Class Action Defense Cases–McCready v. eBay: eBay Not A Debt Collector Under Federal FDCPA Or Reporting Agency Under Federal FCRA, And eBay Lawfully Produced Documents Pursuant To Subpoena, Seventh Circuit Holds

Fair Debt Collection Practices Act Requires Affirmative Action, Fair Credit Reporting Act Does Not Apply to Commercial Activity,

On July 10, 2006, a federal appellate court consolidated two appeals and (1) agreed with eBay’s defense team that eBay was not subject to the federal FDCPA (Fair Debt Collection Practices Act) or the federal FCRA (Fair Credit Reporting Act), and (2) affirmed that eBay compliance with a subpoena for records did not violate the federal ECPA (Electronic Communications Privacy Act) or the federal SCA (Stored Communications Act): it therefore affirmed the dismissals entered in both underlying lawsuits. McCready v. eBay, Inc., ___ F.3d ___, 2006 WL 1881142 (7th Cir. 2006). For clarity, we address the two lawsuits separately. The first lawsuit arose from the fact that plaintiff utilized eBay’s services to operate an online business through which he would buy and sell goods. Several eBay users became unhappy with their business dealings with plaintiff; they used eBay’s “Feedback Forum” to explain their dissatisfaction, and several of them notified eBay of their complaints. eBay told plaintiff of the complaints and explained that his accounts would be suspended if the complaints were not resolved. Ultimately, eBay suspended plaintiff’s accounts but offered to reinstate them if he reimbursed monies to the claimants. “Rather than make good on his sales, [plaintiff] embarked on retaliatory litigation,” Slip Opn., at 2, and a summary of that litigation is described in the Note below. Relevant here, plaintiff filed a federal court complaint against eBay alleging violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692 _et seq._, the Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 _et seq._, the Electronic Fund Transfers Act (EFTA), 15 U.S.C. §§ 1693 _et seq._, Title 11 of the U.S. Bankruptcy Code, and nine (9) state law claims. _Id._, at 3. The district court granted the defense motion to dismiss the FDCPA and FCRA claims, and declined to exercise supplemental jurisdiction over the state law claims; the parties stipulated to dismissal with prejudice of the bankruptcy claim. _Id._, at 4.

With respect to the FDCPA claim, the Seventh Circuit observed that eBay simply suspended plaintiff’s accounts until he resolved the outstanding fraud complaints and never threatened to take collection against him; the Court held that such conduct could not be deemed an attempt to “collect” a debt. McCready, at 8. With respect to the FCRA claim, plaintiff asserted that eBay’s “Feedback Forum” constituted a “consumer report, id., at 9. The Court quickly dispatched this claim on several grounds:

Class Action Court Decisions FCRA Class Actions FDCPA Class Actions Uncategorized

Class Action Defense Issues–G.M. Sign v. Global Shop: New Case Law Does Not Constitute “Order Or Other Paper” Permitting Removal Of Class Action To Federal Court After 30-Day Period Has Lapsed Illinois Court Holds

The “Order or Other Paper” Exception to the 30-Day Period to Remove a State Court Action to Federal Court is not Satisfied By New Appellate Law

We have discussed that class action defense often benefits from removal of the case to federal court, and that the Class Action Fairness Act of 2005 (CAFA) greatly expanded access to federal courts in class action cases, in separate articles. If CAFA does not apply, then removal of cases to federal court generally is governed by 28 U.S.C. § 1446, also discussed in prior articles related to class action defense. Broadly speaking, the defense must remove a case to federal court within 30 days of receipt of the complaint or “a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable,” 28 U.S.C. § 1446(b) (italics added). This 30-day time period is “mandatory” but not “jurisdictional.” Fristoe v. Reynolds Metals Co., 615 F.2d 1209, 1212 (9th Cir. 1980); Somlyo v. J. Lu-Rob Enterprises, Inc., 932 F.2d 1043, 1046 (2d Cir. 1991). On May 9, 2006, an Illinois federal district court considered whether a recent Seventh Circuit opinion constituted an “order or other paper” from which federal jurisdiction “may first be ascertained.” G.M. Sign, Inc. v. Global Shop Solutions, Inc., 430 F.Supp.2d 826 (N.D. Ill. 2006).

Plaintiff filed suit a putative class action against Global Shop Solutions in Illinois state court for alleged violations of the federal Telephone Consumer Protection Act, 47 U.S.C. § 227 (TCPA), which the then-existing weight of authority held “vests exclusive jurisdiction in state courts for private actions under the TCPA,” though the Seventh Circuit Court of Appeal had not yet addressed the issue. G.M. Sign, at 827-28 and n.1. In fact, a week Global Shop had been served, an Illinois federal district court remanded a similar TCPA action to state court “holding that the TCPA conferred exclusive [jurisdiction] on the state courts.” Id., at 827 (citing Brill v. Countrywide Home Loans, Inc., 2005 WL 2230193 (N.D. Ill. 2005)). After the time for removal had passed, the Seventh Circuit reversed Brill and held that TCPA claims may be brought in federal court both under federal question jurisdiction and under diversity jurisdiction. Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 451 (7th Cir. 2005). Global Shop removed its class action lawsuit to federal court 32 days after the issuance of Brill.

Class Action Court Decisions Removal & Remand Uncategorized

Harris v. Investor’s Business Daily: California Class Action By Telemarketing Employees Not Preempted By Federal FLSA (Fair Labor Standards Act) California Court Holds

California Appellate Court Holds that Federal Fair Labor Standards Act (FLSA) May Serve as Unlawful Act for California Unfair Competition Claim, and Triable Issues of Fact Exist As to Overtime Pay Claim and Unlawful Deductions for Cancelled Subscriptions Claim

Employees who worked as telemarketers selling newspaper subscriptions filed a class action in California state court “alleging claims under the California Labor Code for overtime pay, unlawful commission deductions, and waiting penalties, and for unfair competition pursuant to [California Business & Professions Code] section 17200.” Harris v. Investor’s Business Daily, 138 Cal.App.4th 28, 31 (Cal.App. 2006). The claims were based on a compensation system whereby employees “were compensated on the basis of a point system which rewarded them for selling longer subscriptions, winning daily contests, and meeting weekly sales goals” but they were “subject to a ‘chargeback’ – a deduction from points earned on a sale if the customer cancelled the subscription within 16 weeks.” Id. To ensure that it complied with state and federal laws, the compensation system provided that employees would be paid no less than the prevailing minimum wage. Id. The complaint was later amended to a add a claim that alleged violations of the federal FLSA (Fair Labor Standards Act, 29 U.S.C. § 207(a)(1)) as the predicate for a new section 17200 violation. Id., at 32. The defense demurrer to the new 17200 cause of action was sustained without leave to amend, and the defense summary adjudication motion as to the balance of the class action claims was granted. Id.

The appellate court first addressed the FLSA-based 17200 claim. The defense had argued that FLSA preempted the claim “because traditional opt-out class actions are available under the California law, while, under FLSA, class members must opt in.” Harris, at 32. Relying upon several unpublished federal court decisions, id., at 34-36, the appellate court concluded that FLSA did not preempt section 17200, and that the purpose behind the federal “opt-in” requirement – “to protect employers from facing ‘financial ruin’ and prevent employees from receiving ‘windfall payments, including liquidated damages'” – is not implicated by a section 17200 claim “limited to restitution.” Id., at 33-34.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense And Employment Law Issues–Loving v. Johnson: Prison Inmates Are Not Employees Under Federal FLSA (Fair Labor Standards Act) For Working At Prison Fifth Circuit Holds

In Case of First Impression for Federal Courts in Fifth Circuit, Court Joins Sister Circuits in Holding that Fair Labor Standards Act (FLSA) Does not Cover Prisoners Working at Prison On July 7, 2006, the Fifth Circuit Court of Appeals considered the appeal of a prison inmate from a federal district court judgment dismissing his action as frivolous. Loving v. Johnson, ___ F.3d ___, 2006 WL 1868320 (5th Cir. 2006). The prisoner filed suit claiming that under the federal Fair Labor Standards Act, 29 U.

Class Action Court Decisions Class Actions In The News Employment Law Class Actions Uncategorized

California Court Agrees With Defense: Holds Both Class Action Plaintiff And Class Members Must Have Suffered Injury In Fact, And Both Must Have Standing Which Requires Detrimental Reliance On Allegedly False Advertising, In Order To Warrant Certification

Pfizer v. Superior Court: Proposition 64 Requires Class Action Representatives and Class Members Satisfy Injury in Fact and District Court Exercise of Discretion to Select Class Action Attorneys Best Able to Represent Absent Class Members is Generally Not Subject to Appellate Review: Class Action Defense Issues

California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code, §§ 17200 et seq., and false advertising statute, id., §§ 17500 et seq., were altered fundamentally by the passage of voter-initiate Proposition 64 in November 2004. In January 2005, a putative class action lawsuit was filed in California state court against Pfizer under California’s UCL and false advertising law (FAL) on the ground that it had “marketed Listerine in a misleading manner by indicating the use of Listerine can replace the use of dental floss in reducing plaque and gingivitis.” Pfizer, Inc. v. Superior Court, ___ Cal.App.4th ___ (Cal.App. July 11, 2006), Slip Opn., at 2. (Prior to Proposition 64, UCL claims were brought as “representative actions”; Proposition 64 amended the UCL and FAL so as to require plaintiffs in such actions to satisfy the requirements for class action lawsuits. _See_ Bus. & Prof., Code, §§ 17203 [UCL], 17535 [FAL].) The trial court certified class action status, describing the class as “all persons who purchased Listerine, in California, from June 2004 through January 7, 2005.” _Id._ The defense filed a petition for writ of mandate, and the appellate court reversed.

In seeking class certification, plaintiff claimed inter alia that his claims were “typical” of the class; the defense disagreed. Pfizer argued that individual issues would predominate over common questions of fact (as detailed in the “Note” below). Slip Opn., at 7. Nonetheless, the trial court certified “a broad class, on an opt-opt basis,” though it noted that whether Proposition 64 amended the standing requirements for class members in UCL class actions is “an open issue.” Id., at 7-8. After carefully analyzing the issue, the California appellate court held that the standing requirements for UCL class actions had been amended by Proposition 64: “Proposition 64 now prohibits any person, other than the Attorney General or local public prosecutors from bringing a lawsuit under the UCL or the FAL unless the person has suffered injury and lost money or property as a result of such violations.” Slip Opn., at 11 (citation omitted).

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

Class Action Defense Cases: D.C. Circuit Grants Federal Government’s Defense Motion To Reassign Class Action

Class Action District Court Judge’s Hostility to Interior Department Makes Him Incapable of Rendering Fair and Impartial Rulings

Federal and state courts are understandably loathe to recuse judges for claims of bias, but on July 11, 2006, in a class action that has been pending for a decade, the United States Court of Appeals for the District of Columbia “reluctantly” granted a federal defense motion to do just that. Cobell v. Kempthorne, ___ F.3d ___, 2006 WL 1889150 (D.C. Cir. 2006). The class action originated in 1996, when five Indians sued the federal government for breach of fiduciary duties in its capacity as trustee of Indian lands by “destroy[ing] critical records, fail[ing] to account to trust beneficiaries, and either los[ing] trust assets or convert[ing] them to government use.” Slip Opn., at 2. By the lawsuit, plaintiffs sought “‘to force the government to abide by its duty to render an accurate accounting’ of the assets held in Individual Indian Money (IIM) trust accounts.” Slip Opn., at 2-3 (quoting _Cobell v. Babbitt_, 91 F.Supp.2d 1, 6-7 (D.D.C. 1999) (“_Cobell V_“)). The case was certified as a class action in 1997, plaintiffs prevailed at trial, and in 1999 the district court ordered the federal government to “come into compliance with their duties.” Slip Opn., at 3 (quoting _Cobell v. Norton_, 240 F.3d 1081,1094 (D.C. Cir. 2001) (“_Cobell VI_“)). The lower court retained jurisdiction over the action and required status reports from the federal government quarterly summarizing its progress. _Id._ In 2001, the D.C. Circuit “generally affirm[ed] the judgment, but cautioned the district court “‘to be mindful of the limits of its jurisdiction’ and therefore to refrain from unduly interfering with Interior’s ‘conduct in preparing an accounting.'” Slip Opn., at 3 (quoting _Cobell VI_, at 1110).

Class Action Court Decisions Class Actions In The News Uncategorized

Kronemeyer v. U.S. Bank: Class Action Alleging Bank Wrongfully Charged Fee To Negotiate Checks Preempted By Federal National Bank Act Illinois Court Holds

Illinois Appellate Court Holds Defense Motion to Dismiss Class Action Should Have Been Granted Because Plaintiffs Lack Standing To Allege Wrongful Dishonor Of Check and Because Federal National Bank Act Preempts Illinois State Law Regarding Fees Charged to Negotiate Checks for Non-Customers

On July 5, 2006, an Illinois appellate court issued a surprising opinion in favor of the defense in a class action case. Illinois follows the rule that courts with interlocutory appeal/certified question procedures usually follow: “Th[e] court’s examination of an interlocutory appeal is usually limited to the questions certified by the trial court and, as with all questions of law, is a de novo review.” Kronemeyer v. U.S. Bank Nat’l Ass’n, ___ Ill.App.3d __ (Ill.App. 2006) (citation omitted) [Slip Opn., at 2]. Rarely do courts deviate from this general rule but the _Kronemeyer_ appellate court did just that, sidestepping one of the questions certified for appeal, addressing a question that had **_not_** been certified for appeal, and reversing the trial court’s order denying the defense motion to dismiss the class action.

Plaintiffs filed a putative nationwide class action alleging that U.S. Bank “regularly charges a fee of $10 to persons who do not have accounts at U.S. Bank and who present for payment checks drawn by its depositors,” and pleading state law causes of action. The defense filed a motion to dismiss the class action on the grounds, inter alia, that plaintiffs lacked standing to prosecute the “wrongful dishonor” claim, and that the claims were preempted by federal National Bank Act, 12 U.S.C. § 93a (2000), and the regulations and regulation interpretations issued by the Office of the Comptroller of the Currency (OCC). Slip Opn., at 2. The trial court denied the motion to dismiss, id., but certified for interlocutory appeal two questions: “(1) whether the plaintiffs’ claims are preempted under the National Bank Act . . . and the regulations and regulatory interpretations issued thereunder by the [OCC] and (2) whether the circuit court has jurisdiction to review whether the OCC correctly interpreted its own regulation or whether that review lies within the exclusive jurisdiction of the federal courts pursuant to the Administrative Procedures Act,” id., at 1 (citations omitted).

Class Action Court Decisions Class Actions In The News Uncategorized

WFS Financial v. Superior Court: Federal Home Owners’ Loan Act (HOLA) Preempts California Automobile Sales Finance Act California Court Holds

California Appellate Court Agrees With Defense And Dismisses Lawsuit Against Lender Based on Federal Preemption: Class Action Defense Issues

WFS Financial and its subsidiary are federal savings associations that operate under the federal HOLA (Home Owners’ Loan Act), 12 U.S.C. §§ 1461 et seq. A car dealer assigned WFS a motor vehicle loan and the borrower defaulted: “WFS repossessed the vehicle, gave notice of its intent to dispose of the vehicle by private sale, sold the vehicle, and filed suit against [the borrower] for the deficiency between the sale price and remaining balance due, including various costs and fees.” WFS Financial, Inc. v. Superior Court, 140 Cal.App.4th 637, 44 Cal.Rptr.3d 561 (Cal.App. 2006). The borrower cross-complained, alleging that WFS failed to comply with California’s Rees-Levering Automobile Sales Finance Act, California Civil Code, §§ 2981 et seq., and included an unfair business practice claim under California Unfair Competition Law (UCL), California Business & Professions Code, §§ 17200 et seq., based on the alleged violations of Rees-Levering. Id., at 563-64. In defense, WFS demurred, arguing that HOLA preempted Rees-Levering. The trial court disagree and overruled the demurrer, and WFS sought a petition for writ of mandate from the California Court of Appeal.. Id., at 564.

Before agreeing with the defense, the appellate court set forth a detailed summary of HOLA, the Federal Home Loan Bank Board (FHLBB) that originally regulated federal savings and loan associations, and FHLBB’s replacement by the Office of Thrift Supervision (OTS). Id., at 565-68. The Court highlighted evidence from numerous sources that Congress intended HOLA to preempt state laws and regulations, concluding:

Class Action Court Decisions Class Actions In The News Uncategorized

Bell v. Farmers Insurance: Defense Deposit Of Class Action Judgment Funds With Claims Administrator Constituted Satisfaction Of Judgment Cutting Off Post-Judgment Interest California Court Holds

California Appellate Court Holds that Defense in Class Action Gave Up Control of Funds for Payment of Damages Satisfying Payment of Judgment and Ending Obligation to Pay Postjudgment Interest Employees filed an overtime pay class action against Farmers Insurance Exchange, ultimately resulting in a jury verdict against the defense totaling nearly $90,000,000 for unpaid time-and-a-half and double-time. The trial court awarded prejudgment interest in the class action, and approved a plan for distribution of the funds to the class members.

Class Action Court Decisions Uncategorized

Chong v. State Farm: Class Action Alleging Insurer’s Violation of California’s Make-Whole Rule Survives Defense Motion To Dismiss Federal District Court Holds

California District Court Rejects Defense Rule 12(b)(6) Motion to Dismiss Class Action and Holds, as Matter of First Impression, that Insured is Entitled to Recover Lawyer Fees and Costs to be Made Whole

Liability insurers may pay a first party claim and then seek reimbursement from the third-party tortfeasor either by (1) joining in and/or financing the insured’s action against the responsible party, or (2) waiting until the insured prevails in a lawsuit against the third party and then demanding reimbursement. Kathleen Chong filed a putative class action against State Farm Mutual Automobile Insurance Company alleging that it violates California’s make-whole rule waiting until the insured prevails in a lawsuit against the third party and then demanding reimbursement in full, regardless of the amount of the insured’s recovery. Defense attorneys filed a motion to dismiss the class action under Rule 12(b)(6), and the motion was denied. Chong v. State Farm Mut. Auto. Ins. Co., 428 F.Supp.2d 1136 (S.D. Cal. 2006),

The facts underlying the class action representative’s claim are as follows. Chong had first party medical insurance limits of $5,000; she was injured in a car accident, and State Farm paid her $5,000. Chong then filed suit against the driver of the other car; State Farm knew about the lawsuit but did not participate in it and did not fund it. Ultimately, Chong spent $28,000 in litigation costs and settled the case for $65,000. State Farm then demanded reimbursement of the $5,000 it paid under the policy. Chong, at 1138. Plaintiff filed a class action against State Farm, alleging that it acted improperly because “her net recovery after taking into account her attorney fees and costs was far below the amount she needed to make her whole.” Id.

The defense motion to dismiss argued that California has not adopted a “blanket make whole rule” and that “no California case . . . has ever held that a policyholder’s payment of attorney fees to secure a damage recovery from a third party means the policyholder has not bee made whole and that the carrier is therefore not entitled to reimbursement.” Chong, at 1139. The District Court disagreed. First, it concisely summarized California law on the make-whole rule:

Class Action Court Decisions Uncategorized