Class Action Defense Blog

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, but Rejects Defense Recommendation that Class Actions be Transferred to District of Columbia

Six class action lawsuits were filed against various defendants, including Chiquita Brands International and Chiquita Fresh North America (Chiquita), as well as current and former officers and directors of Chiquita Brands. The lawsuits fell into two categories: two shareholder derivative class action suits, filed in the District of Columbia and Ohio, and four class action suits under the Alien Tort Statute, filed in the District of Columbia, Florida, New Jersey and New York. In re Chiquita Brands Int’l, Inc., Alien Tort Statute & Shareholders Derivative Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 20, 2008) [Slip Opn., at 1]. Defense attorneys for Chiquita filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the District of the District of Columbia; plaintiffs’ lawyers in all other class actions opposed the motion. Id. Plaintiffs also argued that if the Panel granted pretrial coordination, then the cases should be transferred to district in which their action already was pending – viz., Florida, New York or Ohio. Id. Even though the class action complaints sought different relief under different theories, the Judicial Panel granted the motion for centralization: “All of these actions arise from allegations that Chiquita provided financial support to the Autodefensas Unidas de Columbia (AUC), a Colombian right-wing paramilitary organization engaged in an armed struggle against leftist guerilla groups in various parts of Colombia, including those where Chiquita had banana-producing operations.” Id. The Panel therefore concluded that pretrial coordination was warranted as it would “eliminate duplicative discovery, prevent inconsistent pretrial rulings, and conserve the recourses of the parties, their counsel and the judiciary.” Id., at 2. The Judicial Panel rejected plaintiffs’ concerns that the actions contained “non-common issues,” explaining that the transferee court could address those issues. Id. The Panel agreed, however, that the class actions should be transferred to the Southern District of Florida, rather than the District of the District of Columbia, “because the action there appears to be somewhat further than, or as advanced as, the other actions and the district is closer to Colombia, where many of the events that bear on this litigation took place,” id.

Posted In: Multidistrict Litigation, 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 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 April 11 – 17, 2008, during which time 44 new class action lawsuits were filed. Labor law class actions generally top the list of new class action cases, often by a wide margin. During the time period covered by this post, 26 new class actions were filed alleging employment-related claims (59% of the total number of new class action lawsuits). No other category of class action lawsuits even managed to break the 10% threshold.

Posted In: Class Actions In The News

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of 24 Class Action and Individual Lawsuits Pursuant to 28 U.S.C. § 1407, but Concludes that Northern District of Ohio, rather than Southern District of Ohio, was Appropriate Transferee Court

Twenty-four class action lawsuits were filed in 13 different districts against various defendants, including General Electric, Bayer Healthcare, Tyco and Bracco Diagnostics, “arising out of the allegation that gadolinium based contrast dyes may cause nephrogenic systemic fibrosis in patients with impaired renal function.” In re Gadolinium Contrast Dyes Prods. Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 27, 2008) [Slip Opn., at 1-2]. Lawyers for plaintiffs’ in 12 of the class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the Southern District of Ohio; attorneys for a significant portion of the defense group supported pretrial coordination but argued that the Northern District of Ohio was the appropriate transferee court. Id., at 1. Defense attorneys for the Bracco defendants opposed centralization, arguing that “(1) the actions do not share sufficient questions of fact because each of the contrast agents is chemically and pharmacologically different; (2) because of the unique properties of each contrast agent, a global MDL will impinge upon the due process rights of the separate defendant companies; (3) when each defendant group is considered separately, there are too few actions to warrant MDL treatment for any claims other than those involving the GE defendants; and (4) alternatives to centralization are available and sufficient to coordinate the small number of claims involving Bracco and the Tyco and Bayer defendants.” Id., at 2. The Judicial Panel disagreed, holding that the efficiencies sought to be achieved by Section 1407 warranted pretrial coordination and explaining that the district court will be able to appropriately direct the proceedings. Id., at 2-3. The Panel also agreed with the defense request to transfer the class actions to the Northern District of Ohio, id., at 3.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Three Class Action Lawsuits Involving Six Issues Under the Federal Fair Credit Reporting Act (FCRA), Equally Important to Class Action and Non-Class Action Cases, Grouped Together for Resolution by Seventh Circuit

The Seventh Circuit yesterday issued an opinion that resolved various issues of interest under the federal Fair Credit Reporting Act (FCRA) presented by three lower court opinions – the putative class action styled Murray v. New Cingular Wireless Servs., Inc., out of the Northern District of Illinois, Case No. 04 CV 7666, the putative class action styled Bruce v. KeyBank N.A., out of the Northern District of Indiana, Case No. 2:05cv330, and the putative class action styled Price v. Capital One Bank (USA), N.A., out of the Eastern District of Wisconsin, Case No. 05-C-947 – explaining that the cases involve “issues that have arisen in numerous suits” and that each of the three cases “presents at least two issues, several of which recur in multiple appeals.” Murray v. New Cingular Wireless Servs., Inc., 523 F.3d 719 (7th Cir. 2008) [Slip Opn., at 2]. The Circuit Court organized its discussion around issues, rather than the facts of each appeal, id., so we summarize the opinion without providing an introductory factual summary of the cases. (For the convenience of the reader, the facts underlying the Murray class action may be found in lower court opinion at Murray v. New Cingular Wireless Servs., Inc., 432 F.Supp.2d 788 (N.D. Ill. 2006), the facts underlying the Bruce class action may be found in lower court opinion atBruce v. KeyBank N.A., 2006 WL 3743749 (N.D. Ind. December 15, 2006), and the facts underlying the Price class action may be found in the lower court opinion at Price v. Capital One Bank (USA), N.A., 2007 WL 1521525 (E.D. Wis. May 22, 2007). Additionally, our summary of the district court decision in Murray may be found here.) The issues addressed and conclusions reached by the Seventh Circuit, of importance to class action and non-class action cases alike, are: (1) whether an offer of credit must be valuable to all or most recipients, id., concluding the offer must be “firm” but need not be ‘valuable,” id., at 5, (2) whether an offer of “free” merchandise can constitute an offer of “credit,” id., concluding that it may, id., at 6, (3) whether flyers must contain all material terms of the offer of credit, id., concluding that it need not, id., at 8, (4) whether the fact that the terms of the offer may vary means that the offer is not “firm,” id., concluding that an offer may be firm even though “some matters [are left] for future determination,” id., at 10, (5) whether 6-point type is “conspicuous,” id., concluding that it is not, id., at 12, (6) whether use of 6-point type is a “willful” violation of the FCRA, id., concluding that it would be reckless “today” to do so but was not so at the time the documents in question were prepared, id., at 15.

Must an offer of credit must be valuable to all or most recipients? In Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), the Seventh Circuit held that if one offers a product (such as furniture) along with a “token line of credit,” then the FCRA requires that the credit offer have value to the consumer: “’From the consumer’s perspective, an offer of credit without value is the equivalent of an advertisement or solicitation [for the product rather than the loan].’” Murray, at 3 (quoting Cole, at 726-27). The Circuit Court noted that plaintiffs have twisted Cole to argue that it requires “even a simple offer of credit [to be] valuable enough to justify the use of consumers’ credit files.” Murray, at 3. These efforts must fail, the Seventh Circuit held, because the FCRA “calls for a firm offer of credit but not a valuable firm offer of credit.” Id., at 4 (citing 15 U.S.C. § 1681b(c)(1)(B)(i)). By contrast, “[t]he problem in Cole was how to disentangle an offer of merchandise from an offer of credit when they are made jointly.” Id. Cole thus does not apply to cases involving “pure offers of credit.” Id., at 5.

Continue reading "FCRA Class Action Defense Cases–Murray v. New Cingular: Seventh Circuit Limits Cole Opinion And Resolves Several Fair Credit Reporting Act (FCRA) Issues Of Importance To Class Action And Non-Class Action Cases Alike" »

Posted In: FCRA Class Actions, Class Action Court Decisions

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, but Decides on District of Minnesota as Transferee Court from among the Nine Districts Recommended by Various Parties

Twenty-seven individual and class action lawsuits, followed by 60 related “tag-along” individual and class action filings, were brought against Medtronic and others arising out of allegations that the implantation of Sprint Fidelis leads in defibrillators caused injuries. In re Medtronic, Inc., Sprint Fidelis Leads Prod. Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 21, 2008) [Slip Opn., at 1]. Plaintiffs’ lawyers in four of the class action cases filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407; while no party opposed the motion, various parties alternatively argued over (9) districts as the appropriate transferee court. Id. The Judicial Panel granted the motion for pretrial coordination of the class action lawsuits, and selected the District of Minnesota as the transferee court because Medtronic is headquartered in that district so “relevant discovery may be found there” and because the district is “centrally located.” Id

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Complaint Alleging Failure to Disclose Type of Sweetener used in Diet Drink Improperly Granted Class Action Treatment because Definition of Class Included Millions of Uninjured Individuals and Class Definition could not be Permissibly Limited Missouri Supreme Court Holds

Plaintiff filed a putative class action lawsuit in Missouri state court against Coca-Cola alleging that it “made affirmative misrepresentations and omitted material information regarding the types of artificial sweeteners used in fountain Diet Coke” in violation of state law; Specifically, the class action alleged that Coca-Cola “misled consumers into believing that fountain Diet Coke is the same product as bottled Diet Coke,” when in point of fact the fountain Diet Coke is sweetened with aspartame and saccharin while bottled Diet Coke is sweetened only with aspartame. State ex rel. The Coca-Cola Company v. The Honorable W. Stephen Nixon, ___ S.W.3d ___ (Mo. April 15, 2008) [Slip Opn., at 3]. According to the allegations underlying the class action, plaintiff and other putative class members would not have purchased the fountain drink if they had known that it was made with saccharin. Id. Plaintiff filed a motion requesting that the trial court certify the litigation as a class action; she proposed to define the class as “All individuals who purchased for consumption and not resale fountain diet Coke in the State of Missouri after March 24, 1999 through the date of this order.” Id. Defense attorneys opposed the motion on the grounds that the proposed class was overly broad and indefinite, id. Despite the fact that plaintiff provided no estimate of the size of the class, the trial court accepted the proposed definition and granted class action treatment. Id. Ultimately, defense attorneys filed a petition for writ of prohibition with the Missouri Supreme Court, arguing that the trial court abused its discretion in granting class action certification; the Court reversed. Id.

After rejecting plaintiff’s claim that interlocutory relief should not be considered, see Coca-Cola, at 3-4, and after noting that the standard of review was abuse of discretion, id., at 4, the Missouri Supreme Court turned to the merits. It noted that “the underlying question in any class action certification is whether the class action device provides the most efficient and just method to resolve the controversy at hand, all things considered,” id., at 4, and that implicit in the statutory scheme governing certification of class actions is the requirement that the class definition be proper, id., at 4-5 (citations omitted). In fact, the Supreme Court stated that the first task facing a court in ruling on a motion for class certification is “‘to determine whether the class exists and is capable of legal definition.’” Id., at 5 (citation omitted). The Court explained at page 5, “A class definition that encompasses more than a relatively small number of uninjured putative members is overly broad and improper.” (Citations omitted.) And while it was permissible to certify a class action such that the putative class “initially include[s] members who could not have brought the underlying action in their own name,” the definition ultimately must be capable of being modified so as to “remove the uninjured putative members.” Id. (citations omitted). This requires that only “a relatively small number of uninjured putative members remain,” because the trial court may then “easily resolve individual questions after the common questions have been answered.” Id. If it will not be possible to modify the class definition in this manner, then “the putative class is impermissibly overbroad.” Id.

Continue reading "Coca-Cola Class Action Defense Cases–Coca-Cola v. Honorable W. Stephen Nixon: Missouri Supreme Court Reverses Order Granting Class Action Certification Holding That Definition Of Class Action Membership Was Overly Broad And Indefinite" »

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

Class Action Alleging Securities Violations Failed to Plead “Strong Inference of Scienter” as Required by the Private Securities Litigation Reform Act (PSLRA) Warranting Dismissal of Class Action With Prejudice Kentucky Federal Court Holds

Plaintiffs filed a class action lawsuit against Tempur-Pedic and others alleging securities laws violations arising out of allegedly false and misleading statements regarding the company’s financial situation as part of a scheme to drive up the stock price thereby allowing insiders “to sell more than $246 million worth of stock at an inflated price.” Grillo v. Tempur-Pedic Int’l, Inc., ___ F.Supp.2d ___ (E.D. Ky. March 28, 2008) [Slip Opn, at 1-2]. In essence, the class action alleged that after Tempur-Pedic announced a 6% price increase in its mattress lines in January 2005, it “caused a frenzy of retailers to stock up on their inventory needs before the price increase occurred.” Id., at 5. According to plaintiffs, this caused a “huge amount” of the company’s revenue to be “pulled forward,” but Tempur-Pedic denied this when asked by Goldman Sachs, id. The company reported record earnings and represented to the public that its growth could be “sustained,” when (according to the class action allegations) the company’s retail sales actually were “volatile and irregular.” Id., at 5-6. Plaintiffs’ class action complaint followed a September 19, 2005 press release that lowered guidance for the year, causing the stock to plummet 28% in a single day. Id., at 9. The complaint also detailed allegedly improper insider trading, see id., at 10-11. The class action alleged violations of Sections 10(b), 20(a) and 20A of the Securities and Exchange Act of 1934, and Rule 10b-5, id., at 2. Defense attorneys moved to dismiss the class action on the grounds that it failed to plead the specificity required under the Private Securities Litigation Reform Act (PSLRA). Id., at 2-3. The district court granted the defense motion and dismissed the class action complaint.

The federal court began with the now well known Supreme Court holding that, under the PSLRA, “‘a complaint will survive…only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference one could draw from the facts alleged.’” Grillo, at 17 (citation omitted). Plaintiffs’ mere allegation that defendants had access to internal financial reports and that those reports demonstrate the inaccuracy of the company’s financial representations was held to be inadequate, as they failed to provide any of those reports to the court or to “cite any of their specific details.” Id., at 18-19. Under the district court’s analysis, the allegations underlying the class action failed to meet the requisite level of scienter. For example, the mere fact that certain defendants held high positions within the company, or that they sold stock, were insufficient, as “[holding] high positions in the Company…is not enough to establish scienter,” id., at 19-20, and plaintiffs failed to demonstrate that the stock trades were “unusual or suspicious,” id., at 23-24. (The district court provided a detailed discussion of the stock trade issue. See id., at 24-27.) At bottom, the court concluded that the “strong inference” of scienter had not been shown.

Continue reading "PSLRA Class Action Defense Cases–Grillo v. Tempur-Pedic: Kentucky Federal Court Dismisses Securities Class Action Complaint With Prejudice Finding Class Action Allegations Failed To Plead Scienter With Specificity Required Under PSLRA" »

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

Trial Court Properly Granted Defense Summary Judgment Motion in Class Action Alleging Bank Violated California’s Unfair Competition Law (UCL) by Calculating Interest on a Monthly rather than Daily Basis because Federal Law Permits this Method, it is Consistent with Industry Conduct and it is Required for Sale of Loans on the Secondary Market California Court Holds

Plaintiffs filed a class action against their mortgage lender, Wells Fargo, alleging violations of California’s unfair competition law (UCL) based on the fact that it failed to charge monthly interest based on the number of days in the month, and failed to disclose that it treated each month as one-twelfth of the year, regardless of the number of days in the month. Puentes v. Wells Fargo Home Mortgage, Inc., ___ Cal.App.4th ___, 72 Cal.Rptr.3d 903, 906 (Cal.App. 2008). The class action complaint alleged that plaintiffs obtained a 30-year fixed-rate mortgage from Wells Fargo, evidenced by a promissory note on a multi-state form approved by Fannie Mae and Freddie Mac; the promissory note provided for equal monthly payments and stated, “Interest will be charged on unpaid principal until the full amount of Principal has been paid. I will pay interest at a yearly rate of 6.500 [percent].” Id. The class action further alleged that plaintiffs paid off the loan only seven months later, but, that “[i]n determining the amount of interest owed to retire the obligation, Wells Fargo treated February, as it did for each of the previous full months of the loan, as one-twelfth of a year, or approximately 30.4 days.” Id. After the trial court granted plaintiffs motion for class action treatment of the lawsuit, defense attorneys moved for summary judgment arguing that “[the] interest calculation was consistent with the terms of the note, federal regulations and the uniform nationwide practice of the mortgage industry, and thus as a matter of law cannot constitute an unfair business practice under the UCL.” Id., at 907. The trial court granted the motion, and the Court of Appeal affirmed.

The multi-state form used by Wells Fargo had been approved by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Company (Freddie Mac). Puentes, at 906. In addition to the disclosures in the promissory note, the Truth in Lending Act (TILA) disclosure stated “[i]f you pay off your loan early you will not receive a refund of the part of the finance charge that you have already paid.” Id. Nonetheless, plaintiffs alleged that they and the putative class members “paid Wells Fargo ‘interest for non-existent days ... in the year of early pay off of their residential mortgage loan.’” Id., at 906-07. Based on their view that the bank’s formulation “resulted in charges for 182.5 days during the five full months of the loan instead of the actual 181 days,” they alleged that Wells Fargo “overcharged them $71.98 in interest for days not actually in the loan period, thereby breaching the promissory note by imposing a yearly interest rate of approximately 6.549 percent.” Id., at 907. The trial court granted the defense motion for summary judgment based on federal preemption, and on its finding that the bank’s interest calculation was reasonable under the terms of the note and “comported with industry standards and was not an unfair business practice.” Id.

Continue reading "Wells Fargo UCL Class Action Defense Cases–Puentes v. Wells Fargo: California Court Affirms Summary Judgment In Favor Of Wells Fargo In UCL Class Action Holding Charging Monthly (Rather Than Daily) Interest On Loans Was Not Unlawful" »

Posted In: 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 April 4 – 10, 2008, during which time 42 new class action lawsuits were filed. Class actions alleging employment-related claims typically top the list of new class action cases by a wide margin. Last week, for example, 61% of the new class action filings were labor law class actions, while the next nearest category accounted for only 12% of the new class actions filed that week. During the time period covered by this post, 19 new class actions were filed alleging employment-related claims (45% of the total number of new class action lawsuits). Only two other categories managed to break the 10% threshold: class actions alleging violations of California's unfair competition law (UCL) class action cases, which includes class actions alleging false advertising claims, and class actions alleging violations of federal securities laws, each of which had five (5) new filings (12%).

Posted In: Class Actions In The News

Judicial Panel Grants Plaintiff’s Unopposed Request for Pretrial Coordination of 3 Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Transfers Class Actions to the District of Nebraska

Three class action lawsuits (2 in Illinois and 1 in Nebraska) were filed against General Motors and Saturn Corp. asserting products liability claims based on “allegations that certain Saturn vehicles have defective metal timing chains and oiler nozzles.” In re Saturn L-Series Timing Chain Products Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 19, 2008) [Slip Opn., at 1]. (For the convenience of the reader, a copy of the one of the class action complaints may be found here.) Plaintiff’s lawyer in one of the class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the District of Nebraska; no party responded to the motion. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the moving plaintiff defense that the District of Nebraska was an appropriate transferee forum “because the first-filed action was brought there and it is movant’s unopposed choice.” Id. Accordingly, the Panel ordered the Illinois class actions to be transferred to Nebraska, id.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Labor Law Class Action Plaintiffs Entitled to Redacted Bank Records of Putative Class Members because Defendant Lacked other Business Records Relevant to Class Action Numerosity and Commonality Requirements, and Class Action Defense Attorneys Entitled to Information Regarding Specific Terms of Plaintiffs’ Employment Agreements because Relevant to Typicality and Commonality but not Entitled to Information Concerning Immigration Status, Maryland Federal Court Holds

Plaintiffs filed a labor law class action against S.C.C.P. Painting alleging that it “failed to pay wages for all work performed, failed to pay wages for work directed to be performed but not accounted for on timesheets, failed to pay time and a half for hours worked greater than 40 hours, and deducted wages from paychecks, purportedly for tax withholding purposes but not in fact withheld for that purpose.” Montoya v. S.C.C.P. Painting Contractors, Inc., 530 F.Supp.2d 746, 747 (D.Md. 2008). The class action alleged violations of both state and federal law, and sought to proceed both as a class action under Rule 23 and as a collective action under 29 U.S.C. § 216(b), id. As discovery limited to class action certification issues proceeded, disputes arose and each side filed motions to compel discovery. Id., at 747-48. Plaintiffs’ lawyer sought bank records; defense attorneys sought inter alia information concerning plaintiffs’ immigration status and concerning the specific employment agreements between the putative class representatives and defendant. The court granted the plaintiffs’ motion, and granted and denied the defense motion.

The district court first addressed plaintiffs’ request for bank records, which sought documents “reflecting wages paid to any employees.” Montoya, at 748. The court held that information sought was relevant to issues of numerosity and commonality, and that privacy concerns were resolved by plaintiffs’ agreement that the names of the employees may be redacted from the bank records. Id. The court noted that the records were necessary “in light of the absence of other business records,” and that according to defense attorneys “SCCP did not have any payroll records, no information submitted to tax authorities, no tax sheets or sign-in sheets, no personnel files and no documents showing the rates of pay for any person.” Id. Because the company did not have any information necessary to support a motion for class action certification, plaintiffs were entitled to obtain the bank records.

Continue reading "Class Action Defense Discovery Cases-Montoya v. S.C.C.P. Painting: Maryland Federal Court Holds Employer Bank Records Relevant But Discovery Concerning Immigration Status Irrelevant To Class Action Certification Issues" »

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

As Matter of First Impression, Request in Class Action for Precertification Discovery by Plaintiffs who Learns They were Never Members of Putative Class is not Automatically Prohibited and Trial Court did not Err in Permitting such Discovery where Wrong Alleged Involved Surreptitious Recording of Telephone Calls so Class Members would not Know Their Privacy Rights had been Violated California State Court Holds

Plaintiffs filed class action against their lender, CashCall, alleging that it secretly and illegally monitored its collection calls in violation of the borrowers’ privacy rights; they subsequently filed an amended class action complaint alleging further that defendant “surreptitiously monitored or eavesdropped on their conversations through a machine or other manner” in violation of California law. CashCall, Inc. v. Superior Court, ___ Cal.App.4th ___, 2008 WL 192282, *1 (Cal.App. January 24, 2008). After discovering that the plaintiffs named in the class action had not had their calls monitored, the class action complaint was further amended to substitute new named plaintiffs, id. However, the new plaintiffs, too, were not members of the putative class so plaintiffs sought precertification discovery for the identities of the apparently 551 members of the putative class action whose calls had been surreptitiously recorded. Id., at 1-2. Defense attorneys argued a bright-line rule exists in class actions that preclude discovery of the identity of class members if the named plaintiffs were never members of the class, id., at *3. The trial court disagreed and defense attorneys petitioned the Court of Appeal for writ relief.

The appellate court summarized plaintiffs’ argument as follows: CashCall disclosed in discovery that it had monitored collection calls at least 551 times but refused to disclose the names or contact information of the borrowers at issue. CashCall, at *2. Plaintiffs argued, “It is the clandestine component that makes [CashCall's] monitoring illegal, and it is that aspect [that] makes it difficult, if not impossible, for a victim to ever learn [his or her] rights were violated.” Id. Absent the requested discovery, “the class action might be dismissed for lack of a suitable class representative and then the one-year statute of limitations” may run, “leaving the actual class members without a remedy for CashCall's violation of their privacy rights.” Id. Plaintiffs argued that the trial court should apply a “balancing test” and “should conclude the rights of the parties (i.e., class members) outweigh any potential abuse of the class action procedure and therefore should order that CashCall disclose the names and contact information of the 551 putative class members.” Id. They relied on Parris v. Superior Court, 109 Cal.App.4th 285, 300-01, which held that in determining whether to grant precertification discovery of the identities of putative members of the class action, the “trial court must…expressly identify any potential abuses of the class action procedure that may be created if the discovery is permitted, and weight the danger of such abuses against the rights of the parties under the circumstances.”

Continue reading "Class Action Defense Cases-CashCall v. Superior Court: California State Court Affirms Trial Court Order Permitting Class Action Plaintiff Who Was Never Member Of Putative Class To Obtain Precertification Discovery Of Actual Class Member Identities" »

Posted In: Class Action Court Decisions

Trial Court Properly Entered Judgment for Defense in Class Action by Engineers, Employed by Firms Working under Contract for County, because Engineers were not “Common Law Employees” of County California State Court Holds

Plaintiff-engineers filed a putative class action against the County of Los Angeles alleging that they had been designated improperly as employees of the independent contractors hired to perform work for the County, rather than as employees of the County itself. Holmgren v. County of Los Angeles, ___ Cal.App.4th ___, 71 Cal.Rptr.3d 611, 613 (Cal.App. 2008). As authorized by the California Government Code, Los Angeles outsourced engineering work to two firms: “The engineers were employees of the contracting firms and paid by the contracting firms, and all signed written acknowledgements that they were not employees of the County and not entitled to any of the benefits available to County employees.” Id., at 612. Nonetheless, plaintiffs filed the class action complaint alleging that they were “common law employees” of the County and, as such, entitled to benefits under the County’s retirement plan. Id., at 612-13. The “theme” of the class action complaint was that even though plaintiffs were paid by the independent contractor and designated as a contract employees, they had been “screened, interviewed, and effectively hired by the County; worked solely on County business; had [their] salary fixed by the County; [were] subject to the direct supervision and control of the County; and used County facilities, equipment and supplies to perform County business.” Id., at 613-14. The class action further alleged that plaintiffs performed the same work as, and worked side-by-side with, “recognized County employees,” but for lower pay and without receiving the benefits of County employees. Id., at 614. The trial court granted plaintiffs’ motion for class action treatment of the lawsuit, id., but decided three critical “threshold” issues in favor of the County that effectively eviscerated the class action, see id., at 614-15. Accordingly, plaintiffs stipulated to entry of judgment in favor of the County and appealed, id., at 615. The Court of Appeal affirmed, holding that the engineers were not County employees.

The facts underlying the class action claims were as follows: The County entered into “Master Agreements” with two firms for engineering services pursuant to which each firm would supply the County with the firm’s own employees, bill the County for work performed, and receive payment from the County. The Master Agreement provided that each firm was “solely liable” for the compensation and benefits of their employees, and expressly prohibited the County from soliciting the firms’ engineers. Holmgren, at 613. The named plaintiffs in the putative class action each acknowledged, in writing, that they were not County employees and that they “do not have and will not acquire any rights or salary benefits of any kind from the County of Los Angeles by virtue of my performance of work [for the County].” Id. and n.1. The class action alleged that plaintiffs were “temporary” or “leased” employees, entitled to County benefits, id., at 613.

Continue reading "Class Action Defense Cases-Holmgren v. County of Los Angeles: California State Court Affirms Judgment Adverse To Class Action Plaintiffs Holding Engineers Of Firms Under Contract With County Were Not Common Law Employees Of County" »

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

Class Action Derivative Claims Challenging Severance Package Paid by HP to Former CEO Dismissed for Failure to Make Requisite Demand on Board and Failure to Establish Futility California Federal Court Holds

Plaintiffs filed a class action against Hewlett-Packard, its former chief executive officer, Carleton Fiorina, and various other individual defendants challenging the severance package HP paid Fiorina. Indiana Electrical Workers Pension Trust Fund v. Dunn, ___ F.Supp.2d ___ (N.D. Cal. March 28, 2008) [Slip Opn., at 1-2]. The class action complaint outlined Fiorina’s role in HP’s merger with Compaq, over board member Walter Hewlett’s vigorous opposition, and alleged that Fiorina and HP used knowingly false financial projections to secure approval of the merger. Id., at 2-3. The class action also alleged that after the merger was characterized as a failure, HP fired Fiorina and paid her more than $40 million in benefits, including a $21.4 million severance package that, plaintiffs allege, was aimed at “mak[ing] sure that Fiorina kept quiet about the Compaq merger debacle.” Id., at 3. The second amended class action complaint charges that Fiorina’s severance package were ‘far in excess” of “the express terms of the Company’s Severance Policies,” id. The gravamen of the complaint was that Fiorina termination was “involuntarily” and, accordingly, “she was not entitled to any accelerated vesting of payments under HP’s Long-Term Performance Cash (‘LTPC’) Program.” Id., at 3-4. Defense attorneys for HP and the individual defendants moved to dismiss the class action; the district court granted the motion.

The defense motion to dismiss the class action advanced two main arguments. First, defense attorneys argued that the class action complaint’s derivative claims failed because plaintiffs never made the requisite demand on HP’s board of directors. Dunn, at 8. The district court explained that “[a] shareholder seeking to vindicate the interests of a corporation through a derivative suit must first demand action from the corporation's directors or plead with particularity the reasons why such demand would have been futile.” Id., at 8-9 (citing In re Silicon Graphics Inc. Securities Litig., 183 F.3d 970, 989-90 (9th Cir. 1999)). Because the laws of the state in which HP is incorporated govern whether it would be futile to make the requisite demand and because HP is incorporated in Delaware, the court analyzed futility under Delaware law. Id., at 9. Based on its detailed factual analysis, the district court rejected plaintiffs’ counter that making the requisite demand on the board would have been futile. See id., at 9-14. The district court also concluded that the business judgment rule insulates the board’s decision to pay Fiorina the $21 million severance. Id., at 14. The court explained at pages 14 and 15 that it was incumbent upon plaintiffs to “allege facts sufficient to rebut a presumption that the decision was a result of a valid exercise of business judgment.” Based on the federal court’s analysis, plaintiffs failed to rebut this presumption, see id., at 15-17, and failed to establish that the board’s acts were ultra vires, see id., at 17-21.

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

ERISA Class Action Barred by Plaintiff’s Prior Lawsuit Against IBM thus Supporting Defense Motion to Dismiss Class Action New York Federal Court Holds

Plaintiff filed a putative class action in New York against his former employer’s pension plan and its administrator alleging violations of ERISA (Employee Retirement Income Security Act of 1974) by failing to pay him plan benefits. Adams v. IBM Personal Pension Plan, 533 F.Supp.2d 342, 343 (S.D.N.Y. 2008). Defense attorneys moved to dismiss the class action on the grounds that res judicata barred plaintiff’s claim “as the result of Adams's prior action in the United States District Court for the Northern District of Georgia, in which the court granted the summary judgment motion filed against Adams by IBM, the only defendant in that action.” Id. Plaintiff’s lawyer argued that res judicata did not bar the current class action because the prior lawsuit was against IBM, not the plan or the plan’s administrator, id. Because the parties in the two actions differed – IBM in the Georgia action, and the Plan and Plan Administrator in the New York action – the only way res judicata would apply would be “if the Court finds either that the Plan and Plan Administrator are ‘privies’ of IBM, or that an exception to the mutuality requirement for res judicata applies.” Id. Because the federal court found that IBM, and the Plan and Plan Administrator, are “closely related,” it held that res judicata applied. Id., at 344. Specifically, the prior action alleged the “same misconduct” and it appears that plaintiff erred in filing his first lawsuit against IBM rather than the plan and its administrator, id. The district court concluded at page 344, “In these circumstances, and particularly where the party seeking to avoid claim preclusion was the plaintiff in the prior action and the sole source of the error in naming the incorrect party, res judicata should bar the plaintiff from gaining a second opportunity to litigate the very same claims, even where complete identity between the parties is lacking.” Accordingly, the court granted the motion to dismiss the class action, id.¸at 345.

Posted In: Employment Law 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 March 28 – April 4, 2008, during which time 49 new class action lawsuits were filed. It is a rare week in which labor law class action cases do not lead this list, and during this past week 30 new class actions were filed alleging employment-related claims (61% of the total number of new class action lawsuits). Only one other category even managed to break the 10% threshold for this class action report: California unfair competition law (UCL) class action cases, which includes class actions alleging false advertising claims, with six (6) new filings (12%).

Posted In: Class Actions In The News

Second Circuit Rules District Court Erred in Certifying Class Action because Individual Proof of Reliance on Tobacco Companies’ Marketing of “Light” Cigarettes would be Required

Steven Greenhouse of The New York Times reports today that a copycat lawsuit has been filed in New York federal court against Starbucks seeking damages arising out of the company policy of sharing store tips with shift supervisors. The class action, filed by a former barista, comes hot on the heels of a $105 million California class action judgment against Starbucks. (Our summary of that judgment may be found here.) Mr. Greenhouse quotes plaintiffs’ counsel as admitting that the New York class action “mak[es] literally the same pitch as was made in the California case.” Starbucks has vowed to appeal the California judgment. Starbucks insists that shift supervisors are essentially baristas and therefore may share in customer tips. The New York Times quotes a company statement that “Shift supervisors are not managers and have no managerial authority.”

Mr. Greenhouse’s article, entitled “Starbucks Sued in New York Over Tip Issue,” may be found in Section B of the April 4, 2008 edition of The New York Times.

Posted In: Class Actions In The News

The Los Angeles Times reports today on the Second Circuit opinion reversing class action certification of a fraud under RICO class action against various tobacco companies. (Our initial news on this opinion may be found here, and our summary of the Circuit Court opinion may be found here.) The Los Angeles Times notes that the damages sought by the class action “theoretically could have ballooned to as much as $800 billion,” and quotes a defense attorney as noting that the decision has “tremendous significance” due to its potential impact on numerous similar class action lawsuits pending in other state and federal courts.

The article, entitled “Light cigarette smokers lose class-action status,” may be found in the Business Section of the April 4, 2008 edition of the Los Angeles Times.

Posted In: Class Actions In The News

Chad Bray and Anjali Cordeiro of The Wall Street Journal report today on the Second Circuit ruling that reverses class action certification in a tobacco lights case. (Our news report may be found here, and our summary of the Second Circuit opinion may be found here.) Noting that the class action sought “$280 billion in damages, which could be tripled to more than $800 billion if the smokers’ federal racketeering claims are granted,” the Circuit Court concluded that “difference[s] in plaintiffs’ knowledge and levels of awareness made it difficult to establish a common reliance by the entire class of smokers on the cigarette maker’s marketing.” The lower court had agreed with plaintiffs that the tobacco company defendants had misled the public into believing that “light” cigarettes were less harmful than regular cigarettes, but the Court of Appeals agreed with defense attorneys that individual issues predominate over common issues. The Wall Street Journal summarizes the defense claim that “the issues were so individualized for each brand or each smoker’s own circumstances that the case couldn’t be effectively grouped in such a class.” The article also quotes from the Circuit Court opinion, “Each plaintiff in this case could have elected to purchase light cigarettes for any number of reasons, including a preference for the taste and a feeling that smoking lights was ‘cool.’”

The article, entitled “Tobacco Firms Score Victory As Class-Action Suit is Denied,” may be found on page B3 of the April 4, 2008 edition of The Wall Street Journal.

Posted In: Class Actions In The News

Second Circuit Rules District Court Erred in Certifying Class Action because Individual Proof of Reliance on Tobacco Companies’ Marketing of “Light” Cigarettes would be Required

Stephanie Saul of The New York Times reports today on a “victory for the tobacco industry” – the Second Circuit opinion reversing class action certification of “an $800 billion class-action lawsuit on behalf of smokers who said they had been misled that light cigarettes were safer than regular ones.” (Our initial report on that decision may be found here, and our summary of the Circuit Court opinion may be found here.) Ms. Saul notes that the Second Circuit concluded it would not be possible “to generalize about why smokers chose light cigarettes.” And while the ruling may potentially impact some of the numerous similar class action lawsuits pending in other state and federal courts, the Times explains that the basis of this particular class action was not that smokers suffered personal injury from smoking “light” cigarettes, but rather that they suffered economically because had they known that “light” cigarettes were just as harmful as regular cigarettes, smokers would have purchased the less expensive, regular cigarettes. Ms. Saul notes also that many cases are waiting for the United States Supreme Court to weigh in on the issue, as a decision out of Maine is presently pending before the High Court.

Ms. Saul’s article, entitled “Appeals Court Panel Throws out Class Action Over Light Cigarettes,” may be found in Section C of the April 4, 2008 edition of The New York Times.

Posted In: Class Actions In The News