Class Action Defense Blog

CAFA (Class Action Fairness Act of 2005) and Rule 23 - A General Overview for the Class Action Defense Lawyer

Class action litigation is rampant, and all too often class action lawsuits cause more injury than the wrong they sought to redress. These actions seem driven by a desire to maximize attorney fees rather than to serve the public. A 1995 House Conference Report, for example, enumerated ways in which abusive class actions have hurt the U. S. economy. See, H.R.Rep. No. 104-369, p. 31 (1995). These concerns led to sweeping reforms in federal securities law class actions through the enactment of SLUSA (Securities Litigation Uniform Standards Act) in 1998. Abuse of class action lawsuits also led to the enactment of CAFA (Class Action Fairness Act of 2005).

Class actions may serve an important function. The preamble to CAFA (Class Action Fairness Act of 2005) states, “Class-action lawsuits are an important and valuable part of the legal system when they permit the fair and efficient resolution of legitimate claims of numerous parties by allowing the claims to be aggregated into a single action against a defendant that has allegedly caused harm.”

In federal court, class actions are governed by Rule 23 of the Federal Rules of Civil Procedure. The procedure for filing a class action is simple enough; the difficulty arises when one seeks to certify the class.

A lawsuit is filed with one or more plaintiffs purporting to bring the action on behalf of a putative class. (This is not to suggest that the court may only approve a plaintiff-class. On the contrary, it is possible to seek certification of a defendant class. See e.g., ASARCO Inc. v. Kadish, 490 U.S. 605, 610, 109 S.Ct. 2037, 2041 (1989) (noting that trial court certified the case as a defendant class action); Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812 n.3, 105 S.Ct. 2965, 2974 (1985) (noting that opinion “is limited to those class actions which seek to bind known plaintiffs concerning claims wholly or predominately for money judgments”and “[does not] address class actions where the jurisdiction is asserted against a defendant class.” It is far more common, however, for a suit to seek certification of a plaintiff class.)

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Posted In: Certification of Class Actions

SLUSA (Securities Litigation Uniform Standards Act) was enacted by Congress in 1998 to affect sweeping changes to federal securities laws class actions. SLUSA addresses numerous federal securities laws class actions issues including pleading, class representation, discovery, liability, attorney fee awards, expenses and more. SLUSA also sought to pre-empt state law securities class action litigation, but the Circuit Courts disagreed on the breadth of that pre-emption.

In Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, __ U.S. ___, 126 S.Ct. 1503 (2006), the United States Supreme Court issued its opinion. This opinion addresses whether the Securities Litigation Uniform Standards Act (SLUSA) “only pre-empts state-law class-action claims brought by plaintiffs who have a private remedy under federal law,” as the Second Circuit held in Dabit v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 395 F.3d 25 (2005), or whether SLUSA “also pre-empts state-law class-action claims for which federal law provides no private remedy,” as the Seventh Circuit held in Kircher v. Putnam Funds Trust, 403 F.3d 478 (7th Cir. 2005). The Supreme Court agreed with the Seventh Circuit, holding that SLUSA's pre-emption provision was intended to be read broadly, and pre-empted state-law class-action claims brought not only by purchasers and sellers of securities, but also by holders of securities. As so read, SLUSA pre-empted state-law claims alleging the fraudulent manipulation of stock prices.

As the Supreme Court observed,

Title I of the Securities Litigation Uniform Standards Act of 1998 (SLUSA) provides that “[n]o covered class action” based on state law and alleging “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security” “may be maintained in any State or Federal court by any private party.” § 101(b), 112 Stat. 3227 (codified at 15 U.S.C. § 78bb(f)(1)(A)).

Merrill Lynch v. Dabit, 126 S.Ct. at 1506-07.

Continue reading "Brief Overview of Class Action Issues Under SLUSA (Securities Litigation Uniform Standards Act) For The Defense Lawyer" »

Posted In: PSLRA/SLUSA Class Actions

California Law on Enjoining a Former Employee from Competing Unfairly

In a misguided effort to catch up to a competitor, a business may hire a competitor’s key employees for the purpose of using the trade secret information known to the employee. Or, an employee may quit and go into competition with the former employer, using the confidential, proprietary and trade secret information learned while on the job. Whether characterized as misappropriation or theft of trade secrets, or as unfair competition, the bottom line is that such conduct represents an unfair business practice that can be enjoined under California law.

In a separate article, we explored the enforceability of non-compete agreements in California in light of the statutory prohibition against such agreements set forth in Business & Professions Code section 16600. We noted there that broad exceptions exist to the statutory prohibition, centering around an employer’s legitimate need to protect confidential and proprietary information. We address here the quantum of proof required to enjoin a former employee from using trade secrets in the service of a competitor.

We first address the validity of the “inevitable discovery” rule in California. The inevitable disclosure doctrine permits an employer to enjoin a former employee from working for a competitor “by demonstrating the employee’s new job duties will inevitably cause the employee to rely upon knowledge of the former employer’s trade secrets.” Whyte v. Schlage Lock Co., 101 Cal.App.4^th 1443, 1446 (2002). Prior to Whyte, “[n]o published California decision ha[d] accepted or rejected the inevitable disclosure doctrine.” Id. Whyte unambiguously rejected it. Id., at 1447. Thus, California court decisions upholding non-compete agreements have not done so based on the inevitable discovery rule.

However, these decisions have not always required actual proof of use, either. It may be sufficient if the company can demonstrate the actual “threat” that confidential information will be used by the former employee to benefit a competitor.

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Posted In: Topics of Interest

Labor law class action claims are on the rise. Congress and the courts have noted with dismay the widespread abuse of class actions. For example, in the House Conference Report accompanying what later became the Private Securities Litigation Reform Act of 1995 (PSLRA), 109 Stat. 737 (codified at 15 U.S.C. §§ 77z-1 and 78u-4), Congress explained that class actions were hurting “the entire U.S. economy.” H.R.Rep. No. 104-369, p. 31 (1995). The House Conference Report identified widespread abuse, including frivolous lawsuits, burdensome discovery requests (aimed at extorting settlements), targeting deep-pocket defendants, and “manipulation by class action lawyers of the clients whom they purportedly represent.” Id. Perhaps nowhere is this abuse more prevalent than in the meteoric rise of class actions alleging labor law violations.

In the litigious society we live in, the knee-jerk reaction of individuals who are fired for valid grounds such as theft, incompetence, disruptive behavior, etc. is a lawsuit back against the company for alleged labor law violations. This vehicle provides the means for the disgruntled employee to exact his or her “pound of flesh.” Unfortunately, all too often the employee simple desire to exact vengeance is manipulated by plaintiff’s counsel into a purported class action, “identifying” patterns of abuse that exist only in the imagination of plaintiff’s counsel.

This is not to suggest, of course, that an employer can do no wrong. Certainly if a company is violating state or federal labor laws, litigation is an appropriate vehicle to rectify such deficiencies. Not all such class actions are frivolous: as with every profession and every field, there are many honest and talented attorneys who devote their energies to carefully investigating “facts” reported to them by prospective clients, and to filing class actions that seek to redress what they in good faith believe to be a pattern and practice of employee abuse. If personal experience is any guide, however, these attorneys represent the minority of those who file class actions.

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Posted In: Topics of Interest

Scope of California Business & Professions Code Section 16600

As businesses increasingly seek to hire the key employees of their competitors, the differences in state laws concerning non-compete agreements and protection of trade secrets has become more important. In California, the general rule is that non-compete agreements are unenforceable. That statement, however, is an oversimplification. In fact, non-compete agreements are enforceable in California under the right circumstances.

California Business and Professions Code section 16600 provides that "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." The California Supreme Court has held that that “[t]his section invalidates provisions in employment contracts prohibiting an employee from working for a competitor after completion of his employment or imposing a penalty if he does so [citations], unless they are necessary to protect the employer's trade secrets [citation]. Muggill v. Reuben H. Donnelley Corp., 62 Cal.2d 239, 242 (1965) (italics added). (California’s Uniform Trade Secrets Act may be found at Civil Code section 3426.1.)

Despite the sweeping language utilized by some courts, the exception to the statutory prohibition against non-compete agreements is actually read expansively. In fact, several cases hold that the “trade secret” exception encompasses any act that may be considered “unfair competition.” Thus, one appellate court recently held that Section 16600 “prohibits the enforcement of [a] noncompete clause except as is necessary to protect trade secrets,” Metro Traffic Control, Inc. v. Shadow Traffic Network, 22 Cal.App.4th 853, 860 (1994) (citing Muggill, 62 Cal.2d at 242), but then explained:

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Posted In: Topics of Interest

CAFA (Class Action Fairness Act of 2005) Determination of “Commencement” of Action Turns on State Law Fifth Circuit Holds

On May 3, 2006, the Fifth Circuit Court of Appeals issued its opinion in Patterson v. Dean Morris, L.L.P., ___ F.3d ___, 2006 WL 1156388 (5^th Cir. 2006), where it considered whether an action that had been filed on February 17, 2005 (prior to CAFA’s February 18, 2005 effective date), but the filing fees not paid until February 22, 2005, could be removed to federal court under CAFA (Class Action Fairness Act of 2005). Slip Opn., at 6-7. The district court remanded the consolidated actions finding that CAFA did not apply, and the Fifth Circuit affirmed. Id., at 6. The Fifth Circuit’s analysis turned entirely upon state law, determining when Louisiana would deem the action to have been “commenced.” In so analyzing the case, the Court joined several sister circuits in relying upon state law to determine when an action has “commenced” under CAFA.

Louisiana law permits a party to fax-file a complaint, provided that the filing fee be paid within 5 days thereof, together with a $5 “transmission fee.” If a plaintiff fails to pay the required filing fee and transmission fee, then the fax filing “shall have no force or effect.” Slip Opn., at 7 (citations omitted). In Patterson, plaintiffs paid the court $3,039 on February 22. However, on May 12 plaintiffs learned that they owed the court an additional $2,145 in fees, which they did not pay until June 14. Defendants urged that the late payment took the action outside of the Louisiana statute’s five-day deadline, so the effective date of the commencement of the lawsuit was after the effective date of CAFA. Slip Opn., at 7.

Continue reading "Class Action Defense Cases--Patterson v. Dean Morris: Fifth Circuit Rules On "Commencement Of Action" Under Federal Class Action Fairness Act (CAFA)" »

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

PUBLIC LAW 109 2|FEB. 18, 2005

109th Congress

119 STAT. 4

An Act

To amend the procedures that apply to consideration of interstate class actions to assure fairer outcomes for class members and defendants, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

28 USC § 1 note

SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS.

(a) SHORT TITLE.|This Act may be cited as the Class Action Fairness Act of 2005.

(b) REFERENCE.|Whenever in this Act reference is made to an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of title 28, United States Code.

(c) TABLE OF CONTENTS.|The table of contents for this Act is as follows:

Sec. 1. Short title; reference; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Consumer class action bill of rights and improved procedures for interstate class actions.
Sec. 4. Federal district court jurisdiction for interstate class actions.
Sec. 5. Removal of interstate class actions to Federal district court.
Sec. 6. Report on class action settlements.
Sec. 7. Enactment of Judicial Conference recommendations.
Sec. 8. Rulemaking authority of Supreme Court and Judicial Conference.
Sec. 9. Effective date.

Continue reading "Class Action Fairness Act of 2005 (CAFA): Text for the Class Action Defense Lawyer" »

Posted In: Statutes & Rules

Defending Against Class Actions

In defending against class actions, the single most important motion facing a defendant is the plaintiff’s motion to certify a class. In federal court, Rule 23 of the Federal Rules of Civil Procedure governs class actions. The class action requirements of Rule 23 are mandatory. Class Rule 23(a) requires that the plaintiff demonstrate numerosity, commonality and typicality, and that the class members will be adequately represented, and must additionally demonstrate that the action satisfies Rule23(b). Separate articles discuss the elements of the Rule 23(a) and Rule 23(b). For the convenience of the reader, we set forth the full text of Rule 23 below.

Rule 23. Class Actions

(a) Prerequisites to a Class Action. 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.

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Posted In: Statutes & Rules

Defending Against Class Actions – Removal

In defending against class actions, it will often benefit a defendant to remove the case to federal court whenever possible. CAFA (Class Action Fairness Act of 2005) greatly expands removal jurisdiction of the federal courts pursuant to 28 U.S.C. § 1453. The removal procedure for non-class action cases is set forth in 28 U.S.C. § 1441. Various issues concerning CAFA, removal and remand are discussed in separate articles. For the convenience of the reader, we set forth the full text of Section 1453 below.

28 U.S.C. § 1453. Removal of Class Actions

(a) Definitions.–In this section, the terms "class", "class action", "class certification order", and "class member" shall have the meanings given such terms under section 1332(d)(1).

(b) In general.–A class action may be removed to a district court of the United States in accordance with section 1446 (except that the 1-year limitation under section 1446(b) shall not apply), without regard to whether any defendant is a citizen of the State in which the action is brought, except that such action may be removed by any defendant without the consent of all defendants.

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Posted In: Statutes & Rules

Defending Against Class Actions – Removal

In defending against class actions, it will often benefit a defendant to remove the case to federal court whenever possible. Plaintiffs invariably seek to remand the action to state court. Thus, once a class action has been removed to federal court, it can be expected that plaintiff’s counsel will file a motion to remand the matter to state court. The general procedure for remand is set forth in 28 U.S.C. § 1447. Various issues concerning CAFA, removal and remand are discussed in separate articles. For the convenience of the reader, we set forth the full text of Section 1447 below.

28 U.S.C. 1447. Remand

§ 1447. Procedure after removal generally

(a) In any case removed from a State court, the district court may issue all necessary orders and process to bring before it all proper parties whether served by process issued by the State court or otherwise.

(b) It may require the removing party to file with its clerk copies of all records and proceedings in such State court or may cause the same to be brought before it by writ of certiorari issued to such State court.

(c) A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal. A certified copy of the order of remand shall be mailed by the clerk to the clerk of the State court. The State court may thereupon proceed with such case.

(d) An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1443 of this title shall be reviewable by appeal or otherwise.

(e) If after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court.

Posted In: Statutes & Rules

Defending Against Class Actions – Removal

In defending against class actions, it will often benefit a defendant to remove the case to federal court whenever possible. CAFA (Class Action Fairness Act of 2005) was enacted by Congress to expand federal court jurisdiction over class actions, but the general procedure for removal is set forth in 28 U.S.C. § 1446. Various issues concerning CAFA, removal and remand are discussed in separate articles. For the convenience of the reader, we set forth the full text of Section 1446 below.

28 U.S.C. 1446. Removal

§ 1446. Procedure for removal

(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.

Continue reading "Class Action Defense Issues: Procedure for Removing a Case from State Court to Federal Court - 28 U.S.C. 1446" »

Posted In: Statutes & Rules

Defending Against Class Actions – Removal

In defending against class actions, it will often benefit a defendant to remove the case to federal court whenever possible. The general procedure for removal is set forth in 28 U.S.C. § 1441. CAFA (Class Action Fairness Act of 2005) contains new removal rules specifically applicable to class actions. Various issues concerning CAFA, removal and remand are discussed in separate articles. For the convenience of the reader, we set forth the full text of Section 1441 below.

28 U.S.C. 1441. Removal

§ 1441. Actions removable generally

(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending. For purposes of removal under this chapter, the citizenship of defendants sued under fictitious names shall be disregarded.

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Posted In: Statutes & Rules

California Supreme Court Grants Review in Gentry Case

In a prior article, we discussed the California appellate court opinion enforcing a pre-employment arbitration agreement containing a class action waiver. Gentry v. Superior Court, 135 Cal.App.4^th 944 (Cal.App. 2006).

On April 26, 2006, the California Supreme Court granted review of Gentry. Under California law, the decision cannot be cited during the pendency of the appeal.

Posted In: Arbitration, Class Actions In The News

Amendment of MDL (Judicial Panel on Multidistrict Litigation) Panel Rules of Procedure

Prior articles have discussed class actions and MDL (multidistrict litigation), and have provided the statutory and procedural rules governing MDL. On April 19, 2005, the Judicial Panel on Multidistrict Litigation published an order partially suspending Panel Rule 5.12(a), concerning the manner of filing papers, “insofar as papers submitted for filing requiring an original and eleven copies shall be reduced to four copies along with an original.” For the convenience of the reader, the order itself may be found at the link provided.

Posted In: Multidistrict Litigation, Statutes & Rules

Removal Period Under 28 U.S.C. § 1446 Begins To Run Upon Service Of Complaint U.S. Supreme Court Holds

CAFA (Class Action Fairness Act of 2005) was enacted to greatly expand access to federal courts in class actions. In class actions, defendants often benefit if they can remove the case to federal court. While CAFA contains special rules concern removal and appealability of orders granting or denying motions for remand, removal of cases to federal court generally is governed by 28 U.S.C. § 1446.

Generally, a defendant must remove an action to federal court within 30 days of receipt “by service or otherwise” of the “initial pleading.” Prior to United States Supreme Court opinion in Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 119 S.Ct. 1322 (1999), federal courts were divided on whether receipt of a courtesy copy of the complaint started the 30-day removal period. Compare Valle Trade, Inc. v. Plastic Specialties & Technologies, Inc., 880 F. Supp. 499, 500 (S.D. Tex. 1995) (“Receipt of a ‘courtesy copy’ of the petition constitutes sufficient notice under the statute.”); Uhles v. F.W. Woolworth Co., 715 F. Supp. 297, 297-98 (C.D. Cal. 1989) (30-day removal period begins upon receipt of initial pleadings by any means, “irrespective of the technicalities of state service of process laws”), with Apache Nitrogen Products, Inc. v. Harbor Ins. Co., 145 F.R.D. 674, 680 (D. Ariz. 1993) (holding defendant must be served to commence removal period).

The United States Supreme Court finally resolved the question in Murphy Brothers v. Michetti Pipe, holding that receipt of a “courtesy copy” of a complaint is not sufficient to trigger the time period for removal. Rather, “a named defendant’s time to remove is triggered by simultaneous service of the summons and complaint, or receipt of the complaint, “through service or otherwise,” after and apart from service of the summons, but not by mere receipt of the complaint unattended by any formal service.” 526 U.S. at 347-48.

Posted In: Removal & Remand, Class Action Court Decisions

CAFA (Class Action Fairness Act of 2005) Requires Defendant Establish Removal Jurisdiction in "Mass Action" Cases and Jurisdictional Discovery Discretionary Ninth Circuit Holds

CAFA greatly expands access to federal courts to class action defendants, as well as to defendants in "mass action" cases. One question federal courts have grappled with is whether Congress intended to shift the burden from a class action defendant to establish removal jurisdiction, to a class action plaintiff to prove that the matter should be remanded to state court. On April 4, 2006, the Ninth Circuit held that CAFA does not shift the burden of proof to plaintiffs in mass action cases. Abrego Abrego v. Dow Chemical Co., 443 F.3d 676 (9^th Cir. 2006).

Abrego Abrego involved a mass action brought by 1160 Panamanian workers against Dow Chemical for alleged distribution and use in Panama of a pesticide banned in the United States. Dow removed the case to federal court under 28 U.S.C. § 1332(d)(11), added by CAFA to provide federal court jurisdiction over "mass actions." (The requirements of mass actions are discussed in a separate article.) In response to plaintiffs' motion to remand the action to state court, Dow argued:

[U]nder CAFA and contrary to preexisting removal jurisdiction law: (1) plaintiffs bear the burden of refuting the district court’s removal jurisdiction; (2) a “mass action” is removable regardless of whether there is jurisdiction over all plaintiffs whose claims are necessary to qualify the action as a mass action; and (3) the district court must allow jurisdictional discovery to determine the amount in controversy.

443 F.3d at 677-78. The district court found that Dow had failed to establish removal jurisdiction and remanded the case to state court. Id., at 679.

Continue reading "Class Action Defense Cases--Abrego Abrego v. Dow Chemical" »

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

Post-CAFA (Class Action Fairness Act of 2005) Amendment of Complaint to Add Defendant Allows Removal to Federal Court by that Defendant of Suit Filed Prior to CAFA’s Effective Date Fifth Circuit Holds

On April 6, 2006, the Fifth Circuit Court of Appeals considered “an issue of first impression for this court: whether amending a complaint to add a defendant ‘commences’ a new suit under the Class Action Fairness Act of 2005 (CAFA),” Braud v. Transport Service Co. of Illinois, 445 F.3d 801, 802 (5th Cir. 2006).

In Braud, the class action petition was filed in August 2004. In April 2005 (after CAFA’s February 18, 2005 effective date), plaintiffs amended their petition to add an additional party-defendant, Ineos. Ineos timely removed the action to federal court on the ground of CAFA. Braud, at 802. In considering plaintiffs’ motion for remand, the district court concluded that the amendment did not draw the action into the ambit of CAFA and remanded the matter to state court. The Fifth Circuit reversed.

The sole question on appeal was whether the addition of a new defendant affected the applicability of CAFA. Braud recognized that whether the action was “commenced” after CAFA’s effective date turns entirely upon state law. Braud, at 803. In this regard, the Court explained that the question is not one of “retroactivity” but of “commencement”: “the issue is not whether CAFA should apply to suits commenced before February 18, 2005, but whether the addition of a new defendant commences a new suit.” Id., at 804. In other words, if adding a party-defendant constitutes a new action under state law, then CAFA applies by its terms, not because of retroactivity.

The Fifth Circuit “agree[d] with the Seventh Circuit that amendments that add a defendant commence the civil action as to the added party,” Braud, at 804. It based this holding on two grounds. First, “caselaw holds that generally a party brought into court by an amendment, and who has, for the first time, an opportunity to make defense to the action, has a right to treat the proceeding, as to him, as commenced by the process which brings him into court.” Id. at 805 (citations omitted). Second, “the addition of a new defendant opens a new window of removal under 1446(b).” Id. The full opinion is well worth reading.

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

Plaintiff Lawyer, not Allowed to be Class Counsel and Class Representative, Rewarded with Discovery to Find New Class Action Plaintiffs

Class action case law in California "prohibits a lawyer from serving both as class representative and as counsel for the class, " Best Buy Stores, L.P. v. Superior Court, 137 Cal.App.4th 772, 774 (Cal.App. 2006) (citing Apple Computer, Inc. v. Superior Court, 126 Cal.App.4th 1253 (Cal.App. 2005). On February 6, 2004, a plaintiff's lawyer sought to do just that, filing a putative class action to his own name against Best Buy for alleged violations of the CLRA (Consumer Legal Remedies Act, California Civil Code §§ 1750 et seq.), unfair competition, unjust enrichment based on the theory that the "restocking fee" Best Buy charged for returned merchandise was illegal. Best Buy, at 774. Defense attorneys moved to dismiss the case, and the trial court issued an order to show cause why the motion should not be granted. Id.

The plaintiff lawyer requested that the court compel Best Buy (through a third party) to send a letter to a sampling of members of the putative class so that he could find a new class representative: the trial court granted the motion. Best Buy, at 775. Best Buy filed a petition for writ of mandate in the California Court of Appeal. The defense opposed this class action discovery order as a form of "illegal solicitation"; the appellate court disagreed with this characterization. Id., at 777. The Court agreed, however, that the privacy rights of Best Buy customers needed additional protection. Accordingly, at page 778 it held as follows:

Continue reading "Best Buy v. Superior Court: Class Action Lawyer Permitted, Over Defense Objection, Precertification Discovery To Identify Substitute Class Action Representative California Court Holds" »

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

SLUSA (Securities Litigation Uniform Standards Act) and Pre-emption

SLUSA (Securities Litigation Uniform Standards Act) was enacted by Congress in 1998 to affect sweeping changes to federal securities laws class actions. SLUSA addresses numerous federal securities laws class actions issues including pleading, class representation, discovery, liability, attorney fee awards, expenses and more. SLUSA also sought to pre-empt state law securities class action litigation, but the Circuit Courts disagreed on the breadth of that pre-emption.

In Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, __ U.S. ___, 126 S.Ct. 1503 (2006), the United States Supreme Court issued its opinion. This opinion addresses whether the Securities Litigation Uniform Standards Act (SLUSA) “only pre-empts state-law class-action claims brought by plaintiffs who have a private remedy under federal law,” as the Second Circuit held in Dabit v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 395 F.3d 25 (2005), or whether SLUSA “also pre-empts state-law class-action claims for which federal law provides no private remedy,” as the Seventh Circuit held in Kircher v. Putnam Funds Trust, 403 F.3d 478 (7^th Cir. 2005). The Supreme Court agreed with the Seventh Circuit, holding that SLUSA's pre-emption provision was intended to be read broadly, and pre-empted state-law class-action claims brought not only by purchasers and sellers of securities, but also by holders of securities. As so read, SLUSA pre-empted state-law claims alleging the fraudulent manipulation of stock prices.

Continue reading "Merrill Lynch v. Dabit Class Action Defense Case" »

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

MDL (Multidistrict Litigation) Judicial Panel Rules of Procedure

When multiple actions, class action or otherwise, involving the same facts are pending in different federal district courts, 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), and is discussed in a separate article. The Judicial Panel on Multidistrict Litigation oversees MDL cases, and has published Rules of Procedure governing MDL cases. For the convenience of the reader, a link to those rules may be found here.

Posted In: Multidistrict Litigation, Statutes & Rules