented that they supported the request. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Eastern District of California was the appropriate transferee court because no party objects to that district and the first-filed class action is pending there. Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

District Court Erred in Remanding Class Action to State Court because Decertification Order and Dismissal of Co-Defendants Substantially Increased Remaining Defendant’s Liability such that Amended Class Action Complaint did not “Relate Back” to Original Class Action Complaint, Rendering Class Action Removable under Class Action Fairness Act of 2005 (CAFA) Seventh Circuit Holds

Plaintiff filed a putative class action in Illinois state court against various H & R Block companies alleging violations of the state’s Consumer Fraud Act; the class action complaint alleged that defendants “had used deceptive practices to sell ‘Peace of Mind’ insurance against mistakes by H & R Block that increased customers’ tax liabilities.” Marshall v. H & R Block Tax Services, Inc., 564 F.3d 826, 827 (7th Cir. 2009). The state court granted plaintiff’s motion to certify the litigation as a nationwide class action, identifying three classes and defining the defendant class (which it also certified) as “any entity with the names ‘H & R Block’ or ‘HRB’ in its name, or otherwise affiliated or associated with [TSI], and which sold or sells the [Peace of Mind] product.” Id. Eventually all of the defendants were dismissed from the class action except H & R Block Tax Services (TSI), id. “Subsequently, however, the court decertified the defendant class at TSI's request, leaving TSI, which already was the only defendant, with no class-representative status since there was no longer a defendant class. TSI had asked the court to decertify the plaintiff classes as well, and while the court refused to do so, it did narrow the classes to residents of 13 states.” Id. Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act of 2005), id. TSI argued that “decertification of the defendant class had made the case removable under the Class Action Fairness Act because the decertification occurred after the Act's effective date, and had increased TSI's potential liability notwithstanding the elimination of claims by residents of 37 states.” Id., at 828. Plaintiff argued that TSI’s liability had not increased because it had been jointly and severally liable for the misconduct of the other H & R Block defendants, id. The district court found that CAFA did not apply and remanded the class action to state court. Id. TSI sought and received leave to appeal the remand order, and the Seventh Circuit reversed.

The Seventh Circuit explained that TSI is the franchisor of the H & R Block retail tax offices – it does not operate them. Marshall, at 828. TSI claimed that, based on the decertification order, its potential liability has increased by $60 million, and argued that “a ruling that increases a defendant's potential liability may make a case originally filed before the effective date of the Class Action Fairness Act removable if the ruling comes after that date, unless the alteration in the scope of the plaintiff's claim ‘relates back’ to the original claim.” Id. (citations omitted). The district court remanded the class action to state court because it believed that “only a formal amendment of the complaint could commence a new action for CAFA purposes”; the Circuit Court disagreed, noting that such an interpretation would elevate form over substance. Id. Turning to whether the class action complaint adequately alleged joint and several liability, the Circuit Court concluded that the class action did not meet this test and that plaintiff now sought to “pin the entire liability of all the former members of the defendant class on TSI.” Id., at 829. The Seventh Circuit concluded at page 829, “They may, for all we know, be able to do so, but that will, so far as appears, enlarge TSI's liability; the plaintiffs have presented no evidence to the contrary.” This significant change in potential liability did not “relate back” to the original class action complaint – “the expansion of potential liability was a surprise.” Id. Accordingly, the district court erred in remanding the class action to state court, id.

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

Lender’s Disclosures that APR may Increase based on Information in Credit Report not Clear and Conspicuous Within Meaning of TILA so District Court Erred in Dismissing Class Action Complaint Ninth Circuit Holds

Plaintiffs filed a class action against Chase Bank alleging violations of the federal Truth in Lending Act (TILA), and Regulation Z promulgated thereunder; the class action complaint alleged that plaintiffs “have been the victims of a practice they now call ‘adverse action repricing,’ which apparently means ‘raising . . . a preferred rate to an essentially non-preferred rate based upon information in a customer’s credit report.’” Barber v. Chase Bank USA, N.A., 566 F.3d 883 (9th Cir. 2009) [Slip Opn., at 5996 ]. Specifically, Chase increased plaintiffs’ annual percentage rate (APR) on their outstanding credit card balance from 8.99% to 24.24% based on information obtained from a consumer credit reporting agency; Chase stated that it increased the interest rate “‘outstanding credit loan(s) on revolving accounts . . . [were] too high’ and there were ‘too many recently opened installment/revolving accounts.’” Id., at 5995-96. The class action did not allege that Chase’s practice of increasing the APR based on information in a consumer’s credit report was illegal, but rather that Chase violated federal law by failing to fully disclose it to them. Id. Defense attorneys moved to dismiss the class action complaint for failure to state a claim; the district court agreed with Chase and dismissed the class action. Id., at 5997. Plaintiffs appealed, and the Ninth Circuit reversed.

The Ninth Circuit explained, “We must decide whether a credit card company violates the Truth in Lending Act when it fails to disclose potential risk factors that allow it to raise a cardholder’s Annual Percentage Rate.” Barber, at 5994. Given the purpose of TILA – viz., “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit,” 15 U.S.C. § 1601(a) – the Ninth Circuit reversed. The Circuit Court explained that TILA requires disclosure of “[t]he conditions under which a finance charge may be imposed,” “[t]he method of determining the amount of the finance charge,” and, “[w]here one or more periodic rates may be used to compute the finance charge, each such rate . . . and the corresponding nominal annual percentage rate.” Barber, at 5998 (quoting § 1637(a)(1), (a)(3) & (a)(4)). And under Reg. Z, “creditors must make the required disclosures ‘clearly and conspicuously in writing.’” Id., at 5999 (quoting 12 C.F.R. § 226.5(a)(1)). According to the class action, “Chase failed to disclose completely under the Act why it would change the APRs of its cardholders, in violation of subsection 226.6(a)(2) of Regulation Z.” Id., at 6000.

Continue reading "TILA Class Action Defense Cases–Barrer v. Chase: Ninth Circuit Reverses Dismissal Of TILA Class Action Holding “Buried” Disclosures Did Not As A Matter Of Law Comply With TILA" »

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

$360 Million-Plus Class Action Judgment Against Bank of America Properly Reversed by Court of Appeal because Offsetting Overdraft and Insufficient Funds Fees Against Public Benefit Deposits (such as SSI Benefits) does not Violate State Law California Supreme Court Holds

Plaintiff filed a putative class action against Bank of America alleging, inter alia, violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA); the class action complained that BofA improperly offset Supplemental Security Income (SSI) from bank accounts to cover sums owed the bank. Miller v. Bank of America, NT & SA, ___ Cal.4th ___, 94 Cal.Rptr.3d 31 (Cal. 2009) [Slip Opn., at 4, 5]. Plaintiff opened an account with BofA in 1975; he began receiving SSI benefits in 1992, and in 1994 he began having those benefits deposited directly into his BofA checking account. Id., at 2. BofA erroneously placed $1800 in plaintiff’s account in January 1998, and a few months later it reversed the credit without notice to plaintiff or his consent. Id., at 2-3. In so doing, BofA created a negative balance in plaintiff’s account and, as soon as they were deposited into plaintiff’s account, BofA withdrew the entirety of his May, June and July 1998 SSI payments. Id., at 3. Each month, plaintiff complained that BofA’s conduct meant that he would not have the funds to live, and each month BofA returned the funds to his account, id. BofA also charged plaintiff insufficient funds fees that ranged from $14 to $32 each, up to a maximum of $160 per day. Id., at 3-4. Defense attorneys moved for summary judgment on the class action claims, but the trial court largely denied the motion on the grounds that triable issues of material fact exist, id., at 4-5. The trial court also granted plaintiff’s motion for class action certification; “the class consisted of all Bank customers who received directly deposited public benefit funds without regard to whether those class members had available alternate sources of income to cover their basic living expenses.” Id., at 5. At issue was the $284 million in NSF that BofA debited from customer accounts between January 1994 and May 2003. Id. In a bifurcated trial, a jury found against the bank, awarding $75 million in compensatory damages, plus $1000 in statutory damages to each class member. Id., at 5-6. After the bench trial, the trial court also found against the bank and awarded more than $284 million in damages as well as $1000 to each class member. Id., at 6. In so ruling, the trial court relied on Kruger v. Wells Fargo Bank (1974) 11 Cal.3d 352, 356, which held that “a bank may not satisfy a credit card debt by deducting the amount owed from a separate checking account containing deposits that ‘derived from unemployment and disability benefits’ and, thus, were ‘protected from the claims of creditors.’” Id., at 1. Immediately after Kruger, the California legislature enacted Financial Code section 864, which “comprehensively governs the manner in which banks may exercise the right to set off debts” and “expressly excludes overdrafts and bank charges from the statute’s definition of debt.” Id. The Court of Appeal reversed the judgments, “holding that Kruger did not apply to the Bank’s practice of debiting overdrafts and charging NSF fees to account holders who deposited public benefit funds.” Id., at 6. The California Supreme Court affirmed.

Continue reading "BofA Class Action Defense Cases–Miller v. Bank of America: California Supreme Court Upholds Reversal Of Class Action Judgment Holding Banks May Offset Overdraft/NSF Fees Against Public Benefit Deposits" »

Posted In: Class Action Court Decisions

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by Only One Group Class Action Plaintiffs, and Transfers Actions to Eastern District of New York

Eight class actions – four in New Jersey, two in Illinois and one each in California and New York – were filed against Bayer and various other defendants challenging “Bayer’s marketing and sale of Bayer Aspirin with Heart Advantage or Bayer Women’s Low-Dose Aspirin Plus Calcium, or both.” In re Bayer Corp. Combination Aspirin Products Marketing & Sales Practices Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 14, 2009) [Slip Opn., at 1]. Specifically, the class actions alleged “Bayer marketed these products without approval from the United States Food and Drug Administration and deceived the plaintiffs and putative class members with respect to the safety and efficacy of the products.” Id., at 2. Plaintiffs’ lawyers in three of the class actions filed motions with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the district courts in which their own class action lawsuits were pending; plaintiffs in the California class action opposed centralization until the district court had ruled on their motion to remand their class action to state court. Id., at 1. Defense attorneys for two Bayer entities supported centralization of all of the class actions, including the California class action, in either Illinois or New York, id. At oral argument, the moving parties supported centralization in the Eastern District of New York, id. The Judicial Panel granted the motion to centralize the class action lawsuits, id. The Panel further agreed that the Eastern District of New York was the appropriate transferee court, as it was supported by all parties and as Bayer is headquartered in New York “albeit in another federal district.” Id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Motion to Remand Class Action to State Court Granted because $5 Million Amount in Controversy Required by Class Action Fairness Act (CAFA) not Established because “Cost” of Complying with Possible Injunction not Sufficient to Support Removal Jurisdiction Washington Federal Court Holds

Plaintiff, a citizen of Florida, filed a class action in Washington state court against Motricity, a Delaware corporation with its principle place of business in Washington; the class action complaint alleged that Motricity, which “represents providers of mobile content in dealing with wireless carriers whose networks and billing services the providers use” and “receives a fee per content transaction billed to cellular telephone users,” violated the Washington Consumer Protection Act by “placing unauthorized charges for mobile content on customers' bills.” Rynearson v. Motricity, Inc., 601 F.Supp.2d 1238, 1239 (W.D.Wash. 2009). The class action sought damages, treble damages, restitution, interest, attorney fees and costs, as well as injunctive and declaratory relief. Id., at 1239-40. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), id., at 1240. Plaintiff moved to remand the class action to state court, arguing that the amount in controversy did not exceed $5 million. Id. The district court granted plaintiff’s motion

The district court noted that plaintiff did not contest that numerosity and minimal diversity existed under CAFA; rather, plaintiff focused on the CAFA requirement that the amount in controversy exceed $5 million. Rynearson, at 1240. The federal court explained at page 1240, “The burden of proving the amount in controversy depends on what the plaintiff has pleaded: (1) when the complaint does not specify an amount of damages, the party seeking removal must prove the amount in controversy by a preponderance of the evidence; (2) when the complaint alleges damages in excess of the jurisdictional requirement, the requirement is presumptively satisfied unless it appears to a ‘legal certainty’ that the claim is actually for less than the amount in controversy requirement; and, (3) when the complaint alleges damages less than the jurisdictional requirement, the party seeking removal must prove the amount in controversy with legal certainty.” (Citation omitted.) In this case, the class action complaint did not seek a specific amount of damages so defendant was required to prove that the amount in controversy had been met, id. The thrust of the defense argument was that the cost of developing an “access code” system to comply with a possible injunction the district court may issue would exceed $5 million, thereby satisfying the amount in controversy requirement. Id. The district court disagreed, holding that the defendant’s interpretation of the class action complaint was flawed because “[t]he plain language of the complaint does not request Defendant to implement its own access code system.” Id. Accordingly, the federal court lacked subject matter jurisdiction over the class action warranting remand of the class action to state court. Id., at 1240-41.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, 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.

Continue reading "Class Action Defense Cases–Williams v. Mohawk Industries: Eleventh Circuit Reverses Denial Of Class Action Treatment Of RICO Complaint And Remands For Further Consideration Of Class Action Certification" »

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

Class Action Complaint Alleging Various Defendants Conspired to Wrongfully Deny Authenticity of Warhol Paintings Survives Defense Motion to Dismiss New York Federal Court Holds

Plaintiff filed a class action against the Andy Warhol Foundation for the Visual Arts (a not-for-profit charitable trust), the Estate of Andy Warhol (which was valued at $400 million and which originally owned 100,000 Warhol works of art), Vincent Fremont (the exclusive sales agent for the Foundation’s Warhol paintings) individually and in his capacity as Successor Executor of the Estate, Vincent Fremont Enterprises and the Andy Warhol Authentication Board (a not-for profit corporation responsible for authenticating the works of Andy Warhol) alleging inter alia violations of state and federal antitrust laws; the class action complaint asserted that defendants conspired to control the market for Warhol works. Simon-Whelan v. The Andy Warhol Foundation for the Visual Arts, Inc., ___ F.Supp.2d ___ (S.D.N.Y. May 26, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the amended class action complaint, The Foundation and the Board (the “central actors in the conspiracy”) have “complete control over the authentication of Warhol artwork by virtue of the Board’s status as sole recognized authentication authority for Warhol works and the Foundation’s publication of an official catalogue of Warhol works,” and “the Board has denied the authenticity of works that were previously owned by the Estate and stamped with serial numbers from the Estate…, routinely denies the authenticity of a certain percentage of Warhols, particularly when several from the same series are submitted…, has denied authentication as a means of retaliation…, has approached owners of Warhols to ‘lure’ them into submitting their works for authentication…, and changes its authentication policies when the change suits the Board’s financial interests….” Id., at 3. In essence, the class action alleges that defendants “use their control over the authentication methods to create a scarcity in the market for Warhol artwork and inflate the value of the Warhol works in the Foundation’s possession.” Id., at 3-4. Defense attorneys moved to dismiss the class action complaint. Id., at 2. The district court granted the motion in part and denied the motion in part.

The class action complaint alleged that in 1989, plaintiff purchased a Warhol painting (later entitled “Double Denied”) for $195,000. Simon-Whelan, at 4. Plaintiff claims Warhol created the work in 1965, and that the Foundation and the Estate previously had authenticated the work. Id., at 4-5. In July 2001, plaintiff offered to sell the painting, id., at 5. Defendants “repeatedly urged” him to submit the painting to the Board, and represented to a prospective buyer that it “would not stand by the prior authentications” unless the painting was first submitted to the Board. Id. Plaintiff submitted the painting to the Board in December 2001; the Board denied that it was authenticate but plaintiff was told he could “resubmit the painting with additional documentation.” Id. “Plaintiff spent more than a year documenting the painting’s origin and history and resubmitted the painting with additional documentation in February 2003.” Id. The painting was again denied, id. Plaintiff alleges that the Board “fraudulently denied the authenticity” of the painting, id., at 5-6. The class action complaint alleged that, because of the denials,” Plaintiff was unable to sell any of the Warhols that he owned without first submitting them to the Board and that he was ultimately forced to sell his Warhols through third-parties at a fraction of the price.” Id., at 6.

Continue reading "Class Action Defense Cases–Simon-Whelan v. The Andy Warhol Foundation: New York Federal Court Denies Motion To Dismiss Class Action Alleging Antitrust Violations In Authentication Of Warhol Works Of Art" »

Posted In: Class Action Court Decisions

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Other Class Action Plaintiffs or by Common Defendants, and Transfers Actions to Southern District of New York

Six class actions – one in California and five in New York – were filed against Orleans Homebuilders and OHB Homes alleging violations of federal securities laws; specifically, the class action complaints “arise from a purported massive financial scandal involving common defendant Satyam Computer Services, Ltd. (Satyam), one of India’s largest information technology and outsourcing companies.” In re Satyam Computer Services, Ltd., Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 9, 2009) [Slip Opn., at 1]. According to the allegations underlying the class actions, “defendants deceived the investing public regarding Satyam’s business and finances, and thereby caused plaintiffs to purchase the company’s American Depositary Shares at artificially inflated prices.” Id. Plaintiffs in the California class action filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407; initially, plaintiffs sought centralization in California, but ultimately agreed to centralization in the Southern District of New York, where the other five class actions were pending. Id. Only one class action plaintiff opposed centralization, id. The Judicial Panel granted the motion to centralize the class action lawsuits, id. The Panel also agreed that the Southern District of New York was the appropriate transferee court because “Five of the six constituent actions, including the first-filed action, are already pending there, and the parties suggest that some discovery from accountants and banks may take place in the district.” Id., at 2.

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

Allegations in Securities Fraud Class Action Failed to Meet Heightened Pleading Requirements under Private Securities Litigation Reform Act (PSLRA) Warranting Dismissal with Prejudice of Class Action Complaint Washington Federal Court Holds

Plaintiffs filed a class action against Zumiez and three individual defendants alleging violations of federal securities laws; the class action complaint asserted that defendants “engaged in a scheme to defraud shareholders by making materially false and misleading statements by making false and misleading statements and engaging in insider trading.” In re Zumiez Inc. Sec. Litig., ___ F.Supp.2d ___ (W.D. Wash. March 30, 2009) [Slip Opn., at 7]. According to the allegations underlying the class action, defendants made six different statements that were false or misleading, each of which concerned guidance given to investors and expectations for earnings growth. Id., at 7-8. Defense attorneys moved to dismiss the class action on the grounds that it failed to satisfy the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA). Id., at 9. The district court granted defendants’ motion.

The federal court began by noting that “One obvious difficulty with Plaintiffs’ theory is that, from arch until mid-October, Zumiez not only met, but significantly exceeded, its prediction of ‘mid-single digit’ comparable-store sales growth.” In re Zumiez, at 12. The district court explained at page 12, “Therefore, to raise a credible inference that the Company’s predictions during this time period were false or misleading, Plaintiffs must allege facts to suggest not only that Defendants knew of undisclosed problems within the company, but that these known problems (1) would somehow not manifest a negative effect on earnings until the later quarters, and (2) were not taken into account when calculating the Company’s projected earnings. Plaintiffs allege hardly any such facts, much less facts sufficient to raise a strong inference of wrongdoing.” The court considered plaintiffs’ claim that five of Zumiez’s 2007 earnings projections were false or misleading, see id., at 12-20, but ultimately found that the class action complaint “completely failed to raise a ‘strong inference’ that Defendants knowingly made false or misleading earnings projections,” id., at 20. The district court also considered plaintiffs’ challenges to “two statements that could arguably be viewed as assertions regarding current business performance, rather than forward-looking statements”; specifically, an October 18, 2007, statement that “the Company was ‘on track’ to grow earnings by at least 30%,” and a November 29, 2007, statement that “the Company’s month-to-date comparable-store sales growth were in line with its fourth quarter projections.” Id., at 20. To be actionable, these statements required allegations in the class action complaint of “specific facts sufficient to raise a strong inference that Brooks made the statements with deliberate recklessness to investors,” id., at 20-21 (citation omitted), but the court found no evidence to support such an inference, see id., at 21-23. Accordingly, the district court dismissed the class action complaint with prejudice.

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

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

Sheer Size of Class Action Complaint for Securities Fraud Violations did not Defeat Motions to Dismiss because Class Action Allegations were “Verbose” but “Disordered” and Required “More Definite Statement” Washington Federal Court Holds

Three class action complaints were filed against dozens of defendants alleging securities fraud in connection with Washington Mutual home lending business; specifically, the class actions alleged violations of §§ 10(b) and 20(a) of the 1934 Securities and Exchange Act and Rule 10b-5 promulgated under § 10(b), and under §§ 11, 12(a)(2) and 15 of the 1933 Securities Act. The class actions were consolidated by the Judicial Panel on Multidistrict Litigation, lead plaintiff appointed, and a consolidated class action complaint filed. Among the more than three dozen defendants named in the consolidated class action were officers and directors, including outside directors, underwriters and investment banks, and accounting firms. In re Washington Mutual, Inc. Securities, Derivative & ERISA Litig., ___ F.Supp.2d ___ (W.D. Wash. May 15, 2009) [Slip Opn., at 1-3, 5]. The consolidated class action complaint was enormous, containing almost 400 pages (without exhibits), more than 1000 paragraphs, and citations to 89 confidential witnesses, id., at 5. The first 300 pages of the complaint consist of factual allegations of improper activity that claimed “(1) deliberate and secret efforts to decrease the efficacy of WaMu’s risk management policies…; (2) corruption of WaMu’s appraisal process…; (3) abandonment of appropriate underwriting standards for WaMu loans…; and (4) misrepresentation of financial results….” Id. Defense attorneys for various defendants filed five motions to dismiss the class action claims, id., at 1-2. And if plaintiffs believed that size alone would be sufficient to defeat a motion to dismiss, then they were mistaken: in the end, the district largely granted the motion to dismiss concluding that Counts One, Two and Three required “a more definite statement of the grounds for their claims,” and that Counts Four, Five and Six should be dismissed with respect to “claims regarding WaMu’s August 2006, September 2006, and December 2007 securities offerings.” Id., at 2. (The federal court denied the motion to dismiss Counts Four, Five and Six to the extent they concerned WaMu’s October 2007 securities offering. Id.)

We summarize only briefly the federal court’s 33-page opinion. It is worth noting that the district court characterized the massive class action complaint as a “verbose and disordered pleading,” and concluded that it “failed to organize and clearly identify allegations in support of each element of the 10(b) claims against each defendant” even though more than 280 page of the complaint were directed toward these claims. In re WaMu, at 8. Relying on the heightened pleading requirements established by the Private Securities Litigation Reform Act (PSLRA) which requires that “a plaintiff alleging securities fraud must ‘plead with particularity both falsity and scienter,’” id., at 15 (citation omitted), the district court found “Remarkably, Plaintiffs make no effort to connect a particular statement made by any defendant with allegations as to why that statement was false or misleading or with allegations of facts giving rise to a strong inference of scienter,” id., at 17. The federal court also observed at page 17, “The first 300 pages of the Complaint fail to organize and identify the allegations supporting securities fraud as to each defendant, contain no useful cross-references or paragraph citations to connect the relevant allegations, and appear to include numerous irrelevant allegations, thereby depriving Defendants of proper notice of the grounds for the 10(b) claims against them.”

Continue reading "WaMu Class Action Defense Cases–In re Washington Mutual: Washington Federal Court Dismisses Majority Of Securities Fraud Class Action Claims Finding 400-Page 1000-Paragraph Class Action Complaint Lacked Specificity" »

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

Labor Law Class Action Challenging Defendant’s Classification of Pharmaceutical Sales Representatives as Exempt from Overtime Laws Dismissed on Defense Motion for Summary Judgment because Plaintiff Fell within Outside Sales Exemption Pennsylvania Federal Court Holds

Plaintiff, a pharmaceutical sales representative, filed a class action in Pennsylvania state court against her employer, AstraZeneca, alleging labor law violations; the class action complaint asserted that defendant improperly classified her as “exempt” and failed to pay her overtime required by Pennsylvania law. Baum v. AstraZeneca LP, 605 F.Supp.2d 669, 2009 WL 827920, *1 (W.D.Pa. 2009). Defense attorneys removed the class action to federal court, id. Defense attorneys then moved for summary judgment on the class action claims, id. The facts are quite detailed: in broad terms, plaintiff’s job was to increase defendant’s market share by selling directly to physicians, which required that she build relationships with the doctors and exercise discretion in determining how best to pitch AstraZeneca to doctors. Id., at *2-*3. The defense motion was based on the argument that plaintiff “exercised substantial judgment and discretion while discussing pharmaceutical products with physicians.” Id., at *3. Plaintiff responded that she “gave the same canned speech to each physician.” Id. The district court granted the motion for summary judgment and entered judgment in favor of the defense as to the class action claims.

After summarizing the standard of review and the similarities between the federal Fair Labor Standards Act (FLSA) and Pennsylvania’s Minimum Wage Act (PMWA), see Baum, at *4-*5, as well as the outside sales exemption and administrative exemption, id., at *5-*6, the court turned to an examination of whether either of those exemptions applied. The district court readily concluded that plaintiff had been properly classified. Id., at *6. The federal court’s decision was based on its finding that plaintiff made sales and obtained orders, and had been employed for the purpose of doing so, see id., at *7-*12. Put simply, “where pharmaceutical representatives seek to obtain physician commitments to write prescriptions, these representatives make sales and are engaged in the process of making sales for purposes of Pennsylvania’s outside sales exemption.” Id., at *12. Further, the district court found that plaintiff’s job involved sales activity, confirming she was employed for the purpose of making sales. Id., at *12-*14. Moreover, as noted above, plaintiff spent 90% of her time in the field, id., at *14. Accordingly, the outside sales exemption applied, id., at *14-*15. The court also opined that it would find that the administrative exemption would also apply to plaintiff. Id., at *16. Accordingly, the district court granted defendant’s motion for summary judgment and dismissed the class action complaint. Id., at *16-*17.

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

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by Plaintiffs in One of the Class Actions, and Transfers Actions to District of New Jersey

Two class actions – one in Connecticut and one in New Jersey – were filed against Aetna and affiliated entities, and other defendants (including Ingenix and its parent UnitedHealth Group), challenging Aetna’s “policies and practices for reimbursing its plan members’ visits to health care providers that are not part of the Aetna network,” that is, to “nonparticipating” or “out-of-network” providers. In re Aetna, Inc., Out-Of-Network "UCR" Rates Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 8, 2009) [Slip Opn., at 1]. Specifically, the class action complaints, filed by Aetna health plan members, alleged “that (1) the Ingenix database of billing information was flawed leading to lower reimbursement rates; and (2) Aetna improperly calculated the usual, customary and reasonable (‘UCR’) rates of reimbursement for out-of-network services based upon this data.” Id. Defense attorneys for Aetna filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in Connecticut, New Jersey or New York, but at oral argument limited its request to the district where the two class actions were already pending. Id. Plaintiffs in the New Jersey class action supported the motion and agreed on centralization in that district; plaintiffs in the Connecticut class action opposed centralization or, alternatively, argued for transfer to the District of Connecticut. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that “these two actions involve complex common questions of fact, and that centralization under Section 1407…will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.” Id. The Panel transferred the class actions to the District of New Jersey because, while either district court would be appropriate, “(1) Judge Faith S. Hochberg has been presiding over the action before her since July 2007 and she is well-versed with the issues involved in this litigation; and (2) two other related actions with similar claims against Aetna are also pending before her.” Id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Against Law Firm Alleging Violations of Debt Collection Laws Warranted Class Action Treatment over Defense Challenge to Adequacy of Representation based on Claim that Class Action was Filed by “Professional Plaintiff” and over Challenge to Superiority Prong of Rule 23(b)(3) Class Action Certification Test based on Negative Net Worth of Defendant and FDCPA’s 1% Net Worth Cap on Liability Connecticut Federal Court Holds

Plaintiff filed a class action against the law firm of Wolpoff & Abramson alleging violations of the federal Fair Debt Collection Practices Act (FDCPA). Lemire v. Wolpoff & Abramson, LLP, 256 F.R.D. 321, 2009 WL 827764, *1 (D.Conn. 2009). According to the allegations underlying the class action, Wolpoff’s communication with Connecticut consumers violated state law and therefore a per se violation of the FDCPA, id. Wolpoff argued that a violation of Connecticut debt collection law is not a per se violation of the FDCPA. Id. Plaintiff moved the district court to certify the litigation as a class action, id. The district court granted plaintiff’s motion and granted class action treatment.

After summarizing the well known rules for class action certification under Rule 23, see Lemire, at *2, the court turned to the merits of the motion. Wolpoff conceded that the numerosity test of Rule 23(a)(1) had been met, id., at *3. But as to commonality, Wolpoff argued that each collection letter sent to a Connecticut resident would have to be “analyzed individually to determine whether it contains actionable language” because different letters were sent to consumers who were represented by counsel than those who were unrepresented. Id. The federal court found, however, that the letters were similar in material respects and that the differences go to the merits of the class action claims. Id., at *3-*4. Given the “common content of Wolpoff’s letters” sent directly to consumers, the commonality test had been met. Id., at *4. And the letters to the attorneys were sufficiently similar to warrant class action treatment, and even if different could be addressed by dividing the group into two classes. Id., at *5. And the typicality test was satisfied because Wolpoff “failed to identify any unique ‘claims or defenses,’” id., at *6.

Continue reading "FDCPA Class Action Defense Cases–Lemire v. Wolpoff & Abramson: Connecticut Federal Court Grants Class Action Treatment To FDCPA Class Action Against Law Firm" »

Posted In: FDCPA Class Actions, Class Action Court Decisions

Class Action Failed to Allege Discrimination Against Employer that Calculated Pension Benefits under Pre-Pregnancy Discrimination Act (PDA) Rules, Lawful at the Time, that Gave Less Retirement Credit to Pregnancy Leave than for Medical Leave Supreme Court Holds

Plaintiffs filed a class action against AT&T alleging violations of Title VII of the Civil Rights Act of 1964; the class action complaint asserted that defendant discriminated against employees on the basis of sex and pregnancy by providing pension and other benefits on a seniority system that treated pregnancy differently from other medical conditions. AT&T Corp. v. Hulteen, 556 U.S. ___ (May 18, 2009) [Slip Opn., at 1-3]. AT&T has provided pension and other benefits to employees since 1914 “based on a seniority system that relies upon an employee’s term of employment, understood as the period of service at the company minus uncredited leave time.” Id., at 1-2 (footnote omitted). According to the allegations underlying the class action, from 1960s until the mid-1970s, AT&T gave employees full service credit for “disability” leave but a maximum of 30 days of credit for “personal” leaves of absence, and the company treated pregnancy leave as “personal” rather than disability. Id., at 2. AT&T modified this program in 1977 “entitling pregnant employees to disability benefits and service credit for up to six weeks of leave”; however, leave beyond 6 weeks was still treated as “personal” leave. Id. Both plans were lawful at the time they were in use, id. But in 1978 Congress enacted the Pregnancy Discrimination Act (PDA), which made it unlawful to “treat pregnancy-related conditions less favorably than other medical conditions.” Id., at 3 (citation omitted). AT&T again modified its procedures to comply with the PDA, but it did not “make any retroactive adjustments to the service credit calculations of women who had been subject to the pre-PDA personnel policies.” Id. In the Ninth Circuit (where plaintiffs’ class action had been filed), case law held that “calculation of service credit excluding time spent on pregnancy leave violates Title VII,” id., at 4(citation omitted); in the Sixth and Seventh Circuits, case law held that “reliance on a pre-PDA differential accrual rule to determine pension benefits does not constitute a current violation of Title VII,” id. (citations omitted). The Supreme Court granted certiorari to resolve this conflict.

The Supreme Court defined the issue presented as “whether an employer necessarily violates the Pregnancy Discrimination Act (PDA), 42 U.S.C. §2000e(k), when it pays pension benefits calculated in part under an accrual rule, applied only prior to the PDA, that gave less retirement credit for pregnancy leave than for medical leave generally.” AT&T, at 1. The Supreme Court held “there is no necessary violation; and the benefit calculation rule in this case is part of a bona fide seniority system under §703(h) of Title VII of the Civil Rights Act of 1964…which insulates it from challenge.” Id. We do not discuss the opinion in greater detail. We note only that Justice Ginsburg filed a dissenting opinion, joined by Justice Breyer, arguing in essence that properly paying women today for service credit that should have been earned pre-PDA, is not a retroactive application of the law. Accordingly, AT&T’s conduct constitutes a “current violation of Title VII when, post-PDA, it did not totally discontinue reliance upon a pension calculation premised on the notion that pregnancy-based classifications display no gender bias.” AT&T, at 4 (Ginsburg, J., dissenting).

Posted In: Employment Law 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

Defense Motion to Dismiss Securities Fraud Class Action Granted because Defendants had no Duty to Disclose Merger Discussions Prior before Definitive Merger Agreement Reached and because Anonymous Source Insufficient to Satisfy Heightened Pleading Requirements of PSLRA (Private Securities Litigation Reform Act) New York Federal Court Holds

Plaintiffs filed a class action against Bioenvision and certain officers and directors, and Perseus-Soros Biopharmaceutical Fund (Bioenvision’s largest pre-merger shareholder) alleging violations of federal securities laws; the class action complaint alleged violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, against Perseus-Soros under section 13(d) of the Exchange Act, and against the individual defendants and Perseus-Soros under section 20(a). Vladimir v. Bioenvision Inc., ___ F.Supp.2d ___, 2009 WL 857552, *1 (S.D.N.Y. March 31, 2009). According to the allegations underlying the class action, “defendants artificially deflated the value of Bioenvision’s stock by issuing and by failing to correct or update statements that contained material misrepresentations and omissions as to Bioenvision’s plan to enter into a merger with Genzyme.” Id. Defense attorneys moved to dismiss the class action on the grounds that the allegations in the class action complaint failed to meet the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 (PSLRA). Id. Defendants further argued that “they had no duty to disclose the merger discussions until May 29, 2007, the date when the merger was announced publicly.” Id. Plaintiffs countered that defendants’ failure to disclose the plan to sell Bioenvision to Genzyme had the practical effect of artificially suppressing Bioenvision’s stock price, causing damage to plaintiffs because they sold their stock before the merger was officially announced (at which time the stock price skyrocketed). Id., at 4. Essentially, the “false and misleading” statements consisted of disclosing that its “primary focus” was the development of cancer treatments when its real focus was to find a merger partner. Id., at *5. The district court granted the defense motion and dismissed the class action complaint.

Cutting to the heart of the federal court’s analysis, the district court held that under Second Circuit authority “‘a corporation is not required to disclose a fact merely because a reasonable investor would very much like to know that fact.’” Vladimir, at *7 (citation omitted). Put simply, “[t]here is no specific duty to disclose merger negotiations under SEC rules until they become definitive agreements.” Id. (citations omitted). And since there was no duty to disclose, defendants’ silence could not be deemed misleading. Id. (citation omitted). Plaintiffs argued that the parties had reached a “definitive agreement” to merge in January 2007, thus creating the duty to disclose. Id. But as this allegation was supported only by an anonymous source, it failed to satisfy the PSLRA’s heightened pleading requirements. Id., at *7-*8. Further, as the federal court observed, “Under plaintiffs’ proposed rule, any public company that publicly described its core business or strategy – which is to say, every public company – would be required to disclose potential or actual merger negotiations. Statements that do not raise the subject of mergers, even tangentially, cannot impose a duty to disclose all material information concerning merger discussions.” Id., at *10. The district court ultimately concluded that the allegations in the class action complaint did not plead fraud with particularity as required by Rule 9(b), and in any event do not support a duty to disclose. Id., at *12. Accordingly, the court granted the motion to dismiss by the Bioenvision defendants. Id., at *13.

Continue reading "Securities Fraud Class Action Defense Cases–Vladimir v. Bioenvision: New York Federal Court Grants Motion To Dismiss Securities Fraud Class Action Holding Class Action Complaint Failed To Meet Heightened Pleading Requirements Of PSLRA" »

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

Lender Motion for Summary Judgment as to Class Action Claims Alleging Lender Violated TILA and HOEPA Properly Granted because Disclosed Finance Charges Fell within TILA’s Tolerance for Accuracy and because HOEPA did not Apply as Transaction was not High-Cost Loan Alabama Federal Court Holds

Plaintiff filed a class action against Accredited Home Lenders, dba Home Funds Direct, alleging violations of the federal Truth in Lending Act (TILA) and Home Ownership and Equity Protection Act (HOEPA), which requires additional disclosures be made in connection with “high cost” loans; the class action complaint asserted that her lender “improperly understated the finance charge on credit it extended to her” and “failed t comply with the additional disclosure requirements” of HOEPA. Frazier v. Accredited Home Lenders, Inc., 607 F.Supp.2d 1254, 2009 WL 931167, *1 (M.D.Ala. 2009). According to the allegations underlying the class action, the lender improperly excluded several charges from its calculation of the finance charge – a claim the lender denied. Id., at *2. The class action sought rescission and damages, id., at *1. Defense attorneys moved summary judgment, id.; the lender argued that its disclosures were “accurate, complete, and in compliance with both TILA and HOEPA.” Id., at *2. The class action complaint alleged that the lender charged an “endorsement fee” for a service that was never provided, and that it charged an excessive fee for “a title search, a title examination, recording, and title insurance,” each of which allegedly should have been included in the finance charge. Id. Defense attorneys countered that the fees in question were “imposed by a third party” and that they were not excessive; further, the lender argued that the finance charge disclosed “falls within TILA’s tolerance for accuracy” (that is, one half of one percent of the loan amount). Id. Alternatively, defense attorneys argued that any errors fell within the safe harbor provision of TILA and fell outside the scope of HOEPA. Id. The district court granted the motion and entered judgment in favor of the lender on the class action complaint.

The federal court observed that the “dispositive question” was “how to calculate properly the finance charge” for the loan extended to plaintiff. Frazier, at *2. The court observed that this task was complicated by “the imprecise language of TILA itself and the maze of federal regulations interpreting the statute.” Id. Turning to the merits, the district court rejected the lender’s claim that it was not responsible for charges imposed by third parties, observing that the relevant inquiry is whether it required the services in question. Id., at *3. But the court agreed with defense attorneys that the lender did not “require” the “endorsement fee” charged by the third party, particularly as no service was ever provided in connection with that third party charge, id. Accordingly, the federal court held that “the endorsement fee must be excluded from the finance charge.” Id. The question then, was whether the remaining fees were “excessive” and whether the lender understated that amount of the finance charge, id.

Continue reading "TILA Class Action Defense Cases–Frazier v. Accredited Home Lenders: Alabama Federal Court Grants Lender’s Summary Judgment Motion In TILA Class Action" »

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

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

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Supported by Common Class Action Defendants and by Vast Majority of Class Action Plaintiffs, and Transfers Class Actions to Northern District of California

Twelve class actions – eleven in the Northern District of California and one in the Western District of Washington – were filed against Wal-Mart and Netflix alleging violations of antitrust laws; specifically, the class action complaints allege “defendants conspired to divide the online DVD rental market in violation of federal antitrust laws.” In re Online DVD Rental Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 10, 2009) [Slip Opn., at 1]. (Forty-three (43) additional class action lawsuits were filed in various district courts, and were considered by the Court as potential tag-along class actions. Id. at n.1.) Plaintiffs in one of the California class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of California; plaintiffs in 35 of the class actions supported the motion, as did all defendants in the various class actions. Id. Plaintiffs in 9 of the potentially-related class actions supported centralization, but argued alternatively for coordination in various district courts in Alabama, Illinois, Louisiana, New York, Ohio, Puerto Rico, or West Virginia. Id. The Judicial Panel granted the motion to centralize the class action lawsuits (in part because it would “prevent inconsistent pretrial rulings…with respect to class certification”), and agreed that the Northern District of California was the appropriate transferee court. Id., at 1-2. The Judicial Panel explained in selection of the California district court as follows at page 2, “The vast majority of the actions are already pending in the Northern District of California before Judge Phyllis J. Hamilton. Moreover, two of the defendants are headquartered in that district and, accordingly, relevant documents and witnesses are likely located there.” Accordingly, the Panel granted the motion and ordered all actions outside the district transferred to the Northern District of California, id., at 2.

Posted In: Multidistrict Litigation, 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.

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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.

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

Class Action on Behalf of Florida Citizens Against Florida Corporation, Removed to Federal Court under Class Action Fairness Act (CAFA), Properly Remanded to State Court because Home State Exception to CAFA Jurisdiction Applies First Circuit Holds

Plaintiff filed a class action in Florida state court against Kash N’ Karry Food Stores (a chain of grocery stores in Florida) alleging “alleging that Kash N' Karry had failed to adopt adequate security measures to protect its customers' credit card information.” In re Hannaford Bros. Co. Customer Data Security Breach Litig., 564 F.3d 75 (1st Cir. 2009) [Slip Opn., at 3]. According to the allegations underlying the class action, a computer hacker stole from defendant the credit and debit card information of approximately 1.6 million Kash N’ Karry customers, and limited the class action’s definition to Florida residents, id., at 3-4. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), and the Judicial Panel on Multidistrict Litigation coordinated plaintiff’s class action for pretrial purposes with two dozen other class actions in the District of Maine. Id., at 4. The other 24 class actions had been filed against entities that were related to Kash N’ Karry; specifically, its sister corporation Hannaford Brothers, and their common parent company, Delhaize America. Id. Plaintiff moved to remand his class action to state court under the home state exception to CAFA jurisdiction; the district court granted plaintiff’s motion and the First Circuit gave defendant leave to appeal. Id. The Circuit Court stated that this case “presents an issue of first impression for this circuit regarding the application of the home state exception to federal jurisdiction under [CAFA].” Id., at 2. Defense attorneys argued that the class action complaint had been drafted to defeat CAFA jurisdiction “in violation of congressional intent”; plaintiff responded that the home state exception to CAFA jurisdiction applied and, accordingly, that the district court order remanding the class action to state court was correct. Id. The Circuit Court affirmed the remand of the class action to state court, holding that the class action complaint fell squarely within the home state exception to CAFA jurisdiction.

CAFA’s home state exception “requires a federal court to decline to exercise jurisdiction if at least two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the state where the action was originally filed.” In re Hannaford, at 2 (citing 28 U.S.C. § 1332(d)(4)(B)). The First Circuit observed that plaintiff’s class action complaint limits the scope of the class to Florida citizens, and is brought against a single corporation, Kash N’ Karry, which also is a Florida citizen. Id. The district court remanded the class action to state court on the basis of the home state exception, and the Circuit Court affirmed, rejecting defense attorney claims that “the application of CAFA's home state exception depends on a broader assessment of the claims brought by others who do not fall within the complaint's class definition or of the claims available to the class against other possible defendants.” Id.

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Posted In: Class Action Fairness Act (CAFA), Multidistrict Litigation, Removal & Remand, 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.”

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