Class Action Defense Blog

Class Action Waiver in Payday Loan Agreement Containing Mandatory Arbitration Clause was Unconscionable and Trial Court did not Err in Severing Class Action Waiver, Compelling Arbitration, and Allowing Arbitrator to Determine Whether Matter should Proceed as Class Action Missouri State Appellate Court Holds

Plaintiff filed a class action against QC Financial, a payday lender, from whom plaintiff had borrowed money several times; the class action complaint alleged that defendant violated various Missouri state laws governing payday lenders. Woods v. QC Financial Services, Inc. d/b/a Quik Cash., ___ S.W.2d ___ (Mo.App. December 23, 2008) [Slip Opn., at 1]. Defense attorneys moved to dismiss the class action and to compel plaintiff to arbitrate the dispute individually; the motion was premised on an arbitration clause with a class action waiver that was contained in the payday loan documents. Id., at 1-2. Each loan agreement contained a mandatory arbitration clause that provided in pertinent part that the borrower is (1) waiving their right to a jury trial, (2) waiving their right to any court proceeding (other than small claims), and (3) waving the right to “SERVE AS A REPRESENTATIVE, AS A PRIVATE ATTORNEY GENERAL, OR IN ANY OTHER REPRESENTATIVE CAPACITY, AND/OR TO PARTICIPATE AS A MEMBER OF A CLASS OF CLAIMANTS, IN ANY LAWSUIT FILED AGAINST US AND/OR RELATED THIRD PARTIES.” Id., at 2. The arbitration clause further provided that “all disputes including any Representative Claims against us…shall be resolved by binding arbitration only on an individual basis with you” and precluded the arbitrator from allowing any dispute to proceed as a class action, id. Plaintiff moved for declaratory judgment, seeking to hold the class action waiver unconscionable; the trial court granted plaintiff’s motion and severed the provisions of the arbitration clause prohibiting class actions. Id. At the same time, the trial court denied the defense motion to compel plaintiff “to participate in individual arbitration,” but granted the defense motion to dismiss in part, in that the matter was ordered to arbitration for the arbitrator to decide whether the litigation could proceed as a class action. Id. Defendant appealed, and the Missouri Court of Appeal affirmed.

Defense attorneys raised several issues on appeal: (1) that plaintiff failed to prove procedural unconscionability; (2) that the arbitration clause was not procedurally unconscionable “because the font size used complies with statute and [plaintiff] signed the contract without any misrepresentations, hurry, or duress from [defendant]”; (3) that the arbitration clause was not substantively unconscionable, in part because the Federal Arbitration Act (FAA) “preempts the trial court's holding as Missouri law does not bar class action waivers in all consumer contracts”; (4) that the class action waiver was an “essential “ part of the loan agreement, which does not contain a severance clause, so the trial court erred in severing the class action waiver from the arbitration clause; and (5) that the trial court erred in granting plaintiff’s request for declaratory judgment because it was not properly presented. Woods, at 3-4. The appellate court began by addressing the fifth point, quickly rejecting the defense characterization of the trial court’s action as one of “granting summary judgment,” and holding that the court granted declaratory judgment only to the extent that the mandatory arbitration clause precluded class action relief and only after hearing argument and testimony. Id., at 4-5. The Court of Appeal concluded that there was nothing improper in this aspect of the court’s ruling, id., at 5.

Continue reading "Class Action Defense Cases–Woods v. QC Financial: Missouri State Appellate Court Affirms Trial Court Order Striking Class Action Waiver From Arbitration Clause And Then Compelling Arbitration Of Dispute" »

Posted In: Arbitration, Class Action Court Decisions

Statutes of Limitation for Class Action Claims Against UPS were Tolled in Labor Law Class Action during Appeal from Summary Judgment in Favor of UPS in Certified Class Action Alleging Related Claims Fifth Circuit Holds

Plaintiff filed a class action against his former employer, United Parcel Service, alleging labor law violations; the class action complaint asserted that UPS discriminated against its employees on the basis of race. Taylor v. United Parcel Service, Inc., ___ F.3d ___, 2008 WL 5401487, *1 (5th Cir. December 30, 2008). Plaintiff worked for UPS from 1975 to 2004, during which time he was member of class action lawsuit that had been filed in 1994. Id. The 1994 class action alleged that UPS engaged in race discrimination; plaintiff “was a member of the pay and promotion class and gave deposition testimony on behalf of the class” in a class action that was dismissed on UPS’s motion for summary judgment in June 2000 and affirmed by the Eighth Circuit in August 2004. Id. (citing Morgan v. United Parcel Service of America, Inc., 143 F.Supp.2d 1143 (E.D.Mo. 2000), aff'd, 380 F.3d 459 (8th Cir. 2004), cert. denied, 544 U.S. 999 (2005)). In January 2003, during the pendency of the appeal in the prior class action, plaintiff filed a Title VII charge with the Equal Employment Opportunity Commission, and in March 2003, plaintiff filed the present putative class action “alleging that UPS had denied him promotion on the basis of race and retaliation since at least 1993, denied him equal pay on the basis of race and retaliation since November 1991, and provided a hostile work environment.” Id. As the Fifth Circuit explained, “The biggest difference between the claims asserted in the Morgan class action [filed in 1994] and this suit is [plaintiff’s] addition of the retaliation claims, which allegedly are related to his participation in Morgan.” Id. Defense attorneys moved for summary judgment as to all of the class action claims; the district court granted the motions as to the promotion and hostile work environment claims, but denied the motions as to plaintiff’s discriminatory and retaliatory pay disparity claims. Id., at *2 (citing Taylor v. United Parcel Service, Inc., 421 F.Supp.2d 946, 956 (W.D.La. 2006)). Plaintiff appealed, and the Fifth Circuit reversed.

The Fifth Circuit explained that its statute of limitations analysis played a “central part” in the district court's decision to toss out of the class action complaint. Taylor, at *2. Specifically, “[t]he district court found that tolling ceased on [plaintiff’s] claims in 2000, when the Eastern District of Missouri dismissed the Morgan class claims, rather than in 2004, when the Eighth Circuit affirmed that dismissal”; based on that conclusion, all of plaintiff’s promotion claims in the current class action were time-barred to the extent they arose prior to March 2002. Id. (For reasons we do not here discuss, the district court found that plaintiff’s post-March 2002 promotion claims failed on the merits. See id.) With respect to the “retaliatory promotion” claims, the district court entered summary judgment in favor of UPS because plaintiff presented no evidence that the decision makers at UPS knew of his role in the Morgan class action, and that the time between plaintiff’s involvement in the 1994 class action and the March 2002 pay period “was simply too long to independently support an inference of causation.” Id. Finally, the lower court rejected the class action’s “hostile work environment” claim, and held that the four-year statute of limitations barred the class action’s discriminatory and retaliatory pay claims. Id., at *2-*3. Plaintiff challenged on appeal the district court’s ruling only as to the promotion and pay disparity claims, but not the hostile work environment claim. Id., at *3.

Continue reading "UPS Class Action Defense Cases–Taylor v. UPS: Fifth Circuit Reverses Dismissal Of Labor Law Class Action Holding Statutes Of Limitation Governing Class Action Claims Were Tolled During Appeal Of Related Class Action" »

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

District Court Erred in Dismissing Class Action Complaint Alleging that Packaging of Toddler “Fruit Juice Snacks” was Deceptive and Misleading because Reasonable Consumer is not Required to Read Ingredient List to Correct Misimpressions given by Balance of Packaging Ninth Circuit Holds

Plaintiffs filed a class action against Gerber Products alleging that it deceptively marketed its toddler “Fruit Juice Snacks”; the 8-count class action complaint “challenged five features of the packaging used by Gerber to sell its Fruit Juice Snacks” (summarized in the Note, below). Williams v. Gerber Products Co., ___ F.3d ___ (9th Cir. December 22, 2008) [Slip Opn., at 16633]. Defense attorneys moved to dismiss the class action under Rule 12(b)(6); the district court granted the motion and dismissed the class action because it “found that Gerber’s statements were not likely to deceive a reasonable consumer, particularly given that the ingredient list was printed on the side of the box and that the ‘nutritious’ claim was non-actionable puffery.” Id., at 16634. The Ninth Circuit reversed.

The Ninth Circuit focused on whether plaintiffs had stated claims under California’s Unfair Competition Law (UCL), which includes false advertising claims, and California’s Consumer Legal Remedies Act (CLRA), noting that these claims “are governed by the ‘reasonable consumer’ test,” which requires plaintiffs to show that members of the public are likely to be deceived by Gerber’s packaging. Williams, at 16637 (citations omitted). Under California law, the advertising need not be “false” – it is sufficient if it is either “actually misleading” or if it is likely to deceive or confuse the public. Id. (citation omitted). The district court dismissed the class action because it found as a matter of law, based “solely on its own review of an example of the packaging,” that the packaging was not likely to deceive the public. Id., at 16637-38.The Circuit Court explained, however, that California courts generally leave such determinations to the trier of fact, id., at 16638 (citations omitted). And while it is true that orders granting motions to dismiss UCL claims “have occasionally been upheld,” those situations are “rare” and this case did not present such a “rare situation.” Id. The Court explained at page 16638 and 16639:

Continue reading "Class Action Defense Cases–Williams v. Gerber Products: Ninth Circuit Reverses Dismissal Of Class Action Challenging Gerber “Fruit Juice Snacks” Packaging" »

Posted In: Class Action Court Decisions

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

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

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

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

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

As a resource for California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in the California state and federal courts located in Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers the period from January 9 - 15, 2009, during which time 45 new class action lawsuits were filed. While class actions alleging employment-related claims generally top the list of the class action filings, this past week showed remarkable balance among the top three categories of new class action complaints. During this report period, class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, equaled those class action alleging violations of state and/or federal labor laws -- 14 new class action lawsuits were filed as to each of these categories, representing 31% each of the total number of new class actions filed. The only other category to meet the 10% threshold involved antitrust claims, with 8 new class action filings (18%).

Posted In: Class Actions In The News

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 Ohio

Thirteen (13) class actions lawsuits – 12 in the Northern District of Ohio and 1 in the Southern District of Florida – were filed against National City and certain affiliates alleging violations of federal securities laws by issuing “materially false and misleading statements which had a negative impact in 2008 on National City’s stock”; the putative class actions were filed on behalf of three separate groups – “securities holders seeking relief under the federal securities laws, shareholders suing derivatively on behalf of National City [and] participants in National City’s retirement savings plans suing for violations of the Employee Retirement Income Security Act of 1974 [(ERISA)].” In re National City Corp. Securities, Derivative & Employee Retirement Income Security Act (ERISA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. November 26, 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 Northern District of Ohio. Id. Responding plaintiffs in the Ohio derivative and ERISA class actions supported the motion; however, the ERISA class action plaintiffs opposed coordination of their class actions with the securities fraud class actions. Id. Plaintiffs in the Florida class action opposed the motion, arguing that their lawsuit should remain in Florida because they had filed a motion to remand the class action to Florida state court, id. The Judicial Panel granted the motion to centralize all of the class action lawsuits and agreed that the Northern District of Ohio was the appropriate transferee court. Id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

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

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

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

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

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

District Court Properly Granted Plaintiffs’ Summary Judgment Motion in Class Action Under Fair Debt Collection Practices Act (FDCPA) because Fees Debt Collector Sought to Recover and Underlying Class Action Claims were not Proper Seventh Circuit Holds

Plaintiffs filed a class action against AFNI, a debt collection company, alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and the Wisconsin Consumer Act; the class action complaint asserted that AFNI’s collection practices violated state and federal law because ANFI sought to collect a 15% that was not authorized by either statute or contract. Seeger v. AFNI, Inc., 548 F.3d 1107, 1109-10 (7th Cir. 2008). According to the class action complaint, plaintiffs had entered into contracts with various cellular telephone service providers, and each contract advised customers of the possibility that a debt collection agency may be retained in the event of a payment default, id., at 1109-10; for example, Cingular’s contracts provided that customers would be required to pay “the fees of any collection agency, which may be based on a percentage at a maximum of 33% of the debt, and all costs and expenses, including reasonable attorneys' fees and court costs,” incurred in collecting payments owed, id., at 1110. Additionally, each service contract “contained various provisions making it clear that failure to pay was cause for termination of the contract and that an early termination fee or cancellation fee would be imposed.” Id. Each plaintiff fell behind on payments owed under the cell phone contracts, id., at 1109. AFNI purchased the accounts, and sent debt collection letters to plaintiffs “informing each one that he owed a debt and that Cingular was the original creditor” and that each “was responsible for paying AFNI a collection fee of 15% of the ‘original balance.’” Id., at 1109-10. Plaintiffs filed the class action complaint “alleging that [ANFI’s] attempt to include a separate collection fee in the amount due violated the FDCPA”; an amended class action complaint added party plaintiffs and added also the Wisconsin Consumer Act claim. Id., at 1110. Plaintiffs’ attorneys moved the district court to certify the litigation as a class action, and the district court agreed that class action treatment was warranted. Id., at 1110. The parties then filed cross motions for summary judgment; the district court ruled in favor of plaintiffs and ANFI appealed. Id., at 1109. The Seventh Circuit affirmed.

In ruling on the summary judgment motions, the district court concluded that AFNI violated both the FDCPA and Wisconsin state law “because neither AFNI's contracts with its customers nor Wisconsin law authorized it to charge the type of collection fee it was using.” Seeger, at 1109. Specifically, the district court ruled that ANFI “violated the FDCPA because neither the contracts nor Wisconsin law permitted the owner of a debt to impose a separate fee for collection, if the fee was for the purpose of reimbursing the owner itself as opposed to a third-party debt collector.” Id., at 1110. Defense attorneys first argued that Wisconsin law permits debt collectors to charge “incidental or consequential damages” for customer breaches of the cell phone service contracts, and by extension that the 15% fee it sought to charge plaintiffs “may be collected by an entity that purchases the contract for collection purposes.” Id., at 1111. The Seventh Circuit disagreed. The Court recognized that all states “permits recovery of losses that are the natural and probable result of the breach of a contract and that were within the reasonable contemplation of the parties” and that “[t]his rule applies to service contracts like the plaintiffs' cell phone contracts,” id. (citations omitted), but it found ANFI’s reliance on this general proposition to be insufficient. Rather, to recover the 15% fee it sought to impose, ANFI “must show that this rule permits a third-party purchaser of an account to recover its internal costs to recover the debt in this manner, and, if so, that the 15% fee it charged to the plaintiffs reflected AFNI's actual costs.” Id. The defense argument failed, the Circuit Court concluded, because (1) “Neither a law expressly permitting a collection fee on behalf of a person in the position of a seller of cellular telephone services nor an agreement between the class members and their cellular providers exists here”; and (2) ANFI failed to establish that the fee it sought to charge “can properly be characterized as incidental or consequential damages resulting from the plaintiffs' breach of their cellular phone contracts with Cingular.” Id., at 1112.

Continue reading "FDCPA Class Action Defense Cases–Seeger v. AFNI: Seventh Circuit Affirms Summary Judgment Against Debt Collector In FDCPA Class Action Holding Fee Sought To Be Recovered By Debt Collector Were Not Authorized" »

Posted In: FDCPA Class Actions, Class Action Court Decisions

Securities Fraud Class Action Complaint Failed to Adequately Plead Strong Inference of Scienter Required by Private Securities Litigation Reform Act (PSLRA) because Defense Presented Compelling Inference that Company Refused to Disclose Details of Phase III Drug Trials for “Competitive Reasons,” thereby Supporting District Court Order Dismissing Class Action Complaint Without Leave to Amend Fourth Circuit Holds

Plaintiffs filed a class action against Inspire Pharmaceutical and three of its directors (collectively “Inspire”), as well as other defendants, alleging violations of federal securities laws; the class action complaint asserted that Inspire “overstat[ed] the prospects for an experimental drug that the company was developing to treat dry eye disease.” Cozzarelli v. Inspire Pharmaceuticals Inc., 549 F.3d 618 (4th Cir. 2008) [Slip Opn., at 2]. Specifically, the class action alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and of Rule 10b-5, as well as violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. See id., at 6. Defense attorneys moved to dismiss the class action on the ground that the allegations in the class action complaint failed to meet the heightened pleading requirements established by the Private Securities Litigation Reform Act of 1995 (PSLRA), and the Supreme Court’s decision in Tellabs, Inc. v. Makor Issues & Rights, Ltd., ___ U.S. ___, 127 S.Ct. 2499 (2007). See id., at 2-3 and 6-7. Specifically, Inspire argued that plaintiff’s class action complaint failed to raise the requisite “strong inference of scienter,” id., at 6, or that defendants had made false or misleading statements, id., at 7. The magistrate recommended that the motion be granted, and the district court dismissed the class action. Id., at 6-7. The Fourth Circuit affirmed.

In brief, Inspire had reached Phase III trials of its drug diquafosol tetrasodium, but while the study showed that the drug objectively resulted in substantial improvement of dry eye disease, the company failed to achieve its second primary goal, or “endpoint,” in that patients did not report subjective feelings of improvement. See Inspire, at 3-4. The FDA gave Inspire two options: (1) “conduct two additional trials that met both an objective endpoint and a subjective endpoint,” or (2) “conduct one additional trial that replicated – this time as a primary endpoint – the corneal clearing that Inspire achieved” in its prior study. Id., at 4. Inspire chose the second option but was “tight-lipped” about details of its new study, id., at 5. Inspire made several “generic” comments about its new study, including that it was “very similar” to the prior study and that it was a “confirmatory” Phase II trial, id. Additionally, some stock analysts “speculated that the primary endpoint of [the new study] was only a relative improvement in corneal staining scores and that [the new study] was likely to meet that endpoint.” Id. In point of fact, however, the new study failed to meet its primary endpoint, and Inspire’s stock plunged 44.5% on the news. Id., at 6. Plaintiffs’ class action complaint followed, id.

Continue reading "PSLRA Class Action Defense Cases–Cozzarelli v. Inspire Pharmaceuticals: Fourth Circuit Affirms Dismissal Of Securities Fraud Class Action Holding Allegations In Class Action Complaint Failed To Meet PSLRA’s Heightened Pleading Requirements" »

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

Defense Motion for Summary Judgment in Song-Beverly Class Action should have been Granted because Zip Codes do not Constitute “Personal Identification Information” within the Meaning of Song-Beverly Act California State Appellate Court Holds

Plaintiff filed a class action against Party City alleging violations of California’s Song-Beverly Act, Cal. Civ. Code, § 1747 et seq.; specifically, the class action complaint asserted that the retailer requested zip codes from customers in connection with credit card purchases, and alleged that this violated Song-Beverly which, inter alia, prohibits retailers from seeking “personal identification information” in connection with credit card/debit card purchases. Party City v. Superior Court, 169 Cal.App.4th 497 (Cal.App. 2008) [Slip Opn., at 3]. According to the allegations underlying the class action, plaintiff made a purchase at defendant’s store and the cashier “asked for and recorded her five-digit zip code before completing her credit card transaction.” Id. The class action alleged that a zip code constituted “personal identification information” within the meaning of Song-Beverly, and that defendant used its customers’ zip codes “to further its own business purposes, including target marketing to increase product sales.” Id., at 4. Defense attorneys moved for summary judgment on the ground that zip codes are not “personal identification information” within the meaning of the statute, and that defendant’s cashier did not require plaintiff to provide her zip code as a condition to using her credit card to purchase merchandise, id., at 5. The trial court denied the motion. Id., at 2. Defense attorneys filed a petition for writ of mandate with the California Court of Appeal, id. The appellate court granted the petition and reversed the trial court, ordering that summary judgment be entered in favor of Party City in the putative class action.

Federal regulations define the Zone Improvement Plan (ZIP) Code system as “a numbered coding system that facilitates efficient mail processing.” Party City, at 6, n.4. The defense argument was two-fold. First, Party City submitted evidence that it “trains its cashiers to ask for the customer’s zip code before the type of payment is known, and to enter ‘99999’ into the register if the customer does not provide a zip code, and then to complete the transaction.” Id., at 5 (footnote omitted). The appellate court found it unnecessary to address this aspect of the defense motion because its interpretation of “the definitional issue” compelled judgment in favor of Party City. See id., n.3. Second, and the “key issue” identified by the appellate court, the defense argued that a zip code does not constitute “personal identification information” within the meaning of Song-Beverly. Id., at 5. Party City explained in its summary judgment motion that it “use[d] zip code information requested from customers for demographic purposes, to send promotional mailer to various zip codes throughout the country.” Id., at 5-6 (footnote omitted). To prove the point, defense attorneys submitted evidence that as of the year 2000, there were 25,000 individual addresses that shared plaintiff’s zip code and 27,500 individual addresses that shared the zip code of the trial court. Id., at 6. Moreover, Party City assures that “zip code information is made available only to the company’s marketing department, and zip code data is transmitted there alone, without customer names or credit card numbers.” Id. Further, “the company does not maintain a system or database that would allow it to locate a particular California customer’s address or phone number utilizing only zip code, name or credit card number.” Id., at 6-7.

Continue reading "Song-Beverly Class Action Defense Cases–Party City v. Superior Court: California State Appellate Court Orders Summary Judgment In Favor Of Retailer In Song-Beverly Class Action Holding Zip Codes Not “Personal Information” Under Statute" »

Posted In: Class Action Court Decisions

To assist class action defense attorneys anticipate the types of class actions against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in the California state and federal courts located in Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers the period from January 2 - 8, 2009, during which time only 27 new class action lawsuits were filed. Labor law class actions often top the list of the new class action filings and this again proved true. During this report period, 12 new labor law class action lawsuits were filed, representing a relatively low 44% of the total number of new class actions filed. The only other category to meet the 10% threshold involved class actions alleging violations of California's Unfair Competition Law (UCL), which includes false advertising claims, with 5 new filings (19%).

Posted In: Class Actions In The News

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by All Class Action Plaintiffs, but Limits Scope of Centralization Order to Only Five (5) of the Eight (8) Class Actions at Issue, and Transfers Actions to Northern District of Ohio rather than Illinois as Requested by Defense Attorneys

Eight class actions – four in Illinois, two in New Jersey, and one in Ohio and New York – were filed against various defendants, including Whirlpool and Sear, Roebuck, alleging products liability claims; specifically, the class action complaints alleged that “certain front-loading washing machines manufactured by Whirlpool and sold under the Whirlpool brand name contain design defects that cause the machines to fail to drain properly, thereby resulting in the creation of mold, mildew, and associated unpleasant odors.” In re Whirlpool Corp. Front-Loading Washer Products Liability Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 2, 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 Northern District of Illinois; all responding plaintiffs opposed the motion (at least in the form proposed by defense attorneys). Id. The Judicial Panel separated the class actions into two groups – one group, consisting of five class actions, shared the factual issues summarized above, while the other group, consisting of the remaining three class actions, involved class actions that named only Sears as a defendant. Id., at 1-2. The Judicial Panel granted the motion to centralize the class action lawsuits as to the five class actions, concluding that centralization “will eliminate duplicative discovery, prevent inconsistent pretrial rulings (particularly with respect to class certification), and conserve the resources of the parties, their counsel and the judiciary.” Id. However, the Panel selected the Northern District of Ohio as the appropriate transferee court, id., at 2. In making this selection, the Panel observed that plaintiffs in one of the Illinois class actions and in the two New Jersey class actions supported centralization in the Northern District of Ohio, so long as only the five class actions forming “group one” were coordinated. Id., at 1. The Panel denied the motion as to the class actions against Sears only, see id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Propriety of District Court Dismissal of Anti-Spam Class Action Complaint would Benefit from California Supreme Court Interpretation of Statute Ninth Circuit Holds

Plaintiff filed a class action against Vonage Holdings, Vonage America and Vonage Marketing (collectively “Vonage”) alleging violations of California’s anti-spam law. Kleffman v. Vonage Holdings Corp., ___ F.3d ___ (9th Cir. December 17, 2008) [Slip Opn., at 16588]. According to the class action complaint, Vonage or its marketing agents sent 11 unsolicited email advertisements to plaintiff; the class action alleged that “each e-mail contained an advertisement stating, ‘You Could Save up to 50% on Your Phone Bill!’” Id. The class action further alleged that each ad was “marked with Vonage’s copyright” and “clearly identified as Vonage mailings in the body of the e-mail.” Id. Vonage allegedly sent the emails from 11 different domain names in order to hinder the efforts of internet service providers to “identify and block Vonage’s unsolicited commercial e-mail advertisements” and to deceive the recipients into opening the emails. Id., at 16588-89. As the Ninth Circuit explained, California’s anti-spam law “prohibits unsolicited commercial e-mail advertisements containing or accompanied by falsified, misrepresented, or forged header information.” Id., at 16588 (citing Cal. Bus. & Prof. Code § 17529.5(a)(2)). Defense attorneys moved to dismiss the class action; the district court granted the motion holding that the class action complaint “failed to state a claim under the plain language of § 17529.5.” Id., at 16589. Plaintiff appealed, and the Ninth Circuit certified the dispositive question to the California Supreme Court pursuant to California Rules of Court Rule 8.548. Id., at 16586.

The specific question certified to the California Supreme Court by the Ninth Circuit is as follows: “Does sending unsolicited commercial e-mail advertisements from multiple domain names for the purpose of bypassing spam filters constitute falsified, misrepresented, or forged header information under Cal. Bus. & Prof. Code § 17529.5(a)(2)?” Kleffman, at 16588. The Circuit Court explained at page 16586, “The decisions of the California Courts of Appeal and California Supreme Court provide no precedent to the certified question, and the answer may be determinative of this appeal.” The Ninth Circuit noted that the certified question involves an issue “likely to emerge again in cases governed by § 17529.5” but the relevant provision of the anti-spam law had not “been interpreted by the California Courts of Appeal or the California Supreme Court.” Id., at 16589.

Posted In: Class Action Court Decisions

Class Action Complaint Alleging Various Claims Arising from Manufacture and Sale of Toys Tainted with Lead Paint Survives Defense Motion to Dismiss, Save for Class Action Claims under Consumer Protection Safety Act (CPSA) California Federal Court Holds

Numerous class action complaints were filed against various defendants, including are Mattel and Fisher-Price (“Manufacturer Defendants”) and Target, Toys “R” Us, Wal-Mart Stores, KB Toys and Kmart (“Retailer Defendants”), alleging labor law violations; the class action complaint asserted that a computer error caused Sprint to systematically fail to properly calculate commissions due employees of Sprint’s Business Direct Channel. In re Mattel, Inc. Toy Lead Paint Products Liab. Litig., ___ F.Supp.2d ___ (C.D.Cal. November 24, 2008) [Slip Opn., at 1 and nn.2 and 3]. According to the class actions, certain toys manufactured and sold by defendants contained unsafe levels of lead paint. Id., at 1. The toys at issue in the class action lawsuits “were subject to recalls ordered by the Consumer Product Safety Commission (‘CPSC’) in which the Manufacturer Defendants provided replacement toys.” Id. The Judicial Panel on Multidistrict Litigation consolidated the class action lawsuits in the Central District of California, which eventually granted a motion to certify the litigation as a class action, see id. The consolidated class action complaint sought damages under theories of strict liability and negligence, breach of express and implied warrantees, and for violations of the federal Consumer Protection Safety Act (CPSA) and California’s Consumers Legal Remedies Act (CLRA). Id., at 2. Defense attorneys moved the district court to dismiss the second amended class action complaint, id., at 1. The district court granted the motion and dismissed the class action.

Preliminarily, the federal court rejected the defense argument that defendants’ voluntary recall and replacement of the tainted toys, pursuant to CPSC Regulations, precluded a state law claim for refund. See In re Mattel, at 3-4. The district court also found that the class action adequately alleged injury, see id., at 4-6; as the court explained at pages 5 and 6, “The Court knows of no authority for the proposition that a defendant can defeat a plaintiff’s claim on standing grounds through the unilateral offering of a remedy of the defendant’s choosing.” Additionally, the federal court rejected defense claims that the class action theories “sounded in fraud” and so had to be pleaded with particularity, see id., at 6-7, and rejected also defense claims that the Retailer Defendants owed no duty to inspect for latent defects and, accordingly, could not be found liable for negligence, id., at 7-8.

Continue reading "Class Action Defense Cases--In re Mattel: California Federal Court Dismisses Class Action Claims Under Consumer Protection Safety Act But Refuses To Dismiss Remaining Class Action Claims Arising From Sale Of Lead Tainted Toys" »

Posted In: Class Action Court Decisions

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

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

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

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

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

As Matter of First Impression, Finance Charge by Bank for IRS Refund Anticipation Loan was not “Interest” within the Meaning of 15 U.S.C. § 1615 so District Court Properly Dismissed Class Action Ninth Circuit Holds

Plaintiff filed a class action against Pacific Capital Bank alleging violations of California’s Unfair Competition Law (UCL); the class action complaint alleged that plaintiff obtained a “Refund Anticipation Loan” (RAL) from the Bank secured by her “anticipated federal income tax refund” and authorized the IRS to deposit her refund into an account established by the Bank. Davis v. Pacific Capital Bank, N. A., ___ F.3d ___ (9th Cir. December 24, 2008) [Slip Opn., at 16773-74]. According to the allegations underlying the class action, the Bank agreed to loan plaintiff $1115 for a fee of $85, and required that 48 days after the loan, plaintiff pay the Bank $1200 (representing a yearly interest rate of 57.969%). Id., at 16774. The loan documents expressly provided that plaintiff was not entitled to recover any part of the $85 finance charge, even if plaintiff repaid the loan early, but did not require plaintiff to additional finance charges if the loan was repaid late. Id. The IRS deposited plaintiff’s refund 10 days before the 48-day deadline for repayment, and plaintiff filed her class action alleging that it was unlawful for the Bank to retain the $17.74 pro-rated portion of her finance charge; the theory underlying the class action was that federal law prohibited the Bank from retaining “unearned interest.” Id. Defense attorneys moved to dismiss the class action on the ground that the $85 finance charge was not interest, and that the class action’s UCL claim was preempted by the National Bank Act. Id., at 16773-74 and n.1. The district court granted the defense motion and dismissed the class action, id., at 16774. The Ninth Circuit affirmed.

The issue presented to the Ninth Circuit was as follows: “Must a creditor who imposes a flat finance charge that does not vary with the term of a Refund Anticipation Loan refund a portion of the charge as ‘unearned interest’ under 15 U.S.C. §1615 when the loan is repaid earlier than anticipated in the loan agreement?” Davis, at 16773. Section 1615 provides, “If a consumer prepays in full the financed amount under any consumer credit transaction, the creditor shall promptly refund any unearned portion of the interest charge to the consumer.” 15 U.S.C. § 1615(a)(1). The difficulty with the class action case was that “Congress did not define the word ‘interest’ as used in § 1615, [so] it is not immediately obvious whether it encompasses the finance charge at issue.” Id., at 16774. Based on the Circuit Court’s analysis of the proper statutory interpretation to be given § 1615, and particularly the legislative history, see id., at 16775-77, the Court held that § 1615 did not require the Bank to refund any portion of the $85 finance charge, id., at 16777. And because the class action’s UCL claims were premised on the allegedly “unfair” and “unlawful” refusal of the Bank to refund a portion of the finance charge, the district court properly dismissed the class action complaint. Id., at 16777. Accordingly, the Ninth Circuit affirmed the judgment.

Posted In: Class Action Court Decisions

As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in the California state and federal courts located in Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers the period from December 19 - 31, 2008, during which time only 38 new class action lawsuits were filed. Labor law class actions often top the list of the new class action filings by a wide margin, but the number of new employment-related class actions, as a percentage of the total number of new class action lawsuits filed, had dropped off somewhat in late November and early December. This report, however, covers more than a week because of the holidays, and labor law class action lawsuit filings surged to familiar territory. During this report period, 22 new labor law class action lawsuits were filed, representing 58% of the total number of new class actions filed. The only other category to meet the 10% threshold involved class actions alleging violations of California's Consumer Legal Remedies Act (CLRA) with 4 new filings (11%).

Posted In: Class Actions In The News

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Supported by All Responding Parties including Other Class Action Plaintiffs and Countrywide Defendants, but Transfers Class Actions to Western District of Kentucky

Six class actions –three in California, two in Florida, and one in Missouri – were filed against Bank of America and various Countrywide entities, together with other defendants, alleging violations of the federal Fair Credit Reporting Act (FCRA). In re Countrywide Financial Corp. Customer Data Security Breach Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 2, 2008) [Slip Opn., at 1 and n.2.]. Specifically, the class action complaints alleged that Countrywide failed “to limit access to and/or adequately safeguard private customer information” in violation of the FCRA, id., at 2. Plaintiff 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 Western District of Missouri or the District of Kansas. Id., at 1. All responding parties, which included more than 20 of the 26 plaintiffs in related “tag-along” class action lawsuits, supported centralization, and while some of the class action plaintiffs requested transfer to California, Florida, Missouri, North Carolina or Ohio, the vast majority – including more than 20 plaintiffs tag-along class actions and the Countrywide defendants – supported transfer to the District of Kansas. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, but rejected each of the district requested by the parties. Id., at 2. The Judicial Panel concluded, “Given that this litigation involves 32 known actions pending throughout the United States, any number of districts would be an appropriate transferee forum.” Id. And without discussion or explanation, the Panel selected the Western District of Kentucky as the transferee court, id.

Posted In: FCRA Class Actions, Multidistrict Litigation, Class Action Court Decisions

The author of the Class Action Defense Blog wishes all of you a very happy New Year. A new class action article will be published tomorrow.

Posted In: Class Actions In The News

The author of the Class Action Defense Blog is taking the day off for the New Year holiday. A new class action article will be published on Friday, January 2.

Posted In: Class Actions In The News