Class Action Defense Blog

In order to assist California class action defense attorneys anticipate the claims against which they may 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 relevant timeframe. This report covers the time period from June 15 – June 21, 2007, and during that time 36 new class action lawsuits were filed in these courts. Class actions alleging employment law claims typically lead the list of new filings, and this past week was no exception. In all, sixteen (16) new labor law class action cases were filed in these state and federal courts, representing approximately 44% of the total number of new class actions for the relevant time period. Unfair competition law (UCL) class action cases, which include false advertising cases, dropped from the first-place ranking it had last week to second, with 6 new class action filings (17%). The only other category to meet the 10% threshold involved new securities laws claims, with 4 new cases (11%).

Posted In: Class Actions In The News

Click-Fraud Class Action Stated Claim for Breach of Contract and Breach of Implied Covenant of Good Faith and Fair Dealing, but Under New York Law Remaining Claims in Class Action Complaint Fail

Plaintiff, an advertising customer, filed a putative class action against Findwhat.com, an Internet search engine operator, and Advertising.com, an Internet advertising provider, alleging that defendants “engaged in ‘click fraud’ by employing individuals and ‘robot’ computer programs (commonly called ‘bots’) to click on Payday's hyperlinked advertisements and thereby caused Payday to incur inflated charges under its agreement with Findwhat.” Payday Advance Plus, Inc. v. Findwhat.Com, Inc., 478 F.Supp.,2d 496, 499 (S.D.N.Y. 2007). The class action complaint alleged causes of action for breach of contract, unjust enrichment, negligence and conspiracy, as well as two claims based on an alleged joint venture. Id. The defense moved to dismiss the class action complaint for failure to state a claim, id. The district court granted the defense motion as to most of the claims in the complaint, but refused to dismiss the class action claims alleging breach of contract.

Plaintiff contracted with Findwhat to provide Internet advertising services. Findwhat offers advertising services in connection with its Internet search engine, and utilizes a “pay-per-click” formula for charging its customers: “Under this formula, an advertising customer bids on one or more keywords which, when entered into Findwhat's search engine by Internet users, will return a hyperlink . . . to the advertising customer's web site alongside the search results returned by the search engine.” Payday, at 500. Each time an Internet user clicks on a customer’s link, a fee is charged ranging from 50 cents per click to more than $100 per click for “the most sought-after keywords.” Id. Defendant Advertising developed “ClickTracker,” a software program that tracks and measures Internet sales. Id., at 501. According to the class action complaint, Findwhat and Advertising entered into a business relationship to split revenue from their Internet advertising activities, and then conspired to artificially inflate the price of popular keywords. Id. Additionally, plaintiff alleged that Findwhat hired people to click on advertising links in order to increase revenue at the cost of the customer, and that Advertising used computer programs to “click continuously and systematically” on customer links in order to increase revenue. Id.

The class action complaint named only Findwhat as a defendant on the breach of contract claim, and alleged that the Findwhat contract only permitted a charge for “the actual click through advertising from actual consumers” but that Findwhat charged for “advertising and/or services that were not generated from potential consumers, but from individuals, ‘robot’ programs and other software employed by the Defendants solely designed to increase traffic to Plaintiff's website and drive up revenue.” Payday, at 502. Defense attorneys disagreed, arguing that the terms of the contract are not as restrictive as plaintiff claims, id. Under New York law, the court resolved the contract interpretation issue as a matter of law, id. However, plaintiff never signed the contract relied upon by Findwhat and refused to acknowledge that the terms of the unsigned agreement proffered by Findwhat was the “actual agreement of the parties”: “Because there has been no agreement on the language that reflects the contract terms, and because there is a reasonable dispute as to the meaning of the terms relating to the ‘clicks’ for which Payday owed payments, the Court cannot find as a matter of law that the contract is unambiguous.” Id.

Continue reading "Class Action Defense Cases-Payday v. Findwhat.Com: New York Federal Court Grants Defense Motion In Click-Fraud Class Action To Dismiss Unjust Enrichment, Negligence And Civil Conspiracy Claims But Denies Motion As To Breach Of Contract Claim" »

Posted In: Class Action Court Decisions

FDCPA Class Action Certified Over Defense Objection that Range of 100-500 Class Members does not Satisfy Numerosity and that Allegation that Debt Collection Letters Violate Federal Fair Debt Collection Practices Act (FDCPA) Presented Common Questions of Law and Fact Illinois Federal Court Holds

Plaintiff filed a putative class action against Check Brokerage Corp. alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) based on debt collection letters sent by the company. Day v. Check Brokerage Corp., 240 F.R.D. 414, 415 (N.D. Ill. 2007). The class action alleged that defendant’s letters violate the FDCPA in that they are “false, deceptive, or misleading as determined by the unsophisticated consumer standard and therefore in violation of 15 U.S.C. § 1692(e), (e)(2)(A), (e)(5), and (e)(10).” Id., at 416. The class action complaint also alleged that defendant “used unfair or unconscionable means to collect or attempt to collect a debt in violation of 15 U.S.C. § 1692(f) and (f)(1)” and that the notice concerning a consumer's right to dispute a debt failed to comply with 15 U.S.C. § 1692(g)(a), id. Plaintiff moved the court to certify the litigation as a class action; defense attorneys argued that class action treatment was inappropriate because neither numerosity nor commonality had been met. Id., at 415. The district court disagreed.

The class action complaint was premised upon four debt collection letters defendant sent to plaintiff concerning a $20 debt. Day, at 416. The first letter advised Day that his $20 check had not cleared, that he now owed $65 (which included a “return check charge” of $25 and a “bank charge to merchant” of $20), and that additional fees may be imposed if payment is not made promptly and it was in his "‘best interests to clear this check immediately,’ despite the notification at the end of the letter that Day had thirty days to dispute the validity of the debt.” Id. The second letter “suggest[ed] you give this matter your immediate attention" and quoted Illinois Commercial Code § 3-806 about liability for dishonored checks. Id. The third letter “demand[ed] the $65.40 and stat[ed], ‘WE MUST HAVE YOUR PAYMENT NOW!!’” The letter also warned plaintiff that he could be liable for additional amounts. Id. Finally, the fourth letter stated, "THIS CHECK REMAINS UNPAID! WE ARE, THEREFORE, GOING TO SHOW YOU HOW MUCH IT COULD COST SHOULD IT GO TO LITIGATION." This letter included reference to warrants for arrest and adverse credit reports, and ended, "Common sense would dictate that this check be paid at this point. THE AMOUNT DUE, INCLUDING THE CHECK AND SERVICE CHARGES TO THIS POINT, IS $65.40." Id.

Continue reading "Class Action Defense Cases-Day v. Check Brokerage: Illinois Federal Court Holds That Class Action Rule 23(a)(1) Numerosity Test Does Not Require Exact Number And Debt Collection Letters Presented Common Questions Of Fact And Law" »

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

Federal Securities laws Barred Class Action Complaints Alleging Antitrust Violations Because, under Facts of the Case, Securities Laws “Implicitly Precluded” Enforcement of Antitrust Laws United States Supreme Court Holds

Purchasers of initial public offerings (IPOs) filed a class action against various underwriting firms that market and distribute IPOs for antitrust violations alleging that defendants “unlawfully agreed with one another that they would not sell shares of a popular new issue to a buyer unless that buyer committed (1) to buy additional shares of that security later at escalating prices (a practice called ‘laddering’), (2) to pay unusually high commissions on subsequent security purchases from the underwriters, or (3) to purchase from the underwriters other less desirable securities (a practice called ‘tying’).” Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. __ (June 18, 2007) [Slip Opn., at 1]. Defense attorneys argued that the antitrust violations underlying the class action complaint were precluded by the federal securities laws, id., at 4. The district court agreed with the defense arguments and dismissed the class actions, but the Second Circuit reversed and reinstated the class action complaints, id. The U.S. Supreme Court granted certiorari and reversed the Second Circuit, id., at 4; the Supreme Court held that “we must interpret the securities laws as implicitly precluding the application of the antitrust laws to the conduct alleged in this case,” id., at 1.

The antitrust class action lawsuits arose from the following facts. As part of an IPO, underwriters “will typically form a syndicate to help market the shares,” which in turn estimates market demand and recommends offering price and number of shares for the offering. Credit Suisse, at 2. The syndicate then commits to purchase from the company all of the newly issued shares on a date certain for a fixed price; the price reflects “[the] price the syndicate will charge investors when it resells the shares,” but the syndicate’s actual purchase price reflects a discount that “amounts to the syndicate’s commission.” Id. In other words, the syndicate purchases the shares at a discounted price, and then resells them at the agreed upon fixed price, id., at 3. From this, class actions were filed alleging that defendant underwriters “abused” the syndication practice “by agreeing among themselves to impose harmful conditions upon potential investors,” id.; the Supreme Court added that these were “conditions that the investors apparently were willing to accept in order to obtain an allocation of new shares that were in high demand,” id. These conditions included entering into laddering agreements, tying agreements and paying excessive commissions, thereby “artificially inflat[ing] the share prices of the securities in question,” id., at 4.

Continue reading "Credit Suisse Class Action Defense Case-Credit Suisse v. Billing: Supreme Court Holds Antitrust Class Action Based On Syndicate Conduct In Sale Of IPOs Barred Because "Clearly Incompatible" With Securities Laws" »

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

Rule 23(b)(3) Superiority Class Action Requirement not met Where Financial Impact on Defendant for Technical Violation of FACTA (Fair and Accurate Credit Transactions Act) would be Disproportionate to any Harm to the Class California Federal Court Holds

Within hours of purchasing an item at Cost Plus with her credit card, plaintiff filed a putative class action alleging a technical violation of the federal Fair and Accurate Credit Transactions Act (FACTA) in that her receipt truncated her credit card number but failed to omit the expiration date of the card. Spikings v. Cost Plus, Inc., Case No. CV-06-8125-JFW (C.D. Cal. May 25, 2007) [Slip Opn., at 1-2]. Plaintiff filed a motion for certification of class action treatment; defense attorneys objected arguing in part that the prerequisite Rule 23(b)(3) finding of superiority did not exist thus barring class action certification. Id., at 2. The district court agreed with the defense and refused to certify the litigation as a class action.

FACTA requires that no more than the last 5 digits of a credit card number be shown on customer receipts, and that the expiration date of the credit card not be disclosed on the receipt. 15 U.S.C. § 1681c(g). Plaintiff purchased an item at Cost Plus on December 19, 2006, and within four (4) business hours filed her putative class action complaint. Spikings, at 2. Plaintiff served the class action complaint on December 26, 2006, defendant deleted the expiration date from credit card receipts in all but three of its stores by January 11, 2007, and completed the process of deleting the expiration date from all customer credit card receipts by January 29, 2007. Id. Nonetheless, plaintiff pursued the class action, alleging that defendant’s violation of FACTA was “willful” within the meaning of 15 U.S.C. § 1681n, thus entitling the class to statutory damages of $100-$1000 per violation, as well as punitive damages and attorney fees. Id. Plaintiff also moved the court to certify the litigation as a class action, id., at 1.

Continue reading "FACTA Class Action Defense Cases-Spikings v. Cost Plus: Certification Of Class Action Rejected For Technical Violation Of Fair And Accurate Credit Transactions Act Because Class Action Treatment Would Subject Defendant To Disproportionate Liability" »

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

Putative Class Action Alleging FACTA Violation for Inclusion of Credit Card Expiration Date on Customer Receipts did not Warrant Class Action Treatment Because Rule 23(b)(3) Superiority Requirement not Satisfied California Federal Court Holds, Particularly as Defendant’s Act in Correcting the Violation Immediately on Receipt of Plaintiff’s Complaint Established its Good Faith and “Nullified Any Deterrence Benefit”

Plaintiff filed a putative class action against International Coffee & Tea alleging that it violated the Fair and Accurate Credit Transactions Act (FACTA) because it provided customers with credit card receipts that included the last five digits of the credit card and the card’s expiration date. Soualian v. International Coffee & Tea, LLC, Slip Opn., at 1 (C.D. Cal. June 11, 2007). Plaintiff filed a motion to certify the litigation as a class action; defense attorneys objected that Rule 23(b)(3)’ superiority test had not been met. Id. The district court agreed and refused to permit the litigation to proceed as a class action.

FACTA provides that “no person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number of the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” 15 U.S.C. § 1681c(g)(1). Plaintiff’s putative class action sought to represent “the class of individuals who made purchases at Defendant’s stores…and who received receipts on which Defendant printed more than the last five digits of the person’s credit card or debit card number, or on which Defendant printed the expiration date of the person’s credit or debit card.” Soualian, at 1. The district court outlined the elements required for class certification under Rule 23(a), but focused its analysis on whether Rule 23(b)(3) had been satisfied, id.

Continue reading "FACTA Class Action Defense Cases-Soualian v. International Coffee & Tea: California Federal Court Denies Plaintiff’s Motion To Certify Class Action In Fair And Accurate Credit Transactions Act (FACTA) Suit" »

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

As a reference for class action defense attorneys who defend against securities class action litigation, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress provided for unlawful representations in 15 U.S.C. § 78z of the PSLRA, which provides:

§ 78z. Unlawful representations

No action or failure to act by the Commission or the Board of Governors of the Federal Reserve System, in the administration of this chapter shall be construed to mean that the particular authority has in any way passed upon the merits of, or given approval to, any security or any transaction or transactions therein, nor shall such action or failure to act with regard to any statement or report filed with or examined by such authority pursuant to this chapter or rules and regulations thereunder, be deemed a finding by such authority that such statement or report is true and accurate on its face or that it is not false or misleading. It shall be unlawful to make, or cause to be made, to any prospective purchaser or seller of a security any representation that any such action or failure to act by any such authority is to be so construed or has such effect.

Posted In: Statutes & Rules

To assist defense attorneys who defend class actions 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 relevant timeframe. This report covers the time period from June 8 – June 14, 2007, during which time 39 new class action cases were filed in these courts. Unfair competition law (UCL) class action cases, which include false advertising cases, seized the top spot of new weekly class action filings with 14 new cases, representing 36% of the class action cases filed during the week. Employment law claims ran a close second with 13 new class action filings (33%). No other category cracked the 10% threshold.

Posted In: Class Actions In The News

Class Action Defense Effort to Compel Arbitration Based on Provision in Contract Executed by Plaintiff Rejected by District Court because Arbitration Clause Held to be Unconscionable

Plaintiffs filed a putative class action against Debt Relief of America (DRA) in Nebraska federal court alleging that DRA - a company that offers “to help consumers eliminate their debt by negotiating reduced payoffs in settlement of the debts” - engaged in acts of fraud and charged excessive and undisclosed fees in violation of Racketeer Influenced and Corrupt Organizations Act (RICO) and Nebraska’s Consumer Protection Act and Deceptive Trade Practices Act. Hollins v. Debt Relief of Am., 479 F.Supp.2d 1099, 1103 (D. Neb. 2007). Defense attorneys moved to compel arbitration under a Client Negotiation Agreement executed by plaintiff in Nebraska; the Agreement includes an arbitration clause and a Texas choice-of-law provision. Id. The district court denied the defense motion, holding that the arbitration clause was procedurally and substantively unconscionable.

Plaintiff responded to an advertisement by DRA to assist in reducing debt; he admits signing the Agreement but claims that he did not notice the arbitration clause, that it was “buried in the fine print of an illegible fax,” and that DRA did not point out the arbitration provision before he executed the Agreement. Hollins, at 1103. The class action complaint alleged that plaintiff paid DRA almost $5000 based on its “promise[] to manage his debts,” but that the company “never took any action to assist [him] or contact his creditors.” Id. The complaint further alleged DRA advised him to “ignore[] his creditors,” that his accounts were sent to collection, and that “he filed bankruptcy because of DRA's alleged misrepresentations.” Id. Plaintiff’s purported class action seeks to represent “all Nebraska residents who paid any amount for DRA's debt relief services,” id.

Continue reading "Class Action Defense Cases-Hollins v. Debt Relief: Nebraska Federal Court Denies Defense Motion To Compel Arbitration Of RICO Class Action Holding Arbitration Clause Unenforceable" »

Posted In: Arbitration, Class Action Court Decisions

Allegedly Wrongful Denial of Insurance Policy Benefits Satisfies Commonality and Typicality Requirements for Class Action Treatment, and While Rule 23(b)(1) and (b)(2) Classes Would not be Certified, Louisiana Federal Court Holds that Rule 23(b)(3) Class Action Treatment was Warranted

Plaintiff filed a breach of contract class action against her health insurer arising out of the denial of insurance benefits allegedly due and owing under a cancer insurance policy. Doiron v. Conseco Health Ins. Co., 240 F.R.D. 247, 249 (M.D. La. 2007). The class action complaint alleged that the cancer policy required the insurer to pay benefits directly to the insured if certain terms and conditions of the policy were met. Id. Plaintiff’s husband was diagnosed with cancer in March 2001 and underwent treatment, but he died in December 2001. Plaintiff submitted documentation to the insurer, but it only paid a portion of the insured’s claim. Id. Plaintiff filed as a putative class action on the grounds that "she, and the members of the Sub-Classes she seeks to represent, were and will continue to be denied claims for benefits for certain charges they commonly and typically incurr(ed), and which claims Conseco consistently deny(ied), for their radiation treatment and/or chemotherapy treatment." Id. Plaintiff moved the court to certify the lawsuit as a class action; defense attorneys objected to class action treatment insisting that case-by-case inquiries would be required, thus defeating commonality and typicality, and that none of the subparts of Rule 23(b) could be satisfied. The district court concluded that Rule 23(a) had been satisfied, and that a Rule 23(b)(3) class could be certified.

With respect to numerosity, defense conceded that the class consisted of at least 200 members, and the district court observed that in the Fifth Circuit a class of 100-150 members is generally deemed sufficient to satisfy the numerosity requirement; accordingly, the court found that Rule 239(a)(1) had been satisfied. Doiron, at 251.

Continue reading "Class Action Defense Cases-Doiron v. Conseco Health: Louisiana Federal Court Agrees With Defense That Rule 23(b)(1) and (b)(2) Class Action Could Not Be Certified But Certifies Class Action Against Health Insurer Under Rule 23(b)(3)" »

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

In Decision with Significant Impact on Defense of Class Action Lawsuits, U.S. Supreme Court Holds that Private Party cannot Remove Lawsuit to Federal Court under Federal Officer Removal Statute Merely because it Complies with Federal Laws

Plaintiffs filed a suit in Arkansas state court against Philip Morris alleging violations of the state’s unfair and deceptive business practices statutes arising out of its marketing of “light” cigarettes, which plaintiffs argued suggested that they were “safer” - i.e., lower in tar and nicotine - than regular cigarettes. Watson v. Philip Morris Cos., Inc., 551 U.S. __, 127 S.Ct. 2301 [Slip Opn., at 1-2] (2007). Defense attorneys removed the action to federal court on the basis of the federal officer removal statute, which the district court agreed authorized removal, id., at 2. The Supreme Court explained that the district court reasoned the lawsuit “attacked Philip Morris’ use of the Government’s method of testing cigarettes” and that plaintiffs “had sued Philip Morris for ‘act[s]’ taken ‘under’ the Federal Trade Commission, a federal agency (staffed by federal ‘officer[s]’).” Id. The district court certified the question for interlocutory review, and the Eighth Circuit affirmed “emphasiz[ing] the FTC’s detailed supervision of the cigarette testing process” and relying upon cases authorizing removal “by heavily supervised Government contractors.” Id., at 2-3. The Eighth Circuit held that Philip Morris was “acting under” the FTC with respect to its marketing of “light” cigarettes, thus authorizing removal. Id., at 3. The Supreme Court granted certiorari and reversed.

The federal officer removal statute, 28 U.S.C. § 1442(a)(1), permits removal of suits brought against the “United States or any agency thereof or any officer (or any person acting under that officer) of the United States or of any agency thereof, sued in an official or individual capacity for any act under color of such office” (italics added). The Supreme Court recognized that the phrase “acting under” are “broad” and that “the statute must be ‘liberally construed,’” but added that “broad language is not limitless.” Watson, at 3 (citations omitted). The High Court’s analysis of the legislative history led it to conclude that the Congressional intent was to cover persons “aiding or assisting” federal officers in the performance of their duties, or acting directly “under or by authority of any such officer.” Id., at 3-7. So viewed, the Supreme Court held that the words “acting under” in the federal officer removal statute must be a reference to “a relationship that involves ‘acting in a certain capacity, considered in relation to one holding a superior position or office.’” Id., at 7. “In our view, the help or assistance necessary to bring a private person within the scope of the statute does not include simply complying with the law.” Id., at 8 (italics in original).

Continue reading "Watson v. Philip Morris-Class Action Defense Issues: U.S. Supreme Court Rejects Tobacco Company Argument That Heavily Regulated Industry Falls Within Scope of Federal Officer Removal Statute" »

Posted In: Removal & Remand, Class Action Court Decisions

Court Expands Holding in Pioneer Electronics to Employer-Employee Relationship and Essentially Grants Class Action Plaintiffs Unrestricted Access to Personal Contact Information of Putative Class Members Prior to Certification of Class Action and Without any Showing of Likelihood that Class Action will be Certified

Plaintiffs filed a labor law class action against their former employer, Belaire-West Landscaping, alleging wage and hour violations. Belaire-West Landscape, Inc. v. Superior Court, __ Cal.App.4th __, 57 Cal.Rptr.3d 197, 198 (Cal.App. 2007). Prior to certification of the litigation as a class action, plaintiffs moved to compel Belaire to produce the names and addresses of all current and former employees; defense attorneys objected on the grounds of the absent class members’ right to privacy under the California Constitution. Id. The trial court granted the motion, and approved a proposed notice to putative class members that required them to affirmatively object in writing to the production of their contact information to plaintiffs, id. The defense sought a writ of mandate, and the Court of Appeal issued an order to show cause why the letter to absent class members should not require an “opt-in privacy notice procedure,” id., at 199-200. Ultimately, the appellate court denied the writ, holding that “the opt-out notice adequately protects the privacy rights of the current and former employees involved.” Id., at 199.

We have previously reported on the recent opinion by the California Supreme Court in Pioneer Electronics (USA), Inc. v. Superior Court, 40 Cal.4th 360 (Cal. 2007) - that summary, and the text of the Court’s opinion, may be found here. In brief, Pioneer approved of the type of notice at issue in Belaire-West because the class members already had taken the step of affirmatively contacting the defendant and providing their contact information for the express purpose of having someone contact them to redress their concerns. The Court of Appeal summarized the Pioneer decision as holding that “under the circumstances presented, an opt-out notice was sufficient to protect the privacy rights of the DVD purchasers.” Belaire-West, at 200 (citation omitted). The question is whether the facts of Belaire-West are similar to “the circumstances presented” in Pioneer.

The appellate court recognized the significant differences between the cases. For example, the Court of Appeal stated that the Supreme Court “focused on the fact that the consumers in question had voluntarily disclosed their contact information to Pioneer in seeking redress of their grievances concerning a Pioneer DVD player,” Belaire-West, at 200-01, and at page 201 quoted the Supreme Court’s reasoning as follows:

Continue reading "Class Action Defense Cases-Belaire-West v. Superior Court: California Appellate Court Subordinates Employees' Privacy Rights To Class Action Plaintiff's Request For Their Personal Contact Information" »

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

Federal Arbitration Act (FAA) Provision Allowing Appeals from Orders Denying Petitions to Compel Arbitration Inapplicable Where District Court Granted Defense Motions Dismissing Class Action Allegations in Putative Class Action Complaint and then Granted Defense Motion Compelling Arbitration

Plaintiffs filed a putative class action in the District of Columbia federal court against their broker, National Financial Services and Fidelity Brokerage Services (both subsidiaries of Fidelity Investments), alleging violations of the federal Electronic Funds Transfer Act (EFTA) and various state laws arising out of Fidelity’s failure to pay customers interest on the “float” of their funds from date they requested electronic transfer of funds to the date the funds were in fact transferred. Berenson v. National Fin. Servs. LLC, 485 F.3d 35, 36 (1st Cir. 2007). The class action complaint alleged that plaintiffs opened an account with Fidelity in the 1980s, id. The Fidelity account agreement contained an arbitration clause requiring arbitration of “all controversies” but forbidding either party in a putative class action from seeking to compel arbitration unless (1) class action treatment is denied, (2) the class action is decertified, or (3) the court excludes the customer from participating in the class action, id., at 37-38. After the class action complaint was transferred to the Massachusetts federal court, id., at 37 n.3, defense attorneys filed a series of motions attacking the pleadings and the class action allegations but “reserved the right to compel arbitration if class certification is denied,” id., at 38. Ultimately defense attorneys succeeded in defeating the class action allegations and moved to compel arbitration of the plaintiffs’ non-class claims. After the district court compelled arbitration, Fidelity sought appellate review of the court’s order granting summary judgment; the First Circuit dismissed the interlocutory appeal for lack of jurisdiction.

Plaintiffs began using the company’s electronic bill payment service in the mid-1980s, but after a period of time Fidelity contracted out this service and in 2000 entered into an agreement with CheckFree to handle the bill payment service using the “good funds” method, which the First Circuit summarized at page 37 as follows:

Continue reading "Class Action Defense Cases-Berenson v. National Financial: First Circuit Dismisses Interlocutory Appeal In Class Action For Lack Of Jurisdiction" »

Posted In: Arbitration, Class Action Court Decisions

To assist class action defense lawyers who defends against securities class action litigation, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress provided for court review of orders and rules under the PSLRA in 15 U.S.C. § 78y, which provides as follows:

§ 78y. Court review of orders and rules

(a) Final Commission orders; persons aggrieved; petition; record; findings; affirmance, modification, enforcement, or setting aside of orders; remand to adduce additional evidence

(1) A person aggrieved by a final order of the Commission entered pursuant to this chapter may obtain review of the order in the United States Court of Appeals for the circuit in which he resides or has his principal place of business, or for the District of Columbia Circuit, by filing in such court, within sixty days after the entry of the order, a written petition requesting that the order be modified or set aside in whole or in part.

(2) A copy of the petition shall be transmitted forthwith by the clerk of the court to a member of the Commission or an officer designated by the Commission for that purpose. Thereupon the Commission shall file in the court the record on which the order complained of is entered, as provided in section 2112 of title 28 and the Federal Rules of Appellate Procedure.

(3) On the filing of the petition, the court has jurisdiction, which becomes exclusive on the filing of the record, to affirm or modify and enforce or to set aside the order in whole or in part.

(4) The findings of the Commission as to the facts, if supported by substantial evidence, are conclusive.

(5) If either party applies to the court for leave to adduce additional evidence and shows to the satisfaction of the court that the additional evidence is material and that there was reasonable ground for failure to adduce it before the Commission, the court may remand the case to the Commission for further proceedings, in whatever manner and on whatever conditions the court considers appropriate. If the case is remanded to the Commission, it shall file in the court a supplemental record containing any new evidence, any further or modified findings, and any new order.

Continue reading "15 U.S.C. § 78y--Congressional Provisions Regarding Court Review Of Orders and Rules Pursuant To The Private Securities Litigation Reform Act (PSLRA)" »

Posted In: Statutes & Rules

As a resource to California 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 relevant timeframe. This past week, 43 new class action cases were filed in these courts, and after a one-week break labor law class action lawsuits returned to its familiar spot atop the list of new weekly class action filings. This report covers the time period from June 1 – June 7, 2007, during which time 19 new employment-related class action cases (44%) were filed in the California state and federal courts listed above. Surprisingly, no other category cracked the 10% threshold.

Posted In: Class Actions In The News

Judicial Panel Grants Defense Request, Unopposed by Plaintiffs, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 but Elects to Transfer Class Actions to Western District of Arkansas

Five class action lawsuits (two in Alabama, and one in Arkansas, Tennessee and Texas) were filed against Pilgrim’s Pride by current and former employees alleging violations of the federal Fair Labor Standards Act (FLSA). In re Pilgrim’s Pride Fair Labor Standards Act Litig., 489 F.Supp.2d 1381, 1381 (Jud.Pan.Mult.Lit. May 10, 2007). Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in either the Eastern District of Texas or the Western District of Arkansas; plaintiffs agreed that pretrial coordination was appropriate, but disagreed with the defense and with each other as to the appropriate transferee court. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that “[t]he actions share questions of fact arising out of similar allegations that certain employees of pilgrim’s Pride are entitled to compensation under the [FLSA].” Id. The Panel selected the Western District of Arkansas as the transferee court because it did not have any other MDL cases pending and its docket permits it to bring to bear the resources necessary to manage the class action litigation, and because the Arkansas court enjoyed wide, if not unanimous, support of the parties. Id., at 1381-82.

Posted In: Multidistrict Litigation, Class Action Court Decisions

General Release Executed by Employees at Termination was Valid Under ERISA but Class Action Claims Fell Within Carve-Out Provision in Release, and Former Plan Participants have Standing to Prosecute Class Action Alleging Breach of Fiduciary Duty Against Plan Administrators Illinois Federal Court Holds

Plaintiffs filed a putative ERISA class action lawsuit against Tellabs alleging breach of fiduciary duty “by permitting investments in Tellabs securities when it was imprudent to do so and by disseminating misleading information to Plan participants about the prudence of investing in Tellabs securities.” Brieger v. Tellabs, 473 F.Supp.2d 878, 880 (N.D. Ill. 2007). Defense attorneys moved for summary judgment on two grounds: (1) the putative members of the class action had executed general releases which barred them from prosecuting the class action complaint, and (2) plaintiffs lacked standing to prosecute the class action because they had cashed out of the Plan. Id., at 883. The district court denied the motion.

Briefly, in December 2000, Tellabs announced a $100 million sales agreement with Sprint, and in January 2001 announced increased sales and expressed optimism about the future. For purposes of the period covered by the class action complaint, in February 2001 Tellabs common stock hit a high of $67 per share. However, the following month Tellabs lowered its revenue and earnings expectations for 2001, and in April 2001 it announced that it would not meet its lowered expectations. “By April 16, 2001, Tellabs stock had declined to $35.50 per share.” Brieger, at 881. The stock recovered to $42 per share in May 2001, but fell to $16 by June 2001 and plunged to under $1 by April 2003. Id., at 881-82. Tellabs implemented workforce reductions, and in exchange for severance benefits each employee executed a general release which provided that the employee released Tellabs – including its “officers, directors, agents, employees, employee benefit plans (and their plan fiduciaries and administrators)” – “from any and all claims of any kind relating to or arising out of Employee's employment or the termination of that employment with Tellabs, Inc. or any of its subsidiaries or affiliates.” Id., at 882.

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

In Seminal FCRA (Fair Credit Reporting Act) Class Action Cases, Supreme Court Holds (1) “Willful” Failures Under FCRA § 1681n(a) Include Acts of “Reckless Disregard,” (2) “Adverse Action” in Determining Insurance Premiums Includes Setting First-Time Insurance Rates, (3) Review of Credit Report must have Impacted Rate Charged Consumer, and (4) Insurers did not Violate FCRA

Plaintiffs filed two separate putative class action lawsuits against GEICO and Safeco Insurance, respectively, alleging willful failure to give notice of adverse actions under the federal Fair Credit Reporting Act (FCRA) in violation of § 1681m(a). Safeco Ins. Co. of America v. Burr, __ U.S. __, 2007 WL 1582951 (June 4, 2007) [Slip Opn., at 4]. The questions before the United States Supreme Court in the consolidated cases were “whether willful failure covers a violation [of the FCRA] committed in reckless disregard of the notice obligation, and, if so, whether … Safeco and GEICO committed reckless violations.” Id., at 1. The Supreme Court held that a “willful” violation of the FCRA included “reckless disregard,” but that neither GEICO nor Safeco recklessly violated the FCRA, id., at 1-2.

The class action complaints were filed by individuals who purchased car insurance from GEICO and Safeco, each of which rely upon credit reports in setting insurance premiums. Safeco, at 4-5. In these consolidated class actions, defendants allegedly offered plaintiffs auto insurance at rates that were higher than the most favorable rates offered by the companies. Id., at 4. However, the insurers did not send plaintiffs notices of adverse action, id., at 4-5. The FCRA requires that “any person [who] takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report” must provide notice to the consumer. 15 U.S.C. § 1681m(a). For these purposes, an “adverse action” includes “a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for.” § 1681a(k)(1)(B)(i). The Supreme Court explained that these notices “must point out the adverse action, explain how to reach the agency that reported on the consumer’s credit, and tell the consumer that he can get a free copy of the report and dispute its accuracy with the agency.” Safeco, at did not allege actual damages; rather, it sought statutory and punitive damages under § 1681n(a). Id.

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Posted In: FCRA Class Actions, Class Action Court Decisions

As Matter of First Impression, Seventh Circuit Holds that FCRA (Fair Credit Reporting Act) Requires Consumer Reporting Agency to do More than Make Accurate Disclosures because Statute Requires that Disclosures also be “Clear”

Plaintiffs filed a putative class action against credit reporting agency Equifax Information Services alleging violations of the federal Fair Credit Reporting Act (FCRA). Gillespie v. Equifax Information Services, LLC, 484 F.3d 938, 939 (7th Cir. 2007). The class action complaint asserted that Equifax’s disclosures failed to comply with the FCRA; specifically, the class action complaint alleged that consumers could not properly calculate the date by which negative credit information must be removed from their reports. Id. Defense attorneys moved for summary judgment on the grounds that the information it provided to consumers was clear and accurate. The district court agreed and granted summary judgment in favor of the defense; based on this ruling, the court found it unnecessary to address plaintiffs’ motion to certify the lawsuit as a class action. The Seventh Circuit reversed.

Plaintiff Heather Gillespie opened a credit account with Direct Merchants Bank in 1999 and defaulted on the account in 2001; plaintiff Angela Cinson opened an account with Sears in 1993 and defaulted on the account in 1996 or 1997. Gillespie, at 939. The delinquent accounts were sold to a collection agency, and information on the delinquencies made it to the Equifax credit files of each plaintiff, id. In 2004, each plaintiff requested their credit file from Equifax and Equifax complied. Gillespie, at 939. Plaintiffs objected to the “Date of Last Activity” entry in their credit files. Id. The court explained at page 939 the manner in which the field is completed:

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Posted In: FCRA Class Actions, Class Action Court Decisions

District Court must Resolve Issues Regarding Existence of Contract before Compelling Arbitration and Dismissing Class Action Allegations, but Class Action Complaint Against Co-Defendant Properly Dismissed Ninth Circuit Holds

Plaintiff filed a putative class action in federal court against MemberWorks and West Telemarketing alleging she was charged a membership fee for joining the “Essentials program” - a service that, for an annual fee, offers members a 20% discount at certain retailers - in violation of 39 U.S.C. § 3009 (prohibiting mailing unordered merchandise) and various state laws because she had not heard of, and did not join, the program. Sanford v. MemberWorks, 483 F.3d 956, 958-59 (9th Cir. 2007). Defense attorneys for MemberWorks moved to compel arbitration based on a clause in the membership agreement and to strike the class action allegations; defense attorneys for West joined in the motion to compel arbitration. Id., at 959. Plaintiff objected to the arbitration demand on the ground that she never enrolled in the Essentials program, id. The district court granted the motion to compel arbitration as to MemberWorks, holding that a determination as to the enforceability of the contract as a whole must be made by the arbitrator; but the court denied the motion as to West because it was not in privity with plaintiff, and instead dismissed the class action complaint as to West because West had not mailed plaintiff any merchandise that she had not ordered and because the court refused to exercise supplemental jurisdiction over the state law class action claims - namely, conversion, unjust enrichment and fraud - against West. Id. The Ninth Circuit affirmed the dismissal of the class action complaint as against West, but reversed the district court order compelling arbitration and reinstated the class action allegations as against MemberWorks.

Plaintiff purchased by telephone Tae-Bo fitness tapes through West Telemarketing. Sanford, at 958. Sales agents were instructed to read purchasers a script at the conclusion of the transaction stating that, with the purchaser’s consent, they would be sent a “risk-free 30-day membership” in the Essentials program, and that the $72 annual fee would be billed to their credit card if membership was not canceled within 30 days. Id. Plaintiff denied hearing the script or agreeing to the trial membership; MemberWorks’ records showed that plaintiff enrolled in the program and received a membership kit that included a membership agreement containing an arbitration clause. Id., at 958-59. Plaintiff did not cancel the membership so a $72 fee was charged to her card, and the next year a renewal fee of $84 was billed to her card. Id., at 959. Plaintiff disputed the renewal fee and MemberWorks reversed the charge, id. Plaintiff then filed her putative class action against MemberWorks and West.

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Posted In: Arbitration, Class Action Court Decisions