Four (4) class action lawsuits were filed in Arizona, Florida, Illinois and New York against various defendants, including Michelin North America and American Honda Motor relating to the PAX “run-flat” tire system manufactured by Michelin and installed in certain Hondas and Acuras sold in the United States. In re Michelin North Am., Inc. PAX Sys. Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 15, 2008) [Slip Opn., at 1]. Defense attorneys for Michelin filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class action litigation pursuant to 28 U.S.C. § 1407 in the District of Maryland; defense attorneys for Honda supported the motion. Id. All plaintiffs agreed that pretrial coordination was appropriate, but they argued for transfer to the Northern District of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, concluding that this “will eliminate duplicative discovery; avoid inconsistent pretrial rulings; and conserve the resources of the parties, their counsel and the judiciary.” Id. The Panel also agreed with defense attorneys that the District of Maryland was the appropriate transferee court, noting that “the wave of putative statewide class action lawsuits relating to the PAX System began with an action removed to the District of Maryland” and that the Maryland district court judge has “had an opportunity to familiarize himself with issues in this litigation.” Id., at 2.
Download PDF file of In re Michelin North America Transfer Order ]]>Seven (7) class action lawsuits (5 in Washington and 2 in New York) were filed against various defendants, including Washington Mutual, “arising from alleged misrepresentations or omissions concerning WaMu’s financial condition with respect to its subprime home loan portfolio.” In re Washington Mutual, Inc., Securities, Derivative & “ERISA” Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 21, 2008) [Slip Opn., at 1]. Defense attorneys for common defendant Washington Mutual filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class action litigation pursuant to 28 U.S.C. § 1407 in the Western District of Washington, where five class actions already were pending; no party opposed pretrial coordination, but plaintiffs’ lawyers in the New York class actions argued for that district as the transferee court. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the defense that the Western District of Washington was the appropriate transferee court because most of the actions were pending there and because WaMu is headquartered in Seattle. Id., at 1-2.
Download PDF file of In re Washington Mutual Transfer Order]]>Plaintiffs filed a putative class action lawsuit in South Carolina state court against GAF Materials “alleging claims for negligence, negligent representation, breach of warranty, breach of implied warranties, fraud, a violation of the South Carolina Unfair Trade Practices Act (‘SCUPTA’), and unjust enrichment.” Brooks v. GAF Materials Corp., 532 F.Supp.2d 779, 780 (D.S.C. 2008). The class action complaint alleges the class “suffered property damage as a result of the Defendant's defective roofing materials” and seeks compensatory and punitive damages, but in order to avoid removal jurisdiction the class action complaint expressly states that the “amount in controversy for the entire proposed Class does not exceed five million dollars” and that “[t]he Plaintiffs' individual recovery, as well as any putative Class Members individual recovery, exclusive of interest and costs, is not to exceed $74,999.00.” Id. Defense attorneys removed the suit to federal court under the Class Action Fairness Act (CAFA), and plaintiffs’ moved to remand the action to state court. Id. Defense attorneys originally removed the class action in May 2006, but the district court granted plaintiffs’ motion to remand “because the amount in controversy does not exceed $75,000, exclusive of interest and costs, for diversity jurisdiction under 28 U.S.C. § 1332.” Id., at 780. After plaintiffs amended their class action complaint, defense attorneys again removed the action to federal court but the district court remanded the action “for lack of jurisdiction based on the one-year cap on removal set forth in 28 U.S.C. § 1446(b),” id., at 780-81, but the court subsequently rescinded its remand order and requested briefing on whether the amount in controversy exceeded $5 million for purposes of CAFA removal jurisdiction, id., at 781.The district court granted the motion.
In analyzing whether the Class Action Fairness Act authorized removal of this lawsuit, the district court stressed that “Plaintiffs have placed a clear limitation on damages in their complaint.” Brooks, at 782. The Court held at page 782, “the court declines to ‘adopt any approach under which the court will be required to undertake its own independent review of the amount in controversy despite a specific limitation on damages in the plaintiff's complaint.’” As the master of their complaint, plaintiffs are entitled to limit damages sought therein in order to avoid removal jurisdiction, and they effectively did so here. Id. Accordingly, the district court granted plaintiffs’ motion to remand the class action to state court, finding that the amount in controversy requirement had not been met. Id., at 782-83. However, the federal court expressly barred plaintiffs from playing games with removal. The court’s remand order expressly states, “with respect to all claims, the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney's fees, exceeding five million dollars ($5,000,000), exclusive of interest and costs for the putative class action, and the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney's fees, exceeding seventy-four thousand nine hundred ninety-nine dollars ($74,999.00), exclusive of interest and costs, for any individual claims.” Id., at 783.
]]> NOTE: The district court refused to award plaintiffs attorney fees or costs finding that defense attorneys “had an ‘objectively reasonable basis for seeking removal.’” Brooks, at 783 (citation omitted).Download PDF file of Brooks v. GAF Materials Remand Order]]>Plaintiff filed a class action complaint against Possis Medical and two individuals alleging securities fraud violations. The class action alleged that after Possis Medical decided in 2001 to study whether its non-surgical catheter system, designed to remove blood clots, could be used for other medical procedures, it “made several public statements regarding the study's potentially favorable impact on company revenues”; however, in August 2004, Possis Medical released the results of its study “which did not support expanded…usage.” The precipitous drop in stock value led plaintiff to file her putative class action. Cornelia I. Crowell GST Trust v. Possis Medical, Inc., 519 F.3d 778, 781 (8th Cir. 2008). Defense attorneys moved to dismiss the class action on the ground that the class action complaint “failed to meet the heightened pleading standards” required by the Private Securities Litigation Reform Act (PSLRA), id. The district court granted the motion and dismissed the class action complaint, without granting leave to amend, on the ground that the pleadings were insufficient under the PSLRA. Id. Plaintiff appealed, arguing that the class action adequately alleged securities fraud or, alternatively, that the district court erred in failing to grant leave to file an amended class action complaint, id. The Eighth Circuit affirmed.
With respect to the motion to dismiss the class action, the district court found that the complaint “failed to establish that Possis Medical had misrepresented a material fact or acted with the required scienter.” Crowell Trust, at 782. The Eighth Circuit agreed. First, the class action failed to “provide the level of detail” required to support the misrepresentation element: “‘[R]ote allegations that the defendants knowingly made false statements of material fact’ alone are insufficient.” Id. (quoting In re Navarre Corp. Sec. Litig., 299 F.3d 735, 745 (8th Cir. 2002)). The Circuit Court held that the anonymous statements relied on by plaintiff failed to provide the necessary “who, what, when, where and how” of the allegedly actionable statements. Id., at 782. Moreover, the scienter element was missing because the court cannot focus on isolated acts but rather must consider “‘whether all the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any allegation, scrutinized in isolation meets that standard.’” Id. (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., ___ U.S. ___, 127 S.Ct. 2499, 2502 (2007)). The mere fact that the study was important was insufficient to establish scienter, id., at 783.
With respect to the denial of leave to amend, the Circuit Court noted that plaintiff “failed to demonstrate any meaningful basis upon which it could amend its complaint to comply with the heightened securities pleading standards”; accordingly, the trial court did not err in refusing to grant leave to amend. Crowell Trust, at 784. The Eighth Circuit therefore affirmed the district court order, id.
Download PDF file of Cornelia I. Crowell GST Trust v. Possis Medical]]>Plaintiff filed a class action complaint against Allianz Life Insurance Company of North America alleging inter alia violations of RICO (Racketeer Influenced and Corrupt Organizations Act) and breach of fiduciary duty arising out of defendant’s sale of fixed deferred annuities which, the class action alleged, was “‘an unsuitable financial product’ because the maturity date exceeded his life expectancy and restricted his access to principal without surrender charges.” Negrete v. Allianz Life Ins. Co. of North Am., ___ F.3d ___, 2008 WL 1868993, *1 (9th Cir. April 29, 2008). The district court certified the litigation as a nationwide class action with respect to the RICO claims, and as a state-wide class action with respect to certain other claims, id. This class action was but one of several class actions filed against Allianz regarding the sales of annuities, including: Iorio v. Asset Marketing Inc., No. 05-CV-00633 (S.D.Cal.), filed in March 2005, in the United States District Court for the Southern District of California, and certified as a state-wide class action (covering a class that “partially overlaps the Negrete class”) in July 2006; Mooney v. Allianz Life Ins. Co. of North Am., No. 06-CV-00545, filed February 9, 2006, in the United States District Court for the District of Minnesota, and certified as a nationwide class action (covering a class that, according to defense attorneys, includes annuity transactions that “overlap those in Negrete”); and Castello v. Allianz Life Ins. Co. of North Am., Civ. No. MC03-20405, filed December 22, 2003, in a Minnesota state court and certified as a nationwide class action. Id. (The nationwide class action certification order in Negrete expressly excludes members of the nationwide class action certified in Castello, id., at *1 n.3.) In addition to these class actions, the Minnesota Attorney General filed State of Minnesota v. Allianz Life Ins. Co. of North Am., Civ. No. 07-581, on January 7, 2007, in a Minnesota state court (“the AG Action”), seeking “relief under Minnesota law on behalf of Minnesota residents who purchased Allianz's fixed deferred annuity products” (covering a class that, according to defense attorneys, also may partially overlap the class certified in Negrete). Id., at *2. The district court entered an order “that effectively prevents [Allianz] from proceeding with any settlement negotiations on similar class action claims raised in any federal or state court without first obtaining permission from Negrete's Co-Lead Counsel, and from finalizing a settlement in any other court ‘that resolves, in whole or in part, the claims brought in [the Negrete] action,’ without first obtaining the district court's approval.” Id., at *1. The Ninth Circuit reversed.
The district court order arose as follows. Allianz entered into settlement discussions with the parties in Mooney, Castello, and the AG Action. Negrete, at *2. Plaintiffs’ lawyers in Negrete learned of these negotiations from a third party and requested that defense attorneys assure them that the settlement negotiations would not cover any of the claims addressed in or class members covered by the Negrete action; defense attorneys refused to provide such assurances so Negrete filed an ex parte application seeking an order that would prohibit Allianz from “settling, attempting to settle, negotiating, compromising, or releasing any claims, causes of action, or damages relating to any Allianz deferred annuity purchased by any Class Member in the Negrete/Healey matter during the relevant Class Period, in any other forum, including but not limited to, the Mooney matter, without the express approval of this Court and participation of Court appointed Co-Lead Counsel in the Negrete/Healey matter.” Id. While the district court order, issued without a hearing, “nominally” denied the application as “not authorized by the All Writs Act,” the court nonetheless ordered, “Any discussions of a settlement that would affect any claims brought in this litigation, other than claims of an individual plaintiff or class member, must be conducted or authorized by plaintiffs' Co-Lead Counsel. Any proposed settlement that resolves, in whole or in part, the claims brought in this action shall first be subject to review and approval by the Court in this litigation.” Id. Defense attorneys appealed that order, id., at *3.
]]> Defense attorneys argued that the injunction was improper under the All Writs Act and, further, that it was barred by the Anti-Injunction Act. Negrete, at *5. The Ninth Circuit explained that the defense arguments “depend on a determination that the injunction was directed against proceedings in other courts,” and concluded that “Plainly it was.” Id. The Circuit Court explained at page *5, “[T]he mere form of the injunction does not describe its true reach. In form, it is directed to Allianz and Allianz's attorneys. In substance, it interferes with proceedings in other courts.” In essence, the district court order effectively acted as a restraint on other court proceedings, and therein laid its flaw. Id. As a matter of first impression in the Ninth Circuit, the Court held – following Grider v. Keystone Health Plan Cent., Inc., 500 F.3d 322 (3d Cir. 2007) – that the All Writs Act does not permit a district court to issue an order that enjoins proceedings in another district court. Id., at *6. Accordingly, its order was reversed, id., at *7.Moreover, the Anti-Injunction Act restricts district court powers under the All Writs Act by “preclud[ing] unseemly interference with state court proceedings.” Negrete, at *7. This prohibition reflects “high public policy”; “It is not a minor revetment to be easily overcome; it is a fortress which may only be penetrated through the portals that Congress has made available.” Id. Here, the injunction issued by the district court plainly impacted judicial proceedings in the Minnesota state courts, id.; the issue, then, was whether the only potentially applicable exception – an injunction necessary to aid the district court's jurisdiction – saved the injunction, id., at *8. The Ninth Circuit concluded that the exception did not apply, even though the state court “may reach a conclusion that differs from what a federal court would prefer,” id., at *9. Accordingly, the Anti-Injunction Act also required reversal of the district court order, id., at *10.
NOTE: We do not here discuss the Ninth Circuit’s consideration and rejection of plaintiffs’ claim that the Circuit Court lacked jurisdiction to consider the appeal; suffice it to say that the Ninth Circuit concluded the order was in effect an injunction, regardless of how it was denominated by the district court, and that the district court’s verbal representation that it would not enforce its order did not render the appeal moot. See Negrete, at *3-*5.
Download PDF file of Negrete v. Allianz Life Insurance]]>Plaintiff City of Hope filed suit (not a class action) against Genentech alleging breach of contract and breach of fiduciary duties arising out of an agreement whereby “City of Hope, in return for royalties, entrusted a secret scientific discovery to Genentech to develop, to patent, and to commercially exploit.” City of Hope v. Genentech, Inc., ___ Cal.4th ___ (Cal. April 24, 2008) [Slip Opn., at 1]. Plaintiff prevailed at trial, and the jury awarded $300 million in compensatory damages and $200 million in punitive damages. Id. In a case of critical importance to class action and non-class action cases alike, the California Supreme Court addressed “whether, as the jury found, a fiduciary relationship necessarily arose” between City of Hope and Genentech. Id. The High Court held that it did not and, accordingly, reversed the punitive damage award. However, in a portion of the opinion that we do not summarize, the Supreme Court affirmed the $300 million damage award, concluding that “the evidence that City of Hope introduced at trial to prove that Genentech had breached a fiduciary duty [did not] so prejudice[] the jury as to require setting aside the jury’s award of compensatory damages for breach of contract.” Id., at 2. We again stress that this lawsuit was not a class action, but it involves a topic of significant importance to class action litigation.
In brief, scientists employed by City of Hope “developed a groundbreaking process for genetically engineering human proteins,” and filed a confidential application with the National Institutes of Health for a grant. City of Hope, at 2-3. Genentech was formed by a doctor who learned of the discovery and a venture capitalist “to commercially exploit biotechnology.” Id., at 3. Genentech contacted the City and offered to fund additional research and to secure the patents required for commercialization of the products developed; these discussions led to a draft agreement that left open the royalty rate because Genentech had not yet decided whether to accept the City’s proposal of a 2% flat rate. Id. Ultimately, the parties entered into a contract, see id., at 4-6 (summarizing salient terms), and “the rest is history,” so to speak. Genentech obtained various patents and granted various licenses, but it did not inform the City of all of those licenses. Id., at 6. Genentech also filed a lawsuit, which it settled for $20 million, alleging infringement of patents held by the City’s scientists, but it refused to share any of that award with the City. Id., at 8. That refusal precipitated the lawsuit by the City against Genentech for breach of fiduciary duty and breach of contract, id. As noted above, while the first trial ended deadlocked at 7-5 in favor of Genentech, the jury at the second trial ruled in favor of the City, id., at 8-9.
]]> On appeal, defense attorneys argued that the contract between Genentech and the City did not give rise to a fiduciary relationship; the Supreme Court agreed. City of Hope, at 9. Under California law, “before a person can be charged with a fiduciary obligation, he must either knowingly undertake to act on behalf and for the benefit of another, or must enter into a relationship which imposes that undertaking as a matter of law.” Committee on Children’s Television, Inc. v. General Foods Corp., 35 Cal.3d 197, 221 (Cal. 1983). The Supreme Court found no evidence in the contract that Genentech “entered into it with the view of acting primarily for the benefit of City of Hope.” City of Hope, at 9. On the contrary, the agreement reflected an intent to achieve a “mutually beneficial arrangement,” not one in which Genentech would act for the benefit of the City. Id., at 10. Further, the jury was not instructed and so did not find that Genentech “knowingly” undertook to on of and for the benefit of the City, id. The issue, then was whether the relationship itself – “whether an agreement to develop, patent, and commercially exploit a secret scientific discovery in exchange for the payment of royalties” – is one for which the law will impose an obligation to act as a fiduciary. Id.The City argued that under existing California law the trial court properly instructed the jury that a “fiduciary relationship arises when a person entrusts a secret idea or device to another under an arrangement whereby the other party agrees to develop, patent and commercially exploit the idea in return for royalties.” City of Hope, at 11 (citing Stevens v. Marco, 147 Cl.App.2d 357 (Cal.App. 1956)). Stevens was the City’s “one theory” of fiduciary duty liability from day one. Id., at 12. The City argued that a fiduciary relationship exists because “(1) one party entrusts its affairs, interests or property to another; (2) there is a grant of broad discretion to another, generally because of a disparity in expertise or knowledge; (3) the two parties have an “asymmetrical access to information,” meaning one party has little ability to monitor the other and must rely on the truth of the other party’s representations; and (4) one party is vulnerable and dependent upon the other.” Id. The Supreme Court held, however, that the four factors relied upon by the City were common to contractual relationships, and “do not necessarily give rise to a fiduciary relationship.” Id.,a t 13.
The facts of this case revealed that both parties were sophisticated, possessed substantial bargaining power, and were represented by counsel, and that the City “was to be an independent contractor.” City of Hope, at 14. The mere fact that the City “had to rely on Genentech’s superior ability in obtaining patents and in marketing products” did not alter this fact, as that, too, as a common aspect of a contractual relationship. Id. So, too, is the fact that, as the City claimed, “it reposed trust and confidence in Genentech.” Id., at 15. Thus, the City’s “evidence” of a fiduciary relationship consisted of little more than the identification of characteristics common to contractual relationships. The Supreme Court held that “fiduciary obligations are not necessarily created when one party entrusts valuable intellectual property to another for commercial development in exchange for the payment of compensation contingent on commercial success,” id., at 18, and that the trial court erred in instructing the jury otherwise, id. Accordingly, it struck the award of punitive damages against Genentech. Id., at 28.
NOTE: We do not discuss the Supreme Court’s analysis and affirmance of the jury’s $300 million compensatory damage award; that discussion may be found at pages 19-28 of the slip opinion.
Download PDF file of City of Hope v. Genentech]]>Plaintiffs filed a class action against Wal-Mart on behalf of assistant managers alleging labor law violations. Plaintiffs filed a motion with the district court for class action certification, arguing that class action treatment was appropriate under Rule 23(b)(2) and 23(b)(3). In an order denying class action certification that may be found here, see Sepulveda v. Wal-Mart Stores, Inc., 237 F.R.D. 229 (C.D.Cal. 2006), the district court refused to certify the litigation as a class action on the grounds that (1) the claims for monetary relief in the class action complaint were not incidental, thus rendering certification under Rule 23(b)(2) inappropriate, and (2) the duties of associate managers “are not susceptible to collective proof,” thus rendering class action treatment under Rule 23(b)(3) inappropriate. Id., at 245-46 and 248-49. Plaintiffs appealed. Sepulveda v. Wal-Mart Stores, Inc., Case No. 06-56090 (9th Cir. April 25, 2008) [Slip Opn., at 1-2]. In an unpublished opinion, the Ninth Circuit reversed. In a single paragraph, the Circuit Court stated that the district court had “misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied certification under [Rule] 23(b)(2),” and cited a Ninth Circuit opinion that “refus[ed] to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998).” Id., at 2 (citing Molski v. Gleich, 318 F.3d 937, 949-50 (9th Cir. 2003)). Rather, the lower court should have “focus[ed] on the intent of the Plaintiffs in bringing suit.” Id. (citation omitted). By failing to do so, the district court abused its discretion in denying class action treatment under Rule 23(b)(2). Id. The Ninth Circuit instructed the district court to reconsider on remand whether class certification was appropriate under Rule 23(b)(2) and, further, to consider “using Rule 23(c)(4) to certify issues under the Rule 23(b)(2) standard.” Id. (citation omitted).
The author notes that the district court opinion contains the following discussion of Rule 23(b)(2):
]]> “Class certification under Rule 23(b)(2) is appropriate only where the primary relief sought is declaratory or injunctive. A class seeking monetary damages may be certified pursuant to Rule 23(b)(2) where such relief is merely incidental to [the] primary claim for injunctive relief.” Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1195 (9th Cir. 2001) (citations and internal quotation marks omitted). There is no bright-line rule for determining what damages are “incidental.” Molski v. Gleich, 318 F.3d 937, 940 (9th Cir. 2003). Rather, the Ninth Circuit “examine[s] the specific facts and circumstances of each case ... focus[ing] on the language of Rule 23(b)(2) and the intent of the plaintiffs in bringing the suit.” Id. (citations omitted). The Court may consider “whether a reasonable party would bring the suit to obtain the injunctive relief and whether the injunctive relief sought would be both reasonably necessary and appropriate were the party to succeed on the merits.” In re Paxil Litig., 218 F.R.D. 242, 247 (C.D.Cal. 2003) (citing Molski, 318 F.3d at 950); Wang, 231 F.R.D. at 611-12.Sepulveda, 237 F.R.D. at 245.
NOTE: The Ninth Circuit upheld that the district court order to the extent that it denied class action certification under Rule 23(b)(3), concluding that the district court did not abuse its discretion with respect to that portion of its order. See Sepulveda, at 3.
Download PDF file of Sepulveda v. Wal-Mart Stores]]>On April 29, 2008, Weyerhauser lost a class action lawsuit filed in Oregon; the class action complaint reportedly alleged antitrust violations in that Weyerhauser allegedly monopolized the market for finished alder lumber. A jury found against Weyerhauser and awarded nearly $28 million in damages, which will be trebled under antitrust laws. Weyerhauser has promised to appeal the judgment.
]]>Plaintiffs filed a putative class action against various credit card issuing banks for antitrust violations alleging that defendants “illegally colluded to force cardholders to accept mandatory arbitration clauses in their cardholder agreements.” Ross v. Bank of America N.A., ___ F.3d ___ (2d Cir. April 25, 2008) [Slip Opn at 4]. The class action complaint contained two antitrust claims based on violations of Section 1 of the Sherman Act: (1) that defendants “conspired to impose mandatory arbitration clauses,” and (2) that defendants “participated in a group boycott by refusing to issue cards to individuals who did not agree to arbitration.” Id., at 5-6. The class action prayed for an injunction and sought “to invalidate existing mandatory arbitration clauses, and to force the banks to withdraw all pending motions to compel arbitration.” Id., at 6. Defense attorneys moved to dismiss the class action under Rule 12(b)(1) and (b)(6) on the grounds that plaintiffs lacked standing to prosecute the antitrust class action claims, id. The district court granted the motions on the sole ground of lack of standing, and dismissed the class action complaint. See In re Currency Conversion Fee Antitrust Litig., No. 05 Civ. 7116 (WHP), 2006 U.S. Dist. LEXIS 66986 (S.D.N.Y. September 20, 2006). (A copy of the district court order dismissing the class action may be found here .) Plaintiffs appealed; the Second Circuit reversed and reinstated the class action.
The district court dismissed the class action complaint based on its belief that the injuries alleged by plaintiffs were “entirely speculative and, therefore, insufficient to establish Article III standing.” Ross, at 6 (quoting In re Currency Conversion, at *9, *12-13). As the Second Circuit explained at page 6, “Specifically, according to the district court, the cardholders’ injuries are ‘contingent on their speculation that someday (1) Defendants may engage in misconduct; (2) the parties will be unable to resolve their differences; (3) Plaintiffs may commence a lawsuit; (4) the dispute will remain unresolved; and (5) Defendants will seek to invoke arbitration provisions.’” Id., at 6-7 (quoting In re Currency Conversion, at *14-15). The district court also characterized any “alleged anticompetitive effects” as “inchoate.” Id., at 7 (quoting In re Currency Conversion, at *16). The Circuit Court disagreed.
]]> The Second Circuit noted that the threshold for establishing “injury in fact” is “low,” explaining that “we have held [it] need not be capable of sustaining a valid cause of action,’ but ‘may simply be the fear or anxiety of future harm.” Ross, at 7 (citation omitted). The burden of establishing federal court jurisdiction, and thus injury in fact, lies with plaintiffs in this case (as the party asserting federal jurisdiction), but the Circuit Court held that the class action “adequately alleged antitrust injuries in fact.” Id., at 8. Specifically, among the injuries alleged in the class action and recognized by the district court were that the alleged conspiracy “reduced choice and diminished quality of credit card services,” id., at 9. The district court concluded that this was insufficient because it agreed with defense attorneys that Article III standing does not exist until defendants actually invoke the arbitration clause against a particular customer, id., at 10. In the district court’s view, “until the arbitration clauses are invoked against Plaintiffs, they are dormant contract provisions incapable of creating the requisite Article III injury-in-fact.” In re Currency Conversion, at *13. The Second Circuit held this was error, explaining at page 10:The harms claimed by the cardholders, which lie at the heart of their Complaint, are injuries to the market from the banks’ alleged collusion to impose a mandatory term in cardholder agreements, not injuries to any individual cardholder from the possible invocation of an arbitration clause. The antitrust harms set forth in the Complaint – for example, the reduction in choice for consumers, many of whom might well prefer a credit card that allowed for more methods of dispute resolution – constitute present market effects that stem directly from the alleged collusion and are distinct from the issue of whether any cardholder’s mandatory arbitration clause is ever invoked. The reduction in choice and diminished quality of credit services to which the cardholders claim they have been subjected are present anti-competitive effects that constitute Article III injury in fact.
The Circuit Court rejected defense arguments that “this absence of choice is merely a harm to a ‘subjective preference.’” Ross, at 10. The Second Circuit concluded that in at least two respects “the cardholders have alleged an illegal conspiracy that resulted in a present injury by requiring them to accept less valuable cards than would otherwise have been available, but for the illegal collusion.” Id., at 12. The Court also rejected defense arguments that plaintiffs’ claims were not ripe because they were not “faced with a sufficiently imminent threat of injury.” Id., at 14. Because the Circuit Court believed that plaintiffs’ injuries were not speculative or hypothetical, it held that they were ripe for judicial review. Id. Accordingly, it reversed the district court order dismissing the class action complaint for lack of Article III standing, id., at 15.
NOTE: The Second Circuit did not resolve whether plaintiffs have antitrust standing, only whether they have Article III standing. See Ross, at 12-14.
Download PDF file of Ross v. Bank of America]]>Plaintiffs filed a putative labor law class action against their former employer, a property management company, alleging inter alia that it had failed to pay them for overtime and waiting time; specifically, the class action complaint alleged that defendant failed to pay its “resident employees” for “on-call” time. Isner v. Falkenberg/Gilliam & Associates, Inc., 160 Cal.App.4th 1393, 73 Cal.Rptr.3d 433, 434 (Cal.App. 2008). The class action alleged that the resident employee employment agreement signed by plaintiffs required that they be on call “on designated evenings from 5:00 p.m. until 8:00 a.m. and on designated weekends from 5:00 p.m. Friday evening until 8:00 a.m. Monday morning.” The agreement further required employees to “remain on the facility premises within hearing distance of the emergency alarms systems and telephone” while on call, but provided that they were “otherwise free to use on-call time as he or she chooses.” Id. The appellate court explained, “The gravamen of the complaint was that these resident employees were entitled to payment not just for the hours they spent responding to emergencies while on call, but for all the hours they were on call and thus confined to their apartment or the building office so as to remain within audible range of the telephone and alarm.” Id., at 436. Defense attorneys moved for summary judgment arguing that plaintiffs were entitled to wages only for time spent on the job; the trial court agreed that payment was due only for work “actually performed” and, accordingly, granted summary judgment on the class action complaint. Id. The appellate court affirmed.
The pertinent facts established that resident employees were allowed to arrange for another resident employee to “respond to emergency calls with the Employee, or in the place of the Employee” and that employees would be paid for “[a]ll time spent in responding to emergencies.” Isner, at 434. Moreover, if emergencies prevent an employee from obtaining 5 hours of “uninterrupted sleep,” then defendant agreed to “credit Employee with eight hours' time worked under the terms of [the agreement].” Id., at 435. Plaintiffs were given an apartment to live in, and at least one of them stayed within range of the alarm and telephone while on duty or on call. Id. “While [plaintiffs] were on duty and on call, they slept, ate, talked on their personal telephone, used the internet, played computer games, read magazines or watched television in their apartment when they were not responding to an emergency.” However, while on duty or on call, plaintiffs could not go to the pool or walk around the apartment, because they would be unable to hear the alarm or telephone, and they could not leave the apartment. Id. It was plaintiffs’ responsibility to keep track of and bill their time with respect to “both their usual eight-hour work day and times spent responding to emergencies,” id. And while defendant permitted them to bill all time spent on the job, plaintiffs generally “recorded only the calls that took 15 minutes or more.” Id., at 435-36. “[T]here was never an occasion when [plaintiffs] were not paid for time they recorded on their time sheets.” Id., at 436.
]]> Preliminarily, the appellate court rejected plaintiffs’ claim that issues of fact precluded summary judgment, concluding that “the motion presents purely legal issues.” Isner, at 437. Specifically, “The legal dispute turned on the proper interpretation of the Industrial Welfare Commission’s Wage Order No. 5, which provides in pertinent part that ‘in the case of an employee who is required to reside on the employment premises, that time spent carrying out assigned duties shall be counted as hours worked.’” Id. (italics in original). After noting that the DLSE interprets “hours worked” by resident employees as “only the time spent performing physical, mental or other specified tasks,” id., at 437-38, the appellate court found persuasive that plaintiffs were “free to sleep, eat, talk on the telephone, use the internet, play computer games, read for leisure and watch television while they were not responding to an emergency, so long as they remained available to respond (i.e., within audible range of the telephone and alarm),” id., at 438. The Court held that plaintiffs were entitled to compensation only “for the time they spent carrying out assigned duties, i.e., responding to emergency calls,” but not “for the time they were able to attend to personal matters while remaining available to respond to emergency calls.” Id. Accordingly, the Court of Appeal affirmed the grant of summary judgment in favor of the defense. Id., at 439.Download PDF file of Isner v. Falkenberg/Gilliam & Associates]]>Plaintiff filed a putative securities fraud class action against various defendants, including Scientific-Atlanta and Motorola. The district court dismissed the class action claims against Scientific-Atlanta and Motorola and entered a separate, final judgment under Rule 54(b). Plaintiff appealed, and the Eighth Circuit affirmed. See In re Charter Communications, Inc., Securities Litig., 443 F.3d 987 (8th Cir. 2006). Plaintiff filed a petition for writ of certiorari with the U.S. Supreme Court; the High Court granted the writ and affirmed the Eighth Circuit’s decision. See Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., ___ U.S. ___, 128 S.Ct. 761 (2008). (Our summary of the Supreme Court opinion may be found here.) On remand, the Eighth Circuit was confronted with a matter of first impression: specifically, a provision of the PSLRA (Private Securities Litigation Reform Act of 1995) states that the district court “shall include in the record specific findings regarding compliance by each party and each attorney representing any party with each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to any complaint, responsive pleading, or dispositive motion.” In re Charter Communications, Inc., Securities Litig., 519 F.3d 730, 731 (8th Cir. 2008) (quoting 15 U.S.C. § 78u-4(c)(1)). The district court had failed to include such findings, though no party had raised this issue either in the district court or on appeal. Id. Defense attorneys notified the Circuit Court that Scientific-Atlanta and Motorola “waive all rights in this case to assert, that Plaintiff-Appellant did not comply with Fed.R.Civ.P. 11(b)” and requested entry of a final judgment dismissing the class action complaint. Id.
The Eighth Circuit held that the failure to include the required findings “did not affect either the appealability or the validity of the district court's Rule 54(b) final judgment.” In re Charter Communications, at 731 (citation omitted). After noting that courts have reached different decisions as to whether the failure to include Rule 11(b) statutory findings required a remand to the district court or whether, in the absence of district court findings, the Circuit Court could decide the Rule 11(b), and after confirming that “Congress in the PSLRA clearly intended to reduce judicial discretion to ignore or not sanction Rule 11(b) violations,” the Eighth Circuit held that “the Rule 11(b) issue may still be waived on appeal, either when it is not timely raised by any party or when, as here, it is affirmatively waived by the parties who prevailed in the district court.” Id. Accordingly, the Circuit Court reissued its mandate affirming the final judgment of the district court, id., at 732.
Download PDF file of In re Charter Communications]]>Plaintiffs filed a putative labor law class action against Costco alleging that it “misclassified certain managers as exempt employees.” Costco Wholesale Corp. v. Superior Court, ___ Cal.App.4th ___, 74 Cal.Rptr.3d 345, 347 (Cal.App. 2008). According to the class action complaint, each Costco warehouse store “has hundreds of employees and up to 20 managers”; a “general manager” (apparently the most senior person at the warehouse store), and “ancillary managers” (in charge of various departments, such as meat, bakery, pharmacy, optical, etc.). Id., at 348. The class action alleges that “[s]enior operations personnel at Costco determine how to classify employees for compensation purposes,” and in June 2000 Costco’s corporate counsel hired a law firm to “‘undertake [a] comprehensive factual investigation and legal analysis regarding the classification of managers within Costco Warehouses.’” Id. In response to that request, outside counsel conducted interviews, performed legal research and prepared a 22-page letter dated August 4, 2000, addressed to Costco’s corporate counsel. Id. Internal meetings followed, attended by in-house counsel, and in 2001 Costco reclassified ancillary managers as non-exempt employees. Id., at 348-49. The gravamen of the class action is that Costco “unlawfully failed to pay overtime to ancillary managers…because Costco categorically had misclassified these employees as exempt employees”; Costco’s answer to the class action complaint included the affirmative defense that “plaintiffs were exempt from the protection of the California overtime laws (the exemption defense).” Id., at 349. In discovery, plaintiffs sought inter alia production of the August 4 letter, which defense attorneys had listed on a privilege log; the trial court ordered production of a redacted copy of the letter. Costco sought a writ of mandate but the Court of Appeal denied the petition.
This discovery dispute centered on whether Costco had placed the contents of the August 4 letter at issue by virtue of its affirmative exemption defense and other discovery responses. Specifically, in response to interrogatories Costco stated that it “reasonably expected that employees who held the position of salaried Costco manager regularly and customarily exercised their independent judgment and discretion performing such exempt tasks…for more than 50% of their time.” Costco, at 349. The defense “person most knowledgeable about Costco’s exemption defense” testified that “Costco relied, in part, on input from counsel in classifying its employees as exempt or nonexempt.” Id., at 350. Defense attorneys stated that Costco was not relying on “advice of counsel” as a defense, and asserted the attorney-client privilege as to any discussion with counsel, id. Plaintiffs demanded discovery of legal advice provided by outside counsel on the grounds that the privilege had been waived; defense attorneys reiterated that Costco’s “‘reasonable expectation’ exemption defense was not dependent upon legal advice.” Id.
]]> Plaintiffs filed a motion to compel, arguing that Costco had placed the contents of the communications at issue:“Costco affirmatively placed the requested information directly at issue by basing its exemption defense on its ‘reasonable expectation’ that junior managers spent most of their time on managerial tasks. Plaintiffs have a right to show that Costco actually knew and expected the exact opposite, i.e., that Costco investigated the work of its junior managers and learned that they were spending most of their time doing hands-on work. Furthermore, Costco relied on counsel’s input to support its exemption defense. In essence, Costco testified that it reasonably expected junior managers to be primarily engaged in management tasks based on input from in-house counsel.”
Costco, at 350-51. Defense attorneys responded that the communications were protected by the attorney-client privilege and attorney work product doctrine. Id., at 351. The discovery referee ordered Costco to produce the August 4 letter for in camera review (over defense objection), and then ordered the letter produced in a form redacted by the referee; the redacted letter “left only those parts the referee considered to be not protected by attorney-client or work product privileges” and, in part, included the redaction of “all text on pages 2-9 and 17-21” of the 22-page letter. Id. Defense attorneys objected to the referee’s recommendation, and requested that the trial court rule on Costco’s objection without reviewing the letter, id., at 352. The trial court agreed, but adopted the referee’s recommendation and ordered that the letter, as redacted, be produced. Id. The Court of Appeal summarily denied Costco’s petition for writ of mandate, but the California Supreme Court granted review and transferred the matter back to the appellate court for consideration of the merits. Id., at 352-53.
After discussing at length the privileges and the “substantial evidence” standard of review, see Costco, at 353-57, the Court of Appeal denied writ relief. It noted that the referee believed that the unredacted portions of the letter reflected “factual information about various employees’ job responsibilities…based on non-privileged documents (Costco’s written job descriptions) and interviews with two Costco Managers” which were not protected from disclosure. Id., at 357 (citation omitted). In the appellate court’s view, not only were 13 of the 22 pages “redacted in their entirety,” but “[l]arge portions of the remaining pages [also] were eliminated by the referee.” Id., at 358. The court held that defense attorneys failed to satisfy their two-prong burden of establishing (1) that the material was privileged and (2) that extraordinary relief is warranted, id. Based on its review of the letter (which had been filed under seal), the Court of Appeal concluded that the portions of the letter that the referee left unredacted “are inconsequential and do not infringe on the attorney-client relationship.” Id. The appellate court denied the petition “because the unredacted portions of the [August 4] letter contain no information that can irreparably harm Costco.” Id., at 359.
Download PDF file of Costco Wholesale v. Superior Court]]>Four class action lawsuits were filed against OSI Restaurant Partners (OSI) alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA) based on OSI’s failure to delete certain information from customer credit and debit card receipts. The class actions were pending in the Eastern District of Pennsylvania (two), and the Western District of Pennsylvania and Northern District of Illinois (one each). In re OSI Restaurant Partners, LLC, Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 20, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the Eastern District of Pennsylvania; all parties agreed that pretrial coordination was appropriate, but plaintiffs’ lawyers in two of the class actions argued that the Western District of Pennsylvania was the appropriate transferee court. Id. The Judicial Panel granted the motion for centralization, but agreed with defense attorneys that the Eastern District of Pennsylvania was the appropriate transferee court. Id.
Download PDF file of In re OSI Restaurant Partners Transfer Order]]>