Class Action Defense Blog

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 the two-week period of January 25 – January 31, 2008, during which time 46 new class action lawsuits were filed. New class action cases alleging employment-related claims generally top this list, and this past week was no exception as 22 new labor law class actions were filed during this time period (48% of the total number of new class action lawsuits filed). New antitrust class action complaints came in a distant second with 7 new filings (15%), closely followed by class actions alleging violations of California's unfair competition law (UCL), which include false advertising claims, and class actions alleging violations of federal securities laws, each with 5 new class action filings (11%).

Posted In: Class Actions In The News

Class Action Claims Against Federal Government Arising out of Failed Levee System Fell Within Immunity Afforded by Flood Control Act thus Warranting Dismissal of Class Action Complaint as to Government Louisiana Federal Court Holds

Plaintiffs filed a class action complaint against various defendants, including the U.S. Army Corps of Engineers, arising out of the “catastrophic failures of the levee system surrounding New Orleans and its vicinity” as a result of Hurricane Katrina, centering on the “breaches and failures that occurred at the three ‘outfall canals’ and the floodwalls constructed thereon.” In re Katrina Canal Breaches Consolidated Litig., ___ F.Supp.2d ___ (E.D. La. January 30, 2008) [Slip Opn., at 1-2]. The canals at issue in the class action “serve as conduits for the drainage of excess water from the streets of New Orleans during rain events, [but] these same canals become channels for incoming storm surge creating increased risk of flooding caused by Lake Pontchartrain hurricane driven water.” Id., at 2. Defense attorneys for the federal government moved to dismiss the class action claims against it, id., at 1, and in ruling on the motion the district court relied on an “exhaustive report” prepared by the U.S. Army Corps of Engineers that, in the court’s words, “provides detailed time lines and discussions concerning what proved to be a fifty-year exercise in ineptitude and gross economic and technological mismanagement,” id., at 3 n.2.

As to the U.S. Army Corps of Engineers, plaintiffs’ 73-page class action complaint, brought under the Federal Tort Claims Act, alleged that the Corps “had the legal responsibility and duty to these plaintiffs to cause, allow, and/or conduct the aforesaid dredging activity in a manner that would not compromise the safety of the canal's levee/flood wall system" but that the Corps “(1) negligently failed to follow federal regulations and its own engineering standards and procedures , in regard to the issuance of a permit to dredge the 17th Street Canal…; (2) violated federal law to the extent [that] the River & Harbors Act prohibits the granting of a dredging permit that is contrary to the public interest…; (3) violated of federal regulations…for failing to properly balance the benefits of the requested dredging against the reasonably foreseeable harm, including possible harm related to detrimental effects on flood Control…; [and] (4) negligently issued a dredging permit which cased and allowed changes to occur in the 17th Street Canal Bottom, leading to subsurface and soil destabilization of the canal levee….” In re Katrina, at 19-20. Defense attorneys moved to dismiss the class action claims against the U.S. “based on § 702c immunity granted under the Flood Control Act of 1928 [(FCA)] and the discretionary function exception with respect to allegations of the negligent granting of the dredging permit of the 17th St. Canal.” Id., at 21.

Continue reading "Katrina Class Action Defense Cases-In re Katrina: Louisiana Federal Court Dismisses Class Action Complaint Against Government Finding Class Action Claims Based On Levee System Failure During Hurricane Katrina Barred By Governmental Immunity" »

Posted In: Class Action Court Decisions

Judicial Panel Grants Defense Request, Ultimately Joined by Plaintiffs, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Transfers Class Actions to Western District of Washington

Three products liability class action lawsuits were filed in California, Oregon and Washington against various defendants, including General Motors Corp., arising out of the allegation that the speedometers in certain GM pick-ups and sport utility vehicles registered inaccurately and that GM “failed to disclose and/or fraudulently concealed this alleged defect.” In re General Motors Corp. Speedometer Prods. Liab. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. January 8, 2008) [Slip Opn., at 1]. Defense attorneys for common defendant General Motors filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Western District of Washington; responding plaintiffs initially supported pretrial coordination provided the Panel select the Northern District of California as the appropriate transferee court, but at the hearing on the motion they consented to transfer to the Western District of Washington. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the defense, and plaintiffs, that the Western District of Washington was the appropriate transferee court. Id. Accordingly, the Panel granted the defense motion, id., at 2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Alleging Auto Insurer Breached Insurance Contract by Failing to Pay for Seatbelt Inspections Following Accidents Properly Dismissed Fifth Circuit Holds

Plaintiffs filed a class action lawsuit against their automobile insurance carrier alleging that it was “contractually obligated to provide an extensive seatbelts inspection” following auto accidents. Sonnier v. State Farm Mut. Auto. Ins. Co., 509 F. 3d 673, 2007 WL 4260892, *1 (5th Cir. 2007). The class action complaint does not challenge State Farm’s payment of repair costs as estimated by the body shops that inspect the insured vehicles after accidents; rather, it alleged that the manufacturer and a trade group recommend inspecting seatbelts and their locking mechanisms following any accident. Id. The class action further alleged that if “a body shop deems such an inspection unnecessary and does not list it on the estimate, then State Farm will not cover the cost of the seatbelt inspection.” Id. However, plaintiffs “refused to allege that there is in fact anything wrong with the seatbelt (or even that there seemed to be something wrong).” Id., at *3 n.2. Defense attorneys moved to dismiss the class action for failure to state a claim, noting that plaintiffs “do not allege that their seatbelts were harmed in any way during or after the collisions”; the district court granted the motion because “based on the contractual agreement to repair, if there is no complaint of a failure, there is nothing to repair.” Id., at *1. The Fifth Circuit affirmed.

The Circuit Court summarized plaintiffs’ theory on appeal as “arguing that the term ‘cost of repair’ necessarily includes the cost of the seatbelts inspection because in order to repair something, one must first inspect to determine what is in need of repair.” Sonnier, at *1. The Court disagreed. Interpreting the policy language under Louisiana law, the Fifth Circuit found unambiguous that State Farm’s contractual obligations were limited to loss or damage, and that the cost of repair or replacement was, under the facts of this case, based on “an estimate written based upon the prevailing competitive price.” Id., at *2. The Circuit Court concisely explained its rationale for rejecting plaintiffs’ theory as follows: “State Farm is obligated to pay for loss or damage to [plaintiffs’] vehicles based upon a written estimate. In creating estimates, body shops conduct an inspection, list the items in need of repair, and determine the amount State Farm owes ‘based upon the prevailing competitive price.’ [Plaintiffs’] argument that an estimate must necessarily include an extensive seatbelts inspection finds no support in the policy language. There is no policy language describing State Farm's duty to conduct or pay for automobile inspections. State Farm's duty is to pay for loss or damage to Appellants' vehicles, measured by the cost of repair. That obligation was fulfilled in this case, and [plaintiffs] do not further identify anything broken that needs to be fixed.” Id.

Continue reading "Class Action Defense Cases-Sonnier v. State Farm: Fifth Circuit Affirms Dismissal Of Class Action Complaint Against Automobile Insurance Company Because Allegations In Class Action Failed To State Claim For Failure To Inspect Seatbelts After Accidents" »

Posted In: Class Action Court Decisions

UCL Class Action Against Bank Challenging Overdraft Fees Fails because National Bank Act (NBA) Preempted Class Action Claims Under California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA) California Federal Court Holds, but Grants Plaintiff 20 Days’ Leave to Amend Class Action Complaint

Plaintiff filed a putative class action in California state court against Bank of America alleging violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA) arising out of the Bank’s failure to disclose its Nonsufficient Funds/Overdraft Fees policy (NSF/OD fees policy). Montgomery v. Bank of America Corp., 515 F.Supp.2d 1106, 1108 (C.D. Cal. 2007). The thrust of plaintiff’s class action was that the Bank charged NSF/OD fees “on a sliding scale per overdraft[ that is] overly harsh, unjustified, and bear no relation to the actual damages incurred by the bank and are therefore in breach of California contract law,” and that the Bank’s NSF/OD fee agreements “are contracts of adhesion and unconscionable” due to their failure to accurately disclose the fees that may be assessed. Id., at 1111. Defense attorneys removed the class action to federal court pursuant to the Class Action Fairness Act of 2005 (CAFA), id., at 1108. In the face of a defense motion for judgment on the pleadings, plaintiff filed an amended class action complaint; defense attorneys moved to dismiss the amended complaint. Id. The only ground addressed by the district court was whether the class action claims were “preempted by regulations promulgated by the Office of the Comptroller of the Currency (‘OCC’) pursuant to the National Bank Act (‘NBA’).” Id., at 1109. Because the district court found that the claims were preempted, it granted the defense motion and dismissed the class action complaint.

After noting that Congress did not expressly preempt state laws in this area, Montgomery¸ at 1109, the district court turned to whether “field preemption” existed or whether the court could “imply preemption” to the class action claims, id., at 1109-10. It noted that “The National Bank Act of 1864 was enacted to protect national banks against intrusive regulation by the States.” Id., at 1110 (citations omitted). And under established case law, “state attempts to control the conduct of national banks are void if they conflict with federal law, frustrate the purposes of the [NBA], or impair the efficiency of national banks to discharge their duties.” Id. (citation omitted). Defense attorneys argued that the claims in the class action complaint were preempted by 12 C.F.R. § 7.4002, which expressly authorizes banks to “impose charges and fees” as described therein. Id., at 1111. Under the Bank’s theory, because federal regulations authorize banks to charge fees, federal law occupies the field and “it is up to the OCC, not private plaintiffs, to determine whether a bank has properly weighed the discretionary factors set forth in Section 7.4002 when setting the fee amounts.” Id., at 1112. Plaintiff’s lawyer countered that preemption is disfavored, particularly as it concerns the “historic police powers of the States” to protect consumers. Id., at 1112-13 (quoting Smiley v. Citibank, 11 Cal.4th 138, 148 (Cal. 1995), aff'd, 517 U.S. 735). Plaintiff also argued that the class action’s “failure to disclose” allegations are not preempted by the NBA, id., at 1113.

Continue reading "Class Action Defense Cases-Montgomery v. Bank of America: California Federal Court Dismisses Class Action Complaint Holding National Bank Act (NBA) Preempts Class Action Claims Challenging Nonsufficient Funds/Overdraft Fees" »

Posted In: Class Action Court Decisions

Motion to Intervene in Class Action under Age Discrimination in Employment Act (ADEA) Denied because of Failure to Comply with Statutory Deadline for Filing Notice of Intent to Sue and Former Plaintiff’s Motion to Rejoin Class Action Fails as Time-Barred District of Columbia District Court Holds

Plaintiffs, air traffic controllers, filed a putative class action against their federal employer alleging violations of the Age Discrimination in Employment Act (ADEA), following a February 2005 work force reduction that would, and did, result in their termination in October 2005. Breen v. Peters, 529 F.Supp.2d 24, 2008 WL 62626, *1 (D.D.C. 2008). Plaintiffs bypassed the administrative complaint process, provided the requisite 30-day notice of intent to sue, see 29 U.S.C. § 633a(d), and in March 2005 filed the class action. Id. Plaintiffs subsequently moved to join 20 individuals as named plaintiffs, and the 20 individuals simultaneously moved for leave to intervene; additionally, one plaintiff dismissed from the class action at his request, filed a motion to be reinstated as a party plaintiff. Id. Oddly, the class action complaint defined an 834-person class by name, attaching as an exhibit a list of each of the individuals on whose behalf the putative class action had been filed. Over the course of the litigation, some class members were added and others were dismissed; however, the 20 individuals seeking leave to intervene were never part of the putative class. Id. Defense attorneys opposed each of these motions, id. The district court denied the motions.

With respect to the 20 individuals, defense attorneys argued that they should be denied leave to join the class, either as named plaintiffs or by intervention, because they failed to comply with the statutory filing deadlines for bringing an ADEA claim. Plaintiffs’ conceded this point, but argued, in essence, that since there were more than 800 members of the putative class, what’s another 20? Breen, at *1. The federal court found unpersuasive the argument that the 20 should be permitted to piggy-back on the timely claims filed by or on behalf of the members of the putative class: The ADEA expressly requires that notice of intent to sue be filed with the Equal Employment Opportunity Commission within 180 days of the allegedly unlawful act, see 29 U.S.C. § 633a(d), and while this deadline is not jurisdictional and may, under appropriate circumstances, be deemed tolled, “a court should use its equitable power to toll a statutory deadline only in extraordinary and carefully circumscribed circumstances.” Id., at *2. As the moving parties, the 20 individuals bore the burden of persuaded the district court that the statutory deadline had been equitably tolled, but they failed to meet that burden, id. Indeed, they offered no facts in support of their motion but, rather, “argue[d] that they should be treated as having vicariously met the statutory filing deadline, because several hundred plaintiffs in the case did provide timely notice to the defendants of their intent to sue under the ADEA in compliance with 29 U.S.C. § 633a(d).” Id. They argued defendants would not be prejudiced by adding 20 more class members, but they did not counter the argument that they simply sat on their rights as the statutory deadline passed, id. Accordingly, the district court refused the motions seeking to add the 20 individuals to the class action. Id., at *3.

Continue reading "ADEA Class Action Defense Cases-Breen v. Peters: District of Columbia Federal Court Denies Motion To Add 20 New Plaintiffs To ADEA Class Action And Denies Former Plaintiff's Motion To Rejoin Class Action" »

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

District Court Erred in Holding Plaintiffs Lacked Standing to Prosecute Class Action Complaint and in Ruling on Suitability of Complaint for Class Action Treatment at the Pleading Stage of the Litigation Eleventh Circuit Holds

Plaintiffs filed a class action lawsuit in Florida state court against their mobile home owner’s insurance carrier, Foremost Insurance, for underpayment of damages caused by hurricanes, and defense attorneys removed the class action to federal court. Mills v. Foremost Ins. Co., 511 F.3d 1300, 2008 WL 45806, *1 (11th Cir. 2008). The class action complaint alleged that plaintiffs tendered a claim to Foremost for hurricane damages, but that “Foremost failed to compensate the Millses for contractors' overhead and profit charges, and for state and local sales taxes on materials, incurred by the Millses in having their hurricane-damaged property repaired or replaced.” Id. The Eleventh Circuit referred to these unpaid items as “Withheld Payments,” see id. n.2. Before either side filed a motion concerning class action certification, defense attorneys moved to dismiss the class action on the ground “that class action treatment was inappropriate because common legal or factual questions would not predominate over individual issues.” Id. The district court granted the motion to dismiss on the ground that plaintiffs lacked standing to prosecute the class action claims, id. Plaintiffs appealed dismissal of the class action, and the Eleventh Circuit reversed.

The district court dismissed the class action based on its conclusion that, in order to have standing to prosecute the class action, plaintiffs had to satisfy three “preconditions” set forth in the insurance policy: “(1) they must complete the repairs or replacement of the damaged property; (2) they must actually incur overhead, profit, and sales tax in connection with the repairs or replacement; and (3) they must make a further claim for any ‘additional costs’ (including overhead, profit, and sales tax) incurred in repairing or replacing the damaged property.” Mills, at *1. Because the class action complaint sought damages for Withheld Payments, the district court reasoned that plaintiffs themselves would not be entitled to such damages unless they met these preconditions. Because plaintiffs “failed to allege that they had completed the repairs or replacement and made a claim for such repair or replacement costs,” the district court held that they lacked standing to prosecute the complaint either individually or as a class action. Id. The district court further held that class action treatment would be inappropriate because “the individual inquiry of the facts surrounding the property damage claims of thousands of Foremost policy holders under thousands of separate insurance policies would predominate and overwhelm any common issue.” Id., at *2. Accordingly, it granted the defense 12(b)(6) motion to dismiss the class action complaint, id.

Continue reading "Class Action Defense Cases-Mills v. Foremost: Eleventh Circuit Reverses District Court Dismissal Of Class Action Complaint Alleging Underpayment Of Policy Benefits Holding Plaintiffs Possess Standing And Should Be Allowed To Conduct Discovery" »

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

To assist defense attorneys anticipate the types of class actions 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 the two-week period of January 18 – January 25, 2008, during which time 39 new class action lawsuits were filed. Class actions alleging employment-related claims generally top this list, often by a wide margin, and labor law class actions continued to hold the top spot this past week with 15 new filings (representing 38% of the total number of new class action lawsuits filed). The only other category to break the 10% threshold involved class actions alleging violations of California's unfair competition law (UCL), which include false advertising claims, with 9 new class action filings (23%).

Posted In: Class Actions In The News

Judicial Panel Grants Defense Request, Over Plaintiffs’ Objection, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Agrees With Defense that Eastern District of New York is Appropriate Transferee Court

Nineteen (19) class action lawsuits - 18 in New York and one in Florida - were filed against American Home Mortgage Investment Corp. and various other defendants, including Citigroup Capital Markets, alleging violations of federal securities laws. In re American Home Mortgage Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 19, 2007) [Slip Opn., at 1]. Defense attorneys for Citigroup Capital 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 Eastern District of New York. Id. Eight individual defendants supported the motion, but plaintiffs opposed pretrial coordination of the class actions, id. The Judicial Panel granted the motion to centralize the class action lawsuits, explaining that “All of these actions share issues regarding the financial condition of American Home Mortgage Investment Corp. (AHM) during the 2006-07 time period, and whether the defendants…misrepresented or failed to disclose material information concerning the company and its financial condition and prospects.” Id. The Panel agreed with defense counsel that the Eastern District of New York was the appropriate transferee court, both because 18 of the class action lawsuits already were pending in that court, and because AHM is headquartered in that district. Id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

After sitting on the motion for more than a year, Madison County Circuit Judge Daniel Stack finally granted summary judgment in favor of CyberSource, ending a class action challenging stock options. The class action complaint was filed five years ago, and defense attorneys had consented to class action treatment. The defense moved for summary judgment on the ground that the plaintiff never exercised the stock options and so never suffered any injury. The class action alleged that the plaintiff tried to exercise his stock options for PaylinX (which subsequently merged into CyberSource) but the company interfered with his efforts, but the court found no evidence to support the allegation. Accordingly, the court granted summary judgment and dismissed the class action.

Posted In: Class Actions In The News

Class Action Claims Under 24 U.S.C. § 413(b) were not Rendered Moot by 2006 Congressional Amendment to Section 413 District of Columbia Circuit Holds

Plaintiffs, elderly veterans who were full-time residents of the Armed Forces Retirement Home, filed a class action lawsuit against the Secretary of Defense and the Chief Operating Officer of the Armed Forces Retirement Home; the class action sought to compel the Armed Forces Retirement Home to provide “‘high quality’ health care, as required by 24 U.S.C. § 413(b).” Cody v. Cox, 509 F.3d 606, 2007 WL 4354429, *1 (D.C. Cir. 2007). Defense attorneys moved to dismiss the class action; the district court granted the motion, holding that the 2006 Congressional amendment to section 413 rendered the class action claims moot. See Cody v. Rumsfeld, 450 F.Supp.2d 5, 9-11 (D.D.C. 2006). The Circuit Court reversed. The Court concluded that the district court erred in dismissing the class action complaint because the amendment to section 413 did not render the claims moot. Cody v. Cox, at *1. Accordingly, it reversed and remanded.

The opinion of the District of Columbia Circuit contains an interesting discussion of the federal mootness doctrine, and those interested that doctrine are encouraged to review the opinion.

Posted In: Class Action Court Decisions

On Remand from Supreme Court, Seventh Circuit Holds Allegations of Scienter in Securities Class Action Complaint Satisfied Requirements of Private Securities Litigation Reform Act (PSLRA) Warranting Reversal of District Court Order Granting Defense Motion to Dismiss Class Action

Plaintiffs filed a class action against Tellabs and its CEO alleging violations of federal securities laws; defense attorneys moved to dismiss the class action complaint on the grounds that the Private Securities Litigation Reform Act (PSLRA) required plaintiffs to plead facts sufficient to support a “strong inference” of scienter, and that the putative class action failed to do so. The district court granted the defense motion, but the Seventh Circuit reversed and reinstated the class action. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. __, 127 S.Ct. 2499 (2007). The Supreme Court granted certiorari and reversed, and our article discussing that opinion may be found HERE. The High Court remanded the class action to the Seventh Circuit “with directions to consider whether the plaintiffs’ allegations of securities fraud in violation of section 10(b) of the Securities Exchange Act of 1934…and SEC Rule 10b-5…create the ‘strong inference’ of scienter, as defined by the Supreme Court in its opinion, that the [PSLRA] requires for the complaint to survive a motion to dismiss.” Makor Issues & Rights, Ltd. v. Tellabs, Inc., ___ F.3d ___ (7th Cir. January 17, 2008) [Slip Opn., at 1-2]. On remand, the Seventh Circuit adhered to its prior determination and reinstated the class action.

The Supreme Court explained that the PSLRA “requires plaintiffs to state with particularity both the facts constituting the alleged violation, and the facts evidencing scienter, i.e., the defendant's intention ‘to deceive, manipulate, or defraud.’” 127 S.Ct. at 2504 (citations omitted). Specifically, the PSLRA requires that the complaint “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind,” 15 U.S.C. § 78u-4(b)(2), and the Supreme Court held at pages 2504 and 2505: “It does not suffice that a reasonable factfinder plausibly could infer from the complaint's allegations the requisite state of mind. Rather, … a court governed by § 21D(b)(2)…must consider, not only inferences urged by the plaintiff, as the Seventh Circuit did, but also competing inferences rationally drawn from the facts alleged. An inference of fraudulent intent may be plausible, yet less cogent than other, nonculpable explanations for the defendant's conduct. To qualify as ‘strong’ within the intendment of § 21D(b)(2), we hold, an inference of scienter must be more than merely plausible or reasonable - it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent. (Italics added.) The newly-enunciated test requires a court “take into account plausible opposing inferences,” something the Seventh Circuit expressly refused to do. Id., at 2509. Accordingly, the High Court remanded the class action to the Seventh Circuit to consider these opposing inferences and answer, “would a reasonable person deem the inference of scienter at least as strong as any opposing inference?” Id., at 2511. Our summary of the Supreme Court opinion may be found here .

Continue reading "PSLRA Class Action Defense Cases-Makor v. Tellabs: Seventh Circuit Reaffirms That Class Action Complaint Created “Strong Inference” Of Scienter Required For Securities Class Action To Survive Defense Motion To Dismiss" »

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

Mark Anderson of The Wall Street Journal reports today that the United Supreme Court has agreed to hear an appeal of a decision by the United States Court of Appeals for the Fifth Circuit in a class action by Enron investors against numerous Wall Street firms, “striking a fatal blow against the class-action investor lawsuit.” Mr. Anderson notes that the High Court’s refusal to hear the class action appeal comes one week after the Court’s seminal decision in Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., ___ U.S. ___, 2008 WL 123801 (January 15, 2008), a summary of which may be found here. Mr. Anderson further notes that the ruling “is an indication that the High Court doesn’t believe the Enron suit met the standards set in the Stoneridge ruling for securities class-action lawsuits to proceed.”

Mark Anderson’s article, entitled “Supreme Court Declines Suit Brought by Enron Investors,” may be found online and was posted January 22, 2008 on The Wall Street Journal.Online.

Posted In: Class Actions In The News

District Court Properly Granted Defense Motion for Summary Judgment as to Class Action Claims on Behalf of Insurance Claims Adjusters because Undisputed Facts Established that Class of Employees Covered by Action Fell Within FLSA’s Administrative Exemption Seventh Circuit Holds

Plaintiffs filed a class action lawsuit against their employer, CC Services, alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, the class action complaint alleged that defendant misclassified the class of employees on whose behalf the action was brought (four classes of insurance claims adjusters) in order to avoid paying them overtime. Roe-Midgett v. CC Services, Inc., ___ F.3d ___ (7th Cir. January 4, 2008) [Slip Opn., at 1-2]. Defense attorneys moved for summary judgment as to all of the class action claims, id., at 6. The district court granted the defense motion, id. In ruling against plaintiffs’ class action claims, the federal court applied “the Department of Labor’s so-called ‘short test’ for determining whether employees fall within the FLSA’s administrative exemption,” and “concluded that the primary duties of all four claims-processing positions involved matters (1) ‘directly related to management policies or general business operations’ and (2) ‘requiring the exercise of discretion and independent judgment.’” Id., at 2. Plaintiffs appealed, and the Seventh Circuit affirmed.

CC Services processes insurance claims for auto, home, commercial and farm insurers. Slip Opn., at 3. It operates out of 37 field offices, and in 2004 settled $600 million in claims, id. Each field office is staffed with Property Specialists, Field Claims Representatives, and Material Damage Appraisers (MDAs). Id. The Seventh Circuit noted that plaintiffs presented only limited arguments on appeal with respect to the district court’s summary judgment order concerning Property Specialists and Field Claims Representatives (II and III), id., at 2; as to those three classes, plaintiffs argued that material issues of disputed fact precluded summary judgment on the class action claims, “[b]ut they failed to identify any real factual dispute specific to these employees,” id. The Circuit Court focused, therefore, on the claim that the duties of MDAs failed to meet the requirements for exemption under the short test. Id. The Seventh Circuit summarized the jobs performed by MDAs and its conclusion at pages 2 and 3 as follows:

Continue reading "FLSA Class Action Defense Cases-Roe-Midgett v. CC Services: Seventh Circuit Affirms Summary Judgment In Favor Of Defense In FLSA Class Action Holding Employees Covered By Class Action Complaint Were Exempt" »

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

Employee Retirement Income Security Act (ERISA) does not Impose Legal Duty on Fiduciaries to Disclose to Participants that they are Selling Most of Their Own Stock in Company Seventh Circuit Holds

Plaintiffs, participants in the defined-contribution supplemental pension plan of their employer Indianapolis Power & Light Company (the Thrift Plan), filed a class action against the Plan’s fiduciaries alleging breach of duties under ERISA (Employee Retirement Income Security Act) based on defendants’ failure to disclose to Plan participants that they had sold most of their own stock in the company. Nelson v. Hodowal, ___ F.3d ___, 2008 WL 90057, *1 (7th Cir. January 2, 2008). The district court certified the litigation as a class action and the class action proceeded to trial. Id., at *2. The district court found in favor of defendants and plaintiffs appealed, id. The Seventh Circuit affirmed.

The Seventh Circuit summarized the factual underpinnings of the class action as follows. The Thrift Plan “initially limited employees to holding stock of IPALCO Enterprises, Inc., the employer's parent corporation, or bonds issued by the United States,” but was subsequently amended to permit participants “to diversity their investments” and, ultimately, nine (9) options ranging “from very conservative (a money-market fund) to risky (IPALCO stock and nothing else).” Nelson, at *1. “The Plan hired Merrill Lynch, Pierce, Fenner & Smith, Inc., to advise the participants about appropriate investments; Merrill Lynch stressed the benefits of diversification. The Plan allows participants to change investments among the nine options daily, with no need for advance notice.” Id. However, “all of the employer's matching contributions were allocated to IPALCO stock; the Plan's terms made this mandatory.” Id. IPALCO merged with global energy company AES Corporation in 2001, and “AES offered a premium of 16% relative to the price at which IPALCO's stock had traded the day before the announcement.” IPALCO stock climbed following the announcement, and by the time the merger closed “about 64% of investments in the Thrift Plan were held as IPALCO stock ($145.4 million of the Plan's total assets of $228.1 million).” Id. Because AES is significantly larger than IPALCO, IPALCO’s performance does not significantly impact the market value of AES stock. Nelson, at *1. “When the merger closed, AES was trading for $49.60 a share,” but it began a rapid descent and on February 21, 2002 it “reached a low of $4.11.” Id. The record does not reflect the reasons for the stock’s decline but does confirm that “it continues to be a substantial enterprise” with $6.7 billion in revenues in 2000 and “a profit of roughly $1.40 a share” and $12.3 billion in revenues in 2006. Id. “The stock closed on December 18, 2007, at $21.58.” Id.

Plaintiffs filed a class action against the Plan’s fiduciaries alleging ERISA violations. Nelson, at *2. “The principal contention was that the fiduciaries (all of whom were executives at Indianapolis Power & Light) should have seen the decline coming, or at least should have understood that AES is too volatile to be a suitable investment for pension holdings, and therefore had to compel all of the participants to exchange their IPALCO stock for the Plan's other investment options before the merger closed.” Id. The class action proceeded to a bench trial, and the district court “found essentially every disputed fact in defendants' favor.” Id. (citing 480 F.Supp.2d 1061 (S.D. Ind. 2007)). Specifically, the district court “concluded that the defendants had no reason to foresee any decline in the price of AES's stock (had, indeed, no inside information about AES) and that reasonable fiduciaries would have deemed AES a suitable stock.” Id. Further, the judge “concluded that an ERISA fiduciary is not obliged to strip participants of the ability to make their own decisions, for good or ill” and that “the fiduciaries [were not] obliged (or even allowed) to disregard the Plan's provision requiring all of the employer's contributions to be held as IPALCO (and then AES) stock.” Id.

Continue reading "ERISA Class Action Defense Cases-Nelson v. Hodowal: Seventh Circuit Affirms Defense Judgment In ERISA Class Action Holding Plan Fiduciaries Not Required To Disclose "Facts That May Lead To Idiosyncratic Reactions"" »

Posted In: Employment Law Class Actions

Mark Anderson of The Wall Street Journal reports today that the United Supreme Court has agreed to hear an appeal of a decision by the United States Court of Appeals for the First Circuit in a class action against Phillip Morris involving advertising of light cigarettes. The class action is but one of numerous class action lawsuits in state and federal courts alleging, in essence, that Phillip Morris and other tobacco companies falsely advertised “light” cigarettes as being safer than regular cigarettes. In part, tobacco companies have urged that “the Federal Trade Commission’s regulation of cigarette advertising bars claims under a state law.” A federal district court agreed with Phillip Morris, but the First Circuit reversed. In so doing, the First Circuit created a circuit conflict with a decision out of the Fifth Circuit that barred a similar class action lawsuit. Mr. Anderson quotes a Phillip Morris representative as stating, “A definitive answer to this question will significantly impact the outcome of dozens of pending lawsuits in which the plaintiffs are alleging billions of dollars in potential liability.” The author agrees that the impact on state and federal class action lawsuits against the tobacco industry will be substantial.

Mark Anderson’s article, entitled “Justices to Hear Cigarette Case,” may be found on page A6 of the January 19, 2008 edition of The Wall Street Journal.

Posted In: Class Actions In The News

As a resource for California defense attorneys so that they may anticipate the types of class action lawsuits against which they will have to defend, 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 the two-week period of January 11 – January 17, 2008, during which time 57 new class action lawsuits were filed. While labor law class actions generally top this list by a wide margin, this past week a new category joined the list of top class action lawsuits -- federal Trust in Lending Act (TILA) lawsuits. Fourteen (14) employment-related class action lawsuits were filed during the past week, representing only 25% of the total number of new class action filings (compared with almost 60% of the class action filings during the preceding week). TILA class action cases came in second with 12 new filings (21%). Two other categories cracked the 10% threshold: those alleging violations of federal antitrust law violations with 9 new filings (16%), and those alleging violations of California's unfair competition law (UCL), which include false advertising claims, with 6 new class action filings (11%).

Posted In: Class Actions In The News

Jim Butler, head of Jeffer Mangels Butler & Marmaro's Global Hospitality Group, the premier hospitality practice in a full service law firm is proud to announce that the UNLV/JMBM Hotel Developers Conference will be held March 11-13, 2008 at the Green Valley Ranch Resort & Spa in Las Vegas. Seventy (70) speakers, all focused on "green" hotel development, will address a wide range of topics. The Conference promises to be worthwhile for all those involved in development or the financing of development.

Note: Jim Butler is the leading condo hotel lawyer in the United States and has worked on more than 100 condo hotel or hotel condo projects all over the world. Anyone developing or financing a hotel mixed-use project--whether ground up construction or conversion--should contact Jim Butler to discuss the project. The Global Hospitality Group chaired by Jim Butler has assisted clients with more than $50 billion of hotel transactions involving more than 1,000 properties around the globe. Jim can be reached at 310-201-3526 or jbutler@jmbm.com. Jim's hotel law blog may be accessed here.

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Judicial Panel Grants Defense Request, Over Plaintiff Objection, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Agrees With Defense Request to Transfer Class Actions to Southern District of New York

Ten individual and class action lawsuits, nine (9) in New York and one (1) in Illinois, were filed against various defendants alleging federal securities laws violations arising out of the collapse of Refco, Inc. In re Refco Securities Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 28, 2007) [Slip Opn., at 1]. Defense attorneys for Credit Suisse Securities, Banc of America Securities, Grant Thornton, Mayer Brown and PricewaterhouseCoopers 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 Southern District of New York. Id. Two other defendants supported the motion; lawyers for the Illinois plaintiffs opposed pretrial coordination. Id. The Judicial Panel granted the motion to centralize the class action lawsuits and agreed with the defense that the Southern District of New York was the appropriate transferee court. Id., at 1-2.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Class Action Complaints Alleging FCRA Violations Erroneously Dismissed because FACTA Amendments Eliminating Private Rights of Action for FCRA § 1681m Violations cannot be Applied Retroactively to Class Action Claims Premised on Violations that Occurred Prior to FACTA’s Effective Date Seventh Circuit Holds

Plaintiff Linda Killingsworth filed a class action against Household Bank (now HSBC Bank Nevada) alleging that the prescreened credit card offer extended to her by the Bank prior to August 20, 2004 violated the federal Fair Credit Reporting Act (FCRA), and plaintiff Erick Sawyer separately filed a class action against his auto insurance carrier, Ensurance Insurance Services, alleging that in connection with issuing him an auto policy in October 2004 it “violated the FCRA by charging him a higher rate based on negative information in his credit report without giving him notice of that adverse action, and also by using his initial credit information for subsequent renewals of his policy when corrected credit information would have qualified him for a lower rate.” Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 616 (7th Cir. 2007). The class action complaints were filed in the Northern District of Illinois, and defense attorneys in each class action moved to dismiss the complaint based on Section 311 of the federal Fair and Accurate Credit Transactions Act (FACTA), which amended the FCRA to eliminate certain private rights of action under the FCRA. Id., at 617 (citing 15 U.S.C. § 1681m(h)(8)). In each case, the district court agreed and dismissed the class action complaint, id. Both plaintiffs appealed and the Seventh Circuit consolidated the appeals and issued a single opinion address the question of whether Section 311, which became effective on December 1, 2004, “impairs rights [plaintiffs] possessed prior to the new statute's effective date and therefore has an impermissible retroactive effect if applied to them.” Id. The Seventh Circuit reversed the dismissal of Killingsworth’s class action, concluding that the retroactive application of Section 311 was improper as to her claims, but the Circuit Court remanded for further proceedings as to Sawyer’s class action complaint, concluding that “the retroactivity question cannot be decided at the pleading stage because the conduct alleged in his [class action] complaint straddles FACTA's effective date.” Id.

The issue before the Seventh Circuit was “whether an amendment to the [FCRA] eliminating private rights of action has an impermissible retroactive effect when applied to FCRA claims that accrued prior to the amendment's effective date.” Killingsworth, at 616. Section 311 of FACTA added subsection (h) to FCRA § 1681m so as to eliminate private rights of action for violations of § 1681m. Killingsworth received an offer of credit prior to August 20, 2004, but did not file her class action lawsuit until October 2005. Id., at 617. Her class action alleged a violation of § 1681m(d), and defense attorneys moved to dismiss the class action on the ground that no private right of action existed based on Section 311’s amendment to the FCRA. Id., at 617-18. The district court agreed and dismissed Killingsworth’s class action, id., at 618. For his part, Sawyer applied for auto insurance in October 2004, his auto policy took effect on December 20, 2004, and it was renewed twice at six-month intervals. Id., at 618. Sawyer also filed his class action lawsuit after the effective date of Section 311; his class action alleged a violation of § 1681m(a). Id. However, the class action alleged further that “Ensurance failed to consider interim changes to his credit rating and instead relied on his initial credit score when subsequently renewing his policy,” thus implicating acts taken after Section 311’s effective date. Id. As in Killingsworth, defense attorneys moved to dismiss Sawyer’s class action on the ground that no private right of action existed; the federal court agreed and dismissed Sawyer’s class action. Id.

Continue reading "FCRA Class Action Defense Cases-Killingsworth v. HSBC: Seventh Circuit Reverses District Court Orders Dismissing Of FCRA Class Action Lawsuits Holding FCRA Amendment Barring Private Rights Of Action Not Retroactive" »

Posted In: FCRA Class Actions, Class Action Court Decisions