CAFA Class Action Defense Cases–Manson v. GMAC Mortgage: Massachusetts Federal Court Denies Motion To Remand Class Action To State Court Holding Class Action Removable Under CAFA

Class Action Properly Removed to Federal Court under Class Action Fairness Act (CAFA) because Defendants Adequately Established $5 Million Amount in Controversy and because Plaintiffs Failed to Establish that Local Controversy Exception or Home-State Controversy Exception Applied Massachusetts Federal Court Holds

Plaintiffs filed a putative class action in Massachusetts state court against GMAC Mortgage and various other defendants challenging defendant’s mortgage foreclosure practices; specifically, the class action complaint alleges GMAC violated Massachusetts state law in connection with its foreclosure proceedings because “the foreclosed mortgages had not been validly assigned to the foreclosing banks at the time the foreclosure actions were undertaken.” Manson v. GMAC Mortgage, LLC, 602 F.Supp.2d 289, 291-92 (D. Mass. 2009). Plaintiffs’ class action seeks to represent some 1000 people, all residents of Massachusetts residents, “whose primary residence was foreclosed by a power of sale…by a defendant that did not contemporaneously possess a written assignment of the underlying mortgage at the time the Notice of Sale was served” or “who face a pending foreclosure initiated by a defendant that did not have a written assignment of the underlying mortgage when the Notice of Sale was served and/or when a Right to Cure notice was sent.” Id., at 292. According to the allegations underlying the class action complaint, “the defendant banks and law firms knew that the foreclosures violated: (i) the Statute of Frauds…; (ii) the statutory notice and sale requirements…; and (iii) the common-law duty of good faith and diligence.” Id. Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act), id. Plaintiffs moved to remand the class action to state court on the grounds that the $5 million amount-in-controversy had not been shown and that CAFA’s “local controversy” or “home-state controversy” exceptions required that the district court “decline jurisdiction.” Id. The district court denied plaintiffs motion, concluding that the class action had been properly removed.

The federal court began by noting that CAFA, inter alia, creates federal jurisdiction over class actions with minimal diversity where the combined amount in controversy exceeds $5 million and the class action involves 100 members or more. GMAC, at 293. Plaintiffs conceded that minimal diversity was present and that the putative class contained more than 100 members, but insisted that it was not “reasonably probable” that the amount in controversy exceeded $5 million at the time of removal. Id. (In this regard, the district court observed that the time of removal was the relevant inquiry because “[e]vents subsequent to removal that reduce the amount in controversy do not divest a federal court of CAFA jurisdiction.” Id., at 293 n.5 (citing Coventry Sewage Assocs. v. Dworkin Realty Co., 71 F.3d 1, 6 (1st Cir. 1995)).) Under plaintiffs’ analysis, the class action seeks primarily injunctive and declaratory relief, and each class members’ monetary damage is approximately $1200; thus, the amount in controversy is only $1.2 million. GMAC, at 293. Defense attorneys countered that a total of 3,934 loans were “referred for foreclosure” during the putative class period, with 1,048 of these loans proceeding to foreclosure and 48 foreclosed properties being sold to third parties for more than $15 million. Id., at 293-94. GMAC argued that this fact went directly to “plaintiffs’ contingent claim that defendants may be liable for the collective replacement value of the homes that were foreclosed.” Id., at 294 n.8. In the alternative, defense attorneys argued that “the actual amount assessed foreclosed borrowers in costs and fees was approximately $8,000 per transaction,” not the $1200 figure provided by plaintiffs, which would make the amount in controversy approximately $8 million. Id., at 294. The district court found defendant’s evidence sufficient to meet the amount in controversy test, id.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

Class Action Defense Cases–Walker v. Motricity: California Federal Court Remands Class Action To State Court Holding CAFA’s Amount In Controversy Requirement Not Met And Sanctions Defendant For Removal

Class Action Improperly Removed to Federal Court (Twice) because Defendant Failed to Establish $5 Million Amount in Controversy Required by Class Action Fairness Act (CAFA) and Basis for Defendant’s Removal of Class Action Warrants Sanctions Sua Sponte California Federal Court Holds

Plaintiff filed a putative class action in California state court against Motricity alleging violations of every conceivable statute, including the kitchen sink (see NOTE), arising from Motricity’s alleged act of billing for unwanted mobile content. Walker v. Motricity Inc., 627 F.Supp.2d 1137, 1139-40 (N.D. Cal. 2009). According to the allegations underlying the class action complaint, Motricity “allegedly operates mobile transaction networks to help companies develop, deliver and bill for ‘mobile content’ services to compatible mobile devices in California and the nation,” including such services as “customized ring tones, premium text messages, and sports score reports,” and is purportedly “able to reach and bill millions of wireless subscribers nationwide and has registered thousands of transactions and processed thousands of dollars in California over recent years.” Id., at 1139. Plaintiff alleges that Motricity billed her for “unwanted mobile content services on her cellular telephone bill in the form of premium text messages” that she did not authorize, leading to the filing of her class action. Id., at 1139-40. But plaintiff’s act of excessive pleading was more than matched by defendant’s act in response. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), but the district court granted plaintiff’s motion to remand the class action on the ground that Motricity failed to show the requisite $5 million amount in controversy. Id., at 1139, 1140. Defense attorneys again removed the class action to federal court under CAFA “just fifteen days later,” based on a declaration filed by plaintiff’s counsel in an unrelated action which (Motricity alleged) set forth a ratio for revenue that would (if applied in this case) meet the $5 million threshold for removing class actions under CAFA. Id., at 1140. Plaintiff again moved to remand it to state court. Id. The district court granted plaintiff’s motion, and awarded sanctions for frivolous removal of the class action.

After summarizing CAFA and noting the removing party’s burden of demonstrating that removal jurisdiction exists, see Walker , at 1140-41, the federal court observed that Ninth Circuit authority establishes “different burdens of proof for establishing removal jurisdiction in the CAFA context, depending on what has been pled in the complaint,” id., at 1141. If the class action complaint specifically alleges the amount of damages at issue, then it must appear to a “legal certainty” that the amount prayed for is incorrect; in other words, “If the complaint alleges specific damages in excess of the jurisdictional minimum, then the amount in controversy is presumptively satisfied unless it appears to a ‘legal certainty’ that the claim is actually for less than the jurisdictional minimum, whereas if the specific damages are less than the statutory minimum, it must be shown to a legal certainty that the amount in controversy exceeds that minimum for removal.” Id., at 1141 (citation omitted). But if the complaint does not specify the amount in controversy, then “then the court must look beyond the facts of the complaint and apply the preponderance of the evidence standard.” Id. (citations omitted). In its initial order granting plaintiff’s motion to remand the class action to state court, the district court noted that the class action complaint is silent as to the amount in controversy so Motricity was required to show that the amount in controversy exceeded $5 million. Id., at 1141-42. Because it failed to meet that burden, the court remanded the class action to state court. Id.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

Class Action Defense Cases–Garza v. Swift: Arizona Supreme Court Holds Court Of Appeals Lacked Jurisdiction To Hear Appeal From Trial Court Order Denying Class Action Certification Motion

Trial Court Order Denying Class Action Treatment not Appealable because not “Final Judgment” so Court of Appeals Erred in Exercising Appellate Jurisdiction to Review Order Denying Class Action Certification Arizona Supreme Court Holds Plaintiff filed a putative class action in Arizona state court against his former employer, Swift Transportation, a trucking company, alleging labor law violations; specifically, the class action complaint alleged that Swift paid its truck drivers per “dispatched mile” but “systematically underestimated mileage and, by doing so, routinely underpaid its drivers.

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

Class Action Defense Cases—In re Celexa & Lexapro: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Transfers Class Actions To Massachusetts

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, but Transfers Class Actions to District not Mentioned by Any of the Parties, the District of Massachusetts Two class actions – one in Missouri and one in New York – were filed against various defendants, including Forest Laboratories and Forest Pharmaceuticals alleging that defendants “engaged in false and misleading promotion of Celexa and Lexapro for pediatric or adolescent use and sought to induce physicians and others to prescribe Celexa or Lexapro by providing them with various forms of illegal remuneration.

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Class Action Defense Cases–Proctor v. Metropolitan Money Store: Maryland Federal Court Denies Defense Motion To Dismiss Class Action Claims But Grants Plaintiffs’ Motion To Dismiss Counterclaims And Certifies Class Action

Class Action Complaint Adequately Pleaded Claims Against Individual Defendants Arising out of Alleged “Mortgage Foreclosure Rescue Scam” but Defendants’ Counterclaims for Fraud were Barred by Doctrine of Res Judicata Maryland Federal Court Holds Plaintiffs filed a putative class action against Metropolitan Money Store and others alleging that they were “involved in a mortgage foreclosure rescue scam”; specifically, the class action complaint alleged that plaintiffs were “homeowners with substantial equity in their homes, but who were nevertheless facing foreclosure” which “made them targets of Defendants’ promise of credit repair and foreclosure avoidance, which, in actuality, involved fraudulent representations and transactions designed to siphon off the equity in the homeowners’ homes, thus leaving them in a far worse position than before.

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Holk v. Snapple: Third Circuit Reverses Dismissal Of Class Action Holding Class Action’s State Law Claims Regarding “All Natural” Label Not Preempted By Federal Nutrition Labeling And Education Act

District Court Erred in Dismissing Class Action because Class Action’s State Law Claims Alleging Snapple’s Use of Term “All Natural” was Deceptive were not Impliedly Preempted by Federal Nutrition Labeling and Education Act Third Circuit Holds

Plaintiff filed a putative class action in New Jersey state court against Snapple Beverage Corporation alleging inter alia violations of the state’s Consumer Fraud Act; specifically, the class action complaint alleged that plaintiff purchased a Snapple beverage advertised as “All Natural” when in truth the beverage “contained high fructose corn syrup (‘HFCS’), an ingredient manufactured from processed cornstarch.” Holk v. Snapple Beverage Corp., 575 F.3d 329 (3rd Cir. 2009) [Slip Opn., at 1, 5-6]. According to the allegations underlying the class action complaint, “the FDA has acknowledged[] ‘[t]he word “natural” is often used to convey that a food is composed only of substances that are not manmade and is, therefore, somehow more wholesome.’” Id., at 5. The class action therefore alleged that use of the phrase “All Natural” was deceptive because the beverages contain HFCS. Id., at 6, 7. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id., at 7. Eventually, defense attorneys moved to dismiss the class action’s claims on the grounds that they were preempted by federal law, id. Ultimately, the only issue before the district court was “the claim that Snapple products containing HFCS were deceptively labeled ‘All Natural.’” Id. The district court agreed that plaintiff’s claims were preempted and dismissed the class action, id., at 7-8. The district court rejected the express preemption argument, but concluded that plaintiff’s claims were “impliedly preempted by the detailed and extensive regulatory scheme established by the [FDCA] and the FDA’s implementing regulations.” Id., at 8. The Third Circuit reversed.

The Third Circuit noted that Congress has regulated food and beverage labeling for more than 100 years.” Holk, at 3. The statute implicated by this class action is the Nutrition Labeling and Education Act (NLEA), enacted in 1990. Id., at 5. The Circuit Court also noted that there is “a presumption against preemption.” Id., at 11 (citation omitted). Additionally, health and safety issues, including the labeling and branding of food and beverage, has “traditionally fallen within the province of state regulation.” Id. (citation omitted). The federal government became involved in this field only 100 years ago, id., at 11-12. And finally, the Third Circuit held that Snapple’s arguments in the district court waived the express preemption ground as a basis for affirming the judgment on appeal, id., at 12-15, and that “field preemption” did not apply, id., at 15-22. So the Court turned to the issue of implied preemption.

Class Action Court Decisions Class Action Fairness Act (CAFA) Uncategorized

Class Action Defense Cases–Vasilas v. Subaru: New York Federal Court Denies Motion To Dismiss Class Action For Violation Of Federal Odometer Act Holding Class Action Complaint Adequately Alleged Fraud

Class Action Complaint Alleging Violation of Federal Odometer Act Survives Defense Motion to Dismiss because Class Action’s Claim under the Act Pleaded Fraud with Requisite Particularity New York Federal Court Holds

Plaintiffs filed a putative class action against Subaru of America alleging violations of the Federal Odometer Act and related state laws; specifically, the class action complaint alleged that Subaru manufactured vehicles “with defective odometers that deliberately overstated the vehicles’ mileage.” Vasilas v. Subaru of America, Inc., ___ F.Supp.2d ___ (S.D.N.Y. August 5, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, Subaru’s conduct resulted in “shortening the life span of the vehicles’ warranty coverage, decreasing the resale value of their automobiles, and penalizing plaintiffs with unwarranted ‘excessive mileage’ charges on leased automobiles.” _Id._ Defense attorneys moved to dismiss the class action on the grounds that the Odometer Act “is inapplicable to original factory-installed odometers which, regardless of their inaccuracy, are performing consistent with the manner that they were designed and manufactured to operate.” _Id._ The district court denied the motion, ruling that a claim for relief may be pursued for alleged violations of the Odometer Act.

The district court noted that the class action complaint did not allege that the odometers installed by Subaru were defective; rather, the gravamen of the class action was that “Subaru knowingly and purposefully (a) used, (b) installed or (c) had installed into the vehicle a device that biased, altered and inflated the mileage recorded on the vehicle’s odometer from the actual mileage traveled by the vehicle.” Vasilas, at 2. Further, when customers began complaining about possible inaccuracies in the mileage reported, “Subaru expressly, but falsely, represented to its customers that its odometers accurately recorded the actual mileage,” id. In considering Subaru’s motion to dismiss, the federal court noted that “a private plaintiff suing for violations of the Odometer Act must adequately plead that defendant acted with an intent to defraud,” i_d._, at 3-4 (citation omitted), and that fraud must be pleaded with particularity under Rule 9(b), id., at 4.

Class Action Court Decisions Uncategorized

RESPA Class Action Defense Cases–Tubbs v. North American Title: New Jersey Federal Court Dismisses Class Action RESPA Claim And Dismisses Balance Of Class Action After Declining Jurisdiction Over Class Action’s State Law Claims

Class Action Alleging Improper Charges for Settlement Services Failed to State Claim under Real Estate Settlement Practices Act (RESPA) because Class Action Described an “Overcharge” Rather than a “Markup” or a “Fee Split” and Remaining Class Action State Law Claims Dismissed without Prejudice because Court Refused to Exercise Supplemental Jurisdiction over them New Jersey Federal Court Holds

Plaintiffs filed a putative class action against various North American Title entities alleging inter alia violations of the federal Real Estate Settlement Practices Act (RESPA) and the New Jersey Consumer Fraud Act; specifically, the class action complaint alleged that defendants charged improper fees in connection with the refinancing of residential mortgages. Tubbs v. North Am. Title Agency, Inc., 622 F.Supp.2d 207, 207-08 (D.N.J. 2009). According to the allegations underlying the class action complaint, defendants acted as closing agent when plaintiffs refinanced home loans that they had with Wachovia Bank, id., at 208. Among the closing costs charged by defendants was “release recording fee” of $150, but defendants “did not actually record the release of the mortgages”; instead, “Wachovia prepared and recorded the necessary documents…, and passed through to the borrower the $40 per mortgage recording fee charged by the County.” Id. Defense attorneys moved to dismiss the class action, and plaintiffs filed an amended class action complaint that largely tracked the original. Id., at 208-09. Defense attorneys again moved to dismiss the class action, id., at 209. The district court granted the motion.

The federal court explained that the gravamen of the class action’s RESPA claim was that defendants “violated RESPA by charging a settlement fee for which no services were performed.” Tubbs, at 209. Relying on Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384 (3d Cir. 2005), plaintiffs argued that defendants’ charge for recording a release was a “markup” prohibited by Section 8(b) of RESPA. Tubbs, at 209. But the district court explained that Santiago drew a distinction between a “markup” and an “overcharge,” which “occurs when the settlement service provider charges the consumer a fee, of which only one portion is a fee for the reasonable value of ‘services rendered.” Id. (citing Santiago, at 387). The distinction is important because under Santiago “the plain language of Section 8(b) does not provide a cause of action for overcharges.” Id., at 210 (citation omitted). Defendants did not actually engage in “fee splitting” because the fee charged by Wachovia “was not for the same settlement service.” Id. The district court explained at page 210 that the $40 fee charged by Wachovia was “not a fee for any service Wachovia was providing” but represented “the actual cost of recording the discharge with the Camden County Clerk’s office” and Wachovia “was passing on the county recording fee for the mortgage satisfaction as permitted by New Jersey Statute.” Further, the $25 fee charged by Wachovia was “for its work in preparing the mortgage satisfaction and arranging for its recording.” Id.

Class Action Court Decisions Class Actions In The News RESPA/TILA Class Actions Uncategorized

Class Action Defense Cases—In re Park West Galleries: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Selects Western District Of Washington As Transferee Court

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over the Objections of Class Action Plaintiffs, but Transfers Class Actions to Western District of Washington Four class actions – two in Florida and one each in Michigan and Washington – were filed against various defendants, including Park West Galleries and Fine Art Sales, alleging “that defendants operated a fraudulent scheme to sell fake, worthless, or low-value artwork at shipboard auctions or in private sales through the use of phony appraisals and/or other sales-related documentation.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Cases–Martinelli v. Petland: Arizona Federal Court Dismisses RICO Class Action Alleging Sale Of “Mill Bred” Puppies As “Finest Available” But Grants Leave To Amend Class Action Complaint

Class Action Complaint Alleging RICO and State Consumer Protection Law Violations Arising from Sale of “Mill Bred” Puppies to “Unsuspecting Consumers” who Believed they were Acquiring the “Finest Available” Puppies Failed to State Claims Against Defendants Arizona Federal Court Holds

Plaintiffs filed a putative class action against Petland and Hunte Corporation, purportedly on behalf of a class of “residents of various states who bought a Petland puppy, alleging violations of Racketeer Influenced and Corrupt Organizations Act (RICO) [“predicated on alleged violations of the federal mail and wire fraud statutes”], conspiracy, violations of various state consumer protection laws, and violation of Ohio’s Consumer Sales Practices Act.” Martinelli v. Petland, Inc., ___ F.R.D. ___ (D.Ariz. August 7, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, Petland, “a large national retailer of pets,” and Hunte, which “supplies many of the puppies sold at Petland stores,” promised to sell puppies that were “bred under safe and humane conditions by a reputable breeder with proper canine husbandry practices” but were, instead, bred at a “puppy mill,” described by the class action complaint as “a dog breeding operation in which the health of the dogs is disregarded in order to maintain a low overhead and maximize profits.” _Id._, at 1. The class action alleged that, because of the manner in which they were bred, “their puppies were sick at the time of purchase or became ill shortly thereafter.” _Id._ The class action alleged a “scheme” to sell mill-bred puppies to “unsuspecting consumers” who believed they were buying “the finest available” puppies from USDA-approved “professional and hobby breeders who have years of experience in raising quality family pets.” _Id._, at 2. Plaintiffs also claimed that an 8-month investigation by the Humane Society “confirm[ed] Petland’s practice of misrepresenting and concealing the origin of puppy mill puppies.” _Id._ Defense attorneys moved to dismiss the class action, _id._, and the district court granted the motion but with leave to amend.

The federal court first addressed Petland’s motion. Petland, at 3. Defense attorneys argued the RICO and state consumer protection claims failed because “ (i) the alleged misrepresentations are mere puffery, rather than actionable statements of material fact, (ii) the allegations of non-disclosure…fail to state a claim for relief, and (iii) the allegations of fraud have not been pled with particularity.” Id. Also, Petland argued that the class action failed to allege injury or causation, and that as a matter of law the unjust enrichment claim failed. Id. The district court agreed. As to the RICO claim, plaintiffs argued that Petland failed to disclose the origins of its puppies, but plaintiffs failed to allege “that Petland has an independent duty to disclose to consumers the origin of Petland puppies.” Id. Similarly, the RICO claims predicated on alleged misrepresentations failed because plaintiffs failed to plead with particularity the manner in which the “finest available” statements were made. Id., at 4-6. The federal court further agreed that plaintiffs failed to adequately allege proximate cause for their alleged damages, id., at 6-8, and because “proximate causation is an essential element of claims brought under state consumer protection statutes,” id., at 8, the district court granted the motion to dismiss those class action claims as well, id., at 9. Finally, because the unjust enrichment claim is also premised on fraud, that claim failed as well, id.

Class Action Court Decisions Uncategorized