T-Mobile Class Action Defense Cases–Vega v. T-Mobile: Eleventh Circuit Reverses Class Action Certification Order And Orders Lawsuit To Proceed On Individual Rather Than Class Action Basis

Class Action Certification Order of Labor Law Class Action must be Reversed because District Court Failed to Conduct “Rigorous Analysis” of Rule 23’s Requirements for Class Action Treatment Eleventh Circuit Holds

Plaintiff filed a putative nationwide class action against his former employer, T-Mobile, after it fired him for poor attendance; the class action complaint alleged labor law violations. Vega v. T-Mobile USA, Inc., ___ F.3d ___, 1260-61 (11th Cir. 2009). Specifically, the class action alleged that “by charging back commissions advanced on sales of ‘deactivated’ prepaid service plans, T-Mobile violated the terms of the compensation program, failed to pay commissions earned by the sales representatives, and was unjustly enriched by retaining the benefit of its employees’ services without fully compensating them for such services.” _Id._, at 1262. T-Mobile’s compensation package for retail sales representatives consisted of an hourly wage plus commissions. _Id._, at 1261. The commissions were incentive-based, paid on the employee’s “net activations” – if a customer canceled service within 180 days of activation then T-Mobile would “charge-back” the commission previously paid “in order to reclaim that amount from the sales representative.” _Id._ Under T-Mobile’s plan, commissions paid within the 180-day window are “paid as an advance against commissions anticipated to be earned in the future” and “[c]ommissions are not earned until the expiration of the 180-day commission charge back window.” _Id._ Additionally, T-Mobile, in its sole discretion, determined whether sales qualified for commission payments, _id._ The class action complaint was filed in Florida state court, _id._, at 1262, but defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), _id._, at 1263. Plaintiff moved the district court to certify the litigation as a class action; defense attorneys opposed class action treatment and moved for summary judgment. _Id._ The district court denied T-Mobile’s summary judgment motion, and granted class action certification on behalf of a Florida class only. _Id._, at 1263-64. Pursuant to Federal Rule of Civil Procedure 23(f), the Eleventh Circuit granted interlocutory review of the class action certification order and reversed. _Id._, at 1264.

The class action complaint did not impress the Circuit Court, which it characterized as “incomplete and ambiguous.” Vega, at 1263. The vague complaint “simply alleges: (1) that, because prepaid customers paid up-front for their service, T-Mobile ‘bore no risk of non-payment’; (2) that when T-Mobile charged its employees back for commissions on prepaid plans, ‘even though T-MOBILE received the full benefit of its agreement with the prepaid plan customers, T-MOBILE’s commission based employees lost the benefits of those sales and the resulting commissions’; and (3) that ‘T-MOBILE has unfair [sic] and unjustly profited from its internal systems error by unduly charging back its employees on the prepaid plans and retaining its employee’s [sic] wages for its own use and benefit.’” Id., at 1262. The class action asserted two claims – one for “unpaid wages” and one for “unjust enrichment” – arising out of the central allegation that “T-Mobile improperly withheld or charged back from its employees.” Id. The class action did not allege that employees nationwide were subject to the same compensation structure, id. The Eleventh Circuit noted that the district court certified the litigation as a class action despite two concerns: first, that a nationwide class “lacked commonality due to variations in the contract and employment laws of the fifty states,” and second, that the class action complaint’s allegations “focused on charge backs of commissions already paid, but indicated nothing about any failure to pay commissions in the first instance, the inclusion in the class of T-Mobile ‘employees … who … were entitled to receive[ ] commissions … who did not receive their commissions’ would implicate claims falling outside the scope of the complaint, as pled, and, thus, failed the typicality requirement.” Id., at 1263-64.

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

Class Action Defense Cases–Williams v. Mohawk Industries: Eleventh Circuit Reverses Denial Of Class Action Treatment Of RICO Complaint And Remands For Further Consideration Of Class Action Certification

Class Action Complaint Alleging Violations of State and Federal RICO laws based on Employer’s Conspiracy to Hire Illegal Workers and Depress Wages of Legal Workers Satisfied Rule 23(a)’s Commonality and Typicality Class Action Requirements, and Requires Further Analysis by District Court as to Whether Rule 23(b)(3)’s Class Action Requirements had been Met Eleventh Circuit Holds

Plaintiffs filed a class action against their employer, Mohawk Industries, alleging labor law violations; specifically, the class action complaint asserted that defendant conspired with various temporary employment agencies to hire illegal aliens and depress wages. Williams v. Mohawk Industries, Inc., ___ F.3d ___ (11th Cir. May 28, 2009) [Slip Opn., at 2-3]. According to the allegations underlying the class action, defendant’s activities violated state and federal racketeering laws, and defendant was “unjustly enriched by its criminal activities,” _id._, at 3. Defense attorneys moved to dismiss the class action, ultimately resulting in a circuit court opinion that held the class action’s unjust enrichment claims failed but the class actions state and federal racketeering claims survived. _Id._, at 3-4. Plaintiffs’ lawyers moved to certify the litigation as a class action, _id._, at 5; the district court denied class action treatment because it found that the commonality and typicality requirements for class action certification had not been met, _id._, at 7. The district court also denied plaintiffs’ motion because it found that Rule 23(b)’s requirements for class action certification had not been met. _See id._, at 8-9. Plaintiffs’ appealed and the Eleventh Circuit reversed.

In denying class action certification, the district court found that commonality did not exist because defendant’s operations were “extremely decentralized,” contradicting the idea of “one grand conspiracy to employ illegal workers.” Williams, at 8. Also, plaintiffs claims were not typical because one of them never worked at a facility that used with temporary workers and because each of them “worked at only a handful” of defendant’s locations. Id. As for Rule 23(b)(2), the federal court found that the prayer for monetary relief was not merely incidental to their demand for injunctive relief, id., and that Rule 23(b)(3) had not been met because common issues did not predominate and because a class action was not the superior means of redress, in part because class action treatment would present an “unmanageable number of individual legal and factual issues,” id., at 8-9.

Certification of Class Actions Class Action Court Decisions Uncategorized

Class Action Defense Cases–In re DC Water & Sewer: District Of Columbia Circuit Denies Permission To Appeal Class Action Certification Order As “Blatantly Untimely” And Criticizes Defendant And Defense Counsel For Filing Petition

Petition under Rule 23(f) for Permission to Appeal Class Action Certification Order Untimely and that Defendant and its Counsel “Would File – and Attempt to Justify – such a Blatantly Untimely Petition” is “Troubling” District of Columbia Circuit Holds Plaintiff filed a class action against DC Water and Sewer Authority (WA SA) alleging violations of the Civil Rights Act of 1964; the class action complaint asserted that WASA engaged in acts of discrimination in the hiring and promotion of employees.

Certification of Class Actions Class Action Court Decisions Uncategorized

Prop 64 Class Action Defense Cases–In re Tobacco II: California Supreme Court “Turns Class Action Law Upside Down” And Holds UCL Class Actions May Be Certified Even If Class Members Lack Standing To File Suit In Own Name

Class Actions Alleging Violations of California’s Unfair Competition Law (UCL) may be Certified as a Class Action even if Putative Class Members Lack Standing to Prosecute UCL Claims in Their Own Name, but Class Representative Alleging Misrepresentation as Basis of UCL Class Action Claim must Demonstrate Actual Reliance on the Defendant’s Allegedly Deceptive or Misleading Statements California Supreme Court Holds

A class action lawsuit was filed in California state court against various tobacco industry defendants alleging violations of California’s Unfair Competition Law (UCL); specifically, the class action complaint asserted that defendants “conduct[ed] a decades-long campaign of deceptive advertising and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease.” In re Tobacco II Cases, ___ Cal.4th ___, 93 Cal.Rptr.3d 559 (Cal. 2009) [Slip Opn., at 1-2]. The class action complaint was amended numerous times; the trial court granted plaintiffs’ motion to certify the litigation as a class action, filed in connection with the seventh amended class action complaint. _Id._, at 3. At the time the trial court granted class action status to the lawsuit, under California law an individual had standing to file suit alleging UCL violations even if the individual had not suffered any injury; following class certification, Californians passed Proposition 64, which amended the UCL so as to condition standing to file suit to a “person who has suffered injury in fact and has lost money or property as a result of [such] unfair competition.” _Id._, at 1-2 (quoting Cal. Bus. & Prof. Code, § 17204). Additionally, prior to Prop 64 UCL representative actions did not have to satisfy the requirements for class action treatment under California Code of Civil Procedure section 382, but Prop 64 explicitly requires such compliance, _id._, at 13. Based on the standing requirement imposed by Prop 64, the trial court granted defendants’ motion to decertify the class “on the grounds that each class member was now required to show an injury in fact, consisting of lost money or property, as a result of the alleged unfair competition.” _Id._, at 2. The appellate court affirmed, “agreeing with the trial court that, post Proposition 64, individual issues of exposure to the allegedly deceptive statements and reliance upon them, predominated over class issues.” _Id._, at 9. But the California Supreme Court – in a 4-3 decision – reversed.

The California Supreme Court’s decision is ground-breaking: it represents the first opinion known to this author that allows an individual to be a member of a class even if that person does not have standing to file suit in his or her own name. The Supreme Court addressed two issues: “First, who in a UCL class action must comply with Proposition 64’s standing requirements, the class representatives or all unnamed class members, in order for the class action to proceed?” In re Tobacco II, at 2. This is the question on which we focus here. “Second, what is the causation requirement for purposes of establishing standing under the UCL, and in particular what is the meaning of the phrase ‘as a result of’ in section 17204?” Id. While we do not discuss this aspect of the Court’s opinion, we note its holding: “We conclude that a class representative proceeding on a claim of misrepresentation as a basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions.” Id.

Certification of Class Actions Class Action Court Decisions Uncategorized

3M Class Action Defense Cases–Whitaker v. 3M: Minnesota State Court Grants Class Action Treatment To Labor Law Class Action Against 3M Alleging Age Discrimination

Labor Law Class Action Against 3M Alleging Age Discrimination Warranted Class Action Certification Minnesota State Court Holds Plaintiff filed a class action against his employer, 3M, alleging labor law violations; the class action complaint asserted that 3M discriminated against employees on the basis of age with respect to leadership development opportunities, promotion decisions, compensation decisions, and job eliminations. Whitaker v. 3M Co., Ramsey County District Court, Second Judicial District, Case No.

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

FACTA Class Action Defense Cases–Leysoto v. Mama Mia: Florida Federal Court Denies Class Action Treatment Of FACTA Class Action Because Potential Liability Vastly Disproportionate To Actual Damages Suffered By Putative Class

FACTA Class Action Seeking $4.6 Million to $46 Million in Statutory Damages from Restaurant with Net Worth of $40,000 did not Warrant Class Action Treatment because Class Action not “Superior” Method of Resolving Dispute Florida Federal Court Holds

Plaintiff filed a putative class action in Florida state court against Mama Mia, “a local restaurant in Hollywood, Florida, with approximately $40,000 in net assets”; the class action alleged that defendant violated the Fair and Accurate Credit Transactions Act (FACTA), which requires that merchants truncate credit card and debit card numbers on electronically-printed customer receipts. Leysoto v. Mama Mia I., Inc., 255 F.R.D. 693, 694 (S.D.Fla. 2009). According to the allegations underlying the class action, the receipts defendant provided to customers “displayed both the expiration date and full number of [the customers’] credit card.” Id. (The district court noted that defendant “ceased this practice, and began truncating customer receipts to merely four (4) card numbers, no later than June 26, 2008.” Id.) The class action complaint sought “statutory and actual damages, as well as attorneys’ fees and costs,” id. Defense attorneys removed the class action to federal court, id., and plaintiff moved for class certification, arguing a Rule 23(b)(3) class action should be certified, id., at 694-95. Defense attorneys opposed class action certification on the grounds that class action treatment would expose defendant to statutory damages of $4.6 million – $46 million, even though plaintiff concedes he did not suffer any actual economic injury and even though there was no evidence that any member of the putative class suffered actual economic injury. Id., at 695 and n.5. The district court denied plaintiff’s motion.

The district court explained that the class certification motion “turns on two related questions: (1) whether potential class damages are a proper consideration at the motion to certify stage; and, if so; (2) whether the potential class damages in this matter preclude certification under Fed.R.Civ.P. 23(b)(3).” Leysoto, at 694. Of course, plaintiff bears the burden of establishing that class action treatment was warranted, id., at 695 (citations omitted). FACTA provides for recovery of actual damages or statutory damages of “not less than $100 and not more than $1,000.” Id. (citation omitted). This is important because under Eleventh Circuit authority the district court “may consider potential class damages in adjudicating Plaintiff’s Motion, and given the vast disparity between the requested statutory damages and the actual injury caused by Defendant, the class vehicle is not the superior method for fairly and efficiently adjudicating this dispute.” Id., at 694.

Certification of Class Actions Class Action Court Decisions Class Actions In The News FCRA Class Actions Uncategorized

Mercedes-Benz Class Action Defense Cases–In re Mercedes-Benz: New Jersey Federal Court Grants Class Action Treatment To Class Action Claims For Unjust Enrichment And Consumer Fraud Based On Analog-Based Tele Aid Sales

Nationwide Class Action Complaint Alleging Unjust Enrichment and Violations of New Jersey’s Consumer Fraud Act Claims Warranted Class Action Treatment because Sale by Mercedes of Analog-Based Tele Aid Systems Involved Common Issues that Predominated over Individual Issues and because Balance of Rule 23’s Requirements for Class Action Certification had been Satisfied New Jersey Federal Court Holds

Ten separate class action lawsuits were filed in six different states against Mercedes-Benz and other defendants arising from vehicles equipped with the “Tele Aid” emergency response system; Mercedes-Benz moved the Judicial Panel on Multidistrict Litigation to consolidate the class action complaints for pretrial purposes, pursuant to 28 U.S.C. § 1407. In re Mercedes-Benz Tele Aid Contract Litig., ___ F.Supp.2d ___ (D.N.J. April 27, 2009) [Slip Opn., at 5]. The Judicial Panel granted the motion, and the various class actions were transferred to New Jersey, _id._, at 5-6. (The district court observed that the amount in controversy exceeds $5,000,000 and that minimal diversity exists; accordingly, the court had jurisdiction under the Class Action Fairness Act (CAFA). _Id._, at 2.) Once the class actions were centralized, the district court appointed interim class counsel and directed counsel to file a consolidated amended class action complaint, _id._, at 6. The putative nationwide class action complaint alleged causes of action for common law unjust enrichment and violations of the New Jersey Consumer Fraud Act “premised on the contention that Mercedes made statements or omissions of material facts that it knew or should have known were false or misleading when promoting vehicles purchased by Plaintiffs that were equipped with ‘Tele Aid,’ an emergency response system which links subscribers to road-side assistance operators by using a combination of global positioning and cellular technology.” _Id._, at 2-3. At bottom, the class action claims are premised on the theory that Mercedes knew “that the analog network on which the Tele Aid systems contained in their vehicles depended would cease to function in 2008, but continued to market Tele Aid without disclosing that fact.” _Id._, at 6. Plaintiffs’ attorneys moved the district court to certify the litigation as a class action; defense attorneys argued against class action treatment. _Id._, at 1. The district court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

The district court explained that plaintiffs’ task at the class action certification stage was to demonstrate that the claims in the class action complaint were susceptible to common proof at trial rather than relying on evidence that is individual to the putative class members. In re Mercedes-Benz, at 4. Plaintiffs’ motion for class action treatment was supported in part by three expert reports; the experts supported plaintiffs’ claim that Mercedes failed to adequately inform customers that analog service would terminate at the end of 2007, even though “discontinuation of analog service in early 2008 was a regulatory certainty at the time the FCC finalized its rule on August 8, 2002.” Id., at 3. “Mercedes began including Tele Aid systems in most of its vehicles in 2000,” id., and “touted its ability to provide subscribers with emergency road-side assistance, remotely unlock doors, and track stolen vehicles,” id., at 7. Certain of these vehicles relied solely on analog signals over wireless telephone networks; the company subsequently sold vehicles that were capable of using both analog and digital signals. Id. We do not discuss the facts in greater detail here, see id., at 7-12. The basis of plaintiffs’ class action certification motion was that “this case is particularly well-suited to class treatment because (1) their claims ‘arise from a single course of conduct that affect[ed] large numbers of consumers,’ and (2) the costs to each class member of pursuing his or her suit would exceed any potential recovery.” Id., at 13. Defense attorneys opposed class action treatment because (1) a nationwide class should not be certified as the claims of each named plaintiff are governed by the laws of their respective home states, which differ in material ways, and (2) common questions of fact do not predominate. Id., at 13-14.

Certification of Class Actions Class Action Court Decisions Uncategorized

McDonald’s Class Action Defense Cases–In re McDonald’s French Fries: Illinois Federal Court Denies Class Action Treatment Of Consumer Fraud Class Action Complaint Because Individual Issues Predominate Over Common Issues

Class Action Complaint Alleging Consumer Fraud/Deceptive Practices Based on Alleged Misrepresentation by McDonald’s as to Whether its Potato Products Contained Certain Allergens did not Warrant Class Action Treatment because Individual Issues Predominate Illinois Federal Court Holds

Plaintiffs filed a nationwide class action against McDonald’s alleging “violations of all of the fifty states’ and the District of Columbia’s consumer fraud and/or deceptive trade practices acts, breach of express warranty, and unjust enrichment”; the class action complaint asserted that plaintiffs suffer from “certain medical conditions” and were deceived by McDonald’s as to the ingredients contained in its french fries and hash browns. In re McDonald’s French Fries Litig., ___ F.Supp.2d ___ (N.D. Ill. May 6, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action, McDonald’s would par-fry (or blanch) its potato products “in an oil made of 99% vegetable oil and 1% natural beef flavor”; the beef flavor, in turn, contained “hydrolyzed wheat bran and hydrolyzed casein (a dairy product).” _Id._ McDonald’s would advertise its potato products, however, as “gluten, wheat, and dairy-free,” thus making McDonald’s representations (according to the class action) “at best incorrect, if not intentionally misleading” – claims that McDonald’s denied. _Id._, at 2. (However, McDonald’s later corrected its disclosures about its potato products.) Plaintiffs disclaimed any physical injury from eating the potato products but alleged economic harm in that they would not have purchased products with allergens (i.e., gluten, wheat or dairy) but for McDonald’s misrepresentations. _Id._ The class action sought to recover the “actual economic harm” suffered by the putative class – “(_i.e._, the purchase price of the Potato Products) based on the difference in value between the gluten, wheat, dairy, and allergy-free products plaintiffs wanted and the non-conforming products they actually received.” _Id._, at 2-3. Plaintiffs’ moved the district court to certify the litigation as a nationwide class action; defense attorneys argued against class action treatment. _Id._, at 3-4. The district court determined that class action treatment was not warranted and therefore denied plaintiffs’ class action certification motion.

Plaintiffs proposed to define the nationwide class to include “All persons residing in the United States…(i) who purchased Potato Products from McDonald’s restaurants on or after February 27, 2002 through February 7, 2006 and (ii) who at the time of purchase had 3 been medically diagnosed with celiac disease, galactosemia, autism and/or wheat, gluten or dairy allergies.” McDonald’s, at 4. After summarizing the Rule 23 requirements governing class action motions and noting the “broad discretion” afforded district courts in deciding whether to grant such motions, see id., at 3-4, the court noted that plaintiffs sought certification of a Rule 23(b)(3) class, which requires (in addition to the four elements set forth in Rule 23(a) of numerosity, commonality, typicality and adequacy of representation) that plaintiffs demonstrate “(1) common issues of law and fact predominate, and (2) a class action is superior to other forms of adjudication,” id., at 4 (citation omitted). But preliminarily, the district court observed that the proposed class is overly broad, as the definition includes people who never saw or heard anything from McDonald’s concerning whether the potato products were allergen free. Id., at 5. This was important given that none of the named plaintiffs suffered any physical reaction from eating McDonald’s potato products despite allergens, id., at 6. As the federal court concluded at pages 6 and 7, “It is fairly assumable…that many persons in the class as defined by plaintiffs have gone on eating defendant’s Potato Products since defendant corrected its disclosure. By any definition, these people have suffered no injury, not even the economic one claimed in this lawsuit.”

Certification of Class Actions Class Action Court Decisions Uncategorized

Bankruptcy Class Action Defense Cases–in re Bally Total Fitness: New York Bankruptcy Court Denies Motions By Class Action Plaintiffs To Permit Class Proof Of Claim, To Certify Class Actions Or To Lift Stay

Motions by Plaintiffs in Class Actions Asserting Labor Law Violations Denied because Class Action Device not “Superior” means of Resolving Employees’ Claims given Bankruptcy Proceeding and because Lifting Stay to Allow Class Action Litigation to Proceed would Waste Defendants’ Resources and Distract from Reorganization Efforts New York Bankruptcy Court Holds

Certain putative class action lawsuits were filed against Bally Total Fitness, which subsequently filed a petition for bankruptcy protection. In re Bally Total Fitness of Greater New York, Inc., 402 B.R. 616, 2009 WL 931537, *1 (S.D.N.Y. 2009). Plaintiffs in one of the class action lawsuits, the “Carrera” plaintiffs, “brought…a class action on behalf of thousands of employees” and alleged that Bally made employees work off-the-clock, failed to provide meal and rest periods, failed to provide timely itemized wage statements or final paychecks, and failed to reimburse business expenses. Id. Plaintiffs in another class action lawsuit, the “Flores” plaintiffs, “brought…a class action on behalf of Bally employees…for unpaid wages, failure to provide meal and rest periods mandated by California law and failure to reimburse business expenses.” Id., at *2. The Flores class action was originally filed in California state court, but defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act of 2005), id. Bally’s employees had entered into a written agreement with the company, the “Bally Total Fitness Corporation Employment Dispute Resolution Procedure” (EDRP), which required that employment-related claims be submitted to arbitration and which contained a class action waiver provision such that employment claims were required to be arbitrated individually. Id. In Carrera, Bally lost a motion to compel arbitration of the individual claims, and appellate proceedings were stayed due to the bankruptcy filing; in Flores, Bally’s motion to compel arbitration of individual claims was pending when the company filed bankruptcy, so a decision on that motion was stayed. Id. Plaintiffs in the Carrera class action moved the bankruptcy court to (1) permit them to file a “class proof of claim,” and (2) lifting the automatic stay so the class action could proceed in state court in order to “liquidate” the claims or, alternatively, certifying the litigation as a class action. Id., at *1. Plaintiffs in the Flores class action moved the bankruptcy court to certify the litigation as a class action. Id. The bankruptcy court denied each motion.

With respect to the Carrera plaintiffs’ request for leave to file a class proof of claim, the bankruptcy court noted that there is “no absolute right to file a class proof of claim under the Bankruptcy Code.” In re Bally, at *2 (citations omitted). Rather, in deciding whether to permit the filing of a class proof of claim, bankruptcy courts consider “a) whether the class claimant moved to extend the application of Rule 23 to its proof of claim; b) whether ‘the benefits derived from the use of the class claim device are consistent with the goals of bankruptcy’; and c) whether the claims which the proponent seeks to certify fulfill the requirements of Rule 23.” Id. (citation omitted). The bankruptcy court denied the motion because plaintiffs “failed to demonstrate that the requested relief would both be consistent with the goals of bankruptcy and satisfy the Rule 23 requirements.” Id. In this regard, the Court explained that class proofs of claim are consistent with the goals of bankruptcy “in two principal situations: (i) where a class has been certified pre-petition by a non-bankruptcy court; and (ii) where there has been no actual or constructive notice to the class members of the bankruptcy case and Bar Date.” Id., at *3. As neither situation applied to either the Carrera or Flores class action complaints, the Court denied the motion to permit the filing of a class proof of claim. Id.

Certification of Class Actions Class Action Court Decisions Uncategorized

Quiznos Class Action Defense Cases–Harlow v. Sprint: Colorado Federal Denies Grants Class Action Treatment Of Class Action Complaint By Prospective Franchisees Against Quiznos Because Of Class Action Bar In Agreement

Class Action Bar in Franchise Agreement Precluded Class Action Certification of Lawsuit by Franchisees Against Quiznos because Class Action Bar was not Unconscionable under Colorado Law Federal Court Holds

Plaintiffs filed a class action against various Quiznos entities and others (collectively “Quiznos”) alleging defendants misled prospective franchisees; the class action complaint asserted that it was only after plaintiffs signed 30-page franchise agreements that defendants revealed the restaurant locations were “not as profitable as Quiznos had promised.” Bonanno v. The Quizno’s Franchising Co., LLC, ___ F.R.D. ___ (D.Colo. April 20, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, Quiznos also failed to provide plaintiffs with “any of the promised expert help,” but nonetheless demanded that they open restaurants within the one-year deadline set forth in the franchise agreements or the agreement would be terminated and Quiznos would keep the franchise fee. _Id._, at 2. The class action centered, then, on claims on behalf of “sold but not opened franchisees,” _id._ (Defendants conceded that “not every signed franchise agreement results in a functioning restaurant,” _id._, at 4.) Plaintiffs moved the district court to certify the litigation as a class action, _id._, at 3. Defendants opposed class action treatment, primarily on the ground that Section 21.4 of the franchise agreement prohibits class action lawsuits between the franchisor and the franchisee. _Id._, at 3. The district court held that class action waiver was enforceable and, accordingly, that class action certification was not warranted. The federal court therefore denied the motion. (We do not discuss in detail the 53-page opinion filed by the district court; it is well worth reading and it is available at the link following this article. For our purposes, the important issue is the enforceability of the class action waiver in the franchise agreement.)

Plaintiffs argued that “[t]he most significant issue…is whether, in light of the provision of the franchise agreements that purports to bar class actions, this case can be maintained as a class action in the first instance.” Bonanno, at 3. The district court held a hearing on the validity of the class action bar, and accepted supplemental briefing on the issue. Id., at 3-4. The district court’s order contains a lengthy discussion of the facts that “help elucidate the Court’s decision to enforce the class action bar.” Id., at 4. We do not summarize those facts here, see id., at 4-17, or the federal court’s summary of the standard of review, see id., at 17-19, or the court’s summary of the “history and evolution of class action litigation,” see id., at 20-25, because the district court held that the class action bar was enforceable and therefore did not address the merits of Rule 23, id., at 19.

Certification of Class Actions Class Action Court Decisions Uncategorized