Song-Beverly Class Action Defense Cases—In re Payless ShoeSource: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Eastern District Of California

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Plaintiffs, and Transfers Actions to Eastern District of California Two class actions were filed in the Central and Eastern Districts of California against Payless ShoeSource alleging violations of California’s Song-Beverly Credit Card Act; specifically, the class action complaints allege that “Payless requests and records customers’ personal identification information in violation of California Civil Code § 1747.

Class Action Court Decisions Multidistrict Litigation Uncategorized

FDCPA Class Action Defense Cases–Asset Acceptance v. Hanson: California State Court Affirms Dismissal Of FDCPA Class Action Claims Holding Debt Collector Not Obligated To Inform Debtors That Debts Were Time-Barred

As a Matter of First Impression, Credit Card Debtor’s Class Action Cross-Complaint Alleging Violations of California’s Fair Debt Collection Practices Act (Rosenthal Act) Properly Dismissed on Demurrer for Failure to Define an Ascertainable Class and because Debt Collector was not Obligated to Disclose to Debtors that Debts Sought to be Collected were Time-Barred California State Court Holds

Plaintiff Asset Acceptance filed a lawsuit against debtor Lilia Hanson to collect on a $1300 credit card debt; the debtor filed a putative class action cross-complaint against Asset alleging that it violated California’s Fair Debt Collection Practices Act (“the Rosenthal Act”), which incorporates the federal Fair Debt Collection Practices Act (FDCPA), and Unfair Competition Law (UCL). Asset Acceptance, LLC v. Hanson, (Cal.App., Case No. B208548, April 1, 2009) (unpublished) [Slip Opn., at 1]. The class action claims were premised on the allegation that Asset systematically and fraudulently sought to collect on debts that were time-barred. Id. The central allegation underlying the class action cross-complaint is that Asset purchased credit card debts “for pennies on the dollar and tricks debtors into making payments, which has the legal effect of reviving the debt.” This is because, under California law, “If a debtor acknowledges a debt in writing after the statute of limitations has run, ‘a new obligation is created, for which the original barred debt is said to be “consideration.” The cause of action is on the new obligation, and a new statutory period starts running as on any other written promise.’” Id., at 2 (citations omitted). Asset demurred to the third amended class action cross-complaint; the trial court sustained the demurrer on the ground that the class action sought to represent a class that lacked a “well-defined community of interest.” Id., at 1. In an unpublished opinion, the California Court of Appeal affirmed.

The Rosenthal Act “prohibits debt collectors from using threats, physical force, obscene language, annoying telephone calls, false representations, or falsely simulating a legal action.” Asset Acceptance, at 2 (citations omitted). In part, the statute prohibits a debt collector from obtaining “an affirmation from a debtor who has been adjudicated a bankrupt of a consumer debt which has been discharged in such bankruptcy, without clearly and conspicuously disclosing to the debtor, in writing, at the time such affirmation is sought, the fact that the debtor is not legally obligated to make such affirmation,” id. (citation omitted). The appellate court observed, however, that “The Rosenthal Act is silent on whether a debt collector must give a similar warning when attempting to collect a time-barred debt that has not been discharged in bankruptcy.” Id. This was the central issue on appeal, because the class action alleged that Asset failed to disclose to the putative class members that the debts it was seeking to collect were time barred when it contacted them demanding about payment on the credit card debts. Id., at 3. Further, not only was this a matter of first impression under California case law, but federal courts considering the issue under the FDCPA have reached different conclusions. Id., at 2-3.

Certification of Class Actions Class Action Court Decisions FDCPA Class Actions Uncategorized

Class Action Defense Cases–Budrow v. Dave & Buster’s: California State Court Affirms Defense Judgment In Labor Law Class Action Holding California Law Does Not Prohibit Sharing Tip Pools With Employees That Do Not “Directly Serve” Tables

Trial Court Properly Granted Defense Motion for Summary Judgment in Class Action Alleging Violation of California Labor Code by Sharing Tip Pools with Non-Managerial Employees that only “Indirectly Service” Tables because California Law does not Impose “Direct Table Service” Requirement on Participation in Tip Pools California State Court Holds Plaintiff filed a class action in California state court against, their employer, Dave & Buster’s, alleging labor law violations; the class action complaint was premised “on the theory that distributions from the ‘tip pool’ to persons who did not provide direct table service violated [California] Labor Code section 351.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Countrywide Class Action Defense Cases–In re Countrywide: California Federal Court Grants In Part Motion To Dismiss Securities Fraud Class Action Claims And Holds SEC Rule 430B Not Retroactive

Amended Securities Fraud Class Action Complaint Against Countrywide and Various other Defendants Largely Survives Motion to Dismiss because Allegations in Class Action Complaint Generally Satisfied Heightened Pleading Requirements of Private Securities Litigation Reform Act (PSLRA) and, as Matter of First Impression, SEC Rule 430B is not Retroactive California Federal Court Holds

Plaintiff filed a putative class action against Countrywide and certain individual defendants alleging violations of federal securities laws; the class action was one of “several related securities actions” in the district court involving Countrywide, underwriter defendants and outside directors. In re Countrywide Fin. Corp. Sec. Litig., ___ F.Supp.2d ___ (C.D.Cal. April 6, 2009) [Slip Opn., at 1-2]. Plaintiff’s class action was consolidated with several other class action lawsuits “involving publicly traded Countrywide securities.” _Id._, at 2. The district court appointed lead plaintiffs, and a consolidated amended class action complaint was filed, _id._ By prior court order, dated December 1, 2008, the amended class action complaint was dismissed in part, but the district court granted leave to amend and a second consolidated amended class action complaint was filed. _Id._ Defense attorneys for various defendants again moved to dismiss, _id._ The district court granted the motions in part, but largely denied the motions.

We do not discuss in detail the intensively detailed and fact-driven opinion. In broad terms, after summarizing recent Ninth Circuit authority, see In re Countrywide, at 3-5, and addressing certain evidentiary matters, see id., at 5-6, the district court turned to the merits, following the Ninth Circuit opinion in Glazer Capital Mgmt., LP v. Magistri, 549 F.3d 736 (9th Cir. 2008), which held that a securities fraud complaint must plead facts that constitute strong circumstantial evidence of scienter. The federal court summarily found that the accounting-related allegations against Countrywide, KPMG, and the Individual Defendants, as well as those against the Underwriters, in the second amended class action complaint were sufficient to satisfy the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA). Id., at 6. However, the same could not be said for the insider trading-related allegations: the district dismissed these claims in the original class action complaint, with leave, because of the “weak support” of scienter; the second amended class action complaint “does nothing to alter the insider trading-based scienter analysis” in the prior order, so the federal court dismissed the Section 20A claims with prejudice (except for the claims against Mozilo that post-date October 26, 2006). Id., at 6-7.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases–Lorenzo v. Qualcomm: California Federal Court Dismisses Class Action Finding Plaintiff Lacked Standing To Prosecute Class Action’s Antitrust Claims But Gives Plaintiff Leave To Amend

Class Action Challenging Qualcomm’s Licensing Practices as Anticompetitive Dismissed for Lack of Standing because Plaintiff’s Injury was Too Remote and because California does not Recognize Claim for Common Law Monopoly or for Unjust Enrichment California Federal Court Holds

Plaintiff filed a putative class action against Qualcomm alleging labor law violations; the class action complaint asserted that Qualcomm “is the second-biggest maker of mobile-phone chips and holds more than 1,400 patents which it licenses to more than 130 companies, including chip makers and cell phone manufacturers,” that Qualcomm exercises “monopoly power” over cell phones using CDMA technology, and that Qualcomm engages in various acts that decrease competition and increase costs to consumers. Lorenzo v. Qualcomm Inc., ___ F.Supp.2d ___ (S.D.Cal. March 3, 2009) [Slip Opn., at 1-3]. According to the allegations underlying the class action, plaintiff was harmed by Qualcomm’s “anticompetitive CDMA licensing practices” because he purchased a Palm Treo and a Blackberry Curve from Verizon, and receives cellular service from Verizon. _Id._, at 3-4. The class action also alleged that “CDMA chipset manufacturers suffer direct anticompetitive harm from Qualcomm’s CDMA licensing practices,” including “‘supracompetitive prices and impaired non-price competition in innovation of CDMA functionality.’” _Id._, at 4. The higher costs encountered by the manufacturers are passed along to consumers, _id._ The class action asserted causes of action for violations of (1) California’s Cartwright Act (the state counterpart of the federal Sherman Antitrust Act), (2) California’s Unfair Competition Law (UCL), (3) violations of the Clayton Act (the vehicle for private enforcement of alleged Sherman Act violations), (4) common law monopoly, and (5) unjust enrichment. _Id._, at 4-6. Defense attorneys moved to dismiss the class action, _id._, at 6; primarily Qualcomm argued that plaintiff lacked status to pursue the antitrust claims in the class action complaint, _see, e.g., id._, at 7-8. The district court granted Qualcomm’s motion, but gave plaintiff 30 days leave to amend.

Plaintiff argued that he had standing to prosecute the class action’s antitrust claims because “Plaintiff contends that he need not be a direct consumer or competitor to bring these claims because indirect purchasers have standing to bring an injunctive antitrust claim under both the federal and state antitrust laws” and further “that difficulties in tracing ‘overcharges for components through a distribution chain’ does not preclude standing.” Lorenzo, at 8. According to plaintiff, increased consumer prices for CDMA-capable cellular handset devices were “a direct and foreseeable result of Qualcomm’s anticompetitive licensing practices.” Id., at 8-9. In other words, “even though he was not a participant in the CDMA patent technology market or the CDMA chipset market,” plaintiff claims he suffered an antitrust injury because “the impact on the prices of cellular handsets paid for by the ultimate consumers is clearly foreseeable” and “injury in the form of higher prices to consumers is within the type of injury that the antitrust laws are designed to prevent.” Id., at 9. The district court disagreed, noting that the class action complaint centered on Qualcomm’s alleged anticompetitive CDMA licensing practices. Id., at 10. The district court held that plaintiff’s status as an indirect purchaser, impacted by tracing his alleged injury “through three levels of the supply chain – chipset manufacturers, device manufactures, and vendors,” was “too remote from Qualcomm’s alleged antitrust violations to support standing under the Clayton Act.” Id., at 11. Accordingly, plaintiff lacked standing under the Clayton Act, id., at 12. And while standing under California’s Cartwright Act is broader than under the Clayton Act, see id., at 12-13, the federal court concluded that plaintiff lacked standing under the Cartwright Act as well, id., at 13. And the court further concluded that plaintiff lacked standing to prosecute the class action’s UCL claim, see id., at 14-15.

Class Action Court Decisions Uncategorized

Class Action Defense Cases—In re Lawnmower Engine: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Transfers Class Actions To Eastern District Of Wisconsin

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 Orders Class Actions Transferred to Eastern District of Wisconsin, Where none of the Class Actions had been Filed Twenty-three (23) class actions were filed in 18 federal district courts against numerous defendants, including inter alia Sears, Roebuck and Co., Deere & Co., Kawasaki Motors, and The Kohler Co.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Cases–Martis v. Grinnell Mutual: Illinois State Court Reverses Class Action Certification And Orders Class Action Complaint Dismissed Because Medical Provider Not Third Party Beneficiary Of Insurance Policy

As Matter of First Impression, Class Action Complaint Against Insurance Company Alleging Breach of Contract for Paying Discounted PPO Rate to Medical Providers Without a PPO Contract with Insurer did not Warrant Class Action Treatment because Class Action Failed as a Matter of Law as Medical Providers are not Third Party Beneficiaries of Workers’ Compensation Policies and no Exception Applied Illinois State Appellate Court Holds

Plaintiff, a chiropractor, filed a class action in Illinois state court against Grinnell Mutual Reinsurance Company alleging violation of the Illinois Consumer Fraud Act, conspiracy, unjust enrichment and breach of contract; the class action complaint arose out of defendant’s decision to pay plaintiff a discounted amount for his treatment of a patient. Martis v. Grinnell Mut. Reins. Co., ___ N.E.2d ___ (Ill.App. March 27, 2009) [Slip Opn., at 1-2]. The class action sought to represent “a class of Illinois health care providers who submitted bills to defendant under workers’ compensation insurance and had bills reduced because of a PPO discount even though the providers did not have a PPO contract with defendant.” _Id._, at 2. The class action complaint originally contained seven causes of action, but the trial court granted defendant’s motion to dismiss all claims except the breach of contract claim, _id._, at 2-3. Plaintiff’s moved the trial court to certify the litigation as a class action, and the court granted plaintiff’s motion. _Id._, at 3. Defense attorneys sought and received leave to appeal the class action certification order, _id._, at 3-4. The appellate court reversed, concluding that plaintiff could not state a claim for breach of contract.

Defense attorneys argued that the trial court erred in certifying the litigation as a class action because “plaintiff’s class action [is] based on his breach of contract claim … [but] plaintiff is not an intended third-party beneficiary of the workers’ compensation policy.” Martis, at 4. The Court of Appeal noted that the legal effect of a contract is a question of law, id., and then discussed at length Illinois law governing enforcement of contracts by third parties, see id., at 4-6. The appellate court explained at page 6, “The issue we must decide in this case, whether a medical provider is a third-party beneficiary of a workers’ compensation policy, is one of first impression in this state.” The Court therefore examined the law of sister jurisdictions, see id., at 6-9, and summarized those cases as holding that “medical providers are generally not third party beneficiaries of insurance policies, particularly workers’ compensation policies,” id., at 9. The issue became, then, whether an exception to this general rule applied.

Certification of Class Actions Class Action Court Decisions Uncategorized

Class Action Defense Cases–Beer v. XTO Energy: Oklahoma Federal Court Grants Class Action Treatment To Class Action Against Defendant Improperly Calculated Royalty Payments

Class Action Complaint Challenging Defendant’s Calculation of Royalty Payments based on Inter-Company Sale of Gas to Wholly-Owned Subsidiary Warranted Class Action Treatment Oklahoma Federal Court Holds

Plaintiffs, royalty owners, filed a class action in state court against XTO Energy seeking an accounting of gas produced by certain wells in Texas County, Oklahoma; the class action complaint requested “the legal right to receive a royalty calculated by [XTO]…regarding production from a well in Colorado, Kansas, New Mexico, Oklahoma or Texas.” Beer v. XTO Energy, Inc., ___ F.Supp.2d ___ (W.D. Okla. March 20, 2009) [Slip Opn., at 1]. According to the class action, defendant systematically underpaid royalty owners, _id._, at 2. After defense attorneys learned that plaintiffs were seeking more than $27 million in damages, they removed the class action to federal court. _Id._ Plaintiffs moved the district court to certify the litigation as a class action, _id._ The class action certification motion defined two subclasses: a Kansas subclass consisting of individuals “who receive royalties from at least one well located in Kansas,” and an Oklahoma subclass consisting of individuals “who receive royalties from at least one well located in Oklahoma.” _Id._, at 2-3. Defendant operates the wells at issue in the class action, and “sells the gas produced from the individual wells to its wholly-owned subsidiary, Timberland Gathering and Processing,” _id._, at 3. Defense attorneys opposed class action treatment. The district court determined that class action certification was warranted and granted plaintiffs’ motion.

The district court explained that whether class action treatment is warranted “is an intensely fact-based question that is fraught with practical considerations.” XTO Energy, at 4 (citation omitted). After summarizing the well settled rules governing class action certification under Rule 23, see id., at 4-6, the court stated that it was originally concerned with whether plaintiffs were adequate class representatives, id., at 6. Plaintiffs responded by filing supplemental materials, and the district court turned to the merits of the motion, id. The numerosity prong was not at issue, as defendant conceded that plaintiffs could establish it. Id., at 7. The commonality test also was satisfied because defendant’s own employees conceded that differences in lease language did not affect the royalty payments, id., at 9; the federal court therefore agreed that a common question existed as to whether defendant was permitted to base its royalty payments on an inter-company sale, id., at 8-9. And the typicality test was met because plaintiffs had standing to assert claims on behalf of the class; “defendant’s officers and its expert witness conceded that all royalty owners, regardless of well location, are treated identically by defendant for purposes of royalty payments.” Id., at 10. And finally, the court found that plaintiffs and their counsel would adequately represent the interests of the class, id., at 11-12.

Certification of Class Actions Class Action Court Decisions Uncategorized

Settlement of Class Actions–Chindarah v. Pick Up Stix: California State Court Affirms Dismissal Of Labor Law Class Action Holding Settlements Accepted By Individual Employees Covered By Putative Class Action Complaint Were Enforceable

As Matter of First Impression, Class Action Complaint Alleging Labor Law Violations and Challenging Releases Signed by Employees within Putative Class Action under Direct Settlements Offered by Employer Following Failure to Settle with Named Plaintiffs in Class Action Properly Subject to Summary Judgment because Releases Executed by Members of Class Action were Enforceable California State Court Holds Plaintiffs filed a class action against their former employer, Pick Up Stix, alleging labor law violations; the class action complaint alleged that defendant failed to pay its employees overtime and misclassified employees as exempt from overtime pay.

Class Action Court Decisions Employment Law Class Actions Uncategorized

FCRA Class Action Defense Cases–Harris v. Mexican Specialty Foods: Eleventh Circuit Reverses Dismissal Of FACTA Class Actions Holding FCRA’s Statutory Damage Provision Not Unconstitutional On Its Face

District Court Erred in Dismissing FACTA Class Action Complaints on Grounds that Statutory Damages Awardable under FCRA were Unconstitutional Facially and As-Applied because As-Applied Challenge not Ripe and because Statute not Unconstitutional on its Face in part because Members of Class Actions may have Suffered Actual Damages Eleventh Circuit Holds

Two separate class action lawsuits were filed, one against Mexican Specialty Foods and one against Rave Motion Pictures, alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA), which is part of the Fair Credit Reporting Act (FCRA); specifically, the class action complaints asserted that defendants willfully violated FACTA by including more than the last 5 digits of a customer’s credit or debit card number and/or its expiration date on customer receipts, and sought both statutory damages and punitive damages. Harris v. Mexican Specialty Foods, Inc., ___ F.3d ___ (11th Cir. April 9, 2009) [Slip Opn., at 5-6]. Defense attorneys in each class action moved for summary judgment on the ground that the statutory damages provision of the FCRA is unconstitutional; the federal government intervened as a party-plaintiff “to defend the constitutionality of the statute.” _Id._, at 6. By way of background, and in overly broad terms, the FCRA seeks in part to protect consumer privacy by requiring that merchants safeguard credit information. _Id._, at 3. Toward that end, Congress enacted FACTA, “which is aimed at protecting consumers from identity theft” and which requires that merchants truncate credit/debit numbers on receipts provided to customers at point of sale, _id._, at 3-4 (citing 15 U.S.C. § 1681c(g)(1)). The statutory scheme authorizes private rights of actions for willful violations of the FCRA, including statutory damages of “not less than $100 and not more than $1,000.” _Id._, at 4 (quoting 15 U.S.C. § 1681n(a)(1)(A)). In a single order covering both class actions, the district court held that the statutory damage provision of the FCRA was “unconstitutionally vague on its face and unconstitutionally excessive on its face and as applied to the defendants, in violation of the Fifth Amendment Due Process Clause.” _Id._, at 6. Accordingly, it dismissed the class action complaints with prejudice, _id._ The plaintiffs in each class action appealed and the Eleventh Circuit consolidated the class actions, _id._, at 6-7. The Circuit Court reversed the dismissal of the class action complaints and remanded the class actions to the district court.

After noting that the district court’s ruling on the constitutionality of the FCRA’s statutory damage provision is subject to de novo review, see id., at 7, the Eleventh Circuit turned to whether the case was ripe for adjudication, and it noted that analysis of this issue in facial challenges is different than in as-applied challenges, id., at 8. The Circuit Court readily found that “defendants’ facial challenges to the FCRA are sufficiently ripe for adjudication.” Id., at 9. However, it found the question of whether the as-applied challenge was ripe to be “more problematic.” Id. In connection with its as-applied analysis, the district court assumed that if the class actions succeeded on the merits, then “the plaintiffs would be entitled to monetary awards that would be grossly disproportionate to the harm caused, and that the award would likely bankrupt the defendants.” Id., at 10-11. In the district court’s view, the FCRA mandated a statutory award of $100-$1000 “thus stripping courts of discretion to reduce the verdict below $100 per violation”; as applied, then, the court found that the statutory damage provision of the FCRA would “impose an unconstitutionally excessive penalty” as applied against defendants. Id., at 11. In reversing this finding, the Eleventh Circuit found that the district court assumptions were unwarranted. First, the Court found a dispute existed as to whether defendants would contest class action treatment of the actions. Id. Second, “at this early stage in the proceedings” it was unclear whether putative class members had suffered actual damages, id., at 11-12. And third, it was unclear whether defendants’ violation of FACTA was “willful” within the meaning of the FCRA, which is a prerequisite to an award of statutory damages, id., at 12-13. Accordingly, contrary to the district court’s conclusion, the as-applied challenge to the FCRA was not ripe for adjudication, id., at 13. The Eleventh Circuit therefore limited its review of the district court order to whether the statute was facially unconstitutional. Id.

Class Action Court Decisions FCRA Class Actions Uncategorized