SLUSA Class Action Defense Cases–Kurz v. Fidelity Management: Seventh Circuit Affirms Removal Of Class Action And Subsequent Defense Judgment In Class Action Holding Class Action Complaint Fell Within SLUSA

Class Action Premised on Violations of “Best Execution” Duty Fell within Scope of SLUSA (Securities Litigation Uniform Standards Act of 1998) so Properly Removed and then Properly Dismissed because Time-Barred and no Proof of Injury Seventh Circuit Holds Plaintiffs, former investors in portfolio managed by Fidelity Management & Research and FMR Co. (collectively “Fidelity”), filed a class action in state court against Fidelity alleging violations of state law and breach of contract based on the allegation that “some of [Fidelity’s] employees placed trades through Jeffries & Co.

Class Action Court Decisions PSLRA/SLUSA Class Actions Removal & Remand Uncategorized

Class Action Defense Cases—In re Fannie Mae: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Southern District of New York

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Largely Unopposed by Class Action Plaintiffs, and Transfers Actions to Southern District of New York Nineteen (19) class actions – 15 in New York and one each in the District of Columbia, Florida, New Jersey and Pennsylvania – were filed against the Federal National Mortgage Association (“Fannie Mae”) and numerous other defendants alleging that “Fannie Mae was undercapitalized during the relevant time period, and that defendants concealed this fact from investors in order to raise capital.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Cases–Langendorf v. Conseco: Illinois Federal Court Grants Motion To Dismiss Class Action’s Consumer Fraud Claim Because It Was Premised On Breach Of Contract And Illinois Law Requires More

Defense Motion to Dismiss Class Action’s Claim under Illinois Consumer Fraud and Deceptive Practices Act (ICFA) Granted because Illinois does not Permit Consumer Fraud/Deception Claim to be Founded on Breach of Contract Illinois Federal Court Holds Plaintiffs filed a class action against Conseco and Conseco Senior Health Insurance Company (Conseco) alleging inter alia breach of contract and violations of the Illinois Consumer Fraud and Deceptive Practices Act (ICFA); specifically, the class action complaint alleged that Conseco formulated a scheme “designed to avoid paying…claims under the pretense of requiring additional documentation of proof of a claim above and beyond a Medicare verification” for the purpose of reducing payments to insureds.

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Telco v. Ameritrade: Eighth Circuit Affirms Dismissal Of Class Action And Refuses To Address Appeal From Denial Of Class Action Certification For Lack Of Live Controversy

District Court Order Dismissing Class Action Affirmed for Failure to Plaintiff to Address Merits of Dismissal and District Court Order Denying Class Action Treatment Affirmed because Plaintiff no Longer Member of Class it Purported to Represent Eighth Circuit Holds Plaintiff filed a class action against Ameritrade, an Internet-based securities brokerage firm, alleging that defendant caused its customers to suffer damages by delaying trade executions; essentially, the class action complained that defendant’s failure to timely execute trade requests resulted in the failure to obtain the best possible prices.

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Lu v. Hawaiian Gardens Casino: California State Court Affirms Summary Judgment For Defense In Labor Law Class Action Except For Class Action Claim Under UCL

Class Action Challenging Casino-Employer’s Tip-Pooling Policy Properly Thrown Out on Summary Judgment, but Single Claim – alleging Casino Violated Unfair Competition Law (UCL) by Sharing Tips with Employer’s Agents – Reversed because Triable Issue of Fact Existed as to Whether Employer Participated in Tip Pool in Violation of California Law State Court Holds

Plaintiff filed a class action against his employer, Hawaiian Gardens Casino, alleging violations of California’s Labor Code and of the state’s unfair business practices statute; specifically; the class action complaint asserted defendant’s written tip pool policy governing casino dealers, which “requires dealers to segregate 15 or 20 percent of the tips they receive at the close of each shift” but permits the dealers to keep the remaining portion of the tips they receive, violated California law. Lu v. Hawaiian Gardens Casino, Inc., ___ Cal.App.4th ___, 88 Cal.Rptr.3d 345, 350 (Cal.App. 2009). According to the allegations underlying the class action, the money placed into the tip pool was distributed among “designated employees who provide service to customers, such as the chip service people (also known as ‘chip runners’), poker tournament coordinators, poker rotation coordinators, hosts, customer service representatives or ‘floormen,’ and concierges.” _Id._ However, defendant’s policy expressly prohibited “employers, managers, or supervisors” to participate in the tip pool, _id._ Defendant moved for summary judgment on the grounds that its tip pooling policy did not violate California law, relying in part on _Leighton v. Old Heidelberg, Ltd._, 219 Cal.App.3d 1062 (Cal.App. 1990). _Id._, at 349. The trial court granted defendant’s motion and dismissed the class action, and the appellate court affirmed.

Defendant paid its dealers the minimum hourly wage every two week, without deduction for any tips they received; defendant did not use the tip pool to “offset or pay” the salaries it paid dealers and did not divert any of the money “for its own use.” Lu, at 350. The dealers’ take home pay was “significantly” in excess of the minimum wage, id. Plaintiff alleged that the casino’s tip pooling policy “constituted a conversion of his wages, and violated employee protections contained in Labor Code section 221 (employers may not compel wage kickbacks); section 351 (employers may not take, collect or receive gratuities); section 450 (employers may not compel employees to patronize the employer); section 1197 (employers may not pay less than minimum wage); and section 2802 (employer indemnification for employee’s necessary expenses).” Id. The class action alleged further that defendant’s policy constituted an unfair business practice, id. The appellate court noted that Leighton held that California law does not prohibit tip pooling in restaurants, but that no California case had addressed tip pooling in casinos. Id., at 349. Plaintiff argued that Leighton was distinguishable because “unlike restaurants where tips are left on the tables, in casinos, gratuities are handed directly to dealers, with the result that such gratuities belong solely to the dealers.” Id. Like the trial court, the Court of Appeal disagreed, concluding that “nothing in Labor Code section 351 prohibits tip pooling in casinos.” Id. The appellate court held further that while certain labor laws did not provide a private right of action, they could “nonetheless serve as predicates for suits under the UCL” and, accordingly, the trial court’s order was reversed as to that limited issue, id.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Lead Toys Class Action Defense Cases–In re Mattel: California Federal Court Denies Motion To Dismiss Class Action Complaint Holding Class Action Allegations Were Adequate Save For Federal CPSA Claim

Defense Motion to Dismiss Class Action Claim under Federal Consumer Protection Safety Act (CPSA) Granted but Remaining Claims in Class Action Adequately Pleaded and Survived Motion to Dismiss California Federal Court Holds

Plaintiffs filed a class action against numerous defendants, manufacturers and retailers of children’s toys, alleging they “sold certain toys that were defective and unsafe, and made actionable representations about the quality of the products.” In re Mattel, Inc., Toy Lead Paint Products Liab. Litig., 588 F.Supp.2d 1111, 1114 (C.D. Cal. 2008). Specifically, the class action focused on three types of toys: “toys that were produced with allegedly unsafe levels of lead paint, toys that included small, swallowable magnets that allegedly pose a hazard to children, and a specific toy blood pressure cuff that allegedly contains high levels of lead, but is not specifically alleged to contain lead paint.” Id. The class action advanced numerous claims for relief, including violations of the federal Consumer Protection Safety Act (CPSA), and of California’s Consumers Legal Remedies Act (CLRA), unfair competition law (UCL), and Song-Beverly Consumer Warranty Act (CWA). Id. The class action defendants included Mattel and Fisher-Price (the “Manufacturer Defendants”), id. n.2, and Target, Toys “R” Us, Wal-Mart, KB Toys and Kmart (the “Retailer Defendants”), id. n.3. The Consumer Product Safety Commission ordered a recall of the lead paint toys and magnet toys, and the Manufacturer Defendants provided replacement toys to consumers. Id. Wal-Mart moved to dismiss the class action claims against it, and the remaining defendants filed a separate motion to dismiss the class action as to them. Id. The district court granted the motion in part, and denied the motion in part.

Defense attorneys first argued that the “a voluntary product replacement pursuant to a 16 C.F.R. § 1115.20 corrective action plan preempts state law remedies seeking reimbursement for an allegedly hazardous product.” In re Mattel, at 1115. The district court disagreed. The federal court explained that CPSC regulations permit a company to “submit a voluntary ‘corrective action plan’ to correct an alleged violation of the consumer product safety laws.” Id. (citing 16 C.F.R. § 1115.20(a)). However, the same regulations “explicitly state that actions taken in a voluntary corrective action plan have ‘no legally binding effect,’ and that the CPSC ‘reserves the right to seek broader corrective action.’” Id. (quoting 16 C.F.R. § 1115.20(a)). If preemption applied, as defendants argued, then a manufacturer could essentially “choose their own remedy to a CPSA violation with no guarantee for input from harmed parties…and little incentive on the part of the CPSC to ensure that the proposed remedy was completely adequate.” Id. (citation omitted). The district court therefore rejected the preemption argument, id., at 1116.

Class Action Court Decisions Uncategorized

Class Action Defense Cases—In re Chrysler: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation In District Of New Jersey

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by Common Class Action Defendant, and Transfers Class Actions to District of New Jersey Five class actions – one each in California, Florida, Illinois, New Jersey, and New York – were filed against Chrysler arising out of an alleged defect in the 2.7 liter engine used in several Chrysler cars; specifically, the class actions alleged that design defects made the 2.

Class Action Court Decisions Multidistrict Litigation Uncategorized

CAFA Class Action Defense Cases–Katz v. Gerardi: Seventh Circuit Reverses Order Remanding Class Action To State Court Holding Class Action Fairness Act May Trump Securities Act Of 1933

District Court Erred in Remanding Securities Class Action to State Court because Evidentiary Hearing Required to Determine Whether Section 22(a) of Securities Act Precluded Removal of Class Action to Federal Court Pursuant to CAFA (Class Action Fairness Act) Complaint Seventh Circuit Holds

Plaintiff filed a putative class action in state court against various defendants purportedly on behalf of “a class of persons who contributed real property (or interests in real property) to the Archstone real estate investment trust, in exchange for interests called ‘A-1 Units’”; the class action complaint asserted that defendants violated federal securities laws. Katz v. Gerardi, 552 F.3d 558, 559 (7th Cir. 2009). According to the allegations underlying the class action, “In 2007 Archstone merged into Tishman-Lehman Partnership. Holders of A-1 Units were offered a choice of cash or Series O Preferred Units in the entity formed by the merger. [Plaintiff] contends that the merger violated the terms of the A-1 Units, because neither cash nor the Series O Preferred Units offered investors the same tax benefits as A-1 Units.” Id. Defense attorneys removed the class action to federal court pursuant to the Class Action Fairness Act of 2005 (CAFA), id. The district court remanded the class action to state court on the grounds that the Securities Act of 1933 prohibited removal, id., at 560. The Seventh Circuit granted defendants’ application for permission to appeal and reversed the district court’s remand order.

The Circuit Court began its analysis by observing, “One might suppose that a statute enacted in 2005 supersedes a statute enacted in 1933, but the district court held that § 22(a) [of the Securities Act of 1933] controls because it is ‘more specific’ than the 2005 Act – for § 22(a) deals only with securities litigation, while the 2005 Act covers class actions in many substantive fields.” Katz, at 560. The Seventh Circuit also noted that “[o]nly purchasers of securities may pursue actions under the 1933 Act,” id. (citation omitted). But the district court found it sufficient that the class action complaint “invokes the Securities Act of 1933,” which, in the district court’s view, was alone sufficient to preclude removal.” Id. The Seventh Circuit disagreed: “It is hard to distinguish between a claim artfully designed to defeat federal jurisdiction and one that is properly pleaded but unsuccessful on the merits, but it cannot be right to say that a pleader’s choice of language always defeats removal.” Id. Based on the Circuit Court’s analysis, “Section 22(a) and the 2005 Act are incompatible; one or the other must yield,” id., at 561, and further that § 22(a) did not “insulate” the class action’s alleged claims under the Securities Act from removal under CAFA. See id., at 561-63.

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

Pfizer Class Action Defense Cases–Clark v. Pfizer: Pennsylvania State Trial Court Grants Summary Judgment As To Certain Class Action Claims And Decertifies Litigation As Class Action

Defense Motion for Summary Judgment Granted as to Class Action’s Express Warranty Claim and Granted as to Other Class Action’s Claims as to Individuals who did not Benefit from Off Label Use of Prescription Drug, and Defense Established Grounds to Decertify Class Action because Individual Questions Predominate Pennsylvania State Trial Court Holds

Plaintiffs filed a class action against Pfizer and Warner-Lambert alleging that their drug, Neurontin, approved by the FDA for epilepsy and for neuralgia, was sold by prescription for “off label” purposes “not approved by the FDA.” Clark v. Pfizer, Inc., Philadelphia Common Pleas Case No. 1819 (February 9, 2009) [Slip Opn., at 1]. The trial court noted that doctors were free to prescribe Neurontin “for any condition that they believe to be appropriate even if not FDA approved,” explaining that this practice “is known as off-label prescribing and although permissible in the medical profession, federal law prohibits a drug manufacturer from promoting off-label uses of an approved medication.” Id. According to the class action, defendants “deliberately and unlawfully promoted Neurontin to physicians for ‘off-label uses’ for which effectiveness had not been scientifically demonstrated.” Id., at 2. Defendants were charged criminally in federal court; they pleaded guilty to two specific violations of off-label marketing, and paid a $240 million fine. Id. The class action asserted claims for misrepresentation, negligence and breach of warranty, and sought reimbursement of all drug costs paid by individuals as opposed to insurers, id., at 1. The trial court certified the lawsuit as a class action; defense attorneys moved to decertify the class action and for summary judgment. Id.

Defendants’ motion stressed that certain physician’s prescribed Neurontin for off-label purposes because they believed it would help – and believed it did help – their patients, not because of defendants’ marketing efforts. Clark, at 2-4. The trial court easily concluded that the class action’s express warranty claim failed because “there is no evidence that plaintiffs saw, heard or in any way received any warranties that Neurontin could be used in circumstances not approved by the FDA.” Id., at 4. Further, “[t]he alleged fraud on the medical profession which is the essence of plaintiffs’ claims does not create any warranty.” Id. Accordingly, the trial court granted summary judgment as to the class action’s express warranty claim, id. As to the misrepresentation and negligence claims, the class action alleged that “through defendants’ concerted activities they incorrectly convinced that entire medical community of the effectiveness of off label uses.” Id. However the evidence presented demonstrated that “some of the class members have suffered no injury” because they “received a medical benefit” from the off-label use of Neurontin, id. The court therefore granted summary judgment “as to those class members who benefited from prescribed off label uses of Neurontin,” but denied the motion as to class members who received no benefit from off label uses. Id., at 4-5.

Certification of Class Actions Class Action Court Decisions Uncategorized

Microsoft/Vista Class Action Defense Cases–Kelley v. Microsoft: Washington Federal Court Grants Microsoft Motion To Decertify Class Action Because Rule 23(b)(3)’s Predominance Requirement No Longer Met

Though District Court Initially Granted Class Action Treatment in Class Action Challenging Microsoft’s Marketing of “Vista Capable” PCs, Motion to Decertify Class Action Granted because Plaintiffs could not Establish Causation Element on a Class-Wide Basis Washington Federal Court Holds

Plaintiffs filed a putative nationwide class action against Microsoft alleging inter alia violations of Washington’s Consumer Protection Act or similar state consumer protection statutes and for unjust enrichment; the class action complaint “challenge[d] various aspects of Microsoft’s marketing of its Windows Vista…operating system.” Kelley v. Microsoft Corp., ___ F.Supp.2d ___ (W.D. Wash. February 18, 2009) [Slip Opn., at 2-3]. According to the allegations underlying the class action, nearly a year before releasing Vista, Microsoft authorized PC manufacturers to place stickers on their computers indicating that they were “Windows Vista Capable”; the class action complained that “a large number” of these computers were in fact capable of operating only the “Basic” version of Vista, not the Premium, Business or Ultimate versions of Vista. _Id._, at 2. The class action additionally alleged that Microsoft’s “Express Upgrade Guarantee Program” permitted customers to upgrade from Windows XP only to Vista Basic, _id._ The gravamen of the class action complaint is that “Basic cannot fairly be called ‘The Real Vista.’” _Id._ Defense attorneys countered that “Basic provides customers with a number of benefits over XP and is part of the Vista line.” _Id._ The district court certified the litigation as a class action, and Microsoft subsequently moved to decertify the class and for summary judgment, _id._, at 1. The district court granted the motion to decertify the litigation as a class action but denied summary judgment.

The federal court began by noting that “a district court may revisit its decision to certify a class in order to address developments that arise during the course of litigation.” Kelley, at 4 (citations omitted). Indeed, “[a] court’s power to revisit certification is ‘a vital ingredient in the flexibility of courts to realize the full potential benefits from the judicious use of the class action device.’” Id., at 5 (citation omitted). Microsoft’s motion for class decertification centered on Rule 23(b)(3)’s predominance requirement, id. “Courts have recognized that consumer fraud cases may present unique considerations when determining predominance” and “courts have decertified classes when it becomes apparent that the predominance factor can no longer be satisfied.” Id. (citations omitted). Defense attorneys argued that plaintiffs cannot establish on a class-wide basis the “causation” element of the complaint’s consumer fraud claim. Id., at 8. The district court agreed.

Certification of Class Actions Class Action Court Decisions Uncategorized