Class Action Defense Cases—In re Countrywide Financial: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs’ Motion To Centralize Class Action Litigation But Transfers Class Actions To Western District of Kentucky

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Objection of Responding Class Action Defendants, but Rejects All Recommended Transferee Courts and Transfers Class Actions to Western District of Kentucky Three class actions – one each in California, Illinois and Massachusetts – were filed against various defendants, including Countrywide Financial Corp., Countrywide Home Loans and Countrywide Bank, FSB (collectively “Countrywide”); the class action complaints, each purportedly seeking to represent a nationwide class, alleged that Countrywide “engaged in discriminatory residential lending practices, including the imposition of discretionary fees/charges, which increased the cost of financing and resulted in higher loans for minority borrowers than similarly situated non-minority borrowers.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Cases–In re Nortel Networks: Second Circuit Affirms Attorney Fee Award Of 3% Of Class Action Settlement Value Finding No Abuse Of Discretion In Rejecting Negotiated Fee Following Settlement Of Securities Class Action

District Court Carefully Analyzed Requisite Factors in Determining Reasonable Attorney Fee Award in Securities Class Action and did not Abuse its Discretion in Awarding Class Counsel 3% of the Value of Class Action Settlement Rather than 8.5% Requested by Class Counsel, even though Lead Plaintiffs in Class Action Supported 8.5% Award Second Circuit Holds

Plaintiffs filed a class action against Nortel Networks alleging violations of federal securities laws (Nortel I); specifically, the Nortel I class action complaint alleged that Nortel “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., ___ F.3d ___ (2d Cir. August 19, 2008) [Slip Opn., at 2]. Plaintiffs in the Nortel I class action were represented by Milberg Weiss & Bershad LLP, _id._ After several years of litigation, the district court approved a class action settlement of almost $439 million in cash, plus more than 300,000,000 shares of Nortel common stock valued at more than $700 million at the time the class action settled was approved. _Id._ As part of the “same overall settlement,” Nortel settled a separate action securities class action lawsuit (Nortel II); the terms of that class action settlement involved common stock also valued at more than $700 million plus $370 million in cash (roughly $68.5 million less than the Nortel I class action settlement). _Id._, at 2-3. The district court in Nortel II awarded class counsel 8% of the settlement value in attorney fees, but the Nortel I court awarded Milberg attorney fees amounting to only 3% of the settlement value. _Id._, at 3. Milberg Weiss appealed the attorney fee award, and the Second Circuit affirmed.

Milberg argued on appeal that they were entitled to 8.5% of the value of the class action settlement they obtained in prosecuting the private securities class action and that the district court erred in reducing the award to only 3%. In re Nortel, at 2. Milberg argued that it had a “negotiated fee” which, under the terms of the Private Securities Litigation Reform Act of 1995 (PSLRA), should have been deemed “presumptively reasonable.” Id. The Second Circuit held that Milberg waived its PSLRA argument because it failed to raise it in the district court, id. The Circuit Court’s analysis of the waiver issue may be found at pages 5 through 8.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases–In re Parmalat Securities: New York Federal Court Grants Summary Judgment On Class Action Claims Holding Plaintiffs Failed To Establish Reliance To Support Class Action’s Securities Fraud Claims

Defense (Bank of America, Citigroup and Pavia e Ansaldo) Entitled to Summary Judgment on Securities Fraud Claims because Plaintiffs Failed to Establish Reliance on any Deceptive Acts by Moving Defendants New York Federal Court Holds Plaintiffs filed a class action complaint against various defendants, including various Bank of America entities, various Citigroup entities, and Pavia e Ansaldo, alleging violations of federal securities laws; specifically, the Third Amended Consolidated Class Action Complaint alleged violations of Rule 10b-5 and Section 10(b) “on behalf of purchasers or securities of the international dairy conglomerate Paramalat Finanziaria S.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases–In re Genetically Modified Rice: Missouri Federal Court Denies Class Action Certification of Class Action Complaint Seeking Damages By Producers For Contamination Of Rice

Class Action Claims by Rice Growers Seeking Damages Arising from Contamination of U.S. Rice Supply by Non-Approved Genetically Modified Strains of Rice not Appropriate for Class Action Treatment because Substantial Differences in Individual Damages and Proof of Damages Defeat Rule 23(b)(3) Requirement for Predominance and Superiority Missouri Federal Court Holds

Various class action lawsuits were filed against Bayer CropScience and others seeking to recover for damages allegedly when “the defendants contaminated the U.S. rice supply with non-approved genetically modified strains of rice, thereby affecting the market price for plaintiffs’ crops.” The class action complaints were filed after the U.S. Department of Agriculture announced, in August 2006, that trace amounts of a rice seed developed by Bayer CropScience and “designed to be resistant to a Bayer herbicide, Liberty Link,” had been found in the U.S. rice supply. In re Genetically Modified Rice Litig., 251F.R.D 392 (E.D. Mo. 2008) [Slip Opn., at 1-2]. (The rice strain at issue in the class actions “is now deregulated by USDA, [but] at the time of the contamination it was not approved for human consumption.” Id., at 2.) The Judicial Panel on Multidistrict Litigation consolidated the class actions for pretrial purposes in the Eastern District of Missouri, and plaintiffs’ filed a master consolidated class action complaint. Id., at 1. “The plaintiffs in the master consolidated class action complaint are rice producers from five U.S. states where rice is grown and harvested: Arkansas, Louisiana, Mississippi, Missouri and Texas.” Id., at 3.Plaintiffs’ lawyers moved for class action certification; defense attorneys opposed class action treatment on the grounds that individual issues predominate over common issues. Id., at 1. The district court agreed that class action treatment was not warranted, concluding that class action certification was “inappropriate…because plaintiffs’ varying claims for damages are not amenable to class-wide adjudication.” Id.

According to the master class action complaint, world-wide reaction to the announcement directly affected the market for U.S. long grain rice: Japan barred further imports of such rice, the European Union required that all U.S. rice be “tested and certified as free of genetically-modified traits,” and several other countries – including Russia, Canada, the Philippines, Taiwan and Iraq – “imposed restrictions on U.S. rice imports.” In re Genetically Modified Rice, at 2-3. The class action alleged that “the U.S. market price for rice dropped dramatically as a result of Bayer’s contamination of the rice supply.” Id., at 3. The U.S. produces 13% of the world’s rice and exports nearly half of its rice, id. The class action relies on the market price for rice as listed on the Chicago Board of Trade (CBOT) for the period of August 18-23, 2006 to support its claim that the “dramatic price drop” is attributable to the announcement concerning the discovery of the contaminated rice. Id., at 4. The class action alleged further that economic harm continued beyond August 2006, id.

Certification of Class Actions Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Cases–In re Gilead Sciences: Ninth Circuit Reverses Dismissal Of Securities Fraud Class Action Holding Class Action Complaint Adequately Alleges Loss Causation Under Dura Pharmaceuticals

Securities Fraud Class Action Complaint Adequately Alleged Loss Causation when Facts were Considered as a Whole so District Court Erred in Granting Defense Motion to Dismiss Class Action Complaint Ninth Circuit Holds

Plaintiffs, a group of investors, filed a class action against Gilead Sciences, “a biopharmaceutical company that specializes in developing and marketing treatments for life-threatening diseases,” alleging violations of federal securities law; specifically, the class action complaint alleged that defendants “misled the investing public by representing that demand for its most popular product” – Viread, an antiretroviral agent used to treat HIV – was “strong without disclosing that unlawful marketing was the cause of that strength.” In re Gilead Sciences Securities Litig., ___ F.3d ___ (9th Cir. August 11, 2008) [Slip Opn., at 10322-23]. Viread accounted for almost two-thirds of Gilead’s total revenues, and the fourth amended class action complaint alleged that defendants Gilead and “some of its top officers” violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by aggressively promoting Viread for “off-label” uses, that is, for uses that had not been approved by the FDA, _id._, at 10323-24. The class action complaint outlined an alleged scheme to promote off-label uses and further alleged that ultimately “75% to 95% of Viread sales resulted from off-label marketing efforts.” _Id._, at 10324-25. Defense attorneys moved to dismiss the class action under Rule 12(b)(6) for failure to adequately allege loss causation; the district court agreed and dismissed the class action complaint. _Id._, at 10323. The Ninth Circuit reversed.

As with all securities fraud cases, the specific facts detailed in the class action complaint are central to the Circuit Court’s analysis of the district court order dismissing the class action with prejudice. In this case, those facts span more than 9 pages of the appellate court’s opinion. See In re Gilead Sciences, at 10323-31. We do not summarize those facts here, noting only that, according to “two confidential witnesses who served as Gilead salespeople,” the off-label marketing efforts “took three forms: (1) marketing to HIV patients co-infected with Hepatitis B; (2) marketing Viread as a first-line or initial therapy for HIV infection; and (3) marketing against Viread’s safety profile,” and that, ultimately, “75% to 95% of Viread sales resulted from off-label marketing efforts.” Id., at 10325 (footnote omitted). The FDA sent Gilead a letter in March 2002, accusing the company of off-label marketing, id., and in August 2003 the FDA made public a July 2003 “warning letter,” but the investing public did not yet appreciate the letter’s significance, id., at 10328-29. According to the class action complaint, Gilead also encouraged overstocking of Viread but publicly stated that overstocking was not a basis for Viread’s increased sales, id., at 10326-27. It was not until October 2003 that investors realized the impact of off-label marketing on Viread sales, id., at 10330. The district court dismissed the class action with prejudice on the ground that plaintiffs “failed to adequately plead loss causation” under Dura Pharmaceuticals, Inc.. v. Broudo, 544 U.S. 336 (2005), because the class action complaint failed to “connect the following chain of events…: 1) that [the] alleged failure to disclose the off-label marketing scheme caused a material increase in sales; 2) that practitioners materially decreased their demand for Viread due to the publication of the FDA Warning Letter; and most importantly, 3) that the alleged decrease in sales due to the FDA letter proximately caused Gilead’s stock to decrease three months later,” id., at 10331. The Ninth Circuit explained that the district court order rested entirely on its conclusions concerning loss causation, id.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases—In re Vytorin/Zetia: Judicial Panel On Multidistrict Litigation (MDL) Grants Class Action Plaintiffs’ Motions To Centralize Class Action Litigation And Transfers Lawsuits To District of New Jersey

Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Responding Defendants, and Agrees with Defendants that District of New Jersey is Appropriate Transferee Court Thirty-three (33) class actions lawsuits were filed in 17 federal district courts against numerous defendants, including various Merck and Schering-Plough entities, arising out of the use and/or marketing of the drugs Vytorin and/or Zetia. In re Vytorin/Zetia Marketing, Sales Practices & Products Liab.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Cases—In re Trasylol: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Transfers Class Actions To Southern District of Florida

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Certain Class Action Plaintiffs but Opposed by Others, but Concludes Class Actions should be Transferred to Southern District of Florida Eighteen class actions were filed in 14 different federal district courts against various defendants, including Bayer Corp., Bayer Healthcare Pharmaceuticals, Bayer Healthcare, LLC, Bayer AG, and Bayer Healthcare AG (collectively “Bayer”), alleging product liability claims based on the safety of the Bayer drug Trasylol.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Cases–Clemens v. DaimlerChrysler: Ninth Circuit Affirms Judgment In Favor Of Defense In Products Liability Class Action Holding Post-Warranty Problems Were Not Actionable And Fraud Claims Were Time-Barred

Class Action Alleging Breach of Warranty and Fraud for Defective Head Gaskets Failed because Class Action Plaintiff did not Experience Problems with Head Gaskets Until After Warranty Expired and Delayed Filing Class Action Complaint Until After Statute of Limitations had Expired on Fraud Claim Ninth Circuit Holds

Plaintiff filed a products liability class action against DaimlerChrysler alleging that the Dodge Neon were built with defective head gaskets; the class action complaint alleged breach of express and implied warranties, and fraud. Clemens v. DaimlerChrysler Corp., ___ F.3d ___ (9th Cir. July 24, 2008) [Slip Opn., at 9127-28]. Defense attorneys moved to dismiss the class action’s warranty claims under Rule 12(b)(6). _Id._, at 9128. Specifically, the defense argued plaintiff purchased the car in 1998 and that the warranty was expressly limited to the earlier of 36 months or 36,000 miles, but the class action plaintiff did not notice any problem with his vehicle until 2002, more than 3 years after he purchased the vehicle, at which time it had about 50,000 miles on it. _Id._, at 9128-29. The district court granted the defense motion on the ground that plaintiff’s vehicle was no longer under warranty when it began experiencing problems, _id._, at 9129. Defense attorneys also moved for summary judgment on the class action’s fraud claim on the ground that the statute of limitations had run as the class action complaint had not been filed until December 2005; the district court agreed and granted the motion for summary judgment. _Id_. The Ninth Circuit affirmed.

The Circuit Court easily rejected plaintiff’s arguments with respect to the class action complaint’s express warranty claim because “[t]he head gasket functioned throughout the 36,000 miles of three years for which it was warranted.” Clemens, at 9130. Plaintiff’s claim that the warranty covered “any defective item” and that the head gasket was defective when installed proved unavailing. As the Ninth Circuit explained, “Every manufactured item is defective at the time of sale in the sense that it will not last forever; the flip-side of this original sin is the product’s useful life.” Id., at 9131. In affirming dismissal of the class action complaint, the Ninth Circuit joined the Second Circuit and California state appellate courts in rejecting Alberti v. General Motors Corp., 600 F.Supp. 1026 (D.D.C. 1985), which “held that a breach-of-warranty claim for post-warranty component problems could proceed after the warranty period if the defendant knew of the defects at the time of sale.” Clemens, at 9131 (citation omitted). The class action’s implied warranty claim failed because, under California law, plaintiff was not in “vertical contractual privity with the defendant.” Id., at 9132.

Class Action Court Decisions Uncategorized

NBA Class Action Defense Cases–Johnson v. First Banks: Illinois Appellate Court Affirms Dismissal Of Class Action Holding National Bank Act Preempts Class Action Claims

Class Action Plaintiff Lacked Standing to Pursue “Wrongful Dishonor” Claim and Remaining Class Action Claims were Preempted by the National Bank Act (NBA) Illinois Appellate Court Holds Plaintiff filed a class action in Illinois state court against First Banks, a state bank incorporated in Missouri; the class action complaint alleged that the Bank wrongfully dishonored a check, violated the state’s Consumer Fraud and Deceptive Business Practices Act, and was unjustly enriched because it “wrongfully charged a $5 fee to payees who did not have accounts with the [Bank] but who presented for payment checks drawn by the [Bank’s] depositors.

Class Action Court Decisions Uncategorized

Class Action Defense Settlement Cases–In re Grand Theft Auto: New York Federal Court Decertifies Class Action Holding Proposed Settlement Class In Nationwide Consumer Protection Law Class Action Lacked “Cohesiveness” Required By Rule 23(b)(3)

Certification of Putative Class Action for Purposes of Settlement Required Satisfaction of Rule 23 Class Action Requirements, and Class Proposed for Settlement of Nationwide Class Action Failed to Meet Rule 23(b)(3)’s Predominance Test Requiring Decertification of Class Action New York Federal Court Holds

In 2005, four class action lawsuits were filed against Take-Two Interactive Software and its wholly-owned subsidiary, Rockstar Games; the complaints sought nationwide class action status and alleged, inter alia, violations of the consumer protection statutes of each state and the District of Columbia based on the “inclusion of an interactive, sexual minigame…in their premier product, Grand Theft Auto: San Andreas.” In re Grand Theft Auto Video Game Consumer Litig. (No. II), ___ F.Supp.2d ___ (S.D.N.Y. July 30, 2008) [Slip Opn., at 1]. The Judicial Panel on Multidistrict Litigation coordinated the various class action lawsuits, together with tag-along class action complaints, in the Southern District of New York. _Id._, at 2. Soon thereafter, the court appointed lead counsel for the putative class and a consolidated, amended class action complaint was filed. _Id._, at 2-3. The amended class action alleged that defendants marketed and sold Grand Theft Auto with an improper “content rating,” which they obtained by “withholding pertinent information from the entity charged with assigning content ratings to video games, the Entertainment Software Ratings Board”; specifically, the class action complaint charged that defendants failed to disclose that Grand Theft Auto “contained the Sex Minigame…, a game-within-the-game that allowed players to control the protagonist’s movements as he engaged in various sexual acts” and that purchasers could access the Sex Minigame through what came to be known as the “Hot Coffee Mod.” _Id._, at 3. Defense attorneys moved to dismiss the class action to the extent it advanced claims “under the laws of states where the named plaintiffs did not purchase” the game; the district court denied the motion, holding that a determination of whether to certify the litigation as a class action “was logically antecedent to the standing issues raised therein.” _Id._, at 4. Plaintiffs thereafter moved the federal court to certify the litigation as a nationwide class action; defense attorneys opposed class action treatment, “challenging the propriety of a nationwide class action that asserts claims under the disparate laws of the fifty states.” _Id._, at 4-5. Before the court ruled on that motion, the parties negotiated a settlement of the class action claims, _id._, at 5. In December 2007, the federal court conditionally certified a nationwide class action for settlement purposes and gave preliminary approval to a settlement of the class action, _id._, at 1, 5-6. However, in light of the Second Circuit Court of Appeal’s subsequent opinion in _McLaughlin v. American Tobacco Co._, 522 F.3d 215 (2d Cir. 2008), the district court decertified the settlement class. _Id._ (A summary of the _McLaughlin_ opinion may be found here.)

We cut to the chase of the district court’s 58-page opinion. The district court correctly noted that even for purposes of settlement, the plaintiffs were required to meet the class action criteria set forth in Rule 23(a) – viz., numerosity, commonality, typicality and adequacy of representation – as well as, in this case, Rule 23(b)(3). In re Grand Theft Auto, at 9-10. This latter requirement means that plaintiffs “must show that ‘questions of law or fact common to [Settlement Class] members predominate over any questions affecting only individual members,’ and that the class action ‘is superior to other available methods for fairly and efficiently adjudicating the controversy.’” Id., at 10 (quoting Fed. R. Civ. P. Rule 23(b)(3)). While the proposed settlement is relevant, it goes merely to whether class action treatment would create manageability problems, id. “Trial-manageability issues aside, however, the ‘requirements [of Rule 23(a) and (b)] should not be watered down by virtue of the fact that the settlement is fair or equitable.’” Id. (quoting Denney v. Deutsche Bank AG, 443 F.3d 253, 270 (2d Cir. 2006)).

Certification of Class Actions Class Action Court Decisions Uncategorized