Class Action Defense Cases–Caudle v. Towers, Perrin: New York Federal Court Grants Defense Motion For Judgment On Negligence And Breach Of Fiduciary Duty Class Action Claims Premised On Theft Of Individuals’ Personal Information

Class Action Seeking Credit Monitoring Costs and Identify Theft Insurance Following Theft of Laptops Containing Employees’ Personal Information, including Social Security Numbers, Failed to Establish Negligence or Breach of Fiduciary Duty Claims New York Federal Court Holds

Plaintiff filed a class action against Towers, Perrin, Forster & Crosby, Inc., a benefit and pension consultant to Altria, the parent company of Phillip Morris, where plaintiff worked for 20 years; the class action followed Altria’s disclosure that several laptops had been stolen from Towers’ New York office, and that one of the laptops contained personal information concerning plaintiff, including his social security number. Caudle v. Towers, Perrin, Forster & Crosby, Inc., ___ F.Supp.2d ___, 2008 WL 4104035, *1 (S.D.N.Y. 2008). The class action was filed in federal court under the auspices of the Class Action Fairness Act (CAFA), _id._, at *4. Altria’s letter to plaintiff stated that “although all of the laptops were ‘password-protected,’ only ‘some’ of the files contained on the hard drive of the laptop were protected by a separate and additional password.” _Id._, at *1. Plaintiff received an additional letter directly from Towers stating that it had arranged, and would pay for one year, for Caudle to enroll in the Equifax Credit Watch Gold, a 3-in-1 credit monitoring service that would provide plaintiff “with an early warning system for changes to [his] credit file and help [him] to understand the content of [his] credit file at the three credit reporting agencies.” _Id._ Instead, plaintiff enrolled in “LifeLock,” in part because LifeLock offered more credit fraud insurance than Equifax and because plaintiff believed he needed more than one year of credit monitoring. _Id._, at *2. Plaintiff’s class action alleged that Towers “negligent and breached its contractual and fiduciary duties in allowing the theft to occur,” and sought “to recover the costs of multi-year credit monitoring and identity theft insurance.” _Id._, at *1. Notably, the class action complaint did not allege that plaintiff’s (or any class member’s) personal information had been misused, or that plaintiff had suffered any out-of-pocket loss other than the cost of credit monitoring and identity theft insurance. _Id._ The district court bifurcated discovery, “setting a first phase of discovery to permit the parties to explore whether plaintiff has suffered a compensable injury.” _Id._ At the conclusion of the first phase of discovery, defense attorneys moved for judgment on the class action complaint; the district court granted the motion as to the class action claims for negligence and breach of fiduciary duty, but denied the motion as to the contract claims “without prejudice to the making of a summary judgment motion after the close of all discovery.” _Id._

In granting the defense motion, the district court noted that plaintiff had been told “by Towers, his employer, all three credit reporting agencies and by LifeLock’s marketing materials that, save for the credit fraud insurance, he could perform all the services performed by LifeLock for free.” Caudle, at *2. The class action complaint alleged that plaintiff and 300,000 others “were injured by the theft of the laptops because their personal information was exposed, creating the potential for identity theft and fraud leading plaintiff and the purported class to spend money on monitoring services.” Id. The class action alleged further that “‘[t]he moneys that Plaintiffs reasonably spend to reduce the danger of identity theft and mitigate their damages’ would have to continue ‘beyond the one-year coverage offered by Towers Perrin.’” Id. However, the only actual damages, if any, suffered by plaintiff or the class was the cost for credit monitoring; the class action did not allege any direct financial loss or that any class member had suffered identity theft. Id.

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Brinkley v. Public Storage: In Labor Law Class Action, California State Court Affirms Defense Summary Judgment On Class Action’s Meal And Rest Period Claims Holding Breaks Need Only Be Available

Class Action Claims Alleging Employer Violated State Law because it did not Ensure Employees took Meal and Rest Breaks Failed because Employer need only make Meal and Rest Breaks “Available” but need not “Ensure” they are taken California State Court Holds

Plaintiff filed a class action against his former employer, Public Storage, alleging state labor law violations; in pertinent part, the class action complaint alleged that the paystubs defendant provided to employees failed to comply with state law, and that defendant failed to ensure that employees took all meal and rest breaks permitted by state law. Brinkley v. Public Storage, Inc., 167 Cal.App.4th 1278 (Cal.App. 2008) [Slip Opn., at 2]. The trial court granted plaintiff’s motion to certify the litigation as a class action. Id., at 4-5. Defense attorneys then moved for summary judgment on the grounds that (1) the class action paystub claim failed because defendant’s misstatements were not knowing and intentional, and plaintiff did not suffer any injury, and (2) the class action meal and rest period claims failed because defendant made the breaks available, and California law requires nothing more. Id., at 2. The trial court granted the defense motion and entered judgment in favor of defendant as to all causes of action in the class action complaint premised on those theories (the third, fifth and sixth causes of action). Id., at 5. The California Court of Appeal affirmed. We address the issues in reverse order, because far more labor law class action complaint allege missed meal and rest breaks.

With respect to the class action’s meal and rest period claim, the appellate court held that an employer need only make such breaks available to employees but need not ensure that they are taken. Brinkley, at 10-12 (meal periods) and 12-13 (rest periods). Specifically addressing the class action’s meal breaks claim, the appellate court explained that while plaintiff introduced evidence only that he and other class members “at times missed meal breaks,” but he “did not produce evidence that he or other employees were denied an opportunity to take them.” Id., at 12. Similarly, as for the class action’s rest period claim, defendant pointed to its written policy authorizing employees to take rest breaks, plaintiff’s receipt of that policy, and defendant statements at meetings instructing employees that they were required to take rest periods. Id., at 13. The Court of Appeal held that plaintiff’s allegation that he “could not” take rest breaks was insufficient to raise a triable issue of material fact, id.

Class Action Court Decisions Employment Law Class Actions Uncategorized

PSLRA Class Action Defense Cases–Metzler v. Corinthian Colleges: Ninth Circuit Affirms Dismissal Of Securities Fraud Class Action Holding Class Action Complaint Failed To Meet PSLRA’s Heightened Pleading Requirements

Securities Fraud Class Action Properly Dismissed without Leave to Amend because Class Action Failed to Plead Loss Causation, Scienter or Falsity with Specificity Required by Private Securities Litigation Reform Act (PSLRA) Ninth Circuit Holds

Plaintiff filed a putative class action against Corinthian Colleges (one of the nation’s largest operators of private for-profit vocational colleges) and three of its officers, alleging violations of federal securities laws; specifically, the securities fraud class action alleged violations of §§ 10(b) and 20(a) of the Securities and Exchange Act of 1934 and Rule 10b-5. Metzler Investment GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1055 (9th Cir. 2008). According to the class action complaint, “Corinthian’s colleges are pervaded by fraudulent practices designed to maximize the amount of federal Title IV funding – a major source of Corinthian’s revenue-that those schools receive.” Id. (footnote omitted). Defense attorneys moved to dismiss the class action for failure to meet the heightened pleadings requirements of the Private Securities Litigation Reform Act of 1995 (PSLRA); the district court granted the motion but dismissed the class action complaint with leave to amend. Id., at 1060. Plaintiff filed an amended class action complaint, and defense attorneys again moved to dismiss for failure to meet the PSLRA’s heightened pleading requirements. Id. The district court granted the motion and dismissed the class action without leave to amend, id. The Ninth Circuit affirmed.

We do not here discuss the class action complaint in detail: a detailed summary may be found at pages 1055 through 1059 of the opinion. The Ninth Circuit summarized the class action’s allegations of fraud as including “a variety of false or deceptive schemes: falsifying financial aid applications to obtain federal funds and increase federal award entitlements; encouraging students to falsify federal student aid forms themselves; manipulating student enrollment by counting students not yet enrolled (referred to in the [class action complaint] as ‘false starts’); manipulating or falsifying student grades to maintain federal funding eligibility; exposing the company to bad debt in order to meet regulatory requirements for continued federal funding; delaying notification to federal officials of dropped students and delaying refunds to the federal government after students had dropped; and manipulating job placement data in order to satisfy federal and state regulatory requirements.” Metzler Investment, at 1055. The fraud allegations were based on information from confidential witnesses – “former Corinthian employees that served at numerous campuses in differing capacities” including” campus presidents, admissions officials, financial aid officers, and IT and accounting personnel.” Id., at 1056. The class action complaint relied also on government investigations and private litigation that allegedly confirmed Corinthian’s practices, and noted that certain States had revoked, or were threatening to revoke, Corinthian’s accreditation. Id. With respect to scienter, the class action relied on (1) “suspicious stock sales” totaling more than $33 million by two of the individually-named officers, (2) “Corinthian’s ‘hands on’ management and tracking of student data and information,” to suggest that “Corinthian’s management must have known about underlying fraudulent conduct to achieve maximum federal funding at various schools,” and (3) the allegation that Corinthian’s corporate officers knew that its early revenue recognition practices – “crediting a full month’s worth of tuition regardless of whether a student started at the beginning or end of that particular month” – was improper. Id., at 1058. The bottom line is that the alleged fraud purportedly violated GAAP and inflated Corinthian’s stock price, id., at 1056.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases—In re Toys “R” Us: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Central District of California

Judicial Panel Grants Defense Request for Pretrial Coordination of Two Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by Illinois Class Action Plaintiffs, and Transfers Actions to Central District of California Two putative nationwide class actions were filed in the Central District of California and the Northern District of Illinois against Toys “R” Us alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA); specifically, the class action complaints allege that defendant printed “certain credit and debit card information on customer receipts” in violation of FACTA.

Class Action Court Decisions Class Actions In The News FCRA Class Actions Multidistrict Litigation Uncategorized

Class Action Defense Cases–Cundiff v. Verizon: California State Court Reverses Order Returning Unclaimed Class Action Settlement Funds To Defendant

California Legislature Intended Unclaimed Class Action Settlement Funds to be Used Charitably rather than Returned to Defendant California State Court Holds Plaintiffs filed a class action against GTE California (now Verizon) alleging that it “engaged in unfair business practices by improperly billing residential customers for rented telephone equipment.” Cundiff v. Verizon California, Inc., 167 Cal.App.4th 718 (Cal.App. 2008) [Slip Opn., at 2]. The parties ultimately negotiated a settlement of the class action; under the terms of the settlement, which covered approximately 170,000 class members, Verizon agreed to reimburse three subclasses of customers various monetary amounts, to donate $1 million to certain designated charities, and to pay named plaintiffs $5000 each as an incentive award.

Class Action Court Decisions Uncategorized

Sears UCL Class Action Defense Cases–Thorogood v. Sears: Seventh Circuit Decertifies Class Action Holding Reliance Cannot Be Presumed And Trial On Consumer Protection Class Action Claims Would Require Individual Hearings And Proof

Class Action Certification of Multi-State Class Action Alleging Consumer Protection Act Violations Improper because Reliance on Allegedly False/Deceptive Advertisements cannot be Presumed and Commonality not Present Seventh Circuit Holds

Plaintiff filed a putative multi-state class action against Sears, Roebuck alleging false advertising under various state consumer protection statutes and individual claims for violations of Tennessee’s Consumer Protection Act; specifically, the class action complaint asserted that Sears engaged in deceptive advertising practices in connection with the sale of its Kenmore clothes dryers. Thorogood v. Sears, Roebuck & Co., 547 F.3d 742 (7th Cir. 2008) [Slip Opn., at 1]. According to the class action, “the words ‘stainless steel’ were imprinted on the dryer, and point of sale advertising explained that this meant that the drum in which the clothes are dried inside the dryer was made of stainless steel”; plaintiff, however, believed that this meant “that the drum was made entirely of stainless steel.” Id. The class action was filed in federal court, asserting federal jurisdiction under the Class Action Fairness Act (CAFA). Id., at 2-3. The district court granted plaintiff’s motion for class action certification, id., at 3. In concluding that class action treatment was warranted, the district court reasoned that because “Sears marketed its dryers on a class wide basis…reliance can be presumed.” Id., at 10. The Seventh Circuit granted Sears’ appeal and reversed.

The Seventh Circuit discussed at length the pros and cons of class action lawsuits. See Thorogood, at 3-6. It identified one of the problems with class action lawsuits as “the tendency, when the claims in a federal class action are based on state law, to undermine federalism.” Id., at 6. The Circuit Court explained at page 6, “Our plaintiff wants to litigate in a single federal district court half a million claims wrested from the control of the courts of the 29 jurisdictions in which those claims arose and the law of which govern the claimants’ entitlement to and scope of relief. The instructions to the jury on the law it is to apply will be an amalgam of the consumer protection laws of the 29 jurisdictions, and procedural rules by which particular jurisdictions expand or contract relief will be ignored.” The Court noted, for example, that Tennessee’s Consumer Protection Act does not permit class actions. Id. Defense attorneys argued, therefore, that the class action sought relief on behalf of Tennessee residents that would not be available to them in state court. Id., at 7-8. The Seventh Circuit agreed, observing that “the purpose of the diversity jurisdiction is to protect out-of-state residents against state judicial bias in favor of residents; it is not to expand relief obtainable under state law.” Id., at 8.

Certification of Class Actions Class Action Court Decisions Uncategorized

TILA Class Action Defense Cases–Christ v. Beneficial: Eleventh Circuit Reverses Class Action Certification And Damage Award In Truth-In-Lending-Act Class Action Holding TILA Does Not Authorize Actions Seeking Private Injunctive Relief

Private Injunctive Relief Unavailable Under Truth in Lending Act, so District Court in TILA Class Action Seeking such Relief Improperly Granted Class Action Treatment under Rule 23(b)(2) and Erred Further in Awarding $22 Million in Damages as “Restitution or Disgorgement” under Declaratory Judgment Act Eleventh Circuit Holds

Plaintiff filed a class action against Beneficial Florida, Inc. and numerous affiliates (the Bank) alleging violations of the federal Truth in Lending Act (TILA) in the disclosures made by the Bank in connection with a $2000 loan; the class action complaint alleged that the Bank violated TILA by listing the fee for non-filing insurance (NFI) in the wrong column on the disclosure form. Christ v. Beneficial Corp., ___ F.3d ___ (11th Cir. October 28, 2008) [Slip Opn., at 1-2]. Specifically, the class action alleged that the Bank disclosed the NFI as an “amount charged” when it should have been disclosed as a “finance charge,” _id._, at 4. In part, plaintiff’s class action complaint sought damages, injunctive relief, declaratory relief, and disgorgement, _id._, at 4-5. The Judicial Panel on Multi-District Litigation centralized the class action with other related class actions against the Bank in the Middle District of Alabama, and ultimately the Alabama federal court certified a nationwide class action against the Bank under Rule 23(b)(2), _id._, at 5-6, which authorizes class actions where a defendant acted “on grounds that apply generally to the class, so that injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole,” FRCP Rule 23(b)(2). In certifying the class action, the district court held that “[i]njunctive and declaratory relief are available under TILA,” _id._, at 6 (citation omitted). The district court later granted summary judgment in favor of the plaintiff class “and awarded injunctive relief and over $22 million in restitution and disgorgement pursuant to the Declaratory Judgment Act.” _Id._, at 3. The Eleventh Circuit reversed.

The Eleventh Circuit primarily addressed whether “private injunctive relief” is available under TILA: it noted that TILA is silent on the issue, neither expressly authorizing such relief nor prohibiting it, and that the district court “inferred from TILA’s silence that TILA provides private injunctive relief.” Christ, at 8. Based on its detailed analysis, the Circuit Court disagreed. See id., at 8-12. The Eleventh Circuit then held that certification of a Rule 23(b)(2) class action was inappropriate because the Declaratory Judgment Act, standing alone, would not support such an order. Id., at 12. The Court explained, “The relief sought under the Declaratory Judgment Act is essentially a declaration of liability under TILA, and can only ‘lay the basis for a damage award rather than injunctive relief.’” Id. (citation omitted). Accordingly, because it held that TILA did not authorize private injunctive relief, the Eleventh Circuit vacated the class action certification order. Id.

Certification of Class Actions Class Action Court Decisions Multidistrict Litigation RESPA/TILA Class Actions Uncategorized

SLUSA Class Action Defense Cases–Instituto de Prevision Militar v. Merrill Lynch: Eleventh Circuit Affirms Dismissal Of Class Action By Pension Manager Holding SLUSA Preempts Class Action Securities Fraud Claims Against Merrill Lynch

Class Action Claims Against Merrill Lynch Preempted by SLUSA (Securities Litigation Uniform Standards Act of 1998) because Pension Manager Lawsuit Constituted “Covered Class Action” under SLUSA Eleventh Circuit Holds

Plaintiff, a quasi-governmental agency that manages pension funds for armed forces personnel, filed a putative class action in Florida state court against Merrill Lynch alleging violations of various Florida state laws; it filed separate class action lawsuits against Lehman Brothers and against Pension Fund of America (PFA). Instituto de Prevision Militar v. Merrill Lynch, 546 F.3d 1340, 2008 WL 4723777, *1-*2 (11th Cir. 2008). According to the class action complaint, plaintiff was solicited by Pension Fund of America (PFA) to deposit pension funds with Merrill Lynch in a retirement trust account; believing PFA was the agent of Merrill Lynch, plaintiff invested almost $8 million in PFA through Merrill, id., at *2. The class action alleged further that PFA was carrying out an embezzlement and money laundering scheme, and at the time the class action was filed PFA could not account for almost $3 million of the funds plaintiff invested in it through Merrill Lynch. Id. Defense attorneys moved to dismiss the class action on the grounds that plaintiff’s claims were preempted by the federal Securities Litigation Uniform Standards Act (SLUSA); plaintiff opposed dismissal, arguing that the class action complaint was not a “covered class action” within the meaning of SLUSA. Id., at *3. The district court granted the motion and dismissed the class action. Id. The Eleventh Circuit affirmed.

The Eleventh Circuit explained that “[t]he central question presented on appeal is whether [SLUSA] bars [plaintiff] from pursuing state law claims against Merrill Lynch & Co. and its affiliates for their role in a fraud committed on [plaintiff] by [PFA], a non party to this action.” Instituto, at *1. The Circuit Court summarized the class action as one that arose out of PFA’s theft of funds that it was supposed to have invested, and that sought to hold Merrill Lynch liable under Florida state law for PFA’s fraud “because it allowed PFA to hold itself out as Merrill Lynch’s agent, and because it failed to stop PFA from misappropriating [plaintiff’s] funds.” Id. However, “Congress enacted the Securities Litigation Uniform Standards Act to ensure that securities fraud class actions were brought under federal law.” Id. The district court granted the defense motion to dismiss because it found plaintiff’s class action was a “covered class action” within the meaning of SLUSA. Id. The Circuit Court focused its analysis on whether that determination was correct, see id., at *4, and concluded that it was, id., at *6. The Eleventh Circuit further held that each of the four elements required for SLUSA preclusion had been met by Merrill Lynch. See id., at *6-*10.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases—In re Lending Tree: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation In Western District of North Carolina

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by any Responding Parties, and Transfers Actions to Western District of North Carolina Three class actions – one in California, Illinois and North Carolina – were filed against LendingTree and other defendants alleging that LendingTree failed to “limit access to and/or adequately safeguard private customer information in violation of the Fair Credit Reporting Act.

Class Action Court Decisions FCRA Class Actions Multidistrict Litigation Uncategorized

Class Action Defense Cases–Fernandez v. Victoria Secrets: California Federal Court Grants Final Approval To Settlement Of Labor Law Class Action And Awards Class Action Plaintiffs’ Counsel 34% Of Total Value Of Class Action Settlement

Labor Law Class Action Settlement Providing Class Members with Gift Cards Worth $67.50 found Fair and Reasonable but California Federal Court Reduces Attorney Fee Award from 39.4% to 34% of Class Action Settlement Value Plaintiffs filed a class action against Victoria’s Secret alleging labor law violations; specifically, the class action complaint “alleg[ed] that Victoria’s Secret requires job applicants to participate in a ‘sales tryout’ during which they are trained and directed to work in Victoria’s Secret stores without pay.

Class Action Court Decisions Uncategorized