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District Court Failed to Consider the Manner in which a Class Action Trial would Proceed Prior to Granting Class Action Treatment, Requiring Reversal of Class Action Certification for Abuse of Discretion Fifth Circuit Holds

Plaintiffs filed a putative class action against Chalmette Refining following the release of petroleum coke dust from the Chalmette Refinery. Madison v. Chalmette Refining, L.L.C., ___ F.3d ___ (5th Cir. April 24, 2011) [Slip Opn., at 2]. According to the allegations underlying the class action complaint, plaintiffs (a group of school children and their parent and teachers) were exposed to the petroleum coke dust while reenacting a battle at the Chalmette National Battlefield, located adjacent to the refinery. Id. The class action complaint sought damages for “personal injury, fear, anguish, discomfort, inconvenience, pain and suffering, emotional distress, psychiatric and psychological damages, evacuation, economic damages, and property damages.” Id. Consistent with Fifth Circuit authority, the district court allowed the parties to conduct pre-certification discovery relevant to the propriety of class action treatment. Id. Defense attorneys deposed the five named plaintiffs, but plaintiffs’ counsel elected not to conduct discovery. Id. Plaintiffs then sought class action certification of a Rule 23(b)(3) class, which defendant opposed. Id., at 2-3. “Over two years later, the district court held a hearing on the motion to certify the class. At the conclusion of that hearing, and without any evidence being introduced, the district court orally granted Plaintiffs’ motion.” Id., at 3. Defendant petitioned the Fifth Circuit for leave to take an interlocutory appeal, which the Fifth Circuit granted. Id. Two months later (and after the Fifth Circuit had granted defendant’s petition for interlocutory appeal), the district court issued a written order granting class certification. Id. The Circuit Court reversed.

After summarizing the requirements for class action treatment under Rule 23, see Madison, at 3-4, the Circuit Court opened its analysis at page 4 with the following observation: “Recognizing the important due process concerns of both plaintiffs and defendants inherent in the certification decision, the Supreme Court requires district courts to conduct a rigorous analysis of Rule 23 prerequisites.” The Fifth Circuit stressed that the moving party bears the burden of satisfying the requirements of Rule 23, and that the district court must take “‘a close look at the case before it is accepted as a class action.’” Id., at 4 (quoting Amchem Prods. v. Windsor, 521 U.S. 591, 613 (1997)). The lower court, however, failed to perform such an analysis. Rather, the district court found it sufficient that “there is one set of operative facts that [will] determine liability” because “Plaintiffs were either on the battlefield and exposed to the coke dust or they were not.” Id., at 6.

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District Court did not Abuse its Discretion in Decertifying Class Action Alleging Misclassification of Employees based on its Determination that Common Question of Law and Fact did not Exist Ninth Circuit Holds

Plaintiff filed a putative class action against his employer, United Parcel Service (UPS), alleging violations of California’s Labor Code for failure to pay him overtime or to compensate him for missed meal and rest periods. Marlo v. United Parcel Service, Inc., ___ F.3d ___ (9th Cir. April 28, 2011) [Slip Opn., at 5544]. According to the allegations underlying the class action complaint, plaintiff worked as a full-time supervisor (FTS) for UPS from 1999 to 2008, and “worked more than forty hours per week on a regular basis without taking meal or rest-period breaks, or receiving overtime compensation.” Id. Because he was an FTS, UPS classified plaintiff as exempt from California’s overtime law under the executive and administrative exemptions. Id. Plaintiff alleged that he had been misclassified, and sought and obtained an order certifying the litigation as a class action. Id. The district court subsequently granted summary judgment in favor of UPS, but the Ninth Circuit reversed finding that plaintiff “ha[d] raised material issues of fact related to whether the FTS ‘customarily and regularly exercise[] discretion and independent judgment.’” Id., at 5545 (quoting Marlo v. United Parcel Serv., Inc., 254 Fed. App’x. 568, 568 (9th Cir. 2007)). On remand, however, the district court decertified the class, finding that plaintiff “had failed to establish that common issues of law or fact predominated over individual ones” as required by Rule 23(b)(3). Id., at 5544. A juy returned a partial verdict in favor of plaintiff, finding that the executive and administrative exemptions did not apply to certain supervisorial positions plaintiff held. Id., at 5546. Both sides appealed. The Ninth Circuit affirmed the decertification order, id., at 5544.

The decertification order was based on “doubt regarding the continuing efficacy of a class action in this case.” Marlo, at 5545 (quoting Marlo v. United Parcel Serv., Inc., 251 F.R.D. 476, 480 (C.D. Cal. 2008)). In part, the district court reasoned that “the existence of a uniform policy classifying FTS as exempt is insufficient absent evidence of misclassification,” and that plaintiff “had relied heavily on a survey that was neither reliable nor representative of the class.” Id. (citations omitted). The court explained at 251 F.R.D. at 486,

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To assist class action defense attorneys anticipate the types of cases against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant time frame. This report covers the time period from April 22 – 28, 2011, during which time the total number of class actions filed in these courts dropped to more “normal” levels. There were 69 new class actions were filed in these courts during this reporting period, and 26 of them (38% of the total number of new class actions filed) involved employment-related claims. The only other category to break the 10% threshold involved class actions alleged violations of California’s Unfair Competition Law (UCL), which includes false advertising claims, with 13 new filings (19% of the total number of new class actions filed).

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Class Action Waivers in Arbitration Agreements are Valid under Federal Arbitration Act (FAA) and California’s Discover Bank Rule, Which Found Such Waivers Unenforceable as Unconscionable Under State Law, is Preempted by the FAA Supreme Court Holds

Plaintiffs filed a putative class action in California federal court against AT&T Mobility, with whom they had cellular telephone service, alleging “false advertising and fraud by charging sales tax on phones it advertised as free.” AT&T Mobility LLC v. Concepcion, ___ U.S. ___ (April 27, 2011) [Slip Opn., at 2-3]. According to the allegations underlying the class action complaint, plaintiffs purchased cellular telephone service from AT&T based on an advertisement for “free phones” because, even though they were not charged for the telephones, “they were charged $30.22 in sales tax based on the phones’ retail value.” Id. Defense attorneys moved to compel arbitration, id., at 3. The cellular telephone service contract required arbitration of disputes between the parties and included a class action waiver, providing that claims must be brought in a “individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.” Id., at 1. Plaintiffs opposed arbitration on the grounds that the class action waiver was unconscionable under California law. Id., at 3. Despite viewing the arbitration agreement “favorably,” the district court denied AT&T’s motion to compel arbitration because the class action waiver rendered the arbitration clause unconscionable under California law based on Discover Bank v. Superior Court, 36 Cal.4th 148 (Cal. 2005). Id. The Ninth Circuit affirmed, holding that “the Discover Bank rule was not preempted by the FAA because that rule was simply a ‘refinement of the unconscionability analysis applicable to contracts generally in California.’” Id., at 3-4 (citing Laster v. AT&T Mobility LLC, 584 F.3d 849, 857 (9th Cir. 2009). The Supreme Court granted certiorari and reversed.

The service agreement was consumer-friendly: It provided that a customer could initiate a dispute by filling out a one-page form available online, and if not resolved to the customer’s satisfaction within 30 days, the customer could initiate arbitration by filling out another form available online. If a customer commenced arbitration proceedings, the arbitration would be held “in the county in which the customer is billed” and AT&T was required to “pay all costs for nonfrivolous claims.” AT&T Mobility, at 2. (The customer could also elect to proceed in small claims court. Id.) Moreover, if the amount in dispute was less than $10,000, then the customer could elect whether the arbitration should be conducted “in person, by telephone, or based only on submissions.” Id. Additionally, “the arbitrator may award any form of individual relief, including injunctions and presumably punitive damages.” Id. AT&T was prohibited from seeking reimbursement of its attorney fees, and “in the event that a customer receives an arbitration award greater than AT&T’s last written settlement offer,” then the service agreement “requires AT&T to pay a $7,500 minimum recovery and twice the amount of the claimant’s attorney’s fees.” Id. (footnote omitted). Yet despite what appears to have been every effort to craft an arbitration clause favorable to its customer, albeit prohibiting class actions, the lower courts found the arbitration clause unconscionable and unenforceable under the Discover Bank rule. The Supreme Court reversed.

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As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant time frame. This report covers the time period from April 15 – 21, 2011, during which time the total number of class actions filed in these courts dropped to more “normal” levels. There were 52 new class actions were filed in these courts during this reporting period, and 27 of them (52% of the total number of new class actions filed) involved employment-related claims. This is the first time this year that labor law class actions have passed the 50% mark — a level it frequently hit in past years. The only other categories to break the 10% threshold involved class actions alleging violations of California’s Unfair Competition Law (UCL), which includes false advertising claims, with 12 new filings (23% of the total number of new class actions filed), and class actions alleging violations of federal securities laws with 7 new filings (13% of the total number of new class actions filed).

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To aid defense attorneys in anticipating the types of class actions against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant time frame. This report covers the time period from April 8 – 14, 2011, during which time 79 new class actions were filed in these courts. It appears that labor law class actions may not return to the prior “norm” of accounting for more than half of the total number of new class actions filed in California state and federal courts each week. During this reporting period, only 24 new labor law class actions were filed, representing only 30% of the total number of new class actions filed. The only other categories to break the 10% threshold involved class actions alleging violations of California’s Unfair Competition Law (UCL), which includes false advertising claims, with 21 new filings (27% of the total number of new class actions filed), and class actions alleging violations of federal securities laws with 10 new filings (13% of the total number of new class actions filed).

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As a resource for California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant time frame. This report covers the time period from April 1 – 7, 2011, during which time 65 new class actions were filed in these courts. In past years, class actions involvement employment-related claims often accounted for more than half of the total number of new class actions filed in California state and federal courts each week, but this level has not yet been realized this year. However, the numbers are getting closer. During this reporting period, 32 new labor law class actions filed, representing 49% of the total number of new class actions filed. The only other category to break the 10% threshold involved class actions alleging violations of federal securities laws with 9 new filings (14% of the total number of new class actions filed).

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To assist class action defense attorneys anticipate the types of lawsuits against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant time frame. This report covers the time period from March 25 – 31, 2011, during which time 77 new class actions were filed in these courts. The California Supreme Court decision dramatically expanding the apparent reach of the Song-Beverly Act is the cause of the abnormally high number of class actions filed these past few weeks. During this reporting period, 27 new labor law class actions filed, representing a relatively low 35% of the total number of new class actions filed, but good enough to retain the top spot among weekly class action filings. Three other categories managed to break the 10% threshold: class actions alleging violations of California’s Unfair Competition Law (UCL), which includes false advertising claims, with 13 new filings (17% of the total number of new class actions filed), class actions alleging Song-Beverly Act violations with 11 new filings (14% of the total number of new class actions filed), and class actions alleging violations of federal securities laws with 8 new filings (10% of the total number of new class actions filed).

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As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant time frame. This report covers the time period from March 18 – 24, 2011, during which time 67 new class actions were filed in these courts. Normally, labor law class actions account for more than half of the new class actions filed each week, but during the past several weeks Song-Beverly Act lawsuits have predominated the class action landscape. Apparently, plaintiffs’ counsel have run out of companies to sue, as Song-Beverly Act claims dropped dramatically. During this reporting period, 26 new labor law class actions filed, representing a relatively low 39% of the total number of new class actions filed, but good enough to claim the top spot among weekly class action filings. The only other categories to break the 10% threshold involved class actions alleging violations of California’s Unfair Competition Law (UCL), which includes false advertising claims, with 10 new filings (15% of the total number of new class actions filed), and class actions alleging Song-Beverly Act violations with 8 new filings (12% of the total number of new class actions filed).

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Trial Court Erred in Dismissing Class Action Complaint because Retailer Request for ZIP Codes Violated Song-Beverly Consumer Protection Statute California Supreme Court Holds

Plaintiff filed a putative class action against retailer Williams-Sonoma alleging that it violated California’s Song-Beverly Credit Card Act of 1971 (one of the State’s consumer protection statutes) by asking her for her ZIP code at the time of her purchase. Pineda v. Williams-Sonoma Stores, Inc., 51 Cal.4th 524 (Cal. 2011) [Slip Opn., at 1]. In relevant part, Song-Beverly “prohibits businesses from requesting that cardholders provide ‘personal identification information’ during credit card transactions, and then recording that information.” Id. According to the allegations underlying the class action complaint, plaintiff provided her ZIP code because she believed it was required in order to complete her credit card purchase. Id., at 1-2. More importantly, the class action alleged that Williams-Sonoma “subsequently used her name and ZIP code to locate her home address.” Id., at 2. Defense attorneys demurred to the class action complaint on the grounds that a ZIP code is not personal identification information within the meaning of Song-Beverly. Id., at 3. The trial court sustained the demurrer, and the Court of Appeal affirmed based, in part, on Party City Corp. v. Superior Court, 169 Cal.App.4th 497 (Cal.App. 2008), which had previously held that “a ZIP code, without more, does not constitute personal identification information.” Id., at 3-4 (citation omitted). The California Supreme Court granted review and reversed.

As noted above, the class action complaint alleged that defendant requested that customers provide ZIP codes at point of sale. Pineda, at 2-3. The thrust of the class action complaint was that “[a]t the end of the transaction, defendant had plaintiff’s credit card number, name, and ZIP code recorded in its database.” Id., at 3. The Supreme Court summarized the critical facts as follows: “Defendant subsequently used customized computer software to perform reverse searches from databases that contain millions of names, e-mail addresses, telephone numbers, and street addresses, and that are indexed in a manner resembling a reverse telephone book. The software matched plaintiff’s name and ZIP code with plaintiff’s previously undisclosed address, giving defendant the information, which it now maintains in its own database. Defendant uses its database to market products to customers and may also sell the information it has compiled to other businesses.Id. (italics added). It is undisputed that defendant could not, consistent with Song-Beverly, have asked plaintiff for her home address; the issue presented was whether defendant could, consistent with Song-Beverly, have asked plaintiff for her ZIP code and then use it to obtain her home address.

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