FDCPA Class Action Defense Cases–Barany-Snyder v. Weiner: Sixth Circuit Affirms Judgment On The Pleadings on FDCPA Class Action Holding Attachment Of Entire Contract To Debt Collection Complaint Was Not An Effort To Enforce Each Term In Contract

Class Action Complaint Failed to Adequately Allege Violations of Fair Debt Collection Practices Act (FDCPA) because Mere Attachment of Entire Contract with Unenforceable Attorney Fee Clause to Debt Collection Complaint Underlying Class Action was not an Attempt to Collect Attorney Fees where Debt Collection Complaint did not Pray for Such Fees Sixth Circuit Holds

Plaintiff filed a class action complaint in Ohio federal court against two debt collection attorneys and the law firm where they worked, Keith D. Weiner & Associates; defendants had filed a lawsuit against plaintiff in Ohio state court seeking to recover $8,146.53, plus interest at the rate of 16% per annum and costs alleged owed a college under a revolving credit agreement that contained the following attorney fees clause: “I/We understand that upon default of any, or all of the terms and conditions of this credit agreement and upon proper service of a NOTICE OF DEFAULT by the College, all signers immediately become, at the option of the college, liable for attorney fees and/or actual or reasonable collection costs which may be added to the Total Amount Due.” Barany-Snyder v. Weiner, 539 F.3d 327, 330 (6th Cir. 2008). The collection action did not seek attorney’s fees, and the court entered in favor of the college did not award attorney fees because the college did not seek such an award. Id., at 331. Plaintiff filed for bankruptcy protection, and the college’s debt ultimately was discharged. Id. Plaintiff’s class action complaint alleged that defendants violated the federal Fair Debt Collection Practices Act (FDCPA) and Ohio’s Consumer Sales Practices Act; the class action alleged that Ohio law “prohibits creditors from recovering attorney’s fees in connection with the collection of a consumer debt,” and that defendants violated state and federal law by attaching the college’s credit agreement with the attorney fees clause to the state court complaint. Id. Defense attorneys moved for judgment on the pleadings, arguing that the class action failed to state a claim; the district court granted the motion and plaintiff appealed. Id. The Sixth Circuit affirmed.

Plaintiff’s theory of the case was that “all signers immediately become, at the option of the college, liable for attorney fees and/or actual or reasonable collection costs” and that this violated the FDCPA’s prohibition against making false, deceptive, or misleading representations in connection with the collection of a debt. Barany-Snyder, at 332. The Sixth Circuit disagreed, holding that because the credit agreement was attached in its entirety, and because the attorney fee clause was not “drawn to the consumer’s attention,” even the “least sophisticated debtor” would not have interpreted the debt collection lawsuit as one seeking attorney fees. Id., at 334-35. The Circuit Court explained at page 335, “Indeed, as the district court noted, adopting [plaintiff’s] position leads to the untenable conclusion that the attachment of a contract to a complaint or dunning letter is equivalent to a present threat to exercise every provision of that contract.” Additionally, “while attachment of an affidavit asserting a possible entitlement to attorney’s fees might have been misleading and deceptive to the least sophisticated consumer, this conduct simply did not amount to a false representation in violation of § 1692e(2).” Id., at 335 (citation omitted). Accordingly, defendants’ debt collection action failed to state a claim under § 1692e(2). Id., at 335-36. Finally, the Circuit Court further affirmed that the debt collection action did not attempt to collect a debt in excess of the amount lawfully owed, so defendants did not violate § 1692f(1) as alleged in the class action complaint. Id., at 336. Accordingly, the Sixth Circuit affirmed the district court judgment dismissing the class action complaint, id.

Class Action Court Decisions FDCPA Class Actions Uncategorized

Class Action Defense Cases–Lee v. Dynamex: California Court Reverses Denial Of Class Action Certification Holding Erroneous Discovery Ruling Precluded Plaintiff From Meeting Burden Of Showing Commonality And Typicality Of Claims

Trial Court Erroneous Order in Labor Law Class Action Denying Motion to Compel Discovery of Contact Information of Putative Class Members Deprived Plaintiff of Opportunity to Develop Evidence Required to Support Motion for Class Action Certification thus Requiring Remand California Court Holds

Plaintiff filed a putative class action against parcel delivery company, Dynamex, alleging labor law violations; specifically, the class action complaint alleged that Dynamex, a nationwide courier and delivery service, “had improperly reclassified the drivers from employees to independent contractors in violation of California law.” Lee v. Dynamex, Inc., ___ Cal.App.4th ___ (Cal.App. August 26, 2008) [Slip Opn., at 2]. Prior to seeking class action certification, plaintiff sought to compel Dynamex to identify and provide contact information for putative class members; the trial court denied the motion, and subsequently denied class action treatment of the lawsuit. _Id._ The California Court of Appeal reversed, holding that “the trial court’s discovery ruling directly conflicts with the Supreme Court’s subsequent decision in _Pioneer Electronics (USA), Inc. v. Superior Court_ (2007) 40 Cal.4th 360 (_Pioneer_), as well as our decisions in _Belaire-West Landscape, Inc. v. Superior Court_ (2007) 149 Cal.App.4th 554 and _Puerto v. Superior Court_ (2008) 158 Cal.App.4th 1242 (_Puerto_), and that ruling improperly interfered with [plaintiff’s] ability to establish the necessary elements for class certification….”_Id._, at 2.

Since 2001, Dynamex has employed approximately 800 drivers and has operated out of four locations in California; and in December 2004, the company reclassified its drivers as independent contractors “after management concluded such a conversion would generate economic savings for the company.” Lee, at 2. We do not go into greater detail as to the facts underlying the class action allegations, as they are not material to the issue resolved by the appellate court. In brief, plaintiff worked for Dynamex for 15 days, and filed his class action complaint three months after he stopped working for the company. Id., at 3. In essence, the class action alleged that as independent contractors, Dynamex drivers “performed the same tasks in the same manner as they did when they were classified as employees,” id. Soon after filing his class action, plaintiff sought from Dynamex discovery of the names and addresses of all drivers who had worked as independent contractors for the company; Dynamex objected on the ground that its employees should be given the right to “opt-in” to the request, relying on the then-recent appellate opinion in Pioneer Electronics (USA) Inc. v. Superior Court (Mar. 30, 2005, B174826), which held that “opt-in” letters protected consumer privacy rights by giving them the right to choose whether they wished to have their personal contact information shared with class action plaintiff lawyers. Id., at 3-4. The trial court denied plaintiff’s motion to compel as “premature,” and stated personal contact information would not be ordered disclosed unless and until the litigation had been certified as a class action. Id., at 4.

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

Class Action Defense Cases–In re Merck: Third Circuit Reinstates Class Action Against Merck Holding District Court Erred In Dismissing Securities Class Action Because Class Action Plaintiffs Were Not On Inquiry Notice Sufficient To Time Bar Claims

Fact Stock Price did not React to “Storm Warnings” Contradicted District Court Finding that Class Action Plaintiffs were on Inquiry Notice of Class Action Claims so as to Commence Statute of Limitations Third Circuit Holds

“[Plaintiffs], purchasers of Merck & Co., Inc. stock, filed the first of several class action securities fraud complaints on November 6, 2003, alleging that the company and certain of its officers and directors…misrepresented the safety profile and commercial viability of Vioxx, a pain reliever that was withdrawn from the market in September 2004 due to safety concerns.” In re Merck & Co., Inc. Securities, Derivative & “ERISA” Litig., 543 F.3d 150 (3d Cir. 2008) [Slip Opn., at 3]. The class action complaint alleged that defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934, and Rule 10b-5 by “materially misrepresent[ing] the safety and commercial viability of VIOXX,” id., at 15. Defense attorneys moved to dismiss the class action claims on the ground that they were barred by the statute of limitations, and that the allegations in the class action complaint failed to meet the heightened pleading requirements under the Private Securities Litigation Reform Act of 1995 (PSLRA); the district court granted the motion to dismiss on the first ground, and did not reach the PSLRA argument. Id., at 15-16 and n.8. Plaintiffs appealed, challenging the district court’s finding that “there was sufficient public information prior to November 6, 2001 to trigger Appellants’ duty to investigate the alleged fraud.” Id. The Third Circuit reversed.

We do not discuss the Circuit Court’s 36-page majority opinion in detail, and we do not here summarize the history of Vioxx, leading up to the first class action lawsuit in May 2001, see In re Merck, at 4-9. The FDA sent Merck a warning letter on September 21, 2001, regarding the “marketing and promotion” of Vioxx and stating in part “that Merck’s ‘promotional activities and materials’ for the marketing of Vioxx were ‘false, lacking in fair balance, or otherwise misleading in violation of the Federal Food, Drug, and Cosmetic Act (the Act) and applicable regulations.’” Id., at 9. The FDA’s letter “received widespread coverage by the media and securities analysts,” id., at 10; nonetheless, securities analysts “all maintained their ratings for Merck stock at ‘buy’ or ‘hold’ and/or continued to project increased future revenues for Vioxx,” id., at 11-12. Merck’s stock price did decline in the days immediately following the FDA warning letter, it quickly rebounded and by October 1, 2001 the stock price closed higher than before the announcement of the FDA warning letter a week before. Id., at 12. More product liability class action lawsuits were filed against Merck on September 27, 2001, see id., and the New York Times reported on the health risks of Vioxx in early October 2001, see id., at 12-13. Cutting to the chase, Merck withdrew Vioxx from the market in September 2004, and securities analysts began recommending that Merck stock be sold. See id., at 14-15.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases—In re Epogen & Aranesp: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff’s To Centralize Class Action Litigation But Send Class Actions Back To Central District Of California

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Objection of Certain Class Action Plaintiffs and Defendants and Objection of Common Defendant, but Transfers Class Actions Back to Central District of California, Where Class Actions Originally had been Filed Five nationwide class actions were filed in five different federal courts against common defendant Amgen and various other defendants; the class action lawsuits “concern[ed] Amgen’s marketing of its Epogen and Aranesp anemia drugs, and they also all involve alleged violations of California statutory law.

Class Action Court Decisions Multidistrict Litigation Uncategorized

TILA Class Action Defense Cases–Andrews v. Chevy Chase: Seventh Circuit Reverses Class Action Certification Of TILA Class Action Against Chevy Chase Bank Holding Rescission Not Available In Class Actions Under TILA

Truth-in-Lending Act (TILA) Class Action Lawsuit Erroneously Granted Class Action Status because TILA does not Permit Rescission as a Class Action Remedy only Damages Seventh Circuit Holds

Plaintiffs filed a putative class action against Chevy Chase Bank for violations of the federal Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq.; the class action complaint alleged that, in connection with its adjustable rate mortgage loans, the Bank failed to make the disclosures required by federal law. Andrews v. Chevy Chase Bank, 545 F.3d 570 (7th Cir. 2008) [Slip Opn., at 3-4]. The class action sought not only statutory damages and attorney fees, but prayed for rescission as well, id., at 4.. The district court granted plaintiffs’ motion for class action certification, see Andrews v. Chevy Chase Bank, FSB, 240 F.R.D. 612 (E.D. Wis. 2007); our summary of that opinion may be found here. The author stated in that summary, “[T]he author notes that the court’s analysis is brief and superficial, and fails to address any of the cases that hold rescission to be unavailable on a class-wide basis. See, e.g., McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 423 (1st Cir. 2007) (holding that ‘as a matter of law, class certification is not available for rescission claims, direct or declaratory, under the TILA’).” Defense attorneys filed an interlocutory appeal: the Seventh Circuit explained, “we are called on to answer one question: May a class action be certified for claims seeking the remedy of rescission under the Truth in Lending Act (‘TILA’), 15 U.S.C. § 1635? The only two federal appellate courts to have addressed this question have answered ‘no,’ see McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir. 2007); James v. Home Constr. Co. of Mobile, Inc., 621 F.2d 727 (5th Cir. 1980), and we agree. TILA’s statutory-damages remedy, § 1640(a)(2), specifically references class actions (by providing a damages cap), but TILA’s rescission remedy, § 1635, omits any reference to class actions. This omission, and the fundamental incompatibility between the statutory-rescission remedy set forth in § 1635 and the class form of action, persuade us as a matter of law that TILA rescission class actions may not be maintained.” Id., at 1-2. Accordingly, the Seventh Circuit reversed.

The Circuit Court noted that because the issue presented in the appeal is “purely legal” – viz., whether class action claims for rescission may be pursued under TILA – the district court order is subject to de novo review, rather than the “abuse of discretion” standard generally employed when reviewing an order granting class action certification. Andrews, at 5. The Seventh Court noted at page 6, “Whether TILA allows claims for rescission to be maintained in a class-action format is an issue of first impression in our circuit, but the First and Fifth Circuits, in addition to California’s court of appeals, have held as a matter of law that rescission class actions are unavailable under TILA.” (Citations omitted.) The problem, in the Circuit Court’s words, was simple: TILA provides borrowers with a right of rescission under certain circumstances: “Debtors may rescind under TILA by midnight of the third business day after the transaction for any reason whatsoever…. Rescinding a loan transaction under TILA ‘“requires unwinding the transaction in its entirety and thus requires returning the borrowers to the position they occupied prior to the loan agreement.”’ Id. (citations omitted). The remedy is considered “purely personal”: “It is intended to operate privately, at least initially, ‘with the creditor and debtor working out the logistics of a given rescission.’” Id., at 7 (citations omitted). Moreover, the rescission remedy provided for in TILA “appears to contemplate only individual proceedings; the personal character of the remedy makes it procedurally and substantively unsuited to deployment in a class action.” Id. (citation omitted). Put simply, “Rescission is a highly individualized remedy as a general matter, and rescission under TILA is no exception. The variations in the transactional ‘unwinding’ process that may arise from one rescission to the next make it an extremely poor fit for the class-action mechanism.” Id.

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

Attorney Fee Class Action Defense Cases–In re Nortel Networks: Second Circuit Affirms Class Action Attorney Fee Award Of 3% Of Value Of Nortel Securities Class Action Settlement Rather Than 8.5% Negotiated With Lead Plaintiff

District Court Order Reducing Fee Award from 8.5% Negotiated with Lead Plaintiff to 3% of Value of Securities Class Action Settlement not Subject to Attack on PSLRA Grounds because Argument Waived as not Raised below and Attorney Fee Award is Reasonable Second Circuit Holds

Plaintiffs filed a class action complaint against Nortel Networks alleging violations of federal securities laws; specifically, the class action alleged that defendant “knowingly and recklessly issued false and misleading statements and engaged in various accounting manipulations causing its stock price to be inflated between October 24, 2000 and February 15, 2001.” In re Nortel Networks Corp. Securities Litig., 539 F.3d 129, 130-31 (2d Cir. 2008). After several years of litigation, the parties reached a settlement of the class action (Nortel I); the district court gave final approval to a class action settlement valued at more than $700,000,000. Id., at 131. As part of the settlement, class counsel negotiated a fee award under the Private Securities Litigation Reform Act of 1995 (PSLRA) that provided for an attorney fee award of 8.5%. Id., at 130. At the same time, Nortel settled another class action involving similar securities claims filed on behalf of a separate class of plaintiffs (Nortel II); the value of that class action settlement also was valued at more than $700 million. Id., at 131. Class counsel in each class action sought an award of attorney fees: the district court in Nortel II awarded approximately 8% of the total class recovery in fees; the district court in Nortel I awarded approximately 3% of the total class recovery in fees. Id. Class counsel in Nortel I, Milberg Weiss & Bershad LLP, appealed the fee award, id., at 130, and the Second Circuit affirmed.

The district court based its attorney fee award on its independent analysis of the factors set forth by the Second Circuit in Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 50 (2d Cir. 2000); this analysis led the district court to conclude that an 8.5% fee award would be excessive and that a 3% fee award – amounting to approximately $34 million – would be “fair and reasonable.” In re Nortel Networks, at 131-32. On appeal, “Milberg argues that the district court erred by disregarding the purportedly altered fee-award scheme under the [PSLRA] pursuant to which Milberg’s negotiated fee with the lead plaintiff would have been presumptively reasonable.” Id., at 130. The Second Circuit held that Milberg waived the argument by failing to raise it in the district court. See id., at 132-34. Turning to the reasonableness of the fee award itself, the Second Circuit held that it “will not overturn a district court’s award of attorneys’ fees ‘absent an abuse of discretion, such as a mistake of law or a clearly erroneous factual finding.’” Id., at 134 (citation omitted). The Circuit Court noted that the district court properly considered each of the relevant factors, and that it “carefully weighed” those factors in making its award. Id. The Court rejected Milberg’s argument that “the district court abused its discretion in part because it awarded a fee significantly below those awarded in other cases where we have upheld higher percentage fees and higher lodestar multipliers” and “erred by not using the 8% Nortel II award as a ‘benchmark,’” id. While the award was “toward the lower end of reasonable fee awards,” and while the Circuit Court was “troubled by the district court’s failure to discuss Nortel II and why it believed the fee award here to be more reasonable,” the question on appeal was “not whether we would have awarded a different fee, but rather whether the district court abused its discretion in awarding this fee.” Id. Accordingly, the Circuit Court affirmed the district court’s attorney fee award. Id.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

CAFA Class Action Defense Cases–Lloyd v. General Motors: Maryland Federal Court Denies Motion To Remand Class Action Holding That Under Maryland Law Amendment Adding New Plaintiffs Commenced New Action Under Class Action Fairness Act

Products Liability Class Action Complaint Originally Filed in 1999 Removable under CAFA (Class Action Fairness Act) because Maryland Law Holds Amendments that Add New Party Plaintiffs do not Relate Back so 2007 Amendment to Add New Named Plaintiffs Commenced New Class Action under CAFA Maryland Federal Court Holds

In 1999, plaintiffs filed a putative class action in Maryland state court against four automobile manufacturers seeking “damages arising from the cost of replacing allegedly defective seating systems”; Eight years later, defense attorneys removed the class action to federal court on the ground that removal jurisdiction existed under the Class Action Fairness Act of 2005 (CAFA). Lloyd v. General Motors Corp., 560 F.Supp.2d 420, 421 (D.Md. 2008). Plaintiffs did not dispute that their class action involved more than 100 plaintiffs, or that the amount in controversy was more than $5,000,000, or that the minimal diversity test under CAFA had been met. Id., at 423 n.3. Instead, plaintiffs moved to remand the class action to state court on the ground that the Class Action Fairness Act applies only to class actions “commenced” on or after February 18, 2005 – long after they had filed their class action complaint in this case. Id., at 421. Defense attorneys countered that plaintiffs’ fourth amended class action complaint materially changed the lawsuit so as to “commence” a new action within the meaning of CAFA. Id. The district court agreed and denied the motion to remand the class action state court.

The initial class action complaint alleged that the seating systems in defendants’ cars were “unreasonably dangerous” because they were “susceptible to rearward collapse in the event of a rear-end collision.” Lloyd, at 421. Over the following six months, plaintiffs amended the class action complaint three times “adding several new named plaintiffs and significantly expanding the class of relevant automobiles.” Id. In March 2000, the Maryland state court granted defendants’ motion to dismiss the third amended class action complaint “ruling that the Plaintiffs had failed to plead actual injury and that their claims were barred by the economic loss doctrine.” Id., at 422. The case was tied up in the appellate courts until February 2008, when the Maryland Court of Appeals reinstated the class action complaint. Id. (citing Lloyd v. General Motors Corp., 916 A.2d 257 (Md. 2007). On August 19, 2007, plaintiffs filed a fourth amended class action complaint that, in the district court’s words, “alter[ed] their claims in three significant respects: first, by adding five new named plaintiffs, three of whom were never a part of the putative class; second, by including in the putative class lessees of class vehicles for model years 1988-2005; and third, by including in the putative class owners of class vehicles for model years 1988-89 and 2000-2005. “ Id. It was based on these amendments that defense attorneys removed the class action to federal court, arguing that under CAFA a new action had been “commenced” after February 18, 2005. Id.

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

Attorney Fees Class Action Defense Cases–Mark v. Spencer: California State Court Affirms Dismissal Of Lawsuit Seeking Damages Under Fee-Splitting Agreement Underlying Class Action Following Class Action Court Fee Award Inconsistent With Agreement

Trial Court Properly Dismissed Lawsuit Seeking Recovery under Fee-Splitting Agreement underlying Class Action because Attorney-Plaintiff Failed to Disclose Fee Agreement to Class Action Court as Required by California Law and because Attorneys’ Respective Rights to Fees were Finally Determined by Class Action Court, thus Barring Subsequent Action under Doctrine of Res Judicata, California State Court Holds

Plaintiff, attorney Ronald Mark, was retained by an individual to commence a labor law class action against his former employer, General Nutrition Corporation (GNC); prior to filing the class action complaint, plaintiff asked defendant, attorney Jeffery Spencer, to serve a co-counsel in the class action litigation, and the attorneys signed a written agreement that proposed to split any fee award 50-50, subject to renegotiation in the event that one of them fails to perform an equal share of the work. Mark v. Spencer, ___ Cal.App.4th ___ (Cal.App. August 22, 2008) [Slip Opn., at 3.]. The attorneys filed the class action complaint in November 2001; the class action was settled in 2004, obtaining final court approval in December 2004. _Id._ The attorneys filed a motion requesting “a $600,000 lump sum for attorney fees and expenses” to “Class Counsel,” and Mark and Spencer filed separate declarations in support thereof. _Id._ Neither Mark nor Spencer notified the trial court of their written fee-splitting agreement, and only Spencer appeared at oral argument on the attorney fee application. _Id._ Ultimately, the trial court awarded Spencer about $401,000 and Mark about $76,500, and the class action defendant wired these sums to Spencer and Mark, respectively. _Id._, at 4. Mark filed a lawsuit against Spencer seeking “his share” of the class action attorney fee award; the trial court granted Spencer’s motion to dismiss the complaint ruling (1) Mark failed to comply with California law requiring disclosure of fee agreements in class action cases, and (2) Mark was precluded from collaterally attacking the attorney fee award based on an agreement not provided to the trial court at the time it determined the class action attorney fee award. _Id._ The Court of Appeal affirmed.

First, the appellate court held that Mark was required to disclose the fee-splitting agreement in the class action. After summarizing the potential conflict of interest created by such agreements, see Mark, at 5, and the Rules of Professional Conduct governing such agreements, see id., at 5-6, the Court of Appeal held that “ [t]o fulfill its role in protecting absent class members, the class action court must consider the potential effect of a fee-splitting agreement before approving a proposed settlement,” id., at 8. Put simply, “Rule 3.769 [of the California Rules of Court] was designed to protect class members from potential conflicts of interest with their attorneys by requiring the full disclosure of all fee agreements in any application for dismissal or settlement of a class action.” Id., at 2. The Court rejected plaintiff’s invitation to enforce the fee agreement despite potential harm to the class: “In essence, Mark urges us to sanction the concealment of material information from the class action court, even if it harms the absent class members. The integrity of the judicial system demands we not do so.” Id., at 8. The class action court’s decision to approve the class action settlement could have been affected by the disclosure of the fee-splitting agreement, and “attorneys would have little incentive to disclose the agreement if they could simply enforce it in a separate action.” Id., at 9.

Class Action Court Decisions Uncategorized

PSLRA Class Action Defense Cases–In re Hutchinson: Eighth Circuit Affirms Dismissal Of Class Action Holding Class Action Complaint Failed To Meet Heightened Pleading Requirements Under The Private Securities Litigation Reform Act (PSLRA)

Securities Class Action Properly Dismissed because Allegations in Class Action Complaint Failed to Meet PSLRA’s Heightened Pleading Requirements Eighth Circuit Holds

Plaintiff filed a class action complaint against Hutchinson Technology and six of its officers and directors alleging violations of federal securities law; the class action complaint asserted claims under Section 10(b) of the Securities Exchange Act of 1934 and under Rule 10b-5 of the Securities and Exchange Commission implementing regulation, as well as control person liability under Section 20 of the 1934 Act. In re Hutchinson Technology, Inc. Securities Litig., 536 F.3d 952, 954-55 (8th Cir. 2008). Defense attorneys filed a motion to dismiss the class action complaint on the ground that it failed to meet the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA). Id., at 955. The district court granted the motion and denied plaintiff’s request for leave to file an amended class action complaint. Id. Plaintiff appealed, and the Eighth Circuit affirmed.

Very briefly, Hutchinson manufactures and supplies suspension assemblies for computer hard disk drives. In re Hutchinson, at 955. In 2005, the company’s five largest customers accounted for 90% of its revenue, and sales of suspension assemblies accounted for 95% of its total revenue. Id. After giving guidance of $0.10 earnings per share (EPS) for the fourth quarter of 2004, the company reported EPS of $0.15 to $0.20 for that quarter and announced that it expected an increase in product demand in the first quarter of 2005. Id. Hutchinson stock price increased more than 10% on the news, from $30.93 to $34.09. Id. Thereafter, despite releasing positive information, Hutchinson’s stock price dropped to about $30 per share; also during this time, certain officers sold a total of 137,750 shares of stock at $29-$30 per share for a total of about $6 million, and later sold another 26,820 shares at $33.55-$34 per share for a total of about $1 million. Id., at 956. We do not summarize further additional positive guidance provided by the company, or additional shares of stock sold by insiders. See id., at 956-57. But on August 30, 2005, the company issued a press release disclosing lower demand and a reduction in sales and earnings for fourth quarter 2005: in response, the company stock price dropped from $31.51 to $26.16. Id., at 957. In addition to the financial allegations, the class action complaint contained allegations from five confidential witnesses. Id., at 957-58. In granting the defense motion to dismiss the class action complaint, the district court “[held] that the complaint did not meet the heightened pleading standards for falsity and scienter required by the PSLRA.” Id., at 958. Additionally, it dismissed the Section 20 class action claim (concerning “control person” liability) as derivative of the class action’s Section 78j(b) claim. Id. Finally, the district court denied leave to amend the class action complaint because it found that amendment would be futile, id.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases—In re Family Dollar Stores: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs’ Motion To Centralize Class Action Litigation But Transfers Class Actions To Western District Of North Carolina

Over Objection of Defense Attorneys, Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, but Agrees with Defendant that Class Actions should be Centralized in Western District of North Carolina Nine class action lawsuits were filed against Family Dollar Stores alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, the class action complaints alleged that under the FLSA defendant’s store managers are entitled to overtime pay.

Class Action Court Decisions Multidistrict Litigation Uncategorized