Class Action Defense Blog

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. Congress provided for injunctions and prosecution of violations of the Act in 15 U.S.C. § 77t, which provides:

§ 77t. Injunctions and prosecution of offenses

(a) Investigation of violations

Whenever it shall appear to the Commission, either upon complaint or otherwise, that the provisions of this subchapter, or of any rule or regulation prescribed under authority thereof, have been or are about to be violated, it may, in its discretion, either require or permit such person to file with it a statement in writing, under oath, or otherwise, as to all the facts and circumstances concerning the subject matter which it believes to be in the public interest to investigate, and may investigate such facts.

(b) Action for injunction or criminal prosecution in district court

Whenever it shall appear to the Commission that any person is engaged or about to engage in any acts or practices which constitute or will constitute a violation of the provisions of this subchapter, or of any rule or regulation prescribed under authority thereof, the Commission may, in its discretion, bring an action in any district court of the United States, or United States court of any Territory, to enjoin such acts or practices, and upon a proper showing, a permanent or temporary injunction or restraining order shall be granted without bond. The Commission may transmit such evidence as may be available concerning such acts or practices to the Attorney General who may, in his discretion, institute the necessary criminal proceedings under this subchapter. Any such criminal proceeding may be brought either in the district wherein the transmittal of the prospectus or security complained of begins, or in the district wherein such prospectus or security is received.

Continue reading "15 U.S.C. § 77t--Injunctions And Prosecution Of Offenses Under The Securities Act Of 1933" »

Posted In: Statutes & Rules

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. Congress described the special powers afforded to the Commission in 15 U.S.C. § 77s, which provides:

§ 77s. Special powers of Commission

(a) The Commission shall have authority from time to time to make, amend, and rescind such rules and regulations as may be necessary to carry out the provisions of this subchapter, including rules and regulations governing registration statements and prospectuses for various classes of securities and issuers, and defining accounting, technical, and trade terms used in this subchapter. Among other things, the Commission shall have authority, for the purposes of this subchapter, to prescribe the form or forms in which required information shall be set forth, the items or details to be shown in the balance sheet and earning statement, and the methods to be followed in the preparation of accounts, in the appraisal or valuation of assets and liabilities, in the determination of depreciation and depletion, in the differentiation of recurring and nonrecurring income, in the differentiation of investment and operating income, and in the preparation, where the Commission deems it necessary or desirable, of consolidated balance sheets or income accounts of any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer. The rules and regulations of the Commission shall be effective upon publication in the manner which the Commission shall prescribe. No provision of this subchapter imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the Commission, notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.

Continue reading "15 U.S.C. § 77s--Special Powers Of Commission Under The Securities Act Of 1933" »

Posted In: Statutes & Rules

Class Action Defense Attorneys Urged to Advise Clients about FACTA Requirements

The Fair and Accurate Credit Transactions Act (FACTA), enacted by Congress to amend the Fair Credit Reporting Act, will become effective in only a matter of days. FACTA requires that credit card receipts provided to customers be modified so that the credit card number shown on the receipt is truncated and so that the expiration date is omitted. Defense attorneys and in-house counsel are encouraged to ensure compliance with FACTA; the author predicts class action lawsuits will be filed alleging FACTA violations within months of its effective date.

Posted In: Class Actions In The News, FCRA Class Actions

In Case of First Impression New Jersey Federal Court Permits Class Members Who Opted Out of Initial Proposed Class Action Settlement to Rejoin Class for Amended Class Action Settlement Finding it in the Best Interests of the Class

Plaintiffs filed putative class action lawsuits against several defendants alleging a conspiracy to fix prices of electrical carbon products in violation of the Sherman Act following the investigation and criminal prosecution of various entities by the United States Department of Justice. In re Electrical Carbon Products Antitrust Litig., 447 F.Supp.2d 389, 391-92 (D. N.J. 2006). After the Judicial Panel on Multidistrict Litigation centralized the various lawsuits in the federal court for the District of New Jersey, defense attorneys and class counsel reached proposed settlements and sought certification of a class for purposes of settlement, id., at 392. Thirteen entities elected to opt-out of the proposed class action, 12 of which (referred to herein as the "12 Opt-Outs") had made purchases totaling several hundred million dollars out of the $600 million in purchases at issue in the lawsuit, triggering a defense right to back out of the proposed agreements. Id., at 393. Defense and plaintiff lawyers negotiated new settlements and again sought court approval, id., at 394. The 12 Opt-Outs sought court permission to rejoin the class and participate in the new settlements, id., at 396. The federal court held that opt-out plaintiffs may rejoin a class action, and found that it would be in the best interests of the class to permit the 12 Opt-Outs to do so in this case.

In analyzing this issue, the district court noted that the question before it appeared to be one of first impression: "Where a putative class member has timely filed an opt-out notice, the rules are silent on the procedure to be followed when the party seeks to rejoin the class." In re Electrical Carbon, at 396-97. By analogy to Federal Rules of Civil Procedure Rule 23(e)(4)(B) - which requires court approval for an objector to withdraw an objection to a proposed settlement - the court concluded that opt-out plaintiffs may be permitted to rejoin the class so long as they receive court approval, but stressed that "the Court must scrutinize the decision to assure that no special benefit is conferred upon them at the expense of the other class members, and that the resulting settlements are in the best interests of those class members." Id., at 397. The district court concluded that permitting "re-joinder" would benefit the class because it would prevent the settling defendants from again exercising their right to back out of the proposed settlements based upon the dollar value exposure to the opt-out claimants. Id. The court further found that the class members were "actually better off" with the 12 Opt-Outs in the class. Id., at 397-98.

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

Rule 23 Requirements Met in Class Action Alleging FCRA (Fair Credit Reporting Act) Violations Against E*Trade Illinois Federal Court Holds

Plaintiff filed a class action against E*Trade alleging violations of the federal Fair Credit Reporting Act (FCRA) arising out of a solicitation mailer he received stating that he was pre-approved for a home equity loan and stating that "[i]nformation from a consumer credit report was used in connection with this offer." Murray v. E*Trade Fin, Corp., 240 F.R.D. 392, 2006 WL 3354039, *1 (N.D. Ill. November 20, 2006). Defense attorneys filed a motion for judgment on the pleadings as to the claim for relief in the class action complaint that E*Trade violated the FCRA's disclosure requirements; the district court granted the motion agreeing with the defense that no private right of action exists for such violations under 15 U.S.C. § 1681m(d). Id. The court denied defense efforts to obtain dismissal of the balance of the class action complaint. Plaintiff's lawyer then moved the court to certify the lawsuit as a class action; the court rejected defense arguments in opposition to the motion and granted class action certification, finding that the requirements of Rule 23(a) were met and that the class action satisfied also the requirements of Rule 23(b)(3).

The district court analyzed each of the Rule 23 requirements for certification of a class action, but " E*Trade refutes only the adequacy of Murray as class representative," Murray, at *2, so we do not here discuss the court's analysis supporting its finding that numerosity, commonality and typicality were met. See id., at *2-*4. With respect to the adequacy requirement of Rule 23(a)(4), a district court must examine the adequacy of both the proposed class representative and the proposed class counsel, and determine whether "the representative parties will fairly and adequately protect the interest of the class." Id., at *5. The court readily concluded that proposed class counsel would adequately represent the class based on the firm's class action experience, and noted that even E*Trade "praised" its experience. Id.

Continue reading "E*Trade Class Action Defense Case-Murray v. E*Trade: Illinois Federal Court Rejects Defense Objections To Motion For Certification Of Class Action Alleging Violations Of Federal Fair Credit Reporting Act (FCRA)" »

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

As previously reported, class action plaintiff law firm Milberg Weiss Bershad & Schulman LLP and two of the firm's top partners, David Bershad and Steven Schulman were indicted in mid-May 2006 for paying millions of dollars in kickbacks to clients to serve as plaintiffs. Prosecutors allege that the class action firm paid people to serve as class representatives and recruited people to purchase stock in anticipation that share prices would fall, thereby positioning itself to play a lead role in any subsequent securities fraud class action lawsuits and, concomitantly, realize greater attorney fees. In today's New York Times, Cindy Chang provides additional details, reporting that "The law firm and the partners are accused of making $11.3 million in secret payments to entice people to serve as plaintiffs in more than 150 lawsuits. "

In July 2006, they entered pleas of not guilty in a California federal court. Ms. Chang reports that the trial date now has been set for January 2008, rejecting a request by prosecutors to set the trial for October 2007. While the late trial date permits defense attorneys additional time to prepare a defense for the class action firm, it also means another year of uncertainty for the firm. For example, Milberg Weiss' legal troubles have caused Illinois Cook County Circuit Judge Nancy Arnold to delay approval of a class action settlement involving Boeing until she completes a review of the testimony of the six plaintiffs in the case.

Cindy Chang's article, entitled "Trial of Class-Action Law Firm Is Set for 2008," may be found in Section C. of the November 28, 2006 edition of the New York Times.

Posted In: Class Actions In The News

Class Action Plaintiffs’ Failure to Argue Choice of Law in District Court and in Opening Brief did not Waive Issue on Appeal, and District Court Erroneously Granted Defense Summary Judgment Motion and Erroneously Denied Class Certification in Breach of Fiduciary Duty Class Action Against Plaintiffs’ Prior Attorneys Based on its Incorrect Determination of Applicable Choice of Law

Based on a complicated fact pattern, plaintiffs filed a putative class action against some of their prior counsel in an asbestos mass action for breach of fiduciary duty, specifically, the breach of fiduciary duty of undivided loyalty and candor in the settlement of asbestos claims. Huber v. Taylor, ___ F.3d ___, 2006 WL 3071384, *4 (3rd Cir. October 31, 2006). In broad terms, the class action complaint alleged that prior counsel had negotiated settlements in which counsel received as attorney fees a smaller percentage of the payments made to putative class members than they received in fees from other clients in related actions, thus creating the incentive for counsel to negotiate higher settlements in cases in which they would receive a larger contingent fee. Id., at *3. Plaintiff's lawyers sought class certification, which the District Court denied. The parties thereafter filed cross motions for summary judgment; the court agreed with defense attorneys that plaintiffs had failed to demonstrate actual harm – specifically, that the settlements received by plaintiffs would have been more favorable but for the alleged breaches of fiduciary duties – and therefore granted judgment for the defense. Id., at *4. The Third Circuit Court of Appeals reversed because the district court erred in its choice of law determination.

The Circuit Court opinion defines the “Northerners” as plaintiffs in asbestos actions filed in Pennsylvania, Ohio and Indiana, Huber, at *1, and as “Southerners” those plaintiffs in asbestos actions filed in Mississippi and Texas, id., at *2. The class action complaint alleged that “Northerners received payouts that were between 2.5 and 18 times lower than those received by [Southerners],” id. In cases involving Northerners, class counsel had to share their attorney fee award with local counsel but they did not have to utilize local counsel in cases involving Southerners. The Court of Appeal summarized plaintiffs’ arguments at *2 and *3 as follows:

Continue reading "Huber v. Taylor Class Action Defense Case: Third Circuit Reverses Order Granting Defense Motion For Summary Judgment In Malpractice Class Action Against Prior Class Counsel Because District Court's Choice Of Law Determination Was Flawed" »

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

The New York Times reports on the decision of the United States Supreme Court to let stand the decision of the Illinois Supreme Court that reversed a $10 billion judgment against Philip Morris. The judgment against Philip Morris had been entered in a class action that alleged smokers "were misled about the health risks of 'light' cigarettes." The Illinois Supreme Court reversed the judgment, agreeing with defense attorneys that a statutory exemption for conduct authorized by a governmental regulatory agency applied because "the Federal Trade Commission had endorsed the 'light' and 'low tar' descriptions in settlements with other cigarette makers."

The article, entitled " Justices Let Stand a Decision to Void Big Award Against Philip Morris," may be found in Section C of the November 28, 2006 edition of the New York Times.

Posted In: Class Actions In The News

Illinois Supreme Court Decision Reversing Billion Dollar Class Action Award Against Tobacco Giant Now Final

The Philip Morris defense team secured victory in the Illinois class action involving the sale of "light" cigarettes today when the United States Supreme Court denied the petition for writ of certiorari filed plaintiffs' attorneys. Price v. Philip Morris Inc., ___ U.S. ___, 2006 WL 2843774 (November 27, 2006). The class action originated in 2000, when plaintiffs filed a class action lawsuit in Illinois state court alleging violations of the Consumer Fraud Act and the Deceptive Practices Act based on the packaging, marketing, promotion and sale of "light" cigarettes as having less tar and nicotine than "regular" cigarettes. Price v. Philip Morris Inc., 848 N.E.2d 1, 19-20 (Ill. 2005). Defense attorneys advanced 27 affirmative defenses to the class action complaint, including section 10b(1) of the Consumer Fraud Act, which provides a statutory exemption for conduct specifically authorized by a state or federal regulatory agency. Id., at 19. Ultimately, the trial court certified the lawsuit as a class action and entered judgment against Philip Morris in excess of $10 billion. The Illinois Supreme Court reversed the judgment, finding that the action was barred by section 10b(1). Id., at 53-55. This holding was based on the Illinois Supreme Court's conclusion that the Federal Trade Commission had "specifically authorized all United States tobacco companies to utilize the words 'low,' 'lower,' 'reduced' or like qualifying terms, such as 'light,' so long as the descriptive terms are accompanied by a clear and conspicuous disclosure of the 'tar' and nicotine content in milligrams of the smoke produced by the advertised cigarette." Id., at 50.

The Illinois Supreme Court's opinion was far from unanimous. Four separate opinions were filed: Justice Garman delivered the opinion of the court, Price, at 1 et seq.; Justice Karmeier filed a specially concurring opinion supporting reversal of the judgment for failure to prove actual damages rather than based on the statutory exemption of section 10b(1), id., at 55 et seq.; Justice Freeman filed a dissenting opinion, id., at 60 et seq.; and Justice Kilbride filed a dissenting opinion, id., at 84 et seq. A petition for rehearing was denied in May 2006, with Justices Freeman and Kilbride dissenting. By denying the petition for writ of certiorari, the United States Supreme Court brought finality to the judgment in favor of Philip Morris.

Posted In: Class Action Court Decisions

Error in Refusing to Remand Class Action is not Jurisdictional Error but Defense Improperly Removed Class Action under CAFA (Class Action Fairness Act of 2005) Because Amendments to Complaint Related Back Original Filing Which Predated CAFA's Effective Date

In January 2005, prior to the effect date of the Class Action Fairness Act of 2005 (CAFA), plaintiff filed a barebones class action in California state court against Sears alleging false representations that certain Craftsman tools are made in the U.S. when they are manufactured abroad. Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 571 (7th Cir. 2006). Defense attorneys demurred, and plaintiff's lawyer filed an amended complaint after CAFA became effective. The defense then removed the class action to federal court arguing that the amended complaint did not relate back and was therefore removable under CAFA. The California federal court denied plaintiff's motion for remand and plaintiff did not appeal that ruling. However, after the Judicial Panel on Multidistrict Litigation (MDL) transferred the case to Illinois, plaintiff asked the district court to reconsider the California court's ruling. The Illinois federal court held that the defense removal had been improper and remanded the class action to California state court. Id. Sears appealed, and the Seventh Circuit Court of Appeals affirmed.

Sears first argued that the Illinois federal court should not have reconsidered the ruling of the California federal court. Santamarina, at 571-72. The Seventh Circuit disagreed, explaining that a court has inherent power to reconsider prior rulings in the same lawsuit, even the rulings of a different judge, "if there is a compelling reason, such as a change in, or clarification of, law that makes clear that the earlier ruling was erroneous." Id., at 572. The Circuit Court reasoned at page 572, "Not to reconsider in such circumstances would condemn the parties to the unedifying prospect of continued litigation when they knew that a possibly critical ruling was in error and, unless it became moot in the course of the proceedings, would compel a reversal of the final judgment at the end of the case." The Court of Appeals was critical of plaintiff's delay in seeking reconsideration "almost 15 months since the case was removed to the federal court and 13 months since it was transferred to Chicago," but held that "some latitude" was warranted because the class action was removed and remand denied "only a few months after the promulgation of the Class Action Fairness Act." Id.

Continue reading "Sears Class Action Defense Case-Santamarina v. Sears: Seventh Circuits Holds Class Action Not Removable By Defense Because Under California Law Amendments To Class Action Complaint Related Back To Original Filing" »

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

Federal Court Agrees with Defense that Vioxx Class Action Claims Lack Typicality and Fail to Satisfy Predominance and Superiority Requirements of Rule 23(b)

The Vioxx litigation against Merck - consisting of thousands of individual and numerous class action lawsuits filed in state and federal courts - is well known. Merck withdrew Vioxx from the market in September 2004, following clinical reports that Vioxx led to an increased risk of heart attacks and strokes. By that time, however, an estimated 20 million people had used the prescription drug. The individual and class action lawsuits assert various tort and products liability claims against Merck. In February 2005, the Judicial Panel for Multidistrict Litigation transferred the cases to the federal court for the Eastern District of Louisiana, Judge Eldon Fallon, for pretrial proceedings. In re Vioxx Products Liab. Litig., ___ F.Supp.2d ___ (E.D. La. November 22, 2006) [Slip Opn., at 1-2]. Plaintiffs moved for certification of a nationwide class action against Merck; defense attorneys opposed the motion on two grounds: (1) that each claim must be litigated under the substantive law of each class members' respective state (rather than New Jersey law, as plaintiffs' claimed) thus defeating commonality of law, and (2) that each claim "involves separate and distinct factual issues." Id., at 6. On November 22, 2006, the district court agreed with Merck's defense team and refused to certify a nationwide Vioxx class action.

Merck secured FDA approval for the sale of the prescription drug Vioxx in May 1999 for relief of pain caused by osteoarthritis, rheumatoid arthritis, menstrual pain, and migraine headaches. In re Vioxx, at 1. Following centralization by the Judicial Panel, the Plaintiffs Steering Committee filed a Master Class Action Complaint alleging that Vioxx was defective, that Merck misrepresented its safety in that it knew or should have known that Vioxx was unsafe, and that Vioxx caused medical problems, injury and death. Id., at 4. In December 2005, plaintiffs moved to certify a nationwide class action under Rule 23(b)(3) consisting of all U.S. residents who used Vioxx and who claim personal injuries or assert wrongful death claims arising from such use, id. Merck opposed the motion on the grounds summarized above, see id., at 6.

Continue reading "In re Vioxx Class Action Defense Cases: Louisiana Federal Court Hands Merck Defense Crucial Victory By Denying Motion To Certify Nationwide Class Action Involving Vioxx" »

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

The Los Angeles Times reports that IBM has reached a tentative agreement to pay $65 million in settlement of a class action lawsuit filed in California federal court that alleged it had improperly denied overtime pay to 32,000 workers. According to the article, "The case involved workers classified as 'technical services professional and information technology specialists.' IBM considered them professionals exempt from overtime laws detailed in the Fair Labor Standards Act and state labor laws." Plaintiff's lawyer argued that the employees at issue "were by no means the decision makers or creative types typically ineligible for overtime." IBM maintains that it seeks settlement of the lawsuit because litigation will be "lengthy, burdensome and expensive."

The article, entitled "IBM settles overtime class action," may be found in the Business Section of the November 23, 2006 Los Angeles Times.

Posted In: Class Actions In The News

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. Congress provided for preemption of state laws in 15 U.S.C. § 77r-1, which provides:

§ 77r-1. Preemption of State law

(a) Authority to purchase, hold, and invest in securities; securities considered as obligations of United States

(1) Any person, trust, corporation, partnership, association, business trust, or business entity created pursuant to or existing under the laws of the United States or any State shall be authorized to purchase, hold, and invest in securities that are--

(A) offered and sold pursuant to section 77d(5) of this title,

(B) mortgage related securities (as that term is defined in section 78c(a)(41) of this title),

(C) small business related securities (as defined in section 78c(a)(53) of this title), or

(D) securities issued or guaranteed by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association,

to the same extent that such person, trust, corporation, partnership, association, business trust, or business entity is authorized under any applicable law to purchase, hold or invest in obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof.

(2) Where State law limits the purchase, holding, or investment in obligations issued by the United States by such a person, trust, corporation, partnership, association, business trust, or business entity, such securities that are--

(A) offered and sold pursuant to section 77d(5) of this title,

(B) mortgage related securities (as that term is defined in section 78c(a)(41) of this title),

(C) small business related securities (as defined in section 78c(a)(53) of this title), or

(D) securities issued or guaranteed by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association,

shall be considered to be obligations issued by the United States for purposes of the limitation.

Continue reading "15 U.S.C. § 77r-1--Preemption Of State Law Under The Securities Act Of 1933" »

Posted In: Statutes & Rules

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. In 15 U.S.C. § 77r, Congress provided for the exemption of securities offerings from State regulation as follows:

§ 77r. Exemption from State regulation of securities offerings

(a) Scope of exemption

Except as otherwise provided in this section, no law, rule, regulation, or order, or other administrative action of any State or any political subdivision thereof--

(1) requiring, or with respect to, registration or qualification of securities, or registration or qualification of securities transactions, shall directly or indirectly apply to a security that--

(A) is a covered security; or

(B) will be a covered security upon completion of the transaction;

(2) shall directly or indirectly prohibit, limit, or impose any conditions upon the use of--

(A) with respect to a covered security described in subsection (b) of this section, any offering document that is prepared by or on behalf of the issuer; or

(B) any proxy statement, report to shareholders, or other disclosure document relating to a covered security or the issuer thereof that is required to be and is filed with the Commission or any national securities organization registered under section 78o-3 of this title, except that this subparagraph does not apply to the laws, rules, regulations, or orders, or other administrative actions of the State of incorporation of the issuer; or

(3) shall directly or indirectly prohibit, limit, or impose conditions, based on the merits of such offering or issuer, upon the offer or sale of any security described in paragraph (1).

Continue reading "15 U.S.C. § 77r--Exemption From State Regulation Of Securities Under The Securities Act Of 1933" »

Posted In: Statutes & Rules

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. In 15 U.S.C. § 77q, Congress addressed fraudulent interstate transactions as follows:

§ 77q. Fraudulent interstate transactions

(a) Use of interstate commerce for purpose of fraud or deceit

It shall be unlawful for any person in the offer or sale of any securities or any security-based swap agreement (as defined in section 206B of the Gramm-Leach-Bliley Act) by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly

(1) to employ any device, scheme, or artifice to defraud, or

(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or

(3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.

Continue reading "15 U.S.C. § 77q--Fraudulent Interstate Transactions Under The Securities Act Of 1933" »

Posted In: Statutes & Rules

As a resource for the class action defense lawyer who defends against securities class actions, we provide the text of the Securities Act of 1933. We previously provided the statutory provisions of 15 U.S.C. § 77m - § 77o, which addressed limitations on actions under the Act and the liability of controlling persons under the Act, and provided that the statutes, rules and regulations concerning the Act may not be waived. As part of this comprehensive statutory scheme, Congress provided for additional remedies, and the limitations on those remedies, in 15 U.S.C. § 77p, which provides:

§ 77p. Additional remedies; limitation on remedies

(a) Remedies additional

Except as provided in subsection (b), the rights and remedies provided by this subchapter [15 U.S.C.A. § 77a et seq.] shall be in addition to any and all other rights and remedies that may exist at law or in equity.

(b) Class action limitations

No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging--

(1) an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security; or

(2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.

Continue reading "15 U.S.C. § 77p--Additional Remedies And Limitation On Remedies Under The Securities Act Of 1933" »

Posted In: Statutes & Rules

California Court Holds that Kruger v. Wells Fargo Bank does not Apply to Offsets of Government Benefits Against Overdraft and Other Fees Incurred in Connection with the Same Deposit Account

Plaintiff filed a class action in California state court against Bank of America alleging inter alia violations of the state's Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) arising out of the bank's use of Social Security disability benefits directly deposited into a Bank of America checking account to offset overdraft charges. Miller v. Bank of America, NT & SA, 144 Cal.App.4th 1301 (Cal.App. November 20, 2006) [Slip Opn., at 1-2]. Defense attorneys argued that banks may lawfully apply government benefit deposits against overdraft and other fees connected with the same account. The trial court, however, agreed with plaintiff's lawyer that Kruger v. Wells Fargo Bank, 11 Cal.3d 352 (Cal. 1974), which held that banks may not use public benefit funds deposited in one bank account to offset "an account holder's delinquent but separate credit card account," bars banks from using government benefits to offset any funds owed the bank. Id. The California Court of Appeal framed the issue as follows: "Does a bank act illegally if when balancing customer accounts, it credits for Social Security benefits and other public benefit payments directly deposited to its customers' checking accounts to cover debits for overdraft and overdraft fees?" Id. In reversing the trial court, the appellate court summarized its holding as follows: "In this case, the trial court applied Kruger to prohibit [the Bank] from collecting for overdrafts and fees by debiting directly deposited Social Security and other public benefit payments. This application of Kruger is an extension of its holding that is unwarranted in light of significant differences between the banker's setoff addressed in Kruger and the facts of this case." Id.

The case arose from a bank error in posting an $1800 credit to plaintiff's account. The bank discovered its error and reversed the credit, causing plaintiff's account to be substantially overdrawn. After a Social Security payment was deposited directly into plaintiff's checking account, "it was automatically balanced against the larger overdraft to reduce his negative balance." Miller, at *1-*2. When plaintiff complained the bank reversed the debit. Future direct deposits from Social Security that the bank credited against the overdraft balance were also reversed when plaintiff complained. Id., at *2. Plaintiff filed his class action lawsuit against the bank alleging numerous causes of action including intentional and negligent misrepresentation, intentional infliction of emotional distress, unlawful levy of Social Security benefits, and violations of California's CLRA, UCL and False Advertising Act (FAA). The trial court granted summary adjudication in favor of the defense on the intentional infliction of emotional distress and unlawful levy claims, but the remaining causes of action proceeded to trial. Id. It certified a class consisting of more than 1 million members defined as California residents with "a checking or savings deposit account with Bank of America into which payments of Social Security benefits or other public benefits are or have been directly deposited by the government or its agent." Id., at *3.

Continue reading "Miller v. Bank of America Class Action Defense Case: Billion Dollar Class Action Judgment Reversed As California Court Agrees With Defense That Banks May Apply Funds From Government Benefit Deposits To Cover Overdraft Fees Connected With The Same Account" »

Posted In: Class Action Court Decisions

Judicial Panel Grants Unopposed Defense Request for Pretrial Coordination Pursuant to 28 U.S.C. § 1407 for Centralization of Class Action Lawsuits

Four putative class action lawsuits were filed against InPhonic in the District of Columbia, Illinois and New Jersey (followed by several tag-along suits) alleging violations of various state consumer protection statutes and common law claims, and - in some cases - violations of the Federal Racketeering Influenced and Corrupt Organizations Act (RICO). The class action claims were based on InPhonic's alleged failure to adequately disclose the rebate conditions associated with the purchase of wireless telephones and service plans, failure to honor rebates or delay in processing rebates. In re InPhonic, Inc., Wireless Phone Rebate Litig., 460 F.Supp.2d 1380 (Jud. Pan.Mult.Lit. 2006). The Judicial Panel agreed that centralization was warranted under 28 U.S.C. § 1407, and selected the District of Columbia as the appropriate transferee court, explaining:

This district is where many relevant documents and witnesses are likely to be found, inasmuch as InPhonic's headquarters and related offices are located in the Washington, D.C., metropolitan area. Further, since the District of Columbia is the situs of related court proceedings (an action brought by the Attorney General of the District of Columbia), centralization in the District of District of Columbia carries the added benefit of fostering coordinated discovery between the federal and local proceedings, should such a need arise.

Posted In: Multidistrict Litigation, Class Action Court Decisions

Judicial Panel Agrees with Plaintiffs and Defense that Putative Class Action Lawsuits Warrant Centralization Pursuant to 28 U.S.C. § 1407 and Selects Northern District of California as Transferee Court

At least 15 separate putative class action lawsuits were filed in at least 6 different federal courts in various states - followed by numerous tag-along actions - seeking to recover damages for alleged violations of antitrust laws arising out a purported conspiracy to fix prices on international passenger air travel to or from the United States. In re Int'l Air Transp. Surcharge Antitrust Litig., 460 F.Supp.2d 1377 (Jud.Pan.Mult.Lit. 2006). Defense and plaintiff lawyers agreed that pretrial coordination under 28 U.S.C. § 1407 was warranted, but they disagreed on the appropriate transferee court. The Judicial Panel agreed that pretrial coordination was warranted, and explained that the Northern District of California was the appropriate form because "i) the MDL-1973 actions in that district (which comprise the largest number of actions and potential tag-along actions pending in any single district in this docket) are already proceeding apace before an able judge experienced in the management of complex and multidistrict litigation; and ii) the district is well equipped with the resources that this complex antitrust docket is likely to require." Id.

NOTE: The Judicial Panel noted that four of its judges - Judges Hodges, Jensen, Motz and Hansen - could be putative class members in the case. Accordingly, "each of them has filed with the Clerk of the Panel a formal renunciation of any claim they he might have as a putative class member, thereby removing any basis for disqualification on that ground." In re Int’l Air Transp., at 1378 n.1. The Panel noted that, in any event, it invoked the "rule of necessity." Id. (citing In re Wireless Tel. Radio Frequency Emissions Products Liab. Litig., 170 F.Supp.2d 1356, 1357-58 (Jud.Pan.Mult.Lit. 2001)).

Posted In: Multidistrict Litigation, Class Action Court Decisions

Federal Court Denies Defense Motion To Dismiss Class Action For Lack Of Standing But Otherwise Grants In Part And Denies In Part Defense Motion To Dismiss Class Action Complaint Arising Out Of Unclaimed Property Claims

Plaintiffs filed a putative class action against Choice Point and its subsidiary for violations of the New Jersey Consumer Fraud Act and Uniform Unclaimed Property Act, and for common law claims of tortuous interference, fraud, breach of duty, wrongful exercise of dominion over property and interference with possession of property. Carton v. Choice Point, 450 F.Supp.2d 489, 495 (D. N.J. 2006). Defense attorneys moved to dismiss the class action complaint for lack of standing. The defense also moved to dismiss the class action complaint for failure to state a claim. The federal court held that plaintiffs had standing to pursue the class action, and then granted in part and denied in part the motion to dismiss.

Choice Point is a company that charges a fee to locate and secure the return of unclaimed property. Mellon Investor Services asked Choice Point, with whom it had contract, to track down plaintiffs' father, James Carton Jr., because he held 1600 shares of stock worth $150,000. Carton had died in January 2000, and Choice Point sent a letter to his surviving sons informing them "that a 'stock account' with a 'current value in excess of $15,000' was 'still outstanding with our client.'" Carton, at 493. In response to subsequent inquiries, Choice Point stated only that the value of the asset exceed $15,000. Id., at 494. Choice Point sent plaintiffs a contract in which it "agreed to locate the unspecified 'asset' in exchange for a finder's fee of 35% of the asset's gross value"; plaintiffs signed the contract, but reduced the fee to one-third of the net recovery. Id. Choice Point notified Mellon that it had a signed contract to recover the Carton account and asked that a "stop" be placed on the account. Mellon complied. Choice Point also sent plaintiffs additional documentation, but plaintiffs refused to sign the Letter of Authorization and Irrevocable Stock Power required by Choice Point to complete the transaction. Instead, plaintiffs sought to recover the stock from Mellon directly, but Mellon refused to turn over the stock certificates because of the stop placed on the account. However, for reasons which are unclear, Mellon sent the stock certificates to Choice Point. Choice Point maintained possession of the stock for three years. Carton, at 494.

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Posted In: Class Action Court Decisions