Engle v. Liggett Group: Defense Persuades Florida Supreme Court To Decertify Class Action Against Tobacco Company And Set Aside $145 Billion Punitive Damage Award As Excessive

Successful Appellate Defense of Class Action Case Still Permits Individual Lawsuits to be Filed, and Florida Supreme Court Holds that Several Jury Findings Against the Tobacco Companies Still Stand

In a tremendous victory for the tobacco industry defense, the Florida Supreme Court decertified a class action and set aside a $145 billion punitive damage award as excessive. Engle v. Liggett Group, ___ So.2d ___, Case No. SC03-1856 (July 6, 2006). A nationwide class action had been certified almost a dozen years ago – on October 31, 1994 – on behalf of smokers and their survivors seeking compensatory and punitive damages for injuries allegedly caused by smoking. survivors, who have suffered, presently suffer or who have died from diseases and medical conditions caused by their addiction to cigarettes that contain nicotine.” Slip Opn., at 7. Following an interlocutory appeal filed by the defense, the Florida Court of Appeal affirmed class certification but reduced the scope of the class action to “Florida citizens and residents.” _See R.J. Reynolds Tobacco Co. v. Engle_, 672 So.2d 39, 42 (Fla.App. 1996). The ensuing trial resulted in a jury verdict awarding the named plaintiffs a total of $12.7 million dollars in compensatory damages, and the entire class $145 billion in punitive damages. Slip Opn., at 9.

With respect to the punitive damage award, the Supreme Court held that the trial court’s procedure was fatally flawed. The trial proceeded as follows: Phase I – consisting of the trial on the class action claims for liability and entitlement to punitive damages; Phase II-A – consisting of the trial on the individual class representative’s claims for compensatory damages; and Phase II-B – consisting of a jury trial on the total award of punitive damages payable to the class as a whole. Slip Opn., at 8-9. Phase III (not yet held) would involve the selection a new juries “to decide the individual liability and compensatory damages claims for each class member,” following which “the trial court would divide the punitive damages previously determined equally among any successful class members.” Id., at 10. The Supreme Court rejected this procedure, as well as the size of the award, explaining at page 19:

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

Hapin v. Arrow Financial: Defense Motion to Dismiss FDCPA Class Action Granted Because Debt Collector Letter Not Misleading California Court Holds

California Federal Court Finds Letter Referring to Debtor as “Customer” and to Debt Collector as “Account Representative,” and Offering to “Help” Resolve Debt, Not Misleading Under Fair Debt Collection Practices Act, But Allegation That Debt Collector Sought to Recover Excess Interest Sufficient to Survive Motion to Dismiss

In January 2006, a putative class action was filed in California federal court against Arrow Financial Services alleging violations of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. (FDCPA), and its California equivalent, California Civil Code, §§1788 et seq. Hapin v. Arrow Fin. Serv., 428 F.Supp.2d 1057, 1059 (N.D. Cal. 2006). Plaintiff’s lawyer asserted that the debt collector letter from Arrow was “false, deceptive, and misleading” in that it (1) described plaintiff as a “customer,” (2) characterized the debt collector as an “account representative,” and (3) offered to “‘help Plaintiff regain his financial future . . . [and] by the false . . . characterization of debt as helping “regain his financial future.”’” Id. The complaint also alleged that Arrow sought to collect excessive interest, id. Defense attorneys filed a motion to dismiss the class action complaint, which the California federal court granted in part and denied in part.

Class Action Court Decisions Class Actions In The News FDCPA Class Actions Uncategorized

Defense of Class Action Cases: Judicial Panel On Multidistrict Litigation (MDL) Transfers FCRA Class Action Cases Against Ocean Financial To Northern District Of Illinois

MDL Judicial Panel Grants Defense Motion To Eliminate Duplicative Discovery, Prevent Inconsistent Rulings, and Conserve Resources of Parties and Court in Pretrial Proceedings of Class Action Cases Three class action lawsuits were filed against Ocean Financial Corp. and its subsidiary Ocean Bank, F.S.B. alleging violations under the FCRA (Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.) in that defendants purportedly used consumer reports “for purposes of mailing prescreened offers of credit for home equity loans to plaintiffs and potential class members.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Schiller v. Tower Semiconductor: Order Granting Defense Motion to Dismiss Class Action Alleging Violation of Security Exchange Act’s Proxy Solicitation Requirements Affirmed By Second Circuit

Second Circuit Reaffirms SEC’s Authority SEC Authority to Create Exemptions to Security Exchange Act’s Proxy Statement Requirements and Upholds Exemption For Foreign Private Issuers – Defense Motion to Dismiss Class Action Affirmed

On June 1, 2006, in Schiller v. Tower Semiconductor Ltd., 449 F.3d 286 (2d Cir. 2006), the Second Circuit addressed a “novel” challenge to exemptions for foreign private issuers to the proxy statement requirements of the Securities Exchange Act (“the Act”). The challenge came in the form of a putative class action premised on the allegation that a proxy statement issued by Tower Semiconductor “was materially misleading and therefore violated §§ 14(a) and 20(a) of the Securities Exchange Act of 1934 . . ., 15 U.S.C. §§ 78n(a), 78t, and certain regulations, including Rule 14a-9, 17 C.F.R. § 240.14a-9 (2004),” id., at 289. The defense moved to dismiss the class action on the grounds that Tower was a foreign private issuer (an Israeli corporation) and therefore exempt from § 14(a) by virtue of Rule 3a12-3 of the Act. See 17 C.F.R. § 240.3a12-3 (2004). Plaintiffs’ lawyer responded that the Securities Exchange Commission (SEC) “exceeded its authority in promulgating Rule 3a12-3,” id. The District Court agreed with defense counsel and dismissed the class action.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Defense of Class Action Employment Law Issues–District Court Order Granting Defense Motion for Summary Judgment In Class Action Arising Out Of “English-Only” Policy Affirmed In Part And Reversed In Part By Tenth Circuit

English Only Policy Supports Claims for Disparate Impact, Disparate Treatment, Intentional Discrimination and Violation of Equal Protection

After the City of Altus, Oklahoma, implemented an “English-only” policy for its employees because “other employees could not understand what was being said on the City radio” when Hispanic employees spoke in Spanish to one another, plaintiffs filed a putative class action asserting numerous discrimination-based claims. Maldonado v. City of Altus, 433 F.3d 1294 (10th Cir. 2006). The district court granted the defense motion for summary judgment with respect to all claims advanced by the class action plaintiffs. The Tenth Circuit affirmed the ruling in part, but permitted the class action to proceed on several key grounds because it found a triable issue of fact as to the allegations of “disparate impact and disparate treatment under Title VII; intentional discrimination under [42 U.S.C.] § 1981; and violation of equal protection under 42 U.S.C. § 1983.” Maldonado, at 1298. We provide but a cursory review of the opinion here; a link to the detailed opinion may be found at the end of the article.

Cutting to the chase, in analyzing the class action claims the Tenth Circuit explained that “disparate-impact claims[] ‘involve employment practices that are facially neutral in their treatment of different groups but that in fact fall more harshly on one group than another and cannot be justified by business necessity.’” Maldonado, at 1303 (quoting Int’l Bhd. Of Teamsters v. United States, 431 U.S. 324, 335-36 n.15, 97 S.Ct. 1843 (1977) (italics added)). The Court further explained that in considering whether a plaintiff’s lawyer has established a prima facie case of disparate impacts (whether in class actions or otherwise), the Court employs a sliding scale: “The less the apparent justification for mandating English, the more reasonable it is to infer hostility toward employees whose ethnic group or nationality favors another language.” Maldonado, at 1305. Maldonado held that a prima facie case existed: “Here, the very fact that the City would forbid Hispanics from using their preferred language could reasonably be construed as an expression of hostility to Hispanics. At least that could be a reasonable inference if there was no apparent legitimate purpose for the restrictions.” Id.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense Cases: Federal Claims Court Certifies Class Action By Nurse Care Managers Against VHA For Failure To Pay Overtime: Defense of Class Actions Issues

Despite “Significant Differences” Between Rule 23 and RCFC 23 (Rules of the United States Court of Federal Claims), and Despite Rarity of Class Action Certification, Class Actions Are Not Disfavored in Court of Federal Claims On March 31, 2006, a United States Court of Federal Claims certified a class action under Rules of the United States Court of Federal Claims (RCFC) 23. Filosa v. United States, 70 Fed.Cl. 609 (2006). Though RCFC 23 “is modeled largely” on class action certification under Rule 23, “‘there are significant differences.

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

ViChip v. Lee: Employment Issues

California Federal Court Grants Summary Judgment Under CFAA (Computer Fraud and Abuse Act) Following Seventh Circuit Opinion In Citrin

On June 9, 2006, the federal district court for the Northern District of California granting summary judgment in favor of an employer (ViChip) against its former CEO, CFO, president, secretary, and sole director (Tsu-Chang Lee), for several wrongful acts, including violating the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030. ViChip Corp. v. Lee, 2006 WL 1626706 (N.D. Cal. 2006), Case No. C 04-2914 PJH. The court rejected defense arguments that Lee’s action did not fall within the class of conduct intended to be covered by CFAA because his actions were “authorized.” Slip Opn., at 11-12.

The case arose out of a 2002 joint venture entered into by ViVoDa (through its president Lee) with two other companies; the joint venture created ViChip to “research, develop, and outsource the production of a particular type of integrated circuit.” Slip Opn., at 1. All ViChip employees, including Lee, signed employment agreements that, in pertinent part, assigned to the company anything the employee invented and promised to maintain in confidence any proprietary information. ViChip filed a patent application in June 2003. Id., at 2.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense Cases: Appointment Of Experienced Class Action Lawyer, Instead Of Plaintiffs’ Lawyer, To Represent Absent Members in Class Actions Not Appealable Second Circuit Holds

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 attorneys may attack the adequate representation requirement of Rule 23 by challenging the qualifications, experience and ability of the plaintiff’s lawyer to represent the interests of absent class members. Because the role of lead plaintiff lawyer in class action cases directly impacts attorneys’ fees, it is not a minor matter.

Certification of Class Actions Class Action Court Decisions Uncategorized

Class Action Defense Issues–Alibrandi v. Financial Outsourcing

Debt Servicer Automatically Becomes Debt Collector Under FDCPA (Fair Debt Collection Practices Act) If Lender Previously Declared Loan In Default Second Circuit Holds

In 1978, Congress added Title VIII to the Consumer Credit Protection Act entitled the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692 et seq., as a line of defense between consumers and debt collectors. (Some states, such as California, have enacted parallel state laws, but those are outside the scope of this article.) Congress intended the FDCPA to establish certain ethical guidelines for the collection of consumer debts, and to provide debtors with a means for challenging payoff demands and determining the validity and accuracy of asserted debts. FDCPA has become fertile ground for class action lawsuits; in some of these class actions, the plaintiff’s lawyer has been so bold as to name law firms and attorneys as defendants, in addition to debt collectors. The lawyer who represents debt collectors must use care as the FDCPA has resulted in surprising rulings. One such surprising case, at least for the defense team, is Alibrandi v. Financial Outsourcing Serv., Inc., 333 F.3d 82 (2d Cir. 2003), a New York putative class action.

By way of background, the FDCPA mandates that debt collectors include certain warnings in their first correspondence with debtors. 15 U.S.C. § 1692e(11). For example, the debt collector must inform the debtor of the name of the creditor, the amount of the debt, and the debtor’s right to challenge the validity of the debt. See 15 U.S.C. § 1692g(a). It is a general rule, however, that these warnings need be provided only by a “debt collector” – they need not be provided by a “debt servicer.” See Alibrandi, at 83 (“Significantly, if Financial Outsourcing were a debt service provider, its correspondence with debtors would not have to include the statutory warnings.”).

Class Action Court Decisions FDCPA Class Actions Uncategorized

International Airport Centers v. Citrin: Employment Issues

“Transmission” Under CFAA (Computer Fraud and Abuse Act) Includes Deleting Files From Company Laptop Computer To Hide Improper Conduct

On March 8, 2006, the Seventh Circuit Court of Appeals considered whether an employer could pursue an action under the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030, against a former employee for securely erasing files from a company laptop computer before quitting and going into competition with his former employer. International Airport Centers, L.L.C. v. Citrin, 440 F.3d 418 (7th Cir. 2006). The provision at issue states that one violates CFAA if one “knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer,” which includes company laptop computers. 18 U.S.C. § 1030(a)(5)(A)(i); Citrin, at 419. In his defense, the employee argued that his action of simply deleting computer files did not fall within the class of acts that would constitute a “transmission” within the meaning of CFAA. The district court agreed and dismissed the employer’s lawsuit. Id., at 418-19.

Class Action Court Decisions Employment Law Class Actions Uncategorized