Class Action Defense Blog

California’s Fair Debt Collection Practices Act: A Brief Overview

In 1978, Congress added Title VIII to the Consumer Credit Protection Act entitled the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq. Several states, such as California, have enacted consumer protection laws based upon the FDCPA. California’s version of the federal FDCPA is the Rosenthal Fair Debt Collection Practices Act. California Civil Code § 1788 et seq.

California Civil Code section 1812.700 provides:

(a) In addition to the requirements imposed by Article 2 . . ., third-party debt collectors subject to the federal Fair Debt Collection Practices Act . . . shall provide a notice to debtors that shall include the following description of debtor rights:

“The state Rosenthal Fair Debt Collection Practices Act and the federal Fair Debt Collection Practices Act require that, except under unusual circumstances, collectors may not contact you before 8 a.m. or after 9 p.m. They may not harass you by using threats of violence or arrest or by using obscene language. Collectors may not use false or misleading statements or call you at work if they know or have reason to know that you may not receive personal calls at work. For the most part, collectors may not tell another person, other than your attorney or spouse, about your debt. Collectors may contact another person to confirm your location or enforce a judgment. For more information about debt collection activities, you may contact the Federal Trade Commission at 1-877-FTC-HELP or www.ftc.gov.”

(b) The notice shall be included with the first written notice initially addressed to a California address of a debtor in connection with collecting the debt by the third-party debt collector.

(c) If a language other than English is principally used by the third-party debt collector in the initial oral contact with the debtor, a notice shall be provided to the debtor in that language within five working days.

Continue reading "The Defense of Class Action Cases: California Issues" »

Posted In: FDCPA Class Actions

In 1978, Congress added Title VIII to the Consumer Credit Protection Act entitled the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq. Congress intended the FDCPA to make certain that ethical guidelines for the collection of consumer debts, and to provide debtors with a means for challenging payoff demands and determining the validity and accuracy of asserted debts. It is difficult to argue with the need for such guidelines: t he Federal Trade Commission provides Congress with an annual report covering its FDCPA enforcement activities and with a summary of consumer complaints of alleged violations of the FDCPA by debt collectors. The FTC reports that in 2005 there were more than 66,000 such complaints.

Congress found, “There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy. ” 15 U.S.C. § 1692(a). The FDCPA implements broad reforms to redress such abuse: we will highlight only a few of them in this article.

“The FDCPA broadly prohibits a debt collector from using ‘any false, deceptive, or misleading representation or means in connection with the collection of any debt.’ 15 U.S.C. § 1692e.” Dunlap v. Credit Protection Ass'n, L.P., 419 F.3d 1011, 1012 (9th Cir. 2005). Additionally, it “‘prohibits unfair or unconscionable collection methods, conduct which harasses, oppresses or abuses any debtor, and the making of any false, misleading, or deceptive statements in connection with a debt, and it requires that collectors make certain disclosures.’” Foti v. NCO Financial Systems, Inc., 424 F.Supp.2d 643, 653 (S.D.N.Y. 2006) (citation omitted). For example, third-party debt collectors may not contact debtors before 8:00 a.m. or after 9:00 p.m., they may not threaten debtors with arrest, and they may not threaten legal action unless such action is truly being contemplated. However, the FDCPA does not prohibit third-party debt collectors from contacting debtors on holidays or weekends unless they know, or have reason to know, that it would be “inconvenient” to the debtor to do so. Indeed, the debtor may demand that the third-party debt collector terminate all communications, though the result of such a demand may well be a lawsuit. Specifically, provided the request is in writing, a debtor may demand that all further communication stop.

The FDCPA also “prohibits a debt collector from contacting a debtor where the collection agency ‘knows’ the consumer is represented by an attorney.” Schmitt v. FMA Alliance, 398 F.3d 995, 998 (8th Cir. 2005) (holding that while knowledge of agent is imputed to principal, knowledge of principal is not imputed to agent).

Finally, the FDCPA “requires debt collectors to notify debtors about their ability to challenge the validity of a debt and to provide other basic information. See 15 U.S.C. § 1692g.” Foti, 424 F.Supp.2d at 653. Specifically, the debtor may ask the collection agency to “validate” the debt by requesting proof that the debt is valid. (This provision has proven quite successful against collection agencies that would buy up “junk” debts and then demand payment from unsophisticated consumers.)

The FDCPA provides for private rights of action, and permits debtors to recover actual damages, statutory damages, and attorneys' fees and costs for violations of its terms. Under the statutory penalty provision, a jury may award up to $1000 for each violation of the FDCPA, regardless of whether the debtor can otherwise establish actual damages. One can easily imagine the significant damages potentially at risk in class action lawsuits alleging violations of the FDCPA.

NOTE: It is important to understand that, generally, the FDCPA only applies to third party debt collectors; the statutory scheme was not intended to cover the conduct of the original creditor. Some states, however, such as California, have enacted consumer protection statutes that provide broader coverage. California's Fair Debt Collection Practices Act is discussed in a separate article.

Posted In: FDCPA Class Actions

California Holds In Class Actions Case That Inquiry Notice Triggers California Securities Law Claims Limitation Period And Website Posting Is Insufficient To Establish Inquiry Notice

On May 10, 2006, a California court published its opinion in a class action case that addressed two issues of first impression in California: (1) whether inquiry notice or actual notice commences the statute of limitations period for alleged violations of California's securities laws, and (2) whether referring investors to the company website establishes inquiry notice as to all information contained on the website. Deveny v. Entropin, Inc., 139 Cal.App.4^th 408 (Cal.App. 2006).

Briefly, from August 1998 through June 2002, Entropin released very reports and press releases touting the progress of its development of "a topical solution intended to treat impaired range of motion associated with shoulder and back injuries." Id., at 810-11. The press releases issued between February and June 2002 stated that the drug "'provided statistically significant improvement for soft tissue afflictions for both the shoulders and the lower back.'" Id., at 811-12 (citation omitted). But in September 2002, the company revealed that the clinical trials had been a failure, that the drug was "ineffective," and that the company was "abandoning the drug." Needless to say, "the market price of Entropin securities collapsed." Id., at 812.

In January 2003, a putative class action alleging securities fraud was filed in California state court. The complaint alleged violations of California's securities laws, as well as a federal law claim for violating Section 11 of the Securities Act of 1933. Id., at 812. The company filed a motion for summary judgment, relying in part of the "undisputed fact" that certain information was available on the company's website. Id., at 813. The trial court granted summary judgment and plaintiffs appealed. Id., at 814.

The California Court of Appeal for the Fourth District, Division 2, first examined whether "inquiry notice rather than actual notice applied to plaintiffs' claims." Id., at 815. After observing that the California securities laws at issue were governed by the statute of limitations period contained in California Corporations Code section 25506, Deveny noted that "no published California case has yet addressed whether Corporations Code section 25506 requires actual notice or inquiry notice to trigger the running of the one-year statute of limitations, and our own research has not revealed any such case." Id. Federal courts that had addressed the issue, however, had held that inquiry notice was sufficient, id. (citations omitted). Deveny ultimately concluded that inquiry notice commenced the running of the limitations period under California Corporations Code section 25506. Id., at 815-17. (By its express terms, inquiry notice triggers the one-year limitations period under federal law, 15 U.S.C. § 77m.)

Continue reading "Deveny v. Entropin -- California Class Action Defense Cases" »

Posted In: Class Action Court Decisions

A New Twist On Fair Debt Collection Practices Act Class Actions

California courts have been inundated with class actions alleging violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., and its California equivalent, the Rosenthal Fair Debt Collection Practices Act, California Civil Code § 1788 et seq. While California class action firms originally named the debt collection companies, the lawsuits were soon expanded to include California and out-of-state lawyers and law firms that assisted such debt collection companies in their efforts.

According to a June 20, 2006, press release prepared by the law firm of Brennan, Wiener & Associates of La Crescenta, California, a California putative class action was filed in the Los Angeles Superior Court on behalf of Kenneth Holtzclaw and Shane Satey against Great Seneca Financial Corporation, and against the Maryland law firm of Wolpoff & Abramson. Wolpoff & Abramson, LLP is a national law firm with approximately 850 employees. The firm is noted for its debt collection practice work and its representation of national retail and banking clients. According to the press release, “Wolpoff & Abramson set up Great Seneca just to try to insulate itself from unfair debt collection lawsuits.”

This is not the first time Wolpoff & Abramson has been sued. A computer search and cursory review of those lawsuits suggests that those actions have been less than successful. This does appear to be the first time, however, that an attempt has been made to eradicate the distinction between client and attorney. It will be interesting to see whether discovery turns up any evidence to support the plaintiffs’ bold claim.

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

Class action defendants often remove their case to federal court whenever possible. Plaintiffs almost invariably seek to remand the action to state court. Whether a federal district court order remanding an action to state court may be reviewed on appeal thus is important to any defendant. Because the focus of this article is on appellate review of district orders granting motions to remand a lawsuit to state court, removal and remand are not discussed here; discussions of each may be found in separate articles. Also, special rules apply to cases removed to federal court under CAFA (Class Action Fairness Act of 2005), and those are discussed in a separate article.

If an action is remanded to state court, the plaintiff commonly will assert that appellate review is barred by 28 U.S.C. § 1447(d). However, 28 U.S.C. § 1447(d) precludes review of remand orders only when the case is remanded for reasons stated in § 1447(c). Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 350 (1976). A remand order that is not based on statutory grounds is reviewable because there “is no indication whatsoever that Congress intended to extend the prohibition against review to reach remand orders entered on grounds not provided by the statute.” Id. If, for example, the district court remands the action to state court based on the mistaken belief that state courts have concurrent jurisdiction over the subject matter of the dispute, then the matter is reviewable on appeal because that basis for remand is not among the statutory grounds of 28 U.S.C. § 1447(c).

A plaintiff may seek to insulate the remand order from review by referencing 28 U.S.C. § 1447(c) in the order. While that move may strengthen the plaintiff’s case, it does not serve as a talisman to bar appellate review. In the Ninth Circuit, for example, the appealability of a remand order is subject to de novo review. The Circuit Court is not bound by the lower court’s characterization of its bases for remanding a case to state court. Ferrari, Alvarez, Olsen & Ottoboni, v. Home Ins. Co., 940 F.2d 550, 553 (9th Cir. 1991) (“We determine the basis of authority for remand by examining the substance of the remand order.”).

Continue reading "General Rules for Appealability of Remand Orders: Class Action Defense Issues" »

Posted In: Removal & Remand

California Federal Judges Recuse Themselves From Hearing Los Angeles Case

Prior articles have discussed the California criminal case involving the federal indictment leveled against class action law firm Milberg Weiss Bershad & Schulman. Molly Selvin of the Los Angeles Times recently reported that yet another federal judge, U.S. District Court Judge R. Gary Klausner, has recused himself from hearing the case, bringing to five the number of judges who have bowed out.

One immediate impact caused by the successive recusals is the delay in the arraignments of Howard J. Vogel, a retired real estate investor, and Richard Purtich, a California lawyer. Ms. Selvin reports that Howard Vogel will be arraigned on a criminal charge that he received more than $2.4 million in kickbacks from Milberg Weiss, and that Richard Purtich has “agreed to plead guilty to a felony tax charge related to allegations that he funneled money to a Milberg client.”

Ms. Selvin’s article, Milberg Case Hits Delays as Five Judges Withdraw,” may be found in the June 16, 2006, edition of the Los Angeles Times.

Posted In: Class Actions In The News

California Semiconductor Company In The News

By now, the accounting scandals that have torn apart Wall Street are well known. The litigation fallout has pitted company against accounting firm against law firm, in a never-ending circle of passing the blame. California companies have not been immune; on the contrary, several California companies have been in the throes of such litigation.

Eric Dash of the New York Times reported today on the continuing fight between Micrel Inc., a San Jose, California, company, and its former accounting firm, Deloitte & Touche. According to the article, in 1996 Micrel asked Deloitte & Touche for an opinion on a stock option award plan that would be more fair to new hires – a critical need at a time when high-tech firms were growing by leaps and bounds. Micrel claims that Deloitte approved the program.

Five years later, however, “Deloitte reversed its opinion and urged Micrel to restate its financial reports.” Today, Micrel and Deloitte are still battling in court. Mr. Dash insightfully observes, “The Micrel case and others raise troubling questions about how companies that were pushing the envelope of accounting and tax practice were able to get the blessings of auditors and lawyers. And the widening scandal reveals the extent to which boards of directors, especially the compensation committees that approve option grants, may have failed to do their jobs.”

The legacy of the accounting scandals will consume judicial resources for many years to come. The Micrel program, its well-intended origins and its nascent problems are discussed in Mr. Dash’s article, “Gilded Paychecks: Dating Games Inquiry Into Stock Option Pricing Casts A Wide Net,” printed June 19, 2006, in the New York Times.

Posted In: Class Actions In The News

Remand to State Court of Case Removed Under SLUSA (Securities Litigation Uniform Standards Act of 1998) Not Appealable U.S. Supreme Court Holds

CAFA (Class Action Fairness Act of 2005) and SLUSA (Securities Litigation Uniform Standards Act of 1998) are discussed in various separate articles. Removal and remand issues also are discussed in various articles, which set forth the general rule recently reiterated by the United States Supreme Court: "28 U.S.C. § 1447(d) limits appellate review of a district court order remanding a case from federal to state court." Kircher v. Putnam Funds Trust, 547 U.S. ___, 126 S.Ct. 2145, 2150 (2006). The Supreme Court addressed the scope of appellate review of remand orders in Kircher. As the Supreme Court summarized, "The question here is whether an order remanding a case removed under [SLUSA] is appealable, notwithstanding § 1447(d). We hold it is not." Kircher, at 2150 (italics added).

Kircher involves eight separate putative class actions by investors against mutual funds, investment advisers and an insurance company that alleged state law claims for damages (such as damages for negligence and breach of fiduciary duty) arising out of the practice of "market timing." Kircher, at 2150 and n.4. The actions were removed to federal court on the grounds that they were "removable under and precluded by [SLUSA]." Id., at 2151. The investors moved to remand the lawsuits claiming the district court lacked subject matter jurisdiction; the district court agreed, and remanded the actions on the grounds that it lacked subject matter jurisdiction and that SLUSA did not preclude the claims asserted therein. Id.

The Seventh Circuit reversed, but only after concluding that it had appellate jurisdiction to hear the appeal. Kircher v. Putnam Funds Trust, 373 F.3de 847, 849-50 (7^th Cir. 2004). In part, the Court concluded that the district court's orders were not actually founded on lack of jurisdiction but on the substantive issue of whether the state law claims were precluded by SLUSA: accordingly, the Seventh Circuit concluded that appellate review was not barred by § 1447(d). Id., at 849-51. Having concluded that it had appellate jurisdiction, the Seventh Circuit then held further that SLUSA precluded the investors' claims.

Continue reading "Class Action Defense Cases: Kircher v. Putnam Funds Trust : Remand Of SLUSA Class Action To State Court Not Appealable Supreme Court Holds" »

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

Ohio Supreme Court Rejection of Class Action Against Tobacco Company of Limited Value to Class Action Defendants

On June 14, 2006, the Ohio Supreme Court issued an opinion reversing certification of a class action against a tobacco company for the allegedly "unfair, deceptive, and unconscionable practice[]" of labeling certain cigarettes as "light." Marrone v. Philip Morris USA, Inc., ___ N.E.2d ___, 2006 WL 1584163 (Ohio 2006). While this victory has been widely reported in the press, it is of limited value to class action defendants.

Marrone turned entirely upon Ohio's Consumer Sales Practices Act (CSPA), which prohibits unfair, deceptive and unconscionable practices in consumer sales transactions. However, alleged violations of CSPA may be brought as class actions only "if the violation is an act or practice that was declared to be deceptive or unconscionable by a rule adopted by the Attorney General before the consumer transaction on which the action is based, or if the violation is an act or practice that was determined by a court to violate the CSPA and the court’s decision was available for public inspection in accordance with R.C. 1345.05(A)(3) before the consumer transaction," Slip Opn., ¶ 1.

The limited applicability of Marrone is evident from the following excerpt:

We must determine how similar the defendant’s conduct must be to the conduct that was previously determined to be deceptive in order for a consumer to qualify for class-action certification under R.C. 1345.09(B) for a violation of the CSPA. For the reasons that follow, we hold that a consumer may qualify for class-action certification under Ohio’s CSPA only if the defendant’s alleged violation of the Act is substantially similar to an act or practice previously declared to be deceptive by one of the methods identified in R.C. 1345.09(B). Because the plaintiffs’ claims in this case did not meet that standard, we reverse the judgment of the court of appeals.

Slip Opn., ¶ 2. Marrone is thus limited to a determination of what, under Ohio state law, satisfies the "substantially similar" requirement of R.C. 1345.09(B) so as to authorize a class action. In fact, the Court expressly stated that "plaintiffs may be entitled to pursue class-action relief," but that "they failed to identify any prior rule or court decision that would entitle them to pursue CSPA relief under R.C. 1345.09(B)." Slip Opn., ¶ 30 (itaclis added).

The opinion does have an excellent discussion of the history and purpose behind cigarette tar and nicotine tests, Slip Opn., ¶¶ 26 et seq., and that discussion may prove useful to tobacco defendants in state and federal courts outside of Ohio.

Posted In: Class Actions In The News, Class Action Court Decisions

Multidistrict litigation (MDL) arises when multiple actions, class action or otherwise, involving the same facts are pending in different federal district courts. Under such circumstances, 28 U.S.C. § 1407 sets forth the procedure for the transfer of the actions to a single federal court for coordination or consolidation. This is known as “multi-district litigation” (MDL). The Judicial Panel on Multidistrict Litigation affects the transfer of cases under Section 1407(a).

A request to coordinate or consolidate is made by motion by any party in any of the various federal court actions. “A copy of such motion shall be filed in the district court in which the moving party's action is pending. The panel shall give notice to the parties in all actions in which transfers for coordinated or consolidated pretrial proceedings are contemplated, and such notice shall specify the time and place of any hearing to determine whether such transfer shall be made.” 28 U.S.C. § 1407(c)(ii). The Judicial Panel may also initiate the transfer of the cases on its own motion. 28 U.S.C. §1407(c)(i).

The Judicial Panel on Multidistrict Litigation reviews the request under the guidelines of Section 1407 to determine whether the cases are appropriately coordinated or consolidated for pretrial purposes. See e.g., In re Agent Orange Product Liability Litigation, 818 F.2d 216 (2d Cir. 1987) (use of MDL procedure in connection with Agent Orange class action cases). The Judicial Panel may consider any evidence introduced by any party to any of the various federal court actions in determining whether to coordinate or consolidate the cases. 28 U.S.C. § 1407(c)(ii).

Class actions may be consolidated under the MDL procedure. The Judicial Panel applies the same guidelines in class action cases as in requests made in single plaintiff cases. MDL treatment does not alter the applicability of Rule 23 to class actions, and class certification may follow consolidation under MDL. See e.g., Hilao v. Estate of Marcos, 393 F.3d 987 (9th Cir. 2004).

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Posted In: Multidistrict Litigation

Class action lawsuits are often filed for the purpose of bringing sufficient leverage to bear both through the sheer cost of defending against the lawsuit and the risk, however remote, of substantial liability so as to force the defendant to settle. Thus, plaintiffs’ counsel often use class actions as weapons of extortion, seeking to compel a settlement from defendants. If a defendant elects to but its peace, it does not want to settle only with the named plaintiffs because then there is no guarantee that another lawsuit will soon follow. On the contrary, it is likely that rewarding plaintiffs’ counsel with a settlement will invite another lawsuit. The defendant, therefore, demands the broadest release possible, and plaintiffs’ counsel are generally willing to oblige provided that they have been compensated adequately. In such a situation, the Rule 23 elements of class certification are not meaningfully contested; indeed, the parties often stipulate (as part of the proposed settlement) that the class may be certified.

Rule 23(e) addresses the settlement of class actions. It provides, “A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs.”

A class action settlement will not bind members of the class unless and until the class is certified. The prerequisites to class certification are set forth in Rule 23 of the Federal Rules of Civil Procedure (discussed in a separate article). It is incumbent on the District Court to analyze the Rule 23 factors carefully. General Telephone Co. of Southwest v. Falcon, 457 U.S. 152, 102 S.Ct. 2364 (1982) (reversing class certification for failure to analyze Rule 23 requirements). The question arises, however, whether the same rules apply when plaintiff(s) and defendant(s) seek class certification solely for purposes of settlement.

Prior to 1997, federal circuit courts of appeal were divided on whether Rule 23 applied strictly where the purpose of the motion for class certification was to effectuate the purposes of a proposed class settlement. The Fifth Circuit, for example, held that the requirements for class certification under Rule 23 need not be examined strictly if the ultimate purpose of the motion is to settle the dispute. See, In re Asbestos Litigation, 90 F.3d 963, 975-976, and n.8 (5^th Cir. 1996). The Third Circuit, by contrast, held that while it was appropriate to certify a class solely for the purpose of class-wide settlement, Rule 23’s requirements still must be satisfied to the same extent as if the case were to be litigated. See, In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768, 799-800, cert. denied, 516 U.S. 824, 116 S.Ct. 88 (1995).

Continue reading "Class Action Defense Issues: Settlement Procedure and Class Certification for Settlement – Rule 23(e)" »

Posted In: Certification of Class Actions

Defending Class Actions: Certification Under Rule 23 Part I

General Overview

In defending a class action, the single most important motion facing a defendant is the plaintiff’s motion to certify a class. Federal law requires that the plaintiff demonstrate numerosity, commonality and typicality, and that the class members will be adequately represented. The plaintiff must also show the risk of inconsistent or prejudicial adjudications if separate actions are tried, and that a class action is the superior method for resolving the dispute. This article identifies the statutory requirements for class certification.

In federal court, class actions are governed by Rule 23 of the Federal Rules of Civil Procedure. A prospective class representative must satisfy the prerequisites of Rule 23(a), which provides:

One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

Continue reading "Class Action Defense Issues: Certification of Class Action Cases Under Rule 23 Part I - A General Overview" »

Posted In: Certification of Class Actions

SLUSA (Securities Litigation Uniform Standards Act) was enacted by Congress in 1998. SLUSA followed the Private Securities Litigation Reform Act of 1995 (PSLRA), 109 Stat. 737 (codified at 15 U.S.C. §§ 77z-1 and 78u-4). The House Conference Report accompanying the PSLRA enumerated ways in which abusive class actions have hurt the U. S. economy. See, H.R.Rep. No. 104-369, p. 31 (1995). To address these concerns, Congress enacted sweeping changes to federal securities laws class actions, covering pleading, class representation, discovery, liability, attorney fee awards, expenses and more. This article discusses the salient points of class action provisions of SLUSA; SLUSA is discussed in more detail in a separate article.

One powerful change concerned new requirements for pleading fraud. As the Sixth Circuit explained,

Congress heightened the pleading standard for securities fraud. Before 1995, a plaintiff had to allege fraud “with particularity.” Fed.R.Civ.P. 9(b). Under the PSLRA, a plaintiff must now “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) (emphasis added).

Helwig v. Vencor, Inc., 251 F.3d 540, 548 (6^th Cir. 2001); see also, Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 345, 125 S.Ct. 1627 (2005).

The PSLRA also imposed limits on damages and attorney fees, imposed limits on the way lead plaintiffs were selected and the amounts they could be awarded, imposed sanctions for frivolous litigation, provided companies with a “safe harbor” for certain statements, and allowed courts to issue stays of discovery pending motions by a defendant to have the case dismiss. See, 15 U.S.C. § 78u-4.

Continue reading "Class Action Provisions of the Securities Litigation Uniform Standards Act of 1998 (SLUSA) – A Brief Overview: Class Action Defense Issues" »

Posted In: PSLRA/SLUSA Class Actions

Defense Motion Granted Because Underage Students do not have a Protected Property Interest in Education or in Transportation to Private Kindergarten

We briefly summarize an unremarkable class action case for defense attorneys who may benefit from it. New York law requires a school district to accept children who turn five years old prior to December 1^st, and allows individual school districts to decide the admission age for kindergarten for children who turn five after that date. Plaintiff filed a putative class action alleging that she had a right to free public education (kindergarten) even though she turned five after December 1, and/or that the school district was required to provide her with bus transportation to her private school. The federal court rejected plaintiff’s claims and granted the defense motion to dismiss the action. Manbeck v. Katonah-Lewisboro School Dist., 435 F.Supp.2d 273 (S.D.N.Y. 2006).

Posted In: Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Requires Defendant Prove Subject Matter Jurisdiction Supporting Removal Eleventh Circuit Holds

Removal under CAFA (Class Action Fairness Act of 2005) continues to raise basic questions. On June 5, 2006, the Court of Appeals for the Eleventh Circuit addressed several of these questions in Miedema v. Maytag Corporation, ___ F.3d ___, 2006 WL 1519630 (11^th Cir. 2006). The main issue presented was whether CAFA shifted the burden of proof to the plaintiff to establish that remand was proper. Before addressing that question, however, the Circuit Court joined the growing list of sister circuits to hold that 28 U.S.C. § 1453(c)(1) requires that appellate review be sought not more than 7 days after the district court order granting or denying remand, despite the statutory language of “not less than 7 days,” Slip Opn., at 5-7 (italics added, citations omitted). In the Court’s words,

to read it literally would produce an absurd result: there would be a front-end waiting period (an application filed 6 days after entry of a remand order would be premature), but there would be no back-end limit (an application filed 600 days after entry of a remand order would not be untimely).

Slip Opn., at 6-7. The Court also reaffirmed that CAFA requires that the appeal be resolved within 60 days of the granting of an application to appeal, rather than 60 days from the filing of the petition for review. Id., at 7-8.

Turning to the merits, Miedema joined the Seventh and Ninth Circuits in holding that a class action defendant bears the burden of proving removal jurisdiction: CAFA did not shift that burden to class action plaintiffs. Slip Opn., at 8-14. Miedema held that “the district court did not err by placing the burden of establishing subject matter jurisdiction on Maytag, or by invoking the rule that doubts are to be resolved in favor of remand.” Id., at 14. The Court then analyzed the evidence Maytag provided to the district court and concluded that it was insufficient to establish removal jurisdiction. Class defendants will find the Court’s analysis instructive, and it will assist class defendants in establishing subject matter jurisdiction in any federal court. For this reason, the opinion is well worth reading.

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

In an article entitled, "Defending and Preventing Class Actions Alleging Labor Law Violations," I noted that labor law class actions are on the rise. This opinion was founded solely upon personal experience. A recent article by Kris Maher of the Wall Street Journal adds an objection basis supporting my subjective opinion.

Maher observes that "[w]orkers are filing more lawsuits against employers they accuse of violating fair-wage laws that govern overtime and minimum pay." She also notes that these actions "increasingly seek what is called collective action under federal wage laws as well as class action under similar state laws."

Maher investigation revealed that in 2005 more than twice as many lawsuits "alleging some violation of the Fair Labor Standards Act" were resolved than in 2000 - a startling increase over such a short period of time. Maher's article, "Workers Are Filing More Lawsuits Against Employers Over Wages," printed June 5, 2006, in The Wall Street Journal, is well worth reading.

Posted In: Class Actions In The News

Class action plaintiff firm Milberg Weiss Bershad & Schulman LLP was indicted in mid-May 2006 by federal prosecutors in Los Angeles, together with two of the firm’s top partners, David Bershad and Steven Schulman. Leigh Jones of The National law Journal reported yesterday that the government practice of demanding waivers of attorney-client communications in white-collar criminal cases raises “an especially prickly problem” in the Milberg Weiss case.

Even before the class action firm’s indictment, some attorneys – defense and plaintiff – expressed concern about government prosecutors conditioning leniency on a corporate defendant’s willingness to waive the attorney-client privilege. Here, Leigh Jones notes, the corporate defendant is a law firm. The special problems presented by a government prosecutor’s demand for a waiver of the privilege are discussed in Ms. Jones’ article, “Milberg Weiss Case Highlights Waiver Controversy,” printed June 1, 2006, in The National Law Journal.

Posted In: Class Actions In The News

Milberg Weiss has been in the news frequently as of late. Following the indictment of the class action law firm and two of its partners, some of the firm's clients elected to retain new counsel to prosecute their class actions. Now, Nathan Koppel and Peter Lattman report that partners are jumping ship as well. According to the article, "eight of the firm's 46 partners have announced their departure, along with some associates."

More surprisingly, the Wall Street Journal reports that the U.S. Attorney's Office has been investigating the law firm since at least 1999, and that it was served subpoenas in 2002. The articles quotes U.S. Attorney Debra Yang as saying that Milberg Weiss's last-minute remedial efforts were "almost a knee-jerk response to the notion that they're about to get indicted." The article by Koppel and Lattman, "Milberg Weiss Partners, Clients Defect as Firm's Woes Multiply," may be found in the June 3, 2006, Wall Street Journal.

Posted In: Class Actions In The News

28 U.S.C. § 1446 - 30 day Time Limit

Class action defendants often benefit if they can remove the case to federal court if possible. CAFA (Class Action Fairness Act of 2005) was enacted to greatly expand access to federal courts in class action cases. Removal of cases to federal court generally is governed by 28 U.S.C. §1446. CAFA is discussed in a separate article.

The procedure for removal is set forth in 28 U.S.C. § 1446. As a general rule the defendant must remove the case to federal court within 30 days of receipt of the complaint or “a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable,” 28 U.S.C. § 1446(b). However, if the basis of removal is diversity jurisdiction, then the matter may not be removed more than one year after the lawsuit was filed. Id. Section 1446 provides in part:

(a) A defendant or defendants desiring to remove any civil action or criminal prosecution from a State court shall file in the district court of the United States for the district and division within which such action is pending a notice of removal signed pursuant to Rule 11 of the Federal Rules of Civil Procedure and containing a short and plain statement of the grounds for removal, together with a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.

(b) The notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.

If the case stated by the initial pleading is not removable, a notice of removal may be filed within thirty days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action.

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Posted In: Removal & Remand

28 U.S.C. §1446 and Issues Related to Class Action Defense

Class action defendants often benefit if they can remove the case to federal court if possible. CAFA (Class Action Fairness Act of 2005), discussed in a separate article, was enacted to greatly expand access to federal courts in class action cases. Removal of cases to federal court generally is governed by 28 U.S.C. §1446.

As a general rule the defendant must remove the case to federal court within 30 days of receipt of the complaint or “a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable,” 28 U.S.C. § 1446(b) (italics added). The 30-day time limit on removal is discussed in a separate article.

This issue here discussed is whether a defendant is under a duty to inquire into the existence of jurisdictional facts. The Circuit Courts are split on this issue. This article discusses the recent Ninth Circuit opinion on the topic, Harris v. Bankers Life & Cas. Co., 425 F.3d 689 (9th Cir. 2005). Harris is important because it rejects both Moore’s Federal Practice treatise and the Tenth Circuit’s interpretation of a prior Ninth Circuit opinion, Cantrell v. Great Republic Ins. Co., 873 F.2d 1249 (9th Cir. 1989). Both Moore’s Federal Practice 3d, 107.30[3][f] at n.100 (3d ed. 2005), and Akin v. Ashland Chem. Co., 156 F.3d 1030, 1035 n.2 (10th Cir. 1998), cite to Cantrell as imposing a duty upon a defendant to investigate potential reasons for removal within the first thirty days of receiving a complaint. In Harris, the Ninth Circuit recently rejected Moore’s and Akin’s interpretation of Cantrell and clarified its holding in Cantrell.

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Posted In: Removal & Remand, Class Action Court Decisions