UCL Class Action Defense Cases–Williams v. Gerber Products: Ninth Circuit Reverses Dismissal Of Class Action Holding False Advertising On Front Of Box Not Cured By Accurate Ingredient List On Side Of Box

Class Action Alleging Fraudulent Advertising Erroneously Dismissed Because Consumers not Required to Read Ingredient List to Correct Deceptive Advertising Claims Underlying Class Action Complaint Ninth Circuit Holds

Plaintiffs filed a putative class action against Gerber Products alleging inter alia violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA); specifically, the class action complaint alleged that Gerber’s Fruit Juice Snacks were deceptively marketed because the packaging – which shows images of various fruits “such as oranges, peaches, strawberries, and cherries” – would lead a reasonable consumer to believe that the juices of these fruits were included in the products when in reality “the only juice contained in the product was white grape juice from concentrate.” Williams v. Gerber Products Co., 523 F.3d 934, 936 (9th Cir. 2008). The class action attacked five features of Gerber’s packaging of its fruit juice snacks, including that the product was “nutritious”; defense attorneys moved to dismiss the class action for failure to state a claim, arguing that the packaging, including the ingredient disclosures on the packaging, defeated plaintiffs’ class action claims. Id., at 937. The district court granted the defense motion and dismissed the class action, holding that “Gerber’s statements were not likely to deceive a reasonable consumer, particularly given that the ingredient list was printed on the side of the box and that the ‘nutritious’ claim was non-actionable puffery.” Id. The Ninth Circuit reversed.

The core of the district court’s decision was its finding that Gerber’s packaging was “not likely to deceive a reasonable consumer as a matter of law.” Williams, at 938. It based this decision “solely on its own review of an example of the packaging.” Id., at 939. While California law permits such consideration, as the advertisement itself is “the primary evidence” of its falsity, id. (citation omitted), California courts also hold that “whether a business practice is deceptive will usually be a question of fact not appropriate for decision on demurrer,” id. (citations omitted). Based on its review of the packaging, the Ninth Circuit found “a number of features…which could likely deceive a reasonable consumer.” Id. Most importantly, it held that “reasonable consumers should [not] be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box.” Id., at 939-40. The Circuit Court acknowledged that Gerber’s ingredient list “appears to comply with FDA regulations,” but added that “a busy parent walking through the aisles of a grocery store should [not] be expected to verify that the representations on the front of the box are confirmed in the ingredient list.” Id. As the Ninth Circuit explained at page 940, “We do not think that the FDA requires an ingredient list so that manufacturers can mislead consumers and then rely on the ingredient list to correct those misinterpretations and provide a shield for liability for the deception.”

Class Action Court Decisions Uncategorized

PSLRA Class Action Defense Cases–In re 2007 NovaStar Financial: Missouri Federal Court Grants Defense Motion To Dismiss Class Action Complaint Concluding Class Action Failed To Satisfy PSLRA’s Heightened Pleading Requirements

Class Action Complaint Failed to Plead Securities Fraud with Specificity Required by Private Securities Litigation Reform Act (PSLRA) thus Subjecting Class Action to Motion to Dismiss without Leave to Amend Missouri Federal Court Holds

Plaintiff filed a class action complaint against NovaStar Financial and three of its directors alleging securities fraud violations. In re 2007 NovaStar Financial, Inc., Securities Litig., ___ F.Supp.2d ___ (W.D. Mo. June 4, 2008) [Slip Opn., at 1]. Defense attorneys moved to dismiss the class action, _id._; the class action complaint failed to meet the heightened pleading requirements under the Private Securities Litigation Reform Act (PSLRA), which “is intended to eliminate abusive securities litigation and put an end to the practice of pleading ‘fraud by hindsight,’” _id._, at 2 (citation omitted). The district court granted the defense motion, holding that the class action “has not – and cannot – satisfy the PSLRA’s pleading requirements.” _Id._, at 3. The language of the district court’s opinion should prove useful to class action defense attorneys, so we quote it at length.

The federal court began its analysis with a cogent observation, noting at page 3: “One might be tempted to think that a complaint spanning more than 100 pages and consisting of more than 200 paragraphs could not fail to be specific. The temptation is dangerous and must be resisted.” Under the district court’s careful analysis, it found that the class action complaint “has not specified the allegedly misleading statements, nor has he specified why the statements he has referred to are misleading.” Id. Instead, the class action “presents a very broad picture, and Plaintiff discusses his claims in generalities – precisely what the PSLRA counsels against.” Id. In the court’s words, “This has allowed Plaintiff to pick isolated threads and snippets from the Complaint to create an illusion of detail and insinuate the existence of fraud, which in turn has made it exceedingly difficult for the Court to conduct the analysis required by law.” Id. Relying on the Eighth Circuit’s opinion in In re Cerner Corp. Sec. Litig., 425 F.3d 1079 (8th Cir. 2005), the district court held that the class action failed to plead falsity with the required specificity. See id., at 3-6. At bottom, the class action “has not stated a claim because companies…are not expected to be clairvoyant, and bad decisions do not constitute securities fraud.” Id., at 6.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Labor Law Class Action Defense Cases–Hoenemier v. Sun Microsystems: California Trial Court Grants Plaintiff’s Motion To Certify Labor Law Class Action Alleging Sun Microsystems Improperly Characterized Techinical Writers As Exempt Employees

Class Action Against Sun Microsystems Alleging Misclassification of Technical Writers as Exempt Employees Warrants Class Action Treatment California State Trial Court Holds On May 13, 2008, the California Superior Court for the County of Santa Clara entered an order granting plaintiff’s motion to certify a class action lawsuit against Sun Microsystems and SeeBeyond Technology. Hoenemier v. Sun Microsystems, Inc.,, Santa Clara Superior Court Case No. Case No.: 106CV-071531 (May 13, 2008).

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Borochoff v. GlaxoSmithKline: New York Federal Court Grants Defense Motion To Dismiss Class Action Alleging Securities Law Violations Finding Complaint Failed To Satisfy PSLRA Pleading Requirements

Class Action Failed to Adequately Allege Securities Law Violations because Pharmaceutical Company’s Meta-Analyses were Inconclusive and because Class Action Failed to Adequately Plead Scienter New York Federal Court Holds

Plaintiffs filed a putative class action against pharmaceutical company GlaxoSmithKline (GSK) and certain individual officers and directors of GSK for violations of federal securities laws; specifically, the class action complaint alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and of Rule 10b-5 on the grounds that defendants failed to disclose the truth about its meta-analysis in connection with its diabetes drug, Avandia. Borochoff v. GlaxoSmithKline PLC, ___ F.Supp.2d ___ (S.D.N.Y. May 9, 2008) [Slip Opn., at 1-2]. Plaintiffs filed an amended class action complaint 5 months later, and defense attorneys moved to dismiss the class action under Rule 12(b)(6), _id._, at 9-10. The district court granted the motion and dismissed the class action.

The class action complaint alleged that in September 2005, GSK finalized a meta-analysis that “showed an estimate of…an increased risk of heart attack, associated with the use of Avandia.” Borochoff, at 2. Nonetheless, its October 2005 press release attributed GSK’s “excellent pharmaceutical sales growth” in part to Avandia’s “tremendous success” and “emphasize[d] that we do not expect the growth rate to slow down over the next couple of years.” Id., at 2-3. GSK’s February 2006 press release also referred to Avandia as a “significant growth driver[],” id., at 3. GSK did not disclose the results of its first mea-analysis, which were duplicated by its second meta-analysis, finalized in March 2006. Id. On the contrary, GSK’s 2005 Annual Report, filed on March 3, 2006, stated that “strong growth” from Avandia was expected to continue in 2006. Id., at 4. The class action alleged that GSK’s statements were “materially false and misleading” because it knew, based on its meta-analyses, that use of Avandia carried with it an increased risk of heart attack, id. The class action also cited two additional press releases, from April and July 2006, that called Avandia a “key growth driver[]” and stressed a “32% increase in sales of Avandia.” Id., at 4-5.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

CAFA Class Action Defense Removal Cases–Springman v. AIG: Seventh Circuit Affirms Denial Of Plaintiff’s Motion To Remand Class Action To State Court Upholding Removal Jurisdiction Under Class Action Fairness Act (CAFA)

Amendment of Class Action Complaint to Add Party-Defendant Years after Plaintiff Learned Defendant’s Identity Constituted a New Action Under Class Action Fairness Act of 2005 (CAFA) thereby Creating CAFA Removal Jurisdiction over Class Action Seventh Circuit Holds

In July 2003, plaintiff file a putative class action in Illinois state court against AIG Claim Services and Illinois National Insurance Company for violations of state fraud and consumer protection laws; the class action complaint alleged that AIG Claim Services, in processing claims under Illinois National insurance policies, systematically underpaid accident insurance benefits. Springman v. AIG Marketing, Inc., 523 F.3d 685, 686 (7th Cir. 2008). In December 2003, defense attorneys disclosed that AIG had not adjusted plaintiff’s claim; plaintiff did not inquire further until October 2004, at which time he learned that at affiliate, AIG Marketing, had handled the claim underlying the class action. Id. Nonetheless, plaintiff waited another three years before seeking leave to file an amended class action complaint to sue AIG Marketing in place of AIG Claim Services, id. The state court granted the motion, and defense attorney removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Id. AIG Claim Services could not have removed the class action itself because the class action complaint had been filed well before CAFA’s effective date, id. Plaintiff’s lawyer moved to remand the class action to state court, but the motion was denied, id. The Seventh Circuit affirmed.

The question before the Circuit Court was whether the substitution of AIG Marketing for AIG Claim Services constituted “the commencement of a suit against AIG[ Marketing] within the meaning of the Class Action Fairness Act, thus enabling removal of the entire suit.” Springman, at 686-87 (citing 28 U.S.C. § 1453(b)). After reaffirming the Seventh Circuit’s law, adoption by all but one other circuit courts, that post-filing acts may affect whether a class action complaint is removable under CAFA, see id., at 687 (citations omitted), the Court reiterated the federal removal doctrine, which permits removal based on post-filings acts if, inter alia, the amended complaint “adds a new defendant.” Id. (citation omitted).

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

UCL Class Action Defense Cases–Williams v. Gerber: Ninth Circuit Holds Class Action Complaint Improperly Dismissed Because Class Action’s False Advertising Claims May Have Deceived Reasonable Consumer

Class Action Alleging False Advertising Claims Improperly Dismissed because Factual Questions Existed as to Whether Statements were Deceptive and because Accuracy of Ingredient List did not Insulate Defendant from Liability Based on Misleading Nature of Statements on Front of Product Box Ninth Circuit Holds

Plaintiffs filed a putative class action against Gerber Products Company alleging, inter alia, violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA); the class action complaint claimed that Gerber “deceptively marketed” its “Fruit Juice Snacks,” which are part of Gerber’s “Graduates for Toddlers” line of products. Williams v. Gerber Products Co., 523 F.3d 934, 936 (9th Cir. 2008). Defense attorneys moved to dismiss the class action, id. The district court granted the defense motion and dismissed the class action complaint; the court reasoned that the challenged statements “were not likely to deceive a reasonable consumer,” id., at 937. The Ninth Circuit reversed.

The Ninth Circuit summarized the class action claims at pages 936 an 937 as follows:

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Sharp v. Next: California Court Affirms Trial Court Order Refusing To Disqualify Plaintiffs’ Class Action Counsel And Refusing To Remove All Plaintiffs From Serving As Class Action Representatives

Potential Conflict Between Labor Organization Financing Class Action Litigation and Individual Named Plaintiffs in Class Action Lawsuits did not Disqualification of Plaintiffs’ Class Action Counsel, Funded by Labor Organization, because Conflict Waivers Signed by Plaintiffs and Labor Group were Effective and Trial Court did not Err in Refusing to Disqualify Named Plaintiffs from Prosecuting Class Actions as Motion was Premature California State Court Holds

The Writers Guild of America is a labor organization that represents film, television, news and other media writers; the Guild held several meetings with writers of reality television programs because it believed that reality TV show employees were not provided breaks or overtime pay as required by California law. Sharp v. Next Entertainment, Inc., ___ Cal.App.4th ___ (Cal.App. May 28, 2008) [Slip Opn., at 4]. The Guild believed that class action litigation “would create economic pressure on those who paid illegal wages” and “could facilitate the Guild’s unionizing campaign.” _Id._, at 4-5. Ultimately, two class action lawsuits were filed (the _Sharp_ class action against Next Entertainment and others, and the _Shriver_ class action against Rocket Science Laboratories and others); the class action complaints were filed on behalf of 21 individuals, 16 of whom had attended the meetings referenced above, by a law firm that “had represented the Guild in a significant number of matters for many years.” _Id._, at 5. The class action plaintiffs signed conflict waivers, acknowledging that “the Guild would subsidize the attorney fees for the class action lawsuits and that the firm represented the Guild in other matters”; however, the named plaintiffs demanded, and received the Guild’s assurance, that they control the litigation, not the Guild. _Id._ Defense attorneys eventually moved to dismiss plaintiffs’ law firm arguing that the Guild’s interests and the law firm’s interests conflicted with the interests of the named plaintiffs, and that the law firm had divided loyalties. _Id._, at 9. The trial court denied the motion to disqualify plaintiffs’ counsel, but expressed concern about potential conflicts of interest and the possibility that the Guild would seek to control the litigation, and it issued verbal and written orders to plaintiffs and their counsel seeking to address this concern. _Id._, at 10-11. The trial court also ordered that four of the class action plaintiffs be removed from the litigation based on their deposition testimony that “one of their personal goals was to assist the Guild’s unionizing efforts.” _Id._, at 11. The trial court refused, however, to dismiss all 21 of the class action plaintiffs, _id._, at 12. Defense attorneys appealed the denial of the motions to disqualify and to remove all of the named plaintiffs from the class action litigation; plaintiffs cross-appealed, challenging certain of the verbal and written orders by the trial court, _id._ The appellate court affirmed the orders appealed by the defense, and reversed the orders appealed by the plaintiffs.

The vast majority of the Court of Appeal opinion concerns defendants’ appeal. See Sharp, at 13-32. The appellate court disagreed that the entire law firm representing plaintiffs had to be disqualified because the firm’s “duty of loyalty to the Guild creates actual and potential conflicts of interest because the Guild’s interest in furthering its organizing efforts is antithetical to the sole interests of absent class members, which is to maximize the recovery on the wage and hour claims.” Id., at 13. After providing a detailed summary of the law surrounding motions to disqualify and conflicts of interest, see id., at 13-21, the Court of Appeal’s comprehensive analysis led it to conclude that the conflict waivers signed by the named plaintiffs in the two class action lawsuits were effective, see id., at 21-30. The appellate court stressed, however, that “the class action procedures already include a system by which the court determines if the named class representatives can adequately represent the class,” and that “when plaintiffs seek to have the classes certified, they will have the burden of meeting these requirements.” Id., at 23. The Court of Appeal was also mindful that the motion to disqualify had been filed not by one of the class action plaintiffs, who allegedly suffer as a result of the purported conflict, “but by opposition parties who are not directly touched by the purported conflict.” Id., at 24.

Class Action Court Decisions Employment Law Class Actions Uncategorized

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

Judicial Panel Grants Defense Motion, Unopposed by Any Class Action Plaintiff, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Centralizes Class Actions in Southern District of New York Four class action lawsuits – two in New York, one in Tennessee and one in Texas – were filed against defendants PepsiCo and Pepsi Bottling Group alleging that defendants “misled consumers of its Aquafina bottled water into believing that the water source of Aquafina was something different from and better than tap water.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Removal Cases–Gerlinger v. Amazon.com: Ninth Circuit Affirms Dismissal Of Antitrust Class Action Because Plaintiff Lacked Standing To Pursue Class Action

Antitrust Class Action Properly Dismissed with Prejudice because Plaintiff Failed to Establish Injury-in-Fact Required for Article III Standing to Prosecute Class Action Ninth Circuit Holds Plaintiff filed a putative class action against Amazon.com and book-seller Borders Group alleging antitrust violations; the class action complaint alleged that, following unsuccessful attempts to operate its own online website, Borders entered into an agreement with Amazon to “direct[] shoppers to what is known as a mirror website, a site hosted by Amazon.

Class Action Court Decisions Uncategorized

Time Warner Class Action Defense Cases–Clark v. Time Warner: Ninth Circuit Affirms “Primary Jurisdiction” Dismissal of Class Action And Referral To FCC Of Issue Central To Class Action Complaint

District Court Dismissal of Class Action Complaint and Referral to Federal Communications Commission (FCC) of “Novel and Technical Question” of Issue Central to Class Action Claims was Proper Ninth Circuit Holds

Plaintiff filed a putative class action against Time Warner Cable alleging that it engaged in the practice of “slamming” in violation of 47 U.S.C. § 258(a); the class action complaint alleged further the Time Warner violated the parallel state statute. Clark v. Time Warner Cable, 523 F.3d 1110, 1112 (9th Cir. 2008). The class action advanced also state law claims, as well as RICO (Racketeer Influenced and Corrupt Organizations Act), id. According to the class action’s allegations, defendant telephoned plaintiff marketing a digital phone package; the package utilized Voice over Internet Protocol (VoIP) technology, rather than “the traditional public switched telephone network (PSTN). Id. Plaintiff alleges she rejected the invitation, but defendant disconnected her existing telephone service and sent a technician to install her new service. Id. Defense attorneys moved to dismiss the class action on the grounds that the FCC had not yet decided whether § 258(a) applies to VoIP providers as well as a “telecommunications carriers.” Id., at 1112-13. In addition to referring the § 258(a) class action claim to the FCC, the district court dismissed, without prejudice, plaintiff’s remaining claims. Id., at 1113. The Ninth Circuit affirmed.

The Circuit Court explained that this appeal presents the issue of “whether the doctrine of primary jurisdiction permits a district court to refer a claim raising a novel and technical question of federal telecommunications policy to the Federal Communications Commission for its consideration in the first instance.” Clark, at 1112. “The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency.” Id., at 1114. Put simply, the Telecommunications Act of 1996 “imposes a variety of obligations on telecommunications carriers,” id., at 1113, and expressly prohibits “slamming” – “the practice in which a telecommunications carrier switches a consumer’s telephone service without the consumer’s consent,” id., at 1112. Specifically, § 258(a) states that “[n]o telecommunications carrier shall submit or execute a change in a subscriber’s selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the [FCC] shall prescribe” (italics added). The Ninth Circuit explained at pages 1113 and 1114:

Class Action Court Decisions Uncategorized