Class Action Defense Cases–Desai v. Deutsche Bank: Ninth Circuit Affirms Denial Of Class Action Treatment In Securities Fraud Class Action Case Holding Issue Of Reliance Defeated Predominance Prong Of Rule 23(b)(3)

District Court did not Abuse Discretion in Denying Class Action Certification in Securities Fraud Class Action because Reliance Required to Establish Securities Exchange Act § 10(b) Violation could not be Proven on a Class-Wide Basis Ninth Circuit Holds Numerous putative class action complaints were filed against Deutsche Bank alleging securities fraud in the alleged manipulation of the stock price of GenesisIntermedia, Inc. (“GENI”); the class action lawsuit “followed the collapse of an elaborate stock manipulation scheme.

Certification of Class Actions Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

FedEx Class Action Defense Cases–Babineau v. Federal Express: Eleventh Circuit Affirms Denial Of Class Action Certification Of Labor Law Class Action Holding District Court Acted Within Its Discretion

District Court did not Err in Denying Class Action Treatment of Labor Law Class Action because Court did not Abuse its Discretion in Concluding that Individualized Factual Issues Concerning Gap and Break Periods Predominate over Common Issues Eleventh Circuit Holds

Plaintiffs filed a putative class action against Federal Express alleging labor law violations in that FedEx allegedly “fail[ed] to pay hourly employees for all time worked”; the lawsuit has been characterized as “Round Two” because “the district court denied certification of a nationwide class of FedEx employees asserting substantially similar claims in Clausnitzer v. Federal Express Corp/, 248 F.R.D. 647 (S.D. Fla. 2008)” and then this class action was filed in an “attempt[] to address the defects identified in Clausnitzer by limiting the scope of the class….” Babineau v. Federal Express Corp., ___ F.3d ___ (11th Cir. July 27, 2009) [Slip Opn., at 1-3]. Plaintiffs moved the district court to certify the litigation as a class action, but the court denied the motion concluding that “individualized factual inquiries into whether and how long each employee worked without compensation would swamp any issues that were common to the class.” _Id._, at 2. Plaintiff’s appealed the denial of class certification, _id._ The Eleventh Circuit explained that the issue on appeal was “whether the district court abused its discretion in declining to certify the class.” _Id._ The Circuit Court held the district court acted within its discretion and affirmed.

We do not here summarize the lengthy summary of facts in the Circuit Court opinion, see Babineau, at 2-14. Nor do we address Rule 23(a)’s requirements for class action treatment, as the district court assumed that they had been satisfied. See id., at 14-15. The Eleventh Circuit immediately began its analysis with Rule 23(b)(3)’s class certification requirements. See id., at 15. The Court noted that “common issues will not predominate over individual questions if, ‘as a practical matter, the resolution of [an] overarching common issue breaks down into an unmanageable variety of individual legal and factual issues.’” Id., at 15-16 (citation omitted). In other words, “[c]ertification is inappropriate if the ‘plaintiffs must still introduce a great deal of individualized proof or argue a number of individualized legal points to establish most or all of the elements of their individual claims.’” Id., at 16 (citation omitted). Using these rules, the district court refused class action treatment because it concluded “adjudication of Plaintiffs’ claims on a class basis would be swamped by individual factual inquiries into the activities of each employee during the gap periods or during breaks.” Id. The Circuit Court addressed each in turn.

Certification of Class Actions Class Action Court Decisions Employment Law Class Actions Uncategorized

Labor Law Class Action Defense Cases–Hernandez v. Vitamin Shoppe: California Court Affirms Order Barring Attorney In One Class Action From Contacting Class Members In Related Class Action After Class Conditionally Certified In That Action

As Matter of First Impression, Class Action Plaintiff Attorney Ethically Prohibited from Contacting Class Members in Class Action once Trial Court Conditionally Certifies Litigation as a Class Action and Appoints Class Counsel California State Court Holds

Plaintiffs filed three separate putative class action lawsuits against Vitamin Shoppe alleging labor law violations; specifically, the class action complaint alleged that defendant failed to pay employees overtime, or to provide meal and rest periods, as allowed by California law. Hernandez v. Vitamin Shoppe Ind. Inc., 174 Cal.App.4th 1441, 95 Cal.Rptr.3d 734, 737-38 (Cal.App. 2009). The Perry class action (which included appellant Lisa Hernandez as a named plaintiff) was filed in Marin County, as was the Beauford class action; the Thompson class action was filed in Orange County. Id., at 738. Plaintiff’s attorney in the Thompson class action was Jeffrey Spencer; Spencer also represented named plaintiff Hernandez in the Perry class action. Id., at 737-38. Defense attorneys offered to settle the putative class actions on a class-wide basis, provided that all three plaintiffs attended the mediation; Spencer, on behalf of the Thompson class action, refused to participate. Id., at 738. The parties reached a proposed class action settlement of the Perry class action, and Spencer – as plaintiff’s attorney in Thompson – tried unsuccessfully to coordinate the three class actions or, alternatively, to stay the Perry class action. Id. Spencer, again acting as counsel for the Thompson plaintiffs, opposed court approval of the proposed class action settlement in Perry on the grounds that the settlement “was based on erroneous factual and legal assumptions, and that it was not within a range of reasonableness.” Id. The trial court gave preliminary approval to the proposed class action settlement in Perry and appointed class counsel (not Spencer), but before the claims administrator had sent notice to the class, Spencer (acting as counsel in the Thompson class action) sent letters to Vitamin Shoppe employees urging them to opt-out of the proposed settlement in the Perry class action and to retain him as their attorney. Id., at 739. In pertinent part, the court proceedings that followed included a court order that “ordered that a corrective notice be sent, directed Spencer to refrain from any further communications with class members that he did not represent, and granted the request for monetary sanctions.” Id., at 740. Following reassignment to a new judge after Spencer successfully challenged the original trial court for bias, id., the trial court reaffirmed the court order enjoining Spencer from communicating with any class members that he did not represent, ordering a corrective notice be sent to the class (as well as a procedure for determining the impact of Spencer’s letter on class members), and imposing sanctions against Spencer, id., at 741. The appellate court affirmed the order except for the award of sanctions.

For purposes of this article, we focus on the court order prohibiting Spencer from further communication with members of the putative class and awarding sanctions. The appellate court easily found that the court order did not create any conflict with Spencer’s ethical obligation to communicate with clients because it specifically exempted communications with class members who had retained him. See Hernandez, at 743-44. On the contrary, the court order prohibited Spencer from communicating directly with individuals represented by other counsel – class counsel. The Court of Appeal also concluded that the trial court order was well within its discretionary power to oversee litigation, and “‘to protect the rights of all parties, and to prevent abuses which might undermine the proper administration of justice.’” Id., at 745 (citation omitted). In this regard, the appellate court held that the trial court’s duty to protect absent class members is “particularly pronounced” following class action certification “because class members must decide whether or not to opt out.” Id. (citation omitted). In this case, “Spencer sent his letters unilaterally, without court approval, after the court had reviewed the proposed settlement, counsel’s arguments, preliminarily approved the settlement, and ordered the claims administrator to send notice to the class.” Id. Moreover, Spencer’s letters were misleading, id., at 745-46. And finally, the Court of Appeal rejected the claim that the court order infringed on Spencer’s right to free speech, holding at page 746, “Spencer fails to establish that his constitutional free speech rights entitled him to interfere with the trial court’s duty and authority to supervise the exclusion process after conditionally certifying the class, or to contact class members for whom the court had appointed class counsel.” Accordingly, the Court affirmed the trial court orders, save for the sanction as noted below. Id., at 751.

Certification of Class Actions Class Action Court Decisions Employment Law Class Actions Uncategorized

Labor Law Class Action Defense Cases–Vinole v. Countrywide: Ninth Circuit Affirms Order Granting Defense Motion To Deny Class Action Treatment To Labor Law Class Action

District Court did not Err in Granting Defense Motion to Deny Class Action Certification in Labor Law Class Action because Rule 23 does not Preclude Defendants from Filing such Motions, Plaintiffs had Adequate Time to Conduct Discovery, and District Court did not Abuse its Discretion in Concluding Rule 23(b)(3)’s Predominance Requirement could not be Satisfied Ninth Circuit Holds

Plaintiffs filed a putative class action against Countrywide Home Loans alleging labor law violations; the class action complaint alleged that defendant misclassified its 1,140 External Home Loan Consultants (HLCs) as “exempt” and, accordingly, failed to pay them overtime and other wages lawfully due non-exempt employees. Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935 (9th Cir. 2009) [Slip Opn., at 8299, 8303]. Plaintiffs filed the class action in California state court, but defense attorneys removed the class action to federal court. Id., at 8305. According to the allegations underlying the class action, Countrywide employs HLCs to sell loan products and pays them entirely on a commission basis. HLCs “are focused on outside sales and ‘represent Countrywide in local communities, and specifically work with realtors, builders, and other potential business partners in order to develop business relationships and obtain referral business.’” Id., at 8304. Prior to the discovery cut-off date and before plaintiffs moved for class certification, defense attorneys filed a motion to deny class action treatment. Id., at 8303. Countrywide admitted that it “applies a uniform wage exemption to HLCs,” classifying them as “exempt” outside salespeople under California law and the federal Fair Labor Standards Act (FLSA). See id., at 8304-05. But Countrywide asserted that it does not monitor what the HLCs do and that it “has no control over what HLCs actually do during the day”; rather, each HLC independently decides “how much, or how little time HLCs spend in the office, or working overall,” “how they want to market themselves,” and “how much money they want to make.” Id., at 8304. With respect to this last issue, the average HLC was paid more than $100,000 per year, and some earned “several hundreds of thousands of dollars,” id. Countrywide additionally introduced evidence that the amount of time individual HLCs spent in the office “varies greatly” and that it tracks only “the number and value of loans that HLCs close each month.” Id., at 8305. The district court granted Countrywide’s motion, concluding that class action treatment was not warranted. Id., at 8303. Plaintiffs appealed, and the Ninth Circuit affirmed.

The class action complaint alleged twelve causes of action against Countrywide, each premised on the assumption that Countrywide misclassified HLCs as exempt. Vinole, at 8305. The appeal centered on “whether the district court abused its discretion by (1) considering Countrywide’s motion to deny class certification before Plaintiffs had filed a motion to certify and prior to the pretrial and discovery cutoffs, and (2) denying class certification based on its reasoning that individual issues predominate over common issues.” Vinole, at 8303. We do not belabor the Ninth Circuit’s holding that “Rule 23 does not preclude a defendant from bringing a ‘preemptive’ motion to deny certification.” Id., at 8307. Other courts have reached a similar conclusion, and it rests on the solid observation that “[n]othing in the plain language of Rule 23(c)(1)(A) either vests plaintiffs with the exclusive right to put the class certification issue before the district court or prohibits a defendant from seeking early resolution of the class certification question.” Id., at 8307-08. In resolving this issue of first impression in the Ninth Circuit, the Court explained that “no rule or decisional authority prohibited Countrywide from filing its motion to deny certification before Plaintiffs filed their motion to certify, and Plaintiffs had ample time to prepare and present their certification argument.” Id., at 8303.

Certification of Class Actions Class Action Court Decisions Employment Law Class Actions Uncategorized

FLSA Class Action Defense Cases–Haro v. City of Rosemead: California Court Dismisses Appeal From Denial Of Class Action Treatment Of FLSA Class Action Complaint And Reaffirms FLSA Actions Not Subject To Class Action Treatment

Putative Class Action Alleging Violations of Federal Fair Labor Standards Act (FLSA) not Subject to Class Action Treatment because “Opt-In” Provision of FLSA Incompatible with “Opt-Out” Nature of California Class Action Lawsuits California State Court Holds

Plaintiffs filed a putative class action in California state court against the City of Rosemead alleging violations of the federal Fair Labor Standards Act (FLSA); the class action complaint alleged that the City failed to pay nonexempt employees “for all hours worked.” Haro v. City of Rosemead, 174 Cal.App.4th 1067, 94 Cal.Rptr.3d 874, 876 (Cal.App. 2009). According to the allegations underlying the class action complaint, the City did not pay the employees sought to be covered by the action “the wages to which they were entitled.” Id., at 878. Plaintiffs filed a motion with the trial court to certify the litigation as a class action under California Code of Civil Procedure section 382; defense attorneys opposed class action treatment on the ground that the “opt-in” requirement of an FLSA collective action was incompatible with the “opt-out” nature of class actions under Section 382. Id. The trial court agreed and refused to certify the litigation as a class action, id., at 876; in so ruling, the court observed that plaintiffs had not sought to proceed with a “collective action” under the FLSA but, rather, as a class action under Section 382, id., at 878-79. The trial court denied also plaintiffs’ motion for leave to amend their class action complaint. Id., at 876. Plaintiffs appealed both orders, and the California Court of Appeal dismissed the appeals on the grounds that the underlying trial court orders were not appealable.

The Court of Appeal began by analyzing the differences between “collective actions” under the FLSA and “class actions” under Section 382. Haro, at 876. Importantly, the FLSA requires that members of the putative class affirmatively “opt-in” to the litigation, id. (citation omitted), which has been referred to as “‘[p]robably the most significant difference in procedure between the FLSA’ and, in federal practice, class actions under Federal Rules of Civil Procedure, rule 23,” id. (citation omitted). For this reason, at least one federal circuit court has held, “There is a fundamental, irreconcilable difference between the class action described by Rule 23 and that provided for by FLSA § 16(b). In a Rule 23 proceeding a class is described; if the action is maintainable as a class action, each person within the description is considered to be a class member and, as such, is bound by judgment, whether favorable or unfavorable, unless he has ‘opted out’ of the suit. Under § 16(b) of FLSA, on the other hand, no person can become a party plaintiff and no person will be bound by or may benefit from judgment unless he has affirmatively ‘opted into’ the class; that is, given his written, filed consent.” Id., at 876-77 (quoting LaChapelle v. Owens-Illinois, Inc., 513 F.2d 286, 288 (5th Cir.1975) (footnote omitted). Moreover, “at least one California court has held that the opt-in feature cannot be adopted in California class actions.” Id., at 877 (citing Hypertouch, Inc. v. Superior Court, 128 Cal.App.4th 1527, 1550 (Cal.App. 2005). The California appellate court reaffirmed that “FLSA actions are not class actions,” id.

Certification of Class Actions Class Action Court Decisions Employment Law Class Actions Uncategorized

Wells Fargo Class Action Defense Cases–In re Wells Fargo: Ninth Circuit Reverses Certification Of Labor Law Class Action Holding District Court Erred In Relying On Employer’s Uniform Exemption Policy To Exclusion Of Other Factors

Labor Law Class Action Certification Order Reversed because District Court Abused its Discretion in Relying on Wells Fargo’s Internal Policy of Treating Employees as Exempt “To the Near Exclusion of Other Relevant Factors Touching on Predominance” under Rule 23(b)(3) Ninth Circuit Holds

Plaintiffs filed a putative class action in California against their employer, Wells Fargo Home Mortgage, alleging labor law violations; the class action complaint – brought individually and on behalf of roughly 5000 other current and former Wells Fargo home mortgage consultants (HMCs), who market and sell mortgages – alleged defendant paid HMCs by sales commission until 2005, when “Wells Fargo changed the commission system to include a minimum, non-recoverable draw against commissions.” In re Wells Fargo Home Mortgage Overtime Pay Litig., 571 F.3d 953 (9th Cir. 2009) [Slip Opn., at 8325, 8328-29]. According to the allegations underlying the class action, prior to 2005 Wells Fargo did not track the hours worked by HMCs or pay them overtime because “it treated nearly all of its HMCs as exempt from state and federal overtime requirements.” Id., at 8329. Several plaintiffs filed various putative class action lawsuits against Wells Fargo alleging state and federal labor law violations, which the Judicial Panel on Multidistrict Litigation ultimately consolidated in the Northern District of California. Id. The plaintiffs in this particular California class action (Mevorah) alleged that Wells Fargo’s conduct violated California’s Unfair Competition Law (UCL) by violating the federal Fair Labor Standards Act (FLSA), id. Plaintiffs’ counsel moved the district court to certify the litigation as a class action; defense attorneys opposed the motion in part on the ground that “individual issues predominated and that class treatment was not superior,” and “pointed to a number of exemptions under the FLSA (applicable through the UCL) and California labor law that would require individualized inquiries.” Id. The district court agreed that “individual inquiries would be necessary with respect to five exemptions: the federal outside sales exemption…, California’s outside sales exemption…, California’s commissioned sales exemption…, and the federal highly compensated employee exemption….” Id., at 8329-30. Specifically, the federal court found that these inquiries “would require an analysis of the job experiences of the individual employees, including the amount of time worked by each HMC, how they spend their time, where they primarily work, and their levels of compensation.” Id., at 8330. On the other hand, the district court concluded that common issues existed only as to two exemptions – “whether Wells Fargo qualifies as a ‘retail or service establishment’ for purposes of a federal exemption for commissioned sales…, and whether the employees earned ‘commission wages’ under California’s commissioned sales exemption….” Id. The court nonetheless granted class action treatment “relying on Wells Fargo’s uniform exemption policies,” id., at 8330-31. The Ninth Circuit reversed, holding that while “uniform exemption policies” – such as “an employer’s internal policy of treating its employees as exempt from overtime laws” – is relevant to the predominance test in Rule 23(b)(3), “it is an abuse of discretion to rely on such policies to the near exclusion of other relevant factors touching on predominance.” Id., at 8328.

The Ninth Circuit explained at page 8332: “The question here is whether the district court abused its discretion in finding Rule 23(b)(3)’s predominance requirement was met based on Wells Fargo’s internal policy of treating all HMCs as exempt from state and federal overtime laws. To succeed under the abuse of discretion standard, Wells Fargo must demonstrate that the district court either (a) should not have relied on its exemption policy at all or (b) made a clear error of judgment in placing too much weight on that single factor vis-a-vis the individual issues.” The Circuit Court construed Wells Fargo’s arguments “as a challenge to the weight accorded to the internal exemption policies” in that the district court “[considered] the proper factors but committing clear error in weighing them.” In re Wells Fargo Home Mortgage, at 8332. Specifically, defense attorneys argued that the weight afforded by the district court to Wells Fargo’s exemption policy “was tantamount to estoppels.” Id., at 8332-33. The Circuit Court agreed, finding at page 8333 that the district court’s class action certification order “was clearly driven by Wells Fargo’s uniform exemption policy.” That finding, in turn, “leads to the central question: whether such heavy reliance constituted a clear error of judgment in assaying the predominance factors.” Id.

Certification of Class Actions Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense Cases–In re Neurontin: Massachusetts Federal Court Denies Class Action Certification In Class Action Complaint Arising Out Of Manufacture And Sale Of Prescription Drug Neurontin

Class Action Plaintiffs’ Renewed Motion for Class Action Treatment Adequately Addressed District Court’s Concerns Regarding Rule 23(a)’s Requirements for Class Action Certification but Failed to Satisfy Predominance Prong of Rule 23(b)(3) Massachusetts Federal Court Holds

Plaintiffs – consisting of consumers and third-party payors (TPPs) – filed a putative nationwide class action against Warner-Lambert and Pfizer arising out of defendants’ manufacture and distribution of the drug Neurontin; specifically, the class action complaint alleged that defendants “systematically and knowingly engaged in a fraudulent campaign to market and sell Neurontin for treatment of ‘off-label’ indications – conditions for which the Federal Drug Administration (‘FDA’) had not approved Neurontin – even though defendants knew Neurontin was not effective for those conditions.” In re Neurontin Marketing, Sales Practices & Prod. Liab. Litig., ___ F.R.D. ___ (D.Mass. May 13, 2009) [Slip Opn., at 1]. According to the allegations in the class action complaint, defendants’ conduct violated federal RICO (Racketeer Influenced and Corrupt Organizations Act) and the New Jersey Consumer Fraud Act (NJCFA), as well as claims for common law fraud and unjust enrichment, _id._, at 1-2. Thus, despite its caption, the class action was not a products liability case, _id._, at 2. Plaintiffs’ moved the district court to certify the litigation as a nationwide class action, but the court denied the motion finding that plaintiffs “failed to satisfy the commonality, numerosity, typicality, and predominance requirements of Rule 23 of the Federal Rules of Civil Procedure.” _See In re Neurontin Mktg. & Sale Practices Litig._, 244 F.R.D. 89, 105-107 and 114-16. (D. Mass. 2007). But the federal court denied class action certification without prejudice to the filing of a new motion for class action treatment “that addressed the Court’s concerns.” _In re Neurontin_, at 2 (citing 244 F.R.D. at 115). Plaintiffs filed a new motion for class certification, but the district court denied the motion finding that “common questions will not predominate over issues affecting individual plaintiffs, in accordance with Rule 23(b)(3),” _id._, at 2-3.

We do not here summarize the factual history set forth in the district court’s opinion, see In re Neurontin, at 3-6, or the court’s analysis of the commonality, numerosity and typicality requirements of Rule 23(a) for class action treatment, which the court concluded were satisfied by plaintiffs’ renewed motion for class certification, see id., at 6-17. But the district court spent more than 30 pages analyzing whether the predominance prong of Rule 23(b)(3) had been met, and concluded that it had not. See id., at 17 et seq. We do not discuss the lengthy order in detail. We note that with respect to the first class certification motion, “the Court’s concerns [with predominance] with respect to both groups emanated from their ability to demonstrate by common proof that defendants’ fraudulent marketing of Neurontin caused financial injury to all plaintiffs.” Id., at 18. More specifically, on the facts of this case “the Court could not simply presume that defendants’ fraudulent conduct caused all the off-label Neurontin prescriptions.” Id., at 23. Based on the New Jersey Supreme Court’s subsequent opinion concerning Vioxx in International Union of Operating Engineers Local No. 68 Welfare Fund v. Merck & Co., Inc., 192 N.J. 372 (2007), referred to as Vioxx by the district court, the federal court refused to grant class action treatment to the litigation because “Vioxx precludes NJCFA plaintiffs from establishing causation through a report from a single expert, and the instant plaintiffs seek to do exactly that,” id., at 25.

Certification of Class Actions Class Action Court Decisions Uncategorized

Class Action Defense Cases–Utility Consumers’ Action Network v. Sprint: California Federal Court Denies Nationwide Class Action Treatment To Class Action Complaint Alleging Violations Of California Laws

Class Action Complaint Alleging Violations of California State Laws not Entitled to Nationwide Class Action Treatment because Plaintiffs Failed to Establish that California Law Applies to Non-Residents or that Nationwide Class Action Treatment would be “Superior” Means of Adjudicating Dispute or that Trial of Nationwide Class Action would be Manageable California Federal Court Holds

Plaintiffs filed a putative nationwide class action against Sprint Solutions and Sprint Spectrum (Sprint) alleging violations of various California consumer protection statutes; specifically, the class action complaint alleged inter alia claims under California’s Unfair Competition Law (UCL), Consumer Legal Remedies Act (CLRA), and Public Utilities Code (for cramming), as well as under the Federal Communications Act, 47 U.S.C. §201(b). Utility Consumers’ Action Network v. Sprint Solutions, Inc., ___ F.R.D. ___ (S.D.Cal. June 23, 2009) [Slip Opn., at 1]. Plaintiffs moved the district court to certify the litigation as a class action, _id._, at 1-2. Defense attorneys opposed class action certification, in part on the ground that various states will interpret the relevant contracts differently and have different consumer protection laws such that a nationwide class action would be unworkable. _Id._, at 2. The federal court refused to grant class action treatment to the lawsuit.

In arguing in favor of a nationwide class action, plaintiffs asserted that “California law applies to non-California residents because there is a presumption California law applies absent a showing to the contrary under California choice of law principles, and that California law does not conflict with other state laws. “ Sprint, at 2. Plaintiffs further argued that a nationwide class action was the “superior” means of adjudicating the dispute “because the common issue is the misbilling practices of the Defendants,” id. Defense attorneys countered “that there are individual issues that predominate; that various states will enforce several provisions in the terms and conditions of relevant contracts in various ways; that California statutes cannot be applied to consumers outside of California; and that Plaintiffs’ proposed trial plan is unworkable.” Id. The district court cited well-settled law that the moving party bears the burden of establishing that the requirements for class action treatment have been met, id., at 2-3, and turned immediately to a “rigorous analysis” of whether the class action requirements of Rule 23(b)(3) had been met because the elements of Rule 23(a) “are not seriously in dispute,” id., at 3-4.

Certification of Class Actions Class Action Court Decisions Uncategorized

Class Action Defense Cases–Arias v. Superior Court: California Supreme Court Holds Representative Actions Under UCL Must Comply With Class Action Requirements But Labor Law PAGA Representative Claims Need Not Meet Class Action Requirements

Employee Representative Action Under California’s Unfair Competition Law (UCL) Must Satisfy Class Action Requirements, but Employee Representative Actions Seeking Penalties Under California Labor Code’s Private Attorneys General Act of 2004 (PAGA) Need Not Satisfy Class Action Requirements California Supreme Court Holds

Plaintiff filed a putative class action against his former employer, Angelo Dairy, alleging labor law violations; the class action complaint alleged causes of action for violations of the Labor Code, labor regulations, and an Industrial Welfare Commission wage order, for .breach of contract and “breach of the warranty of habitability on the ground that defendants provided residential units in a defective and dangerous condition,” for violations of California’s Unfair Competition Law (UCL) “based on defendants’ failures to credit plaintiff for all hours worked, to pay overtime wages, to pay wages when due, to pay wages due upon termination, to provide rest and meal periods, and to obtain written authorization for deducting or offsetting wages.” Arias v. Superior Court, ___ Cal.4th ___, 95 Cal.Rptr.3d 588, 2009 WL 1838973, *1 (Cal. June 29, 2009). In addition, the class action complaint sought enforcement under the UCL of penalties provided for in the Labor Code, and alleged under California’s Private Attorneys General Act of 2004 (PAGA), Labor Code § 2698 _et seq._, that “defendants had violated the Labor Code, labor regulations, and an Industrial Welfare Commission wage order by failing to pay all wages due, to provide itemized wage statements, to maintain adequate payroll records, to pay all wages due upon termination, to provide rest and meal periods, to offset proper amounts for employer-provided housing, and to provide necessary tools and equipment.” _Id._ Defense attorneys moved to strike five causes of action in the class action complaint “on the ground that plaintiff failed to comply with the pleading requirements for class actions”; the trial court granted the motion. _Id._ Plaintiff sought a writ of mandate from the Court of Appeal, which held that UCL claims brought in a representative capacity had to satisfy class action requirements, but that representative labor law claims under PAGA need not, _id._ The Supreme Court granted review and held “that an employee who, on behalf of himself and other employees, sues an employer under the [UCL]…for Labor Code violations must satisfy class action requirements, but that those requirements need not be met when an employee’s representative action against an employer is seeking civil penalties under [PAGA].” _Id._

The Supreme Court began in analysis by rejecting plaintiff’s claim that representative actions under the UCL (brought individually and on behalf of others) need not comply with the requirements for class actions. Arias, at *2. After summarizing California’s UCL, including the 2004 amendments thereto, and after noting that California Code of Civil Procedure § 382 does not mention the words “class action,” the Court addressed the issue of whether the UCL, as amended by the voters so as to require that private plaintiffs bringing representative actions comply with Section 382, “imposes a requirement that the action be brought as a class action.” Id. Based on the Supreme Court’s analysis of the statutory language, and recognizing that a “literal construction of an enactment…will not control when such a construction would frustrate the manifest purpose of the enactment as a whole,” id., at *3, the Supreme Court concluded that California voters clearly intended “to impose class action requirements on private plaintiffs’ representative actions” under the UCL, id. The Court therefore held that representative actions under the UCL must comply with class action requirements, id., at *4.

Certification of Class Actions Class Action Court Decisions Employment Law Class Actions Uncategorized

Merck Class Action Defense Cases–In re Vioxx: California Trial Court Denies Class Action Certification Of Putative Class Action Complaint Against Merck Arising From Sale Of Vioxx

Class Action Complaint Alleging Deceptive Marketing Practices in Sale of Vioxx not Entitled to Class Action Treatment because Individual Issues will Predominate over Common Questions of Law or Fact California State Trial Court Holds

Various class action lawsuits against Merck were consolidated in the Los Angeles Superior Court under the title In re Vioxx Consolidated Cases; the class action lawsuits alleged that Merck knew of the cardiovascular dangers associated with Vioxx long before it voluntarily pulled it from the market. In re Vioxx Conxolidated Cases, Los Angeles Superior Court Case No. JCCP4247 (April 30, 2009) [Slip Opn., at 1-2]. The consolidated class action complaint alleged that “Merck’s deceptive marketing practices violate the unfair competition law [(UCL)]…and false advertising law…, constitute deceptive trade practices under the Consumers Legal Remedies Act [(CLRA)]…, and resulted in unjust enrichment.” Id., at 2. Interestingly, the class action “[did] not allege that Vioxx itself harmed anyone or was ineffective, only that consumers lost money in purchasing it because it was more expensive than, but not better than less expensive [alternatives].” Id. Plaintiffs’ lawyers moved the trial court to certify the litigation as a class action; defense attorneys opposed class action treatment, arguing that “individual issues of causation and reliance predominate over any common issues because Merck knew different things about Vioxx at different times and class members, physicians and TPPs [third party payors] were exposed to different representations at different times and were influenced by representations to varying extents.” Id., at 3. Additionally, defense attorneys argued that individual issues will predominate as to economic injury, and that the named representatives’ claims are not typical of the claims of the class. Id. The trial court denied the motion for class action certification.

After summarizing the standards governing class action certification of UCL and CLRA claims, see In re Vioxx, at 3-4, and after readily determining that the numerosity and ascertainability requirements for class action treatment had been met, id., at 5, the trial court turned its attention to the question of typicality – that is, “whether a sufficient relationship exists between the injury to the named plaintiff and the conduct affecting the class.” Id., at 5 (citation omitted). The trial court found that the claims of the individual plaintiffs were not typical of the TPPs based on Merck’s evidence that “the decisionmaking that goes into purchasing Vioxx on an individual basis is entirely distinct from the process of putting it into a group formulary.” Id. The trial court found further that plaintiffs failed to meet their burden of providing “substantial evidence” that common questions of law or fact will predominate over individual issues affecting the various class members. Id., at 6. The court did agree with plaintiffs that Merck engaged in a “uniform marketing scheme that was likely to deceive patients and physicians,” id., at 6-7, and that the information available to physicians was susceptible to common proof, id., at 8, but plaintiffs must additionally prove “damage suffered ‘as a result of’ a deceptive practice,” and this element was not subject to common proof, id., at 8-11. As the trial court explained at page 9, “Under all of plaintiffs’ causes of action, a central issue will be whether defendant’s alleged misrepresentations or nondisclosures were material to those who purchased Vioxx.” This means that plaintiffs will have to prove reliance, id., at 10, and the evidence presented in opposition to the motion for class certification demonstrates that class-wide proof of reliance will not exist. Id., at 10-11. And under the circumstances of this case, the necessary proof of reliance cannot be inferred. Id., at 11-12. Nor are the claims of the TPPs subject to common proof, id., at 11.

Certification of Class Actions Class Action Court Decisions Uncategorized