Class Action Defense Blog

Class Action Plaintiff Lacked Standing to Pursue “Wrongful Dishonor” Claim and Remaining Class Action Claims were Preempted by the National Bank Act (NBA) Illinois Appellate Court Holds

Plaintiff filed a class action in Illinois state court against First Banks, a state bank incorporated in Missouri; the class action complaint alleged that the Bank wrongfully dishonored a check, violated the state’s Consumer Fraud and Deceptive Business Practices Act, and was unjustly enriched because it “wrongfully charged a $5 fee to payees who did not have accounts with the [Bank] but who presented for payment checks drawn by the [Bank’s] depositors.” Johnson v. First Banks, Inc., 829 N.E.2d 233, 234 (Ill.App. 2008). Defense attorneys moved to dismiss the class action on the grounds that (1) plaintiff lacked standing to prosecute the “wrongful dishonor” claim, and (2) the National Bank Act (NBA) preempted plaintiff’s claims. Id. The trial court granted the motion and dismissed the class action, id., at 235. The Appellate Court of Illinois affirmed.

With respect to the class action’s wrongful-dishonor claim, the trial court held that plaintiff lacked standing because he did not have an account with the Bank. Johnson, at 235. The state statute limits bank liability for wrongful-dishonor claims to bank “customers,” and state law defines a bank “customer” as, inter alia, “a person having an account with a bank.” Id. (citations omitted). Because plaintiff did not have an account with the Bank, he was not a “customer” and therefore lacked standing to prosecute the class action’s wrongful-dishonor claim. Id., at 235-36. With respect to the NBA preemption issue, defense attorneys argued that regulations enacted by the federal Office of the Comptroller of the Currency (OCC) “expressly authorize a national bank to impose check-cashing fees on customers and that, therefore the National Bank Act preempts the plaintiff’s state law causes of action.” Id., at 236. Based on its analysis, see id., at 236-38, the appellate court agreed with the defense and held that “an out-of-state bank…has the same power and authority as a national bank to charge non-account holders a check-cashing fee and is subject to the same treatment with respect to the fee,” id., at 238. The Court further explained at page 238, “Through the federal regulations, the OCC authorized the banks to exercise a power, and a state may not infringe on that authorization.”

In sum, the appellate court agreed that plaintiff lacked standing to pursue the class action’s “wrongful dishonor” claim, and that the remaining class action claims were preempted by the National Bank Act. Johnson, at 238. Accordingly, the Court affirmed the judgment of the trial court.

Posted In: Class Action Court Decisions

Certification of Putative Class Action for Purposes of Settlement Required Satisfaction of Rule 23 Class Action Requirements, and Class Proposed for Settlement of Nationwide Class Action Failed to Meet Rule 23(b)(3)’s Predominance Test Requiring Decertification of Class Action New York Federal Court Holds

In 2005, four class action lawsuits were filed against Take-Two Interactive Software and its wholly-owned subsidiary, Rockstar Games; the complaints sought nationwide class action status and alleged, inter alia, violations of the consumer protection statutes of each state and the District of Columbia based on the “inclusion of an interactive, sexual minigame…in their premier product, Grand Theft Auto: San Andreas.” In re Grand Theft Auto Video Game Consumer Litig. (No. II), ___ F.Supp.2d ___ (S.D.N.Y. July 30, 2008) [Slip Opn., at 1]. The Judicial Panel on Multidistrict Litigation coordinated the various class action lawsuits, together with tag-along class action complaints, in the Southern District of New York. Id., at 2. Soon thereafter, the court appointed lead counsel for the putative class and a consolidated, amended class action complaint was filed. Id., at 2-3. The amended class action alleged that defendants marketed and sold Grand Theft Auto with an improper “content rating,” which they obtained by “withholding pertinent information from the entity charged with assigning content ratings to video games, the Entertainment Software Ratings Board”; specifically, the class action complaint charged that defendants failed to disclose that Grand Theft Auto “contained the Sex Minigame…, a game-within-the-game that allowed players to control the protagonist’s movements as he engaged in various sexual acts” and that purchasers could access the Sex Minigame through what came to be known as the “Hot Coffee Mod.” Id., at 3. Defense attorneys moved to dismiss the class action to the extent it advanced claims “under the laws of states where the named plaintiffs did not purchase” the game; the district court denied the motion, holding that a determination of whether to certify the litigation as a class action “was logically antecedent to the standing issues raised therein.” Id., at 4. Plaintiffs thereafter moved the federal court to certify the litigation as a nationwide class action; defense attorneys opposed class action treatment, “challenging the propriety of a nationwide class action that asserts claims under the disparate laws of the fifty states.” Id., at 4-5. Before the court ruled on that motion, the parties negotiated a settlement of the class action claims, id., at 5. In December 2007, the federal court conditionally certified a nationwide class action for settlement purposes and gave preliminary approval to a settlement of the class action, id., at 1, 5-6. However, in light of the Second Circuit Court of Appeal’s subsequent opinion in McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008), the district court decertified the settlement class. Id. (A summary of the McLaughlin opinion may be found here.)

We cut to the chase of the district court’s 58-page opinion. The district court correctly noted that even for purposes of settlement, the plaintiffs were required to meet the class action criteria set forth in Rule 23(a) – viz., numerosity, commonality, typicality and adequacy of representation – as well as, in this case, Rule 23(b)(3). In re Grand Theft Auto, at 9-10. This latter requirement means that plaintiffs “must show that ‘questions of law or fact common to [Settlement Class] members predominate over any questions affecting only individual members,’ and that the class action ‘is superior to other available methods for fairly and efficiently adjudicating the controversy.’” Id., at 10 (quoting Fed. R. Civ. P. Rule 23(b)(3)). While the proposed settlement is relevant, it goes merely to whether class action treatment would create manageability problems, id. “Trial-manageability issues aside, however, the ‘requirements [of Rule 23(a) and (b)] should not be watered down by virtue of the fact that the settlement is fair or equitable.’” Id. (quoting Denney v. Deutsche Bank AG, 443 F.3d 253, 270 (2d Cir. 2006)).

Continue reading "Class Action Defense Settlement Cases–In re Grand Theft Auto: New York Federal Court Decertifies Class Action Holding Proposed Settlement Class In Nationwide Consumer Protection Law Class Action Lacked "Cohesiveness" Required By Rule 23(b)(3)" »

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

District Court Erred in Finding Lack of Commonality Among Proposed Class in Labor Law Class Action Alleging Pay Discrimination Ninth Circuit Holds but Remands Class Action to District Court for Further Consideration because Lower Court had not Addressed Remaining Rule 23 Class Action Requirements

Plaintiffs, current and former Hispanic employees Bashas’, filed a putative class action against Bashas’ alleging violations of Title VII of the 1964 Civil Rights Act; specifically, the class action alleged that Bashas’ discriminated against members of the putative class on the basis of their national origin in that their “pay and working conditions [were] based on their national origin.” Parra v. Bashas’, Inc., ___ F.3d ___ (9th Cir. July 29, 2008) [Slip Opn., at 9636]. According to the class action complaint, Bashas’ operates 150 grocery stores under the trade names of Bashas’, A.J.’s Fine Foods and Food City, id., at 9637. The demographics of both the patrons and the employees differ substantially; for example, 15% of the Bashas’ and A.J.’s workforce is Hispanic, but 75% of the Food City workforce is Hispanic. Id. The class action alleged that, while the clientele differed, the employee job requirements at the three stores were “practically indistinguishable,” and that in 2003 Bashas’ implemented a program to equalize the pay scales at the stores over a period of time. Id. The class action complaint further alleged that the pay discrepancies ranged from $300-$6000 per year, with Hispanic employees generally receiving less pay than employees at Bashas’ and A.J.’s, id. Plaintiffs moved the district court to certify the litigation as a class action; the federal court granted class action treatment with respect to the “working conditions” claim, but ruled that plaintiffs had failed to adequately establish commonality to support class action treatment of the “pay discrimination” claim. Id., at 9636. The Ninth Circuit granted plaintiffs’ request for leave to appeal the district court’s order, id., at 9638, and reversed.

The Circuit Court focused solely on the district court’s conclusion that plaintiffs “failed to establish commonality among the proposed class members for their pay discrimination claim.” Parra, at 9639. To find commonality under Ninth Circuit authority, “‘[t]he existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies.’” Id., at 9640 (citations omitted). The Court noted at page 9641 that “the district court found past pay disparities for similar jobs at Bashas’, Inc.’s three brand stores,” and that it “noted there significant conclusions conceded by Bashas’, Inc.” – (1) that a higher percentage of its employees work for Food City, (2) that during the relevant time period the pay scale at Food City was lower than at Bashas’ and A.J.’s, and (3) that Hispanic employees were paid a lower hourly rate for similar jobs. The district court found these facts insufficient because ”pay disparities no longer existed at the time the order [denying class action certification] was written.” Id., at 9641. This ruling was error, because the court also should have considered “evidence of past pay disparities and discrimination common to the Hispanic workers at Food City.” Id.

Continue reading "Class Action Defense Cases–Parra v. Bashas’: Ninth Circuit Reverses Denial Of Class Action Treatment Of Labor Law Class Action’s Pay Discrimination Claim And Remands For Consideration Of Remaining Class Action Factors" »

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

To assist class action defense attorneys anticipate the types of cases 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 California state and federal courts in the 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 August 1 - 7, 2008, during which time 44 new class action lawsuits were filed. Labor law class action lawsuits generally top the list, often by a wide margin and often accounting for more than 50% of the new class action filings. This past week, 20 new labor law class actions, representing 45% of the total number of new class action lawsuits filed during the reporting period. The only other categories that met the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with 13 new filings (30%), and class action lawsuits alleging violations of federal securities laws, with five (5) new filings (11%).

Posted In: Class Actions In The News

Plaintiffs Lacked Standing to Prosecute Class Action because Underlying Events Occurred Prior to Filing of Chapter 7 Bankruptcy Proceeding by Plaintiffs and Plaintiffs Failed to Disclose Existence of Class Action Claims in Bankruptcy California Federal Court Holds

Plaintiffs filed a class action against Washington Mutual and other defendants alleging inter alia violations of the federal Fair Debt Collection Practices Act (FDCPA); specifically, the class action complaint alleged that defendants improperly froze plaintiffs’ checking account funds. Yack v. Washington Mutual Inc., 389 B.R. 91, 93 (N.D. Cal. 2008). Plaintiffs each had medical problems, and used a credit card to pay for some of their medical bills, id. When plaintiffs fell behind on their payments, their credit card company hired a debt collector, defendant Sunlan, which obtained a $10,000 judgment against them and then levied on their Washington Mutual bank account. Id., at 93-94. Washington Mutual complied with the levy, forwarding funds from plaintiffs’ account to the County Sheriff and withdrawing a legal processing fee, id., at 94. Plaintiffs alleged that the funds were exempt from levy because they social security and pension benefits; a California Superior Court agreed and ordered the funds released, id. Several months later, plaintiffs filed a voluntary Chapter 7 bankruptcy proceeding, id., at 95. Plaintiffs thereafter filed their putative class action complaint alleging that defendants levied on their bank account despite knowing that the funds were exempt from attachment. Id., at 94. Defense attorneys filed a motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim, id. The district court agreed and dismissed the class action.

The thrust of the defendants’ challenge to the class action complaint was that plaintiffs lacked standing to prosecute the claims because they “failed to list the claims in their bankruptcy proceeding, and because they are judicially estopped from pursuing claims held by the bankruptcy trustee.” Yack, at 95. Defense attorneys argued that plaintiffs filed their Chapter 7 proceeding many months after the events underlying the putative class action complaint, and that they did not disclose in that proceeding the claims they now sought to prosecute: “in doing so, plaintiffs effectively concealed from the bankruptcy their supposed claims against defendants.” Id. According to the district court, plaintiffs conceded “that they lack standing to assert those claims in federal court.” Id. The court found that plaintiffs’ efforts to re-open the bankruptcy and obtain abandonment from the trustee of the claims underlying the class action complaint failed, as the bankruptcy court affirmatively denied them that relief. Id., at 96. Accordingly, plaintiffs lacked standing to prosecute the class action, id. The federal court also agreed with defendants’ alternative argument, that plaintiffs were barred from prosecuting the class action claims by the doctrine of judicial estoppel. See id., at 96-97. Accordingly, the court dismissed with prejudice the class action complaint against defendants. Id., at 97.

Posted In: FDCPA Class Actions, Class Action Court Decisions

Class Action Complaint for Breach of Fiduciary Duty Regarding the Diminution of Value of a Defined Contribution Retirement Plan States a Claim for Benefits under ERISA Eleventh Circuit Holds, Requiring Reversal of District Court Dismissal of ERISA Class Action

Plaintiffs filed a class action against their former employer, Home Depot, and certain of its officers and directors, alleging breach of fiduciary duty under ERISA (Employee Retirement Income Security Act of 1974); the class action complaint alleged that plaintiffs received benefit payments under a defined contribution retirement plan, but “that the payment were less than they should have been” because defendants had engaged in conduct that “artificially inflated the value of Home Depot stock.” Lanfear v. Home Depot, Inc., ___ F.3d ___ (11th Cir. July 31, 2008) [Slip Opn., at 1, 4]. Defense attorneys moved to dismiss the class action claim for lack of subject-matter jurisdiction because (1) the class action sought “damages,” not “benefits,” and (2) plaintiffs were not “participants” entitled to sue for breach of fiduciary duty. Id., at 1. The district court agreed and dismissed the class action complaint, id. Additionally, none of the class action plaintiffs pursued administrative remedies before filing the complaint, id., at 5; accordingly, the federal court alternatively concluded that plaintiffs failed to exhaust their administrative remedies, id., at 2, but the court did not rule on the impact of that failure on the class action complaint – specifically, “the district court did not decide whether it should dismiss the complaint without prejudice on that ground or stay the action to allow the former employees to pursue their administrative remedies,” id., at 2-3. The Eleventh Circuit affirmed in part, reversed in part, and remanded the class action for further consideration by the district court.

The class action presented an issue of first impression in the Eleventh Circuit: “whether a complaint for breach of fiduciary duty regarding the diminution of value of a defined contribution retirement plan states a claim for benefits under [ERISA].” Lanfear, at 1. The Circuit Court explained that participant payments under a defined benefits plan are not affected by the value of the plan’s assets; however, participant payments under a defined contributions plan are so affected because “[t]he participant is entitled to the value of the assets in his account, whatever that value may be.” Id., at 4. According to the class action complaint, “Home Depot violated its fiduciary duty by allowing the plan to invest in Home Depot stock even though corporate officials were backdating stock options and making fraudulent transactions, which artificially inflated the value of Home Depot stock.” Id. The complaint sought to restore to the plan the losses allegedly suffered as a result of this conduct. Id., at 4-5.

Continue reading "ERISA Class Action Defense Cases–Lanfear v. Home Depot: Eleventh Circuit Reverses Dismissal Of ERISA Class Action Holding District Court Had Subject-Matter Jurisdiction Because Class Action Sought Benefits Not Damages" »

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

Defense Motion for Judgment as a Matter of Law Granted because Plaintiff’s Evidence Failed to Establish Loss Causation so Jury Verdict could not Stand Arizona Federal Court Holds

Plaintiffs filed a class action against Apollo Group and certain of its officers and directors the Bank and other defendants alleging violations of federal securities law; the class action complaint asserted that defendants made false or misleading statements concerning a Department of Education (DOE) program review at Apollo Group’s wholly-owned subsidiary, University of Phoenix (UOP). In re Apollo Group, Inc. Securities Litig., ___ F.R.D. ___ (D.Ariz. August 4, 2008) [Slip Opn., at 1]. The class action claims relied on two analyst reports, published in September 2004 (“the Flynn reports”) that allegedly disclosed the truth to the market, id. The Policemen’s Annuity and Benefit Fund of Chicago represented the class; the district court certified the litigation as a class action and the matter proceeded to a jury trial. Id. The jury ruled in favor of the plaintiff, and defense attorneys moved the court for judgment as a matter of law or, alternatively, for a new trial. Id. The district court granted the motion for judgment as a matter of law.

The district court set forth the entirety of the facts relevant to its determination in a single paragraph: “On February 5, 2004, as part of its ongoing program review at the UOP, the DOE sent Apollo a program review report that preliminarily found that the UOP had violated DOE regulations. Apollo was not required to immediately disclose the report, and it chose not to do so. But on six different occasions thereafter, between February 27, 2004 and September 7, 2004, Apollo misrepresented the actual state of affairs surrounding the program review by making public statements at odds with the existence and contents of the DOE report. On September 14 and 15, 2004, the contents of the DOE report were widely disseminated for the first time through various newspapers articles, including articles in The Wall Street Journal, The Arizona Republic, and the Chicago Tribune. The market did not react to the disclosure of this news in any significant way. Five days later, the Flynn reports were issued. These reports downgraded Apollo’s stock for various reasons, some of which PABF argued at trial were necessary to reveal the truth of Apollo’s prior misrepresentations. Apollo’s stock price fell significantly thereafter.” In re Apollo, at 2.

Continue reading "Class Action Defense Cases–In re Apollo: Arizona Federal Court Vacates Jury Verdict In Securities Fraud Class Action And Enters Judgment In Favor Of Defendants Because No Proof Of Loss Causation" »

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

As Matter of First Impression, Class Action Fairness Act Permitted Removal of Suit as a “Mass Action” because Plaintiffs’ Counsel Designed the Lawsuit as a “Class Action Substitute” Seventh Circuit Holds

Plaintiffs filed a complaint in Illinois state court against four defendants alleging that they had “designed, manufactured, transported, or used chemicals that allegedly escaped from a wood-processing plant and injured people living nearby”; defense attorneys removed the complaint to federal court, arguing that federal court jurisdiction existed under the Class Action Fairness Act (CAFA). Bullard v. Burlington Northern Santa Fe R.R. Co., 535 F.3d 759 (7th Cir. 2008) [Slip Opn., at 1-2]. Specifically, defense attorneys argued that the litigation constituted a “mass action” within the meaning of the Class Action Fairness Act, id.¸ at 2. (Under the Class Action Fairness Act, “mass actions” also may be removed to federal court; the Seventh Circuit summarized the definition of “mass actions” under CAFA as cases “involving the claims of 100 or more litigants – if at least one plaintiff demands $75,000, the stakes of the action as a whole exceed $5 million, and minimal diversity of citizenship exists.” Id., at 2 (citing 28 U.S.C. § 1332(d)(11)).) Plaintiffs’ moved the district court to remand the case to state court; they conceded that the diversity and amount-in-controversy tests had been met, but argued that the lawsuit was not a “mass action” under the Class Action Fairness Act. Id. The district court denied the motion, and the Seventh Circuit granted leave to appeal “because the legal issue is novel” and “has not been addressed in this or any other circuit.” Id. The Circuit Court affirmed.

The Class Action Fairness Act permits removal of “mass actions” when “monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that plaintiffs’ claims involve common questions of law or fact.” Bullard, at 2. Plaintiffs argued that this means “defendants may remove a ‘mass action’ only on the eve of trial, once a final pretrial order or equivalent document identifies the number of parties to the trial.” Id. The Circuit Court characterized the lawsuit as “a class-action substitute.” Id., at 3. The Court explained at page 3, “Their complaint alleges that several questions of law and fact are common to all 144 plaintiffs; it provides no more information about each individual plaintiff than an avowed class [action] complaint would do. No one supposes that all 144 plaintiffs will be active; a few of them will take the lead, just as in a class action, and as a practical matter counsel will dominate, just as in a class action. Nonetheless, plaintiffs say, they are entitled to litigate in state court because the Class Action Fairness Act has a loophole.” The loophole envisioned by plaintiffs, however, would prevent the application of the removal of “mass actions” until just before trial. As the Seventh Circuit noted, this reading would eviscerate the statute. “Courts do not read statutes to make entire subsections vanish into the night.” Id., at 3.

Continue reading "Class Action Fairness Act Cases–Bullard v. Burlington Northern: Seventh Circuit Affirms Denial Of Remand Motion Holding Suit On Behalf Of 144 Plaintiffs Was A Mass Action Within Meaning Of Class Action Fairness Act" »

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

Jury Verdict in Antitrust Class Action Affirmed because Plaintiffs Satisfied Rule 23(b)(3) Predominance Requirement for Class Action Certification and because Notice to Absent Class Members was Adequate Sixth Circuit Holds

In 2002, plaintiffs filed a class action against various defendants, including Columbia Iron and Metal Company, alleging violations of federal antitrust laws. The class action complaint sought to represent the interests of plaintiffs and “a class of industrial scrap-generating companies in Northeastern Ohio.” In re Scrap Metal Antitrust Litig., 527 F.3d 517, 523 (6th Cir. 2008). According to the class action, plaintiffs sell unprocessed scrap metal, generated as a byproduct of their manufacturing, to brokers and dealers, “who then haul, clean, sort, and process the scrap before selling it to end users, such as steel mills.” Defendants allegedly violated the Sherman Act by “agreeing not to compete with one another, submitting rigged bids, setting prices for the purchase of unprocessed scrap metal, and imposing financial penalties on co-conspirators for disobeying allocation agreements.” Id. In March 2004, the district court certified the litigation as a class action, id., at 523-24. In 2005, Columbia’s defense attorneys moved to decertify the class on the grounds that notice to the class was inadequate, but the district court denied the motion. Id., at 524. A jury awarded plaintiffs more than $20 million, including $11.5 million against Columbia which the district court trebled, pursuant to 15 U.S.C. § 15(a). Id., at 524. Columbia appealed the jury verdict; the Sixth Circuit affirmed.

The Circuit Court explained at page 523, “The movement of unprocessed scrap from generators to dealers generally works as follows: The dealers submit bids to the generators for the purchase of unprocessed scrap during a specified time period at a set price. In setting their bid price, dealers consult various trade publications, which report the prevailing prices that dealers can expect to charge users for the scrap after they have processed it. To ensure that they turn a profit, dealers set their bid price for the unprocessed scrap below the amount they will ultimately charge the users for the processed scrap. If the bid is accepted by the scrap generator, the generator and the dealer enter into a contract at the bid price for the bid period.” As noted above, the class action complaint alleged that defendants conspired to deflate the prices they paid for scrap metal. Defense attorneys raised several arguments, but we focus only on the claim that the district court should not have permitted the litigation to proceed as a class action. Specifically, Columbia argued that the district court erred in certifying a class action because the “predominance” test of Rule 23(b)(3) had not been satisfied as “damages could not be calculated on a class-wide basis.” Id., at 535. Columbia also challenged the notice given to absent class members on the ground that it failed to adequately inform them of “the binding effect of a class judgment.” Id., at 536.

Continue reading "Class Action Defense Cases–In re Scrap Metal: Sixth Circuit Affirms $34 Million Class Action Judgment In Antitrust Class Action Case Holding District Court Properly Certified Litigation As A Class Action" »

Posted In: Certification of Class Actions, 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 California state and federal courts in the 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 July 25 - 31, 2008, during which time 50 new class action lawsuits were filed. Labor law class action lawsuits generally top the list of new class action filings in California state and federal courts, often by a wide margin, and this again proved to be the case. Twenty-five (25) new labor law class action lawsuits were filed during the past week, representing 50% of the total number of new class action lawsuits filed during the time period. The only other categories that satisfied the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with 8 new filings (16%), and class action lawsuits alleging federal antitrust violations, with 6 new filings (12%).

Posted In: Class Actions In The News

Over Objection of Defendants in Products Liability Individual and Class Action Lawsuits, Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Individual and Class Action Cases Pursuant to 28 U.S.C. § 1407 and Transfers Actions to District of Minnesota

Fifteen (15) individual and class action lawsuits were filed in seven (7) different federal district courts against Johnson & Johnson, Ortho-McNeil-Janssen Pharmaceuticals, Inc., and Johnson & Johnson Pharmaceutical Research & Development, among others, alleging “that the antibiotic Levaquin causes tendon rupture, and the warnings provided by defendants informing Levaquin users of this risk were inadequate”; an additional six (6) individual and class action lawsuits subsequently were filed and were treated as tag-along actions by the Judicial Panel on Multidistrict Litigation (MDL). In re Levaquin Products Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 13, 2008) [Slip Opn., at 1]. Plaintiffs in 14 of the individual and class action lawsuits filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the District of Minnesota, where the majority of the lawsuits (8 of the 15 cases before the Panel and 2 of the tag-along actions) already were pending; defense attorneys opposed pretrial coordination of the class action and individual lawsuits, and alternatively argued for transfer to the District of New Jersey. Id. The Judicial Panel granted plaintiffs’ motion, agreeing that the lawsuits raise common questions of fact and that centralization “will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.” Id. The Panel rejected defense arguments that the parties could address common discovery without pretrial coordination, explaining that the 15 actions, presently pending in 7 districts scattered across the country, “are nearly identical in terms of defendants’ alleged conduct, and discovery and other pretrial efforts will undoubtedly overlap. “ Id. The Panel also rejected the defense request for transfer to New Jersey, explaining at page 2: “Eight actions, including the first-filed action, are pending [in Minnesota], and discovery is already underway in those actions.” Accordingly, the Panel ordered the individual and class action lawsuits transferred to the District of Minnesota. Id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Plaintiff Failed to Establish Proximate Cause Underlying Consumer Fraud Claim based on QVC’s “Retail Value” Comparisons of Retail Products, and Trial Court Properly Denied Plaintiff’s Motion for Class Action Certification and Properly Granted QVC’s Motion for Summary Judgment Illinois State Court Holds

Plaintiff filed a class action complaint in Illinois state court against QVC – a retailer of consumer products on television and on an Internet website – alleging violations of the state’s Consumer Fraud and Deceptive business Practices Act. Mulligan v. QVC, Inc., 888 N.E.2d 1190, 1192 (Ill.App. 2008). QVC generally lists a “comparative price” for its products; QVC airs on television “viewer education spots” that advise prospective customers that when it lists a “retail value” for a product, “that figure represents either an actual comparison-shopped price or the price QVC believes that the same or a comparable product would be offered by department stores or other retailers using a customary markup for that product category.” Id., at 1192-93. QVC also explains that the “retail value” listed “does not necessarily represent the prevailing retail price in every community, or the price at which the item was previously sold by QVC.” Id., at 1193. The class action complaint “alleged that QVC’s listed ‘retail value’ overstated the prevailing market price for certain products it sold and falsely created the impression that consumers were receiving a bargain by purchasing at lower QVC prices.” Plaintiff’s lawyer moved the trial court to certify the litigation as a class action, but the court denied the motion because “individual issues of law and fact predominated.” Id., at 1192. Defense attorneys then moved the court for summary judgment as to plaintiff’s individual claims; the trial court granted the defense motion, thereby terminating all individual and class claims in the putative class action. Id. Plaintiff appealed, arguing that the trial court erred in granting summary judgment and further erred in denying her motion for class action treatment. Id. The appellate court affirmed.

An understanding of the facts foretells the appellate court’s holdings. Plaintiff purchased more than 200 items from QVC, and specifies in her class action complaint four products that she purchased for substantially less than QVC’s listed “retail value”; the retail values ranged from $39-$60, and plaintiff paid from $26.75-$38.12. Mulligan, at 1193. Plaintiff’s expert testified that “she determined comparable prices for the products [plaintiff] purchased from QVC by using a cost and a market approach to valuation,” and that in so doing the retail value for some items was actually less than the amount paid by plaintiff, though she “did not factor in ay applicable sales tax, shipping and handling, or other additional costs.” Id., at 1194. The expert also admitted that the “margin of error on her appraisal” could be $5, and that there were “other factors” that QVC properly could have considered but that she did not incorporate into her appraisals. Id. Plaintiff’s purchased these items for many reasons, “including whether the product was appealing, affordable, an impulse purchase, on sale, and whether she was searching for a particular product.” Id., at 1193. She found it convenient to shop from home, and felt like she was part of the QVC “family.” Id. She had seen QVC’s education spots, and admitted that at times she believed the retail value listed by QVC “seemed…awfully high,” but she would make the purchase because she still believed that she was paying a fair price for the item. Id. Additionally, plaintiff purchased items from QVC even if it did not list a retail value, and plaintiff continued to make purchases from QVC even after she filed her class action complaint. Id. As the appellate court explained at page 1193, “[plaintiff] acknowledges that a consumer could not legitimately claim to be actually deceived by QVC’s retail values if the consumer continued to purchase the products after suing QVC.”

Continue reading "QVC Class Action Defense Cases–Mulligan v. QVC: Illinois State Court Affirms Denial Of Class Action Treatment And Summary Judgment In Favor Of Defense In Unfair Business Practice Class Action" »

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

Defense Entitled to Summary Judgment on Class Action Claim Seeking Triple Time for Overtime Hours Worked on Holidays because Employer Only Obligated to Pay Time-and-a-Half for Overtime, including Hours Worked on Holidays, California State Court Holds

Plaintiff, a security guard, filed a putative class action against her employer, Advanced-Tech Security Services, for failure to pay overtime. Advanced-Tech Security Services, Inc. v. Superior Court, 77 Cal.Rptr.3d 757, 759 (Cal.App. 2008). Defendant’s employee handbook explained the company’s policies for overtime and holiday pay, and provided that all hours worked in excess of 40 hours per week would be paid at 1½ times normal rate and that all hours worked on any of six specified holidays will be paid at the regular rate for employees who do not work on those holidays and at 1½ times normal rate for employees who do work on those holidays. Id. The named class action plaintiff worked 12 hours on Labor Day (a specified holiday) and 60 hours during the week, for which she was paid 40 hours at straight time and 20 hours at time-and-a-half; however, the class action alleged that “the time and one-half she was paid for working on Labor Day was her regular rate of pay pursuant to the Employee's Handbook, and she was entitled to be paid one and one-half times the premium rate for the hours she worked on Labor Day.” Id., at 759-60. Similarly, the class action plaintiff worked 8 hours on Memorial Day (a specified holiday) and 8 hours of overtime during that week; the class action alleged she was entitled to receive 23½ hours at straight time, 8 hours of overtime, and 24 hours (triple time) for the 8 hours worked on Memorial Day. Id., at 760. In essence, then, the issue presented by the class action was whether, under California Labor Code section 520(a), an employee is “entitled to time and one-half of the premium holiday pay as overtime if the employee works more than 8 hours in a day or 40 hours in a week.” Id., at 759. The trial court denied defendant’s motion for summary judgment on this issue, but the Court of Appeal granted interlocutory review and reversed.

Defense attorneys moved for summary judgment on the “failure to pay overtime” cause of action in the class action complaint on the ground that plaintiff “would never be able to prove that she was not paid one and one-half times her regular rate of pay for the days she worked in excess of 8 hours per day and/or in excess of 40 hours in one week.” Advanced-Tech, at 760. Plaintiff countered that she was entitled to triple time for holiday hours that were also overtime hours, id. The trial court denied the motion for summary judgment because it believed defendant had not “address[ed] the issue of the propriety of its practice of crediting a contractual holiday premium payment toward overtime pay for work in excess of 40 hours in the same week.” Id., at 761. Reviewing that holding de novo, id., the appellate court reversed. The appellate court summarized its holding at page 759 as follows: “We hold that the plain language of section 510 does not require an employer to compensate an employee at a rate higher than one and one-half times the regular rate of pay under the circumstances presented here. The employer is entitled to credit the time and one-half premium pay on holidays against otherwise earned overtime.” Accordingly, it reversed the trial court order and directed the lower court to grant defendant’s motion for summary judgment as to the “failure to pay overtime” cause of action, see id., at 765. The court’s analysis may be found at pages 761-65.

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

Class Action Plaintiffs Failed to Establish Likelihood of Success on the Merits of ERISA Violations Alleged in Class Action Complaint so District Court Properly Denied Request for Preliminary Injunction that Sought to Enjoin Employer from Implementing Changes to Benefit Plan Fifth Circuit Holds

Plaintiffs, retired employees of Alcatel USA, filed a putative class action against Alcatel alleging violations of ERISA (Employee Retirement Income Security Act); according to the class action complaint, Alcatel improperly eliminated retirement medical benefits of the putative class members and breached fiduciary duties owed to the class. Nichols v. Alcatel USA, Inc., ___ F.3d ___, 2008 WL 2469407, *1 (5th Cir. June 20, 2008). The class action divided the retirees into two groups – Salaried Retirees and Union Retirees: Alcatel provided Salaried Retires with a Salaried Retirees Benefit program and, under a collective bargaining agreement, agreed to provide medical benefits to Union Retirees. Id. The Fifth Circuit summarized the claims of the class action plaintiffs as follows: “The Salaried Retirees contend that the Benefit program is a pension plan and consequently subject to vesting under [ERISA]…. The Union Retirees contend that [Alcatel] does not have the right to increase the cost of retiree health benefits because they are fixed lifetime benefits which individually vested at the time of each retiree's retirement based upon the agreement and course of action between the parties.” Id. Plaintiffs’ lawyers moved the district court for a preliminary injunction, which the district court denied. Id. Plaintiffs filed an interlocutory appeal and the Fifth Circuit affirmed.

The class action was precipitated by Alcatel’s announcement “that it planned to implement changes to certain of its retiree medical welfare benefit plans, including a gradual reduction over a three-year period in the amount of its contribution to the costs of medical benefits.” Nichols, at *1. Class action plaintiffs challenged the proposed changes to the plan and sought a preliminary injunction to prohibit Alcatel from implementing the changes. Id. We do not here discuss the case in further detail, as the Fifth Circuit opinion focuses on well-settled rules concerning preliminary injunctions. We note that in broad terms the Circuit Court agreed that plaintiffs were not likely to prevail on the merits and that the plan at issue was not a “pension” plan but, rather, a “welfare” plan. The full text of the opinion may be found here.

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

Defense Summary Judgment in ERISA Class Action Complaint Erroneously Attacked Class Action Claims as Separate and Distinct, but when Defendants’ Conduct was Considered as a Whole, Genuine Issues of Material Fact Existed Sufficient to Defeat Summary Judgment Illinois Federal Holds

Plaintiffs filed a class action lawsuit against their former employer, Abbott Laboratories, and their new employer, Hospira, a newly-created corporate entity, after Abbott spun off its Hospital Products Division (HPD) to Hospira. The class action complaint alleged that the manner in which defendants spun off HPD violated sections 510 and 404 of ERISA. Nauman v. Abbott Labs., ___ F.Supp.2d ___ (N.D.Ill. July 10, 2008) [Slip Opn., at 1]. The four-count class action alleged that, in order to save money associated with the costs of its pension and retiree medical benefits plans for older workers, (1) Abbott terminated HPD employees with the specific intent of denying them retirement benefits, (2) as part of that scheme, Abbott refused to rehire employees transferred to Hospira within two years of the transfer, (3) as part of that scheme, Hospira refused to hire Abbott employees who retired and collected benefits from Abbott, and (4) Abbott breached fiduciary duties owed under § 404 “by making deliberate misrepresentations about the benefits that post-spin-off employees could expect at Hospira.” Id., at 1-2. Defense attorneys moved for summary judgment on the class action claims on the grounds that Abbott argued that it had legitimate business reasons for spinning off HPD. Id., at 2, 16. The district court held that while the claims may be subject to attack if viewed individually, when the course of conduct are viewed as whole the class action adequately presented genuine issues of material fact as to whether defendants acted with a specific intent to deny benefits to retirees in violation of ERISA.

After providing a lengthy discussion of the material facts, see Nauman, at 5-12, and the legal standard governing § 510 claims under ERISA, see id., at 12-15, and § 404 claims under ERISA, see id., at 16, the district court turned to the merits of the defense motion. The federal court admitted that by “dissecting” the claims in the class action and “examining each in isolation,” the summary judgment motions were “generally persuasive” and “convincing[],” id., at 16. But the district court explained that the motions were “premised on the assumption that the several counts of plaintiffs’ complaint arise out of independent and unrelated events,” id., at 17. The defense motions thus overlook the thrust of the class action – viz., “that the termination alleged in Count I, coupled with the policies challenged in Counts II and III, constitute a ‘scheme’ that Abbott conceived, and that the defendants jointly adopted, with the specific intent of avoiding the payment of projected benefits.” Id., at 18. The court considered defendants’ conduct “as a whole,” id., at 20, and concluded that genuine issues of material fact existed sufficient to warrant a trial on the § 510 class action claims, id., at 21-22.

Continue reading "ERISA Class Action Defense Cases–Nauman v. Abbott Laboratories: Illinois Federal Court Denies Defense Motion For Summary Judgment On ERISA Class Action Complaint Holding Conduct “As A Whole” Warranted Trial" »

Posted In: Class Action Court Decisions

In order to assist class action defense attorneys anticipate the types of class action lawsuits against which they will have to defend in California state and federal courts, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the 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 July 18 - 24, 2008, during which time 46 new class action lawsuits were filed. Labor law class action lawsuits generally top the list of new class action filings in California state and federal courts, and this past week was not an exception. Twenty (20) new class actions asserting employment-related claims were filed during the past week, representing 43% of the total number of new class action lawsuits filed during this reporting period. (We note that while this figure far outnumbers the nearest category, it is well below the level that labor law class actions often hit.) The only other category that satisfied the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with 6 new filings (13%).

Posted In: Class Actions In The News

Judicial Panel Grants Plaintiffs’ Requests for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by other Class Action Plaintiffs and Unopposed by any Class Action Defendants, but Among Various Options Selects Eastern District of Michigan as Transferee Court

Thirty-seven (37) class actions – twelve actions in the Eastern District of Michigan, ten actions in the District of Minnesota, seven actions in the Northern District of Texas, four actions in the Northern District of Ohio, and one action each in the Northern District of California, the Southern District of California, the District of Kansas and the Southern District of Ohio – were filed against various defendants, including Reddy Ice Holdings, Reddy Ice, Arctic Glacier Income Fund, Arctic Glacier, Inc., Arctic Glacier International, and Home City Ice, alleging antitrust violations. In re Packaged Ice Antitrust Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 10, 2008) [Slip Opn., at 1]. Specifically, the 37 class actions, and 28 related class actions that were treated as tag-along cases, see id. n.3, “conspired to allocate markets and to fix, raise, maintain and/or stabilize the price of packaged ice in the United States, in violation of state and federal antitrust laws.” Id., at 1-2. Plaintiffs in 9 of the class actions separately filed 5 motions with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407, but the moving parties did not agree among themselves on the proper venue for transfer. Id., at 1. The Judicial Panel explained at page 1, “Moving and responding plaintiffs variously support centralization in the following districts: the Southern District of California, the Eastern District of Michigan, the District of Minnesota, the Northern District of Ohio, or the Northern District of Texas. Responding defendants support centralization in the District of Minnesota.” (Footnote omitted.)

The Judicial Panel granted the motion to centralize the class action lawsuits, finding that they involved common questions of act and that centralization “will eliminate duplicative discovery, prevent inconsistent pretrial rulings (especially with respect to the issue of class certification), and conserve the resources of the parties, their counsel and the judiciary.” Id., at 1-2. With respect to selecting the proper transferee court, the Panel recognized that “any number of the proposed transferee forums would be acceptable,” but it selected the Eastern District of Michigan because it “offers a relatively geographically central district with favorable caseload conditions” and because more of the pending and tag-along class action cases had been filed in that district than in any other. Id., at 2. Moreover, “the grand jury investigating the packaged ice industry is based in this district.” Id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

This morning we posted an article on yesterday's California Court of Appeal opinion in Brinker Restaurant Corp. v. Superior Court, ___Cal.App.4th ___ (Cal.App. July 22, 2008). We failed to mention that yesterday California's Governor, Arnold Schwarzenegger, issued a press release on the opinion, and on the topic of employee meal and rest breaks. The Governor's press release states:

We are pleased that the California Court of Appeal issued today a decision squarely addressing many of the central issues in dispute concerning meal and rest periods. The confusing and conflicting interpretations of the meal and rest period requirements have harmed both employees and employers. Today's decision promotes the public interest by providing employers, employees, the courts and the labor commissioner the clarity and precedent needed to apply meal and rest period requirements consistently.

Posted In: Class Actions In The News

Trial Court Erred in Granting Class Action Treatment to Complaint Alleging Labor Law Violations because Employer need only “Provide” Meal and Rest Periods to Employees but need not “Ensure” that Meal and Rest Breaks are Taken California State Court Holds

Plaintiffs filed a class action in California state court against Brinker Restaurant, Brinker International and Brinker International Payroll alleging labor law violations; specifically, the class action complaint alleged that Brinker failed to provide its employees with meal and rest breaks. Brinker Restaurant Corp. v. Superior Court, ___Cal.App.4th ___ (Cal.App. July 22, 2008) [Slip Opn., at 3]. Plaintiffs moved the trial court to certify the litigation as a class action, and the court granted the motion. Id. The central issue in the class action was whether an employer must ensure that employees take meal and rest breaks in order to comply with California law, or whether it is sufficient to make available meal and rest breaks; the Court of Appeal held that an employer is not responsible for ensuring that employees take meal and rest breaks to which they are entitled. Id., at 3-4. Accordingly, the appellate court granted defendants’ petition for writ of mandate and reversed the trial court’s class action certification order.

Defendants have a written policy, on a form signed by each employee, that sets forth the statutory meal and rest periods and acknowledging that the employee may be disciplined or terminated for failing to take those breaks. Brinker, at 5. Employees also are required to clock in and out so that defendants may maintain accurate records for payroll purposes, id., at 5-6. Plaintiffs’ class action complaint alleged that defendants failed to provide meal and rest breaks, id., at 7-8. The class action alleged further that defendants required employees to take “early lunches” and then required that they work upwards of 9 hours without any additional meal period, id., at 8. Finally, the class action alleged that defendants required employees to work “off the clock,” id., at 8-9. Plaintiffs argued that employers “must ‘ensure’ that the employee takes meal periods,” id., at 9. The trial court an employer must give employees a meal break “before [an] employee’s work period exceeds five hours,” and that the purpose of the statute is “to provide employees with break periods and meal periods toward the middle of an employee[']s work period in order to break up that employee’s ‘shift.’” Id., at 10.

Continue reading "Labor Law Class Action Defense Cases–Brinker v. Superior Court: California Appellate Court Reverses Trial Court Order Certifying Labor Law Class Action Holding Employers Need Not “Ensure” Employees Take Meal And Rest Breaks" »

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

Class Action Complaint Adequately Pleaded Claims Against T-Mobile because Claims were not Premised on Fraud, so Rule 9(b) did not Apply, and because Claims Sufficiently Pleaded Breach of Contract, Unjust Enrichment and Violation of Consumer Protection Act Washington Federal Court Holds

Plaintiff filed a class action complaint T-Mobile USA alleging unfair business practices in connection with cellular telephone text messaging; specifically, the class action alleged that “T-Mobile charges customers for the receipt of unsolicited text messages, and does not adequately disclose the practice in its contract with customers.” Zaldivar v. T-Mobile USA, Inc., ___ F.Supp.2d ___ (W.D. Wash. July 15, 2008) [Slip Opn., at 1]. The class action complaint alleged breach of contract, unjust enrichment, and violations of Washington’s Consumer Protection Act. Id., at 2. Defense attorneys moved to dismiss the class action complaint under Rule 9(b) for failure to plead fraud with specificity. Id., at 1-2. They argued that the gravamen of the class action was the allegation that T-Mobile defrauded its customers, and therefore Rule 9(b)’s heightened pleading requirements for fraud should apply, id., at 2. The district court disagreed and denied the motion to dismiss the class action.

The federal court distinguished Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003), which held that a plaintiff who “‘rel[ies] entirely’ on a ‘unified course of fraudulent conduct’ to support a claim in which fraud is not a necessary element must nonetheless satisfy Rule 9(b) in ‘pleading the claim as a whole.’” Zaldivar, at 2 (quoting Vess, at 1103-04). Here, the class action does not “‘rely entirely’ on a uniform course of fraudulent conduct”; on the contrary, even if the court assumed that the allegations against T-Mobile were “grounded in fraud” and stripped them from the complaint, the complaint would still state claims for relief against T-Mobile. Id., at 3. For example, the breach of contract claim relies on the allegation the T-Mobile failed to charges customers only for charges ‘contractually agreed upon,” and the Consumer Protection Act class action claim was premised on T-Mobile’s failure to “properly notify or advise” customers that “they were not contractually liable to pay certain fees for text messaging.” Id. Accordingly, the district court denied T-Mobile’s motion to dismiss the class action complaint, id., at 5.

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