Class Action Defense Blog

Ohio Supreme Court Rejection of Class Action Against Tobacco Company of Limited Value to Class Action Defendants

On June 14, 2006, the Ohio Supreme Court issued an opinion reversing certification of a class action against a tobacco company for the allegedly "unfair, deceptive, and unconscionable practice[]" of labeling certain cigarettes as "light." Marrone v. Philip Morris USA, Inc., ___ N.E.2d ___, 2006 WL 1584163 (Ohio 2006). While this victory has been widely reported in the press, it is of limited value to class action defendants.

Marrone turned entirely upon Ohio's Consumer Sales Practices Act (CSPA), which prohibits unfair, deceptive and unconscionable practices in consumer sales transactions. However, alleged violations of CSPA may be brought as class actions only "if the violation is an act or practice that was declared to be deceptive or unconscionable by a rule adopted by the Attorney General before the consumer transaction on which the action is based, or if the violation is an act or practice that was determined by a court to violate the CSPA and the court’s decision was available for public inspection in accordance with R.C. 1345.05(A)(3) before the consumer transaction," Slip Opn., ¶ 1.

The limited applicability of Marrone is evident from the following excerpt:

We must determine how similar the defendant’s conduct must be to the conduct that was previously determined to be deceptive in order for a consumer to qualify for class-action certification under R.C. 1345.09(B) for a violation of the CSPA. For the reasons that follow, we hold that a consumer may qualify for class-action certification under Ohio’s CSPA only if the defendant’s alleged violation of the Act is substantially similar to an act or practice previously declared to be deceptive by one of the methods identified in R.C. 1345.09(B). Because the plaintiffs’ claims in this case did not meet that standard, we reverse the judgment of the court of appeals.

Slip Opn., ¶ 2. Marrone is thus limited to a determination of what, under Ohio state law, satisfies the "substantially similar" requirement of R.C. 1345.09(B) so as to authorize a class action. In fact, the Court expressly stated that "plaintiffs may be entitled to pursue class-action relief," but that "they failed to identify any prior rule or court decision that would entitle them to pursue CSPA relief under R.C. 1345.09(B)." Slip Opn., ¶ 30 (itaclis added).

The opinion does have an excellent discussion of the history and purpose behind cigarette tar and nicotine tests, Slip Opn., ¶¶ 26 et seq., and that discussion may prove useful to tobacco defendants in state and federal courts outside of Ohio.

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

Defense Motion Granted Because Underage Students do not have a Protected Property Interest in Education or in Transportation to Private Kindergarten

We briefly summarize an unremarkable class action case for defense attorneys who may benefit from it. New York law requires a school district to accept children who turn five years old prior to December 1^st, and allows individual school districts to decide the admission age for kindergarten for children who turn five after that date. Plaintiff filed a putative class action alleging that she had a right to free public education (kindergarten) even though she turned five after December 1, and/or that the school district was required to provide her with bus transportation to her private school. The federal court rejected plaintiff’s claims and granted the defense motion to dismiss the action. Manbeck v. Katonah-Lewisboro School Dist., 435 F.Supp.2d 273 (S.D.N.Y. 2006).

Posted In: Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Requires Defendant Prove Subject Matter Jurisdiction Supporting Removal Eleventh Circuit Holds

Removal under CAFA (Class Action Fairness Act of 2005) continues to raise basic questions. On June 5, 2006, the Court of Appeals for the Eleventh Circuit addressed several of these questions in Miedema v. Maytag Corporation, ___ F.3d ___, 2006 WL 1519630 (11^th Cir. 2006). The main issue presented was whether CAFA shifted the burden of proof to the plaintiff to establish that remand was proper. Before addressing that question, however, the Circuit Court joined the growing list of sister circuits to hold that 28 U.S.C. § 1453(c)(1) requires that appellate review be sought not more than 7 days after the district court order granting or denying remand, despite the statutory language of “not less than 7 days,” Slip Opn., at 5-7 (italics added, citations omitted). In the Court’s words,

to read it literally would produce an absurd result: there would be a front-end waiting period (an application filed 6 days after entry of a remand order would be premature), but there would be no back-end limit (an application filed 600 days after entry of a remand order would not be untimely).

Slip Opn., at 6-7. The Court also reaffirmed that CAFA requires that the appeal be resolved within 60 days of the granting of an application to appeal, rather than 60 days from the filing of the petition for review. Id., at 7-8.

Turning to the merits, Miedema joined the Seventh and Ninth Circuits in holding that a class action defendant bears the burden of proving removal jurisdiction: CAFA did not shift that burden to class action plaintiffs. Slip Opn., at 8-14. Miedema held that “the district court did not err by placing the burden of establishing subject matter jurisdiction on Maytag, or by invoking the rule that doubts are to be resolved in favor of remand.” Id., at 14. The Court then analyzed the evidence Maytag provided to the district court and concluded that it was insufficient to establish removal jurisdiction. Class defendants will find the Court’s analysis instructive, and it will assist class defendants in establishing subject matter jurisdiction in any federal court. For this reason, the opinion is well worth reading.

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

28 U.S.C. §1446 and Issues Related to Class Action Defense

Class action defendants often benefit if they can remove the case to federal court if possible. CAFA (Class Action Fairness Act of 2005), discussed in a separate article, was enacted to greatly expand access to federal courts in class action cases. Removal of cases to federal court generally is governed by 28 U.S.C. §1446.

As a general rule the defendant must remove the case to federal court within 30 days of receipt of the complaint or “a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable,” 28 U.S.C. § 1446(b) (italics added). The 30-day time limit on removal is discussed in a separate article.

This issue here discussed is whether a defendant is under a duty to inquire into the existence of jurisdictional facts. The Circuit Courts are split on this issue. This article discusses the recent Ninth Circuit opinion on the topic, Harris v. Bankers Life & Cas. Co., 425 F.3d 689 (9th Cir. 2005). Harris is important because it rejects both Moore’s Federal Practice treatise and the Tenth Circuit’s interpretation of a prior Ninth Circuit opinion, Cantrell v. Great Republic Ins. Co., 873 F.2d 1249 (9th Cir. 1989). Both Moore’s Federal Practice 3d, 107.30[3][f] at n.100 (3d ed. 2005), and Akin v. Ashland Chem. Co., 156 F.3d 1030, 1035 n.2 (10th Cir. 1998), cite to Cantrell as imposing a duty upon a defendant to investigate potential reasons for removal within the first thirty days of receiving a complaint. In Harris, the Ninth Circuit recently rejected Moore’s and Akin’s interpretation of Cantrell and clarified its holding in Cantrell.

Continue reading "Harris v. Bankers Life: Duty of Inquiry to Determine Removability to Federal Court" »

Posted In: Removal & Remand, Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Places Burden of Proof on Plaintiff to Establish Local Controversy Exception to Removal Eleventh Circuit Holds

CAFA contains several provisions that still require judicial interpretation. On May 22, 2006, the Eleventh Circuit considered as a matter of first impression for any Circuit Court of Appeals “the specific question of which party should bear the burden of proof on CAFA’s local controversy exception.” Evans v. Walter Industries, Inc., 449 F.3d 1159, 1164 (11th Cir. 2006). Evans "hold[s] that the plaintiffs bear the burden of proving the local controversy exception," id., at 1165 (italics added). The Court noted that this "places the burden on the party most capable of bearing it" because "plaintiffs have defined the class and have better access to information about the scope and composition of the plaintiff class." Id., at 1164 n.3.

The Eleventh Circuit analyzed the evidence presented to the district court and found it wholly inadequate to establish a local controversy. See Evans, at 1164-68. The court rejected the purported showing that two-thirds of the plaintiff class are Alabama citizens, and rejected further that the token Alabama corporation was a "significant defendant" within the meaning of CAFA. In so doing, Evans appears to have adopted (or at the least to have applied) the test "that a class seeks 'significant relief' against a defendant when the relief sought against that defendant is a significant portion of the entire relief sought by the class." Id., at 1167 (citations omitted).

NOTE: The Eleventh Circuit expressly noted that its opinion concerns only the local controversy exception in 28 U.S.C. § 1332(d)(4)(A), and does not reach the question of the local controversy exception in 28 U.S.C. § 1332(d)(4)(B). Evans, at 1163 n.2.

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

District Court Properly Granted Defense Motion for Judgment on the Pleadings in Class Action Because no Private Right of Action Exists Under Federal Real Estate Settlement Practices Act (RESPA) Eleventh Circuit Holds

On May 26, 2006, the Court of Appeals for the Eleventh Circuit affirmed a judgment entered on a motion for judgment on the pleadings in a putative class action alleging RESPA (Real Estate Settlement Practices Act) violations on the ground that no private right of action exists under Section 10 of RESPA. Hardy v. Regions Mortgage, Inc., ___ F.3d ___, 2006 WL 1452666 (11^th Cir. 2006). Separate articles discuss various issues presented by claims under RESPA.

In Hardy, plaintiffs refinanced their home with Regions Mortgage in 1996 and later received from Cendant Corporation about a “Shoppers Advantage” program that, for $5 a month, entitled plaintiffs to discounts from certain retailers. Plaintiffs joined the program and authorized Regions to add the $5 monthly charge to their mortgage payment. Time passed, and plaintiffs forgot about the Shoppers Advantage program. In 2003, however, they noticed that the $5 monthly fee “had been paid out of their escrow account but was not listed on their mortgage statements.” Plaintiffs filed a putative class action alleging that Regions had violated RESPA by failing to include the $5 fee on their escrow account statement, and had conspired with Cendant to violate RESPA. The district court granted judgment on the pleadings because the complaint alleged a violation of Section 10 of RESPA, for which no private right of action exists, rather than Section 6 of RESPA, which provides for certain private rights of action.

The Eleventh Circuit affirmed. The Hardy court explained that Section6 of RESPA requires that federally related mortgage lenders disclose that “the loan may be assigned, sold or transferred” during its life, and provides for a private right of action for noncompliance. Section 10 of RESPA, however, requires lenders to “provide annual escrow account statements that clearly itemize ‘the amount of the borrower’s current monthly payment . . . the total amount paid out of the escrow account during the period for taxes, insurance premiums, and other charges . . ., and the balance in the escrow account at the conclusion of the period.’” However, Congress did not provide for private rights of action for noncompliance; rather, “the Secretary shall assess . . . a civil penalty” instead. Because plaintiffs alleged a violation of Section 10 of RESPA, and because there is no private right of action under Section 10, the Eleventh Circuit affirmed the judgment.

NOTE: Because it was unnecessary, the Eleventh Circuit did not discuss the fact that Congress did not afford private rights of action for every conceivable alleged violation of Section 6.

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

Arbitration Agreements: Who Decides Legality of Arbitration Clause?

On February 21, 2006, the United States Supreme Court addressed “whether a court or an arbitrator should consider the claim that a contract containing an arbitration provision is void for illegality.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. ___, 126 S.Ct. 1204, 1207 (2006). Plaintiffs filed a putative class action alleging that the interest rates in various deferred-payment transactions with Buckeye Check Cashing “in which they received cash in exchange for a personal check in the amount of the cash plus a finance charge” were usurious. Plaintiffs also alleged that the Deferred Deposit and Disclosure Agreement (“Agreement”) violated Florida lending and consumer-protection statutes. Id.

The Agreement contained an arbitration clause. Nonetheless, the trial court denied Buckeye’s motion to compel arbitration, “holding that a court rather than an arbitrator should resolve a claim that a contract is illegal and void ab initio.” The Florida appellate court reversed on the ground that plaintiffs challenged the Agreement in its entirety, not the arbitration clause alone, so “the agreement to arbitrate was enforceable, and the question of the contract’s legality should go to the arbitrator.” The Florida Supreme Court in turn reversed the appellate court, and the United States Supreme Court granted certiorari. Buckeye, at 1207.

The Supreme Court observed that there is a strong policy in favor of arbitration, and that Congress enacted the Federal Arbitration Act to “overcome judicial resistance to arbitration.” Buckeye, at 1207. The Court explained that legal challenges to arbitration provisions fall into two general categories: (1) a specific challenge to the arbitration clause itself; and (2) a challenge to the legality of the contract as a whole. The Buckeye complaint falls into the second category.

The Supreme Court reviewed prior opinions and enunciated three broad propositions: “First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. Second, unless the challenge is to the arbitration clause itself, the issue of the contract’s validity is considered by the arbitrator in the first instance. Third, this arbitration law applies in state as well as federal courts.” Buckeye, at 1209 (italics added). To hold otherwise, the Court concluded, would create the possibility that the trial court may “deny effect to an arbitration provision in a contract that the court later finds to be perfectly enforceable.” Id., at 1210.

Apparently concerned with remaining “judicial resistance to arbitration,” the Supreme Court summarized its decision in very broad terms: “We reaffirm today that, regardless of whether the challenge is brought in federal or state court, a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator.” Buckeye, at 1210.

NOTE: The Supreme Court expressly reserved the question of whether a court or an arbitrator should resolve “the issue of whether any agreement between the alleged obligor and obligee was ever concluded.” Buckeye, at 1208 n.1.

Posted In: Arbitration, Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Requires That Appeal From Grant Or Denial of Motion to Remand Must Be Made Within 7 Days Ninth Circuit Holds

On May 22, 2006, the Court of Appeals for the Ninth Circuit refused to reconsider en banc its decision in Amalgamated Transit Union Local 1309 v. Laidlaw Transit Serv., Inc., 435 F.3d 1140 (9^th Cir. 2006). However, six justices dissented from the denial of rehearing en banc, and severely criticized as an “abuse of our judicial power” the decision to read “less” as “more.” The dissent is authored by Circuit Judge Bybee, and joined in by Judges Kozinski, O’Scannlain, Rymer, Callahan and Bea.

Download PDF of Amalgamated Transit Union Local 1309 v. Laidlaw Transit Serv., Inc.,

Posted In: Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Requires Appeal From Grant or Denial of Motion to Remand Be Made Within 7 Court Days Ninth Circuit Holds

On January 26, 2006, the Court of Appeals for the Ninth Circuit denied a motion to dismiss as untimely an appeal under CAFA (Class Action Fairness Act of 2005) from a district court order denying a motion to remand a putative class action to state court. Amalgamated Transit Union Local 1309 v. Laidlaw Transit Serv., Inc., 435 F.3d 1140 (9^th Cir. 2006). Specifically, the Ninth Circuit held that "the petition for permission to take an appeal must be filed not more than seven court days after the district court's order." Id., at 1141.

The underlying action was filed in San Diego Superior Court in April 2005, and removed to federal court in June 2005. Plaintiffs moved to remand the matter to state court; the district court denied the motion on October 4, 2005, and the order thereon was entered October 5, 2005. Plaintiffs filed a notice of appeal therefrom on October 11, 2005.

On November 9, 2005, a defendant moved to dismiss the appeal. While the opinion addresses several issues, we focus here on the Ninth Circuit's interpretation of CAFA's provision for appeal of district court orders granting or denying motions for remand. 28 U.S.C. S 1453(c)(1) literally provides that review must be sought "not less than 7 days after entry of the order" (italics added). As the Court observed,

The Tenth Circuit in Pritchett v. Office Depot, Inc., 420 F.3d 1090, 1093 n.2 (10^th Cir. 2005), concluded that the statute contains a "typographical error," and the word "less" should be "more," thereby avoiding "a result demonstrably at odds with the intentions of its drafters."

Amalgamated Transit, at 1145 (citations omitted).

The Ninth Circuit agreed, concluding that the legislative history reveals an intent "to create a time limit for appeal, specifically to require that the party seeking to appeal do so not more than seven days after the district court's order." 435 F.3d at 1146 (citations omitted, italics in original).

The Ninth Circuit thus joined the Tenth Circuit in "striking a word passed on by both Houses of Congress and approved by the President, and replacing it with a word of the exact opposite meaning." 435 F.3d at 1146.

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

District Court Denial of Motion to Remand MDL Actions Involving Opt-Out Class Members Following Class Action Settlement Agreement Does Not Warrant Writ of Mandamus (Mandate) Because Appellate Review Will Provide Adequate Relief, and District Court Ruling on Fraudulent Joinder Upheld Because Statute of Limitations Had Run on Non-diverse Defendants, Third Circuit Holds

Fraudulent joinder is discussed in separate articles which explain a plaintiff may not join a party-defendant for purposes of defeating federal court jurisdiction. MDL (Multidistrict Litigation) topics also are discussed in separate articles which explain that the Judicial Panel for Multidistrict Litigation may transfer litigation pending in multiple courts to a single district court for pretrial proceedings. The MDL cases must be remanded prior to trial, and it is incumbent upon a party to the MDL litigation to file a motion for such remand. On May 15, 2006, in a case brought by individuals who had opted out of a class action settlement agreement, the Third Circuit refused to grant a petition for writ of mandamus to review a district court order denying remand on the grounds that appellate review would be adequate, and the Third Circuit affirmed the district court's ruling that non-diverse parties had been fraudulently joined to defeat federal court jurisdiction. In re Briscoe, 448 F.3d 201 (3d Cir. 2006).

The underlying has a tortured background. In 1997, Wyeth withdrew two diet drugs from the market - and 18,000 lawsuits followed. The Judicial Panel for Multidistrict Litigation consolidated the actions and transferred them to the Eastern District of Pennsylvania (MDL-1203). After four separate trips to the Third Circuit that "set forth various facets of the background to MDL-1203 and its class action settlement agreement," the class action settlement was consummated. Briscoe, at 206. More than 14,000 additional lawsuits followed, brought by 30,000-35,000 individuals who had opted out of the class action settlement. The group of 127 lawsuits at issue in Briscoe had been filed in Texas state court between November 2002 and August 2003, had included as named defendants the individual doctors that had prescribed the diet drugs, and had not alleged any federal law claims. Id., at 208-09. Wyeth removed the cases to federal court and the MDL Judicial Panel transferred the cases to the docket of MDL-1203. Id., at 209.

Continue reading "In re Briscoe: MDL (Multidistrict Litigation) And Class Action Defense Cases" »

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

CAFA (Class Action Fairness Act of 2005) Allows Removal of Suit Filed Prior to CAFA’s Effective Date by Defendant Added to Suit by Amendment After CAFA’s Effective Date Tenth Circuit Holds

On May 12, 2006, the Court of Appeals for the Tenth Circuit considered as a matter of first impression the question of “whether CAFA permits the removal of a class action filed before the Act’s effective date if the removing defendant was first added by amendment after the effective date.” Prime Care of Northeast Kansas, LLC v. Humana Ins. Co., 447 F.3d 1284, 1285 (10^th Cir. 2006). The district court had concluded that CAFA did not apply in such cases and remanded the matter to state court. The Tenth Circuit reversed, vacating the district court’s remand order and remanding the action to federal court.

The Tenth Circuit recognized that courts that have considered post-CAFA amendments to the operative pleading have reached one of three competing conclusions. In brief, those courts “have held that such amendments either (1) do not affect the pre-CAFA commencement date of the case; (2) affect the commencement date only if they do not relate back; or (3) affect the commencement date if they do not relate back or if they add new defendants to the case.” Prime Care, at 1286. The Court “adopt[ed] the second position.” Id. Specifically, “whether a post-CAFA amendment triggers a substantive right to removal under CAFA by the affected parties depends on whether the amendment relates back to the pre-CAFA pleading that is being amended.” Id., at 1289

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

CAFA (Class Action Fairness Act of 2005) Determination of “Commencement” of Action Turns on State Law Fifth Circuit Holds

On May 3, 2006, the Fifth Circuit Court of Appeals issued its opinion in Patterson v. Dean Morris, L.L.P., ___ F.3d ___, 2006 WL 1156388 (5^th Cir. 2006), where it considered whether an action that had been filed on February 17, 2005 (prior to CAFA’s February 18, 2005 effective date), but the filing fees not paid until February 22, 2005, could be removed to federal court under CAFA (Class Action Fairness Act of 2005). Slip Opn., at 6-7. The district court remanded the consolidated actions finding that CAFA did not apply, and the Fifth Circuit affirmed. Id., at 6. The Fifth Circuit’s analysis turned entirely upon state law, determining when Louisiana would deem the action to have been “commenced.” In so analyzing the case, the Court joined several sister circuits in relying upon state law to determine when an action has “commenced” under CAFA.

Louisiana law permits a party to fax-file a complaint, provided that the filing fee be paid within 5 days thereof, together with a $5 “transmission fee.” If a plaintiff fails to pay the required filing fee and transmission fee, then the fax filing “shall have no force or effect.” Slip Opn., at 7 (citations omitted). In Patterson, plaintiffs paid the court $3,039 on February 22. However, on May 12 plaintiffs learned that they owed the court an additional $2,145 in fees, which they did not pay until June 14. Defendants urged that the late payment took the action outside of the Louisiana statute’s five-day deadline, so the effective date of the commencement of the lawsuit was after the effective date of CAFA. Slip Opn., at 7.

Continue reading "Class Action Defense Cases--Patterson v. Dean Morris: Fifth Circuit Rules On "Commencement Of Action" Under Federal Class Action Fairness Act (CAFA)" »

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

Removal Period Under 28 U.S.C. § 1446 Begins To Run Upon Service Of Complaint U.S. Supreme Court Holds

CAFA (Class Action Fairness Act of 2005) was enacted to greatly expand access to federal courts in class actions. In class actions, defendants often benefit if they can remove the case to federal court. While CAFA contains special rules concern removal and appealability of orders granting or denying motions for remand, removal of cases to federal court generally is governed by 28 U.S.C. § 1446.

Generally, a defendant must remove an action to federal court within 30 days of receipt “by service or otherwise” of the “initial pleading.” Prior to United States Supreme Court opinion in Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 119 S.Ct. 1322 (1999), federal courts were divided on whether receipt of a courtesy copy of the complaint started the 30-day removal period. Compare Valle Trade, Inc. v. Plastic Specialties & Technologies, Inc., 880 F. Supp. 499, 500 (S.D. Tex. 1995) (“Receipt of a ‘courtesy copy’ of the petition constitutes sufficient notice under the statute.”); Uhles v. F.W. Woolworth Co., 715 F. Supp. 297, 297-98 (C.D. Cal. 1989) (30-day removal period begins upon receipt of initial pleadings by any means, “irrespective of the technicalities of state service of process laws”), with Apache Nitrogen Products, Inc. v. Harbor Ins. Co., 145 F.R.D. 674, 680 (D. Ariz. 1993) (holding defendant must be served to commence removal period).

The United States Supreme Court finally resolved the question in Murphy Brothers v. Michetti Pipe, holding that receipt of a “courtesy copy” of a complaint is not sufficient to trigger the time period for removal. Rather, “a named defendant’s time to remove is triggered by simultaneous service of the summons and complaint, or receipt of the complaint, “through service or otherwise,” after and apart from service of the summons, but not by mere receipt of the complaint unattended by any formal service.” 526 U.S. at 347-48.

Posted In: Removal & Remand, Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Requires Defendant Establish Removal Jurisdiction in "Mass Action" Cases and Jurisdictional Discovery Discretionary Ninth Circuit Holds

CAFA greatly expands access to federal courts to class action defendants, as well as to defendants in "mass action" cases. One question federal courts have grappled with is whether Congress intended to shift the burden from a class action defendant to establish removal jurisdiction, to a class action plaintiff to prove that the matter should be remanded to state court. On April 4, 2006, the Ninth Circuit held that CAFA does not shift the burden of proof to plaintiffs in mass action cases. Abrego Abrego v. Dow Chemical Co., 443 F.3d 676 (9^th Cir. 2006).

Abrego Abrego involved a mass action brought by 1160 Panamanian workers against Dow Chemical for alleged distribution and use in Panama of a pesticide banned in the United States. Dow removed the case to federal court under 28 U.S.C. § 1332(d)(11), added by CAFA to provide federal court jurisdiction over "mass actions." (The requirements of mass actions are discussed in a separate article.) In response to plaintiffs' motion to remand the action to state court, Dow argued:

[U]nder CAFA and contrary to preexisting removal jurisdiction law: (1) plaintiffs bear the burden of refuting the district court’s removal jurisdiction; (2) a “mass action” is removable regardless of whether there is jurisdiction over all plaintiffs whose claims are necessary to qualify the action as a mass action; and (3) the district court must allow jurisdictional discovery to determine the amount in controversy.

443 F.3d at 677-78. The district court found that Dow had failed to establish removal jurisdiction and remanded the case to state court. Id., at 679.

Continue reading "Class Action Defense Cases--Abrego Abrego v. Dow Chemical" »

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

Post-CAFA (Class Action Fairness Act of 2005) Amendment of Complaint to Add Defendant Allows Removal to Federal Court by that Defendant of Suit Filed Prior to CAFA’s Effective Date Fifth Circuit Holds

On April 6, 2006, the Fifth Circuit Court of Appeals considered “an issue of first impression for this court: whether amending a complaint to add a defendant ‘commences’ a new suit under the Class Action Fairness Act of 2005 (CAFA),” Braud v. Transport Service Co. of Illinois, 445 F.3d 801, 802 (5th Cir. 2006).

In Braud, the class action petition was filed in August 2004. In April 2005 (after CAFA’s February 18, 2005 effective date), plaintiffs amended their petition to add an additional party-defendant, Ineos. Ineos timely removed the action to federal court on the ground of CAFA. Braud, at 802. In considering plaintiffs’ motion for remand, the district court concluded that the amendment did not draw the action into the ambit of CAFA and remanded the matter to state court. The Fifth Circuit reversed.

The sole question on appeal was whether the addition of a new defendant affected the applicability of CAFA. Braud recognized that whether the action was “commenced” after CAFA’s effective date turns entirely upon state law. Braud, at 803. In this regard, the Court explained that the question is not one of “retroactivity” but of “commencement”: “the issue is not whether CAFA should apply to suits commenced before February 18, 2005, but whether the addition of a new defendant commences a new suit.” Id., at 804. In other words, if adding a party-defendant constitutes a new action under state law, then CAFA applies by its terms, not because of retroactivity.

The Fifth Circuit “agree[d] with the Seventh Circuit that amendments that add a defendant commence the civil action as to the added party,” Braud, at 804. It based this holding on two grounds. First, “caselaw holds that generally a party brought into court by an amendment, and who has, for the first time, an opportunity to make defense to the action, has a right to treat the proceeding, as to him, as commenced by the process which brings him into court.” Id. at 805 (citations omitted). Second, “the addition of a new defendant opens a new window of removal under 1446(b).” Id. The full opinion is well worth reading.

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

Plaintiff Lawyer, not Allowed to be Class Counsel and Class Representative, Rewarded with Discovery to Find New Class Action Plaintiffs

Class action case law in California "prohibits a lawyer from serving both as class representative and as counsel for the class, " Best Buy Stores, L.P. v. Superior Court, 137 Cal.App.4th 772, 774 (Cal.App. 2006) (citing Apple Computer, Inc. v. Superior Court, 126 Cal.App.4th 1253 (Cal.App. 2005). On February 6, 2004, a plaintiff's lawyer sought to do just that, filing a putative class action to his own name against Best Buy for alleged violations of the CLRA (Consumer Legal Remedies Act, California Civil Code §§ 1750 et seq.), unfair competition, unjust enrichment based on the theory that the "restocking fee" Best Buy charged for returned merchandise was illegal. Best Buy, at 774. Defense attorneys moved to dismiss the case, and the trial court issued an order to show cause why the motion should not be granted. Id.

The plaintiff lawyer requested that the court compel Best Buy (through a third party) to send a letter to a sampling of members of the putative class so that he could find a new class representative: the trial court granted the motion. Best Buy, at 775. Best Buy filed a petition for writ of mandate in the California Court of Appeal. The defense opposed this class action discovery order as a form of "illegal solicitation"; the appellate court disagreed with this characterization. Id., at 777. The Court agreed, however, that the privacy rights of Best Buy customers needed additional protection. Accordingly, at page 778 it held as follows:

Continue reading "Best Buy v. Superior Court: Class Action Lawyer Permitted, Over Defense Objection, Precertification Discovery To Identify Substitute Class Action Representative California Court Holds" »

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

SLUSA (Securities Litigation Uniform Standards Act) and Pre-emption

SLUSA (Securities Litigation Uniform Standards Act) was enacted by Congress in 1998 to affect sweeping changes to federal securities laws class actions. SLUSA addresses numerous federal securities laws class actions issues including pleading, class representation, discovery, liability, attorney fee awards, expenses and more. SLUSA also sought to pre-empt state law securities class action litigation, but the Circuit Courts disagreed on the breadth of that pre-emption.

In Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, __ U.S. ___, 126 S.Ct. 1503 (2006), the United States Supreme Court issued its opinion. This opinion addresses whether the Securities Litigation Uniform Standards Act (SLUSA) “only pre-empts state-law class-action claims brought by plaintiffs who have a private remedy under federal law,” as the Second Circuit held in Dabit v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 395 F.3d 25 (2005), or whether SLUSA “also pre-empts state-law class-action claims for which federal law provides no private remedy,” as the Seventh Circuit held in Kircher v. Putnam Funds Trust, 403 F.3d 478 (7^th Cir. 2005). The Supreme Court agreed with the Seventh Circuit, holding that SLUSA's pre-emption provision was intended to be read broadly, and pre-empted state-law class-action claims brought not only by purchasers and sellers of securities, but also by holders of securities. As so read, SLUSA pre-empted state-law claims alleging the fraudulent manipulation of stock prices.

Continue reading "Merrill Lynch v. Dabit Class Action Defense Case" »

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

Producers Adequately Alleged Violation of Federal Packers and Stockyards Act (PSA) and Raised Genuine Issues of Material Fact as to Knowledge that Federal Government’s Published Prices for Boxed Beef were Inaccurate

For the few defense attorneys who may benefit from this information, we note that on March 30, 2006, a federal district court denied a defense motion for summary judgment in a class action filed by cattle producers against beef packers under the federal Packers and Stockyards Act (PSA), 7 U.S.C. §§ 181 et seq. The class action alleged that at the time they negotiated for the purchase of cattle, the beef packers knew that the rates for boxed beef published by the federal government were inaccurate. The district court held that the cattle producers had adequately alleged PSA claims and had raised genuine issues of fact in support of those claims. Schumacher v. Tyson Fresh Meats, Inc., 434 F.Supp.2d 748 (D. S.D. 2006).

Posted In: Class Action Court Decisions

Post-CAFA (Class Action Fairness Act of 2005) Amendment of Complaint to Add or Substitute Named Plaintiffs Does Not “Commence” New Action Under CAFA Seventh Circuit Holds

The Class Action Fairness Act of 2005 (CAFA) became effective on February 18, 2005. Understandably, then, federal courts still confront matters of first impression under CAFA. On January 30, 2006, the Seventh Circuit Court of Appeals addressed “whether amending a complaint to add or substitute named plaintiffs (class representatives) ‘commences’ a new suit” for purposes of CAFA. Phillips v. Ford Motor Co., 435 F.3d 785, 786 (7^th Cir. 2006). The Court noted, “No appellate court has yet decided whether adding named plaintiffs to a class action suit ‘commences’ a new suit for purposes of removal under CAFA.” Id.

In Phillips, the lawsuits at issue had been filed prior to the enactment of CAFA, but new plaintiffs were added by amendment after CAFA’s effective date. The Seventh Circuit held that the amendment did not commence a new suit for purposes of CAFA. In analyzing the legal issue presented, the Court observed that state law controlled: because the question “is whether adding named plaintiffs commences a new suit in state court, the answer should depend on state procedural law.” Phillips, at 787.

Continue reading "Ford Motor Class Action Defense Case--Phillips v. Ford Motor Company " »

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

California Court Upholds Arbitration Clause With Class Action Waiver In Employment Agreement

On January 19, 2006, the California Court of Appeal for the Second District, Division 5, addressed “the enforceability of a pre-employment arbitration agreement containing a class action waiver.” Gentry v. Superior Court, 135 Cal.App.4^th 944, 37 Cal.Rptr.3d 790, 791 (Cal.App. 2006). In 1995, while employed by Circuit City, Gentry received an “Associate Issue Resolution Package” and a copy of the company’s “Dispute Resolution Rules and Procedures” setting forth various procedures for resolving employment-related disputes. The documents contained an arbitration agreement that included a class action waiver provision. The company provided each employee with 30 days to opt out of the arbitration agreement, but Gentry did not elect to do so. 37 Cal.Rptr.3d at 791-92.

In 2002, Gentry filed a putative class action against Circuit City in California state court alleging that Circuit City misclassified employees in order to avoid paying overtime. Id., at 791. Circuit City moved to compel arbitration. The trial court compelled arbitration with the class action waiver, and stayed the superior court action. The appellate court stated:

The issue in this case is a narrow one: whether the class action waiver in the Circuit City arbitration agreement is an unconscionable provision that renders the provision unenforceable. We conclude the provision is neither procedurally nor substantively unconscionable. Id., at 792.

Gentry recognized that the California Supreme Court “has found pre-employment arbitration agreements is to be adhesive where the agreement is made a condition of employment.” Id., at 793 (citations omitted). This case was different, however, because “Signing the arbitration agreement was not made a condition of Gentry’s employment; he was given 30 days to decide whether or not to opt out of the agreement, and chose not to do so.” Id. The Court also rejected Gentry’s claim that Circuit City “attempted to ‘sucker unsophisticated employees into opting out’ by touting the advantages of arbitration”; the court found that Circuit City had fairly presented both the advantages and disadvantages of arbitration. Id., at 794.

Finally, the court observed that Circuit City would not preclude litigation by means of the class action waiver: “Gentry has alleged statutory violations that could result in substantial damages and penalties should he prevail on his individual claims.” Id., at 795-96. For all of these reasons, the appellate court believed that Discover Bank v. Superior Court, 36 Cal.4^th 148 (Cal. 2005), which invalidated a class action waiver provision in a consumer contract of adhesion involving a credit card company, “does not render the class action waiver in this case unenforceable.” Id., at 791.

The opinion is well worth reading. If the case remains viable, Gentry will prove extremely useful in preventing employment law class actions. Defense attorneys and in-house counsel are well advised to keep track of the status of Gentry.

Posted In: Arbitration, Class Actions In The News, Employment Law Class Actions, Class Action Court Decisions, Topics of Interest