Veterans Class Action Defense Cases-Cody v. Cox: District of Columbia Circuit Reverses Dismissal Of Class Action Holding Congressional Amendment To Statute Did Not Render Class Action Claims Moot

Class Action Claims Under 24 U.S.C. § 413(b) were not Rendered Moot by 2006 Congressional Amendment to Section 413 District of Columbia Circuit Holds Plaintiffs, elderly veterans who were full-time residents of the Armed Forces Retirement Home, filed a class action lawsuit against the Secretary of Defense and the Chief Operating Officer of the Armed Forces Retirement Home; the class action sought to compel the Armed Forces Retirement Home to provide “‘high quality’ health care, as required by 24 U.

Class Action Court Decisions Uncategorized

PSLRA Class Action Defense Cases-Makor v. Tellabs: Seventh Circuit Reaffirms That Class Action Complaint Created “Strong Inference” Of Scienter Required For Securities Class Action To Survive Defense Motion To Dismiss

On Remand from Supreme Court, Seventh Circuit Holds Allegations of Scienter in Securities Class Action Complaint Satisfied Requirements of Private Securities Litigation Reform Act (PSLRA) Warranting Reversal of District Court Order Granting Defense Motion to Dismiss Class Action

Plaintiffs filed a class action against Tellabs and its CEO alleging violations of federal securities laws; defense attorneys moved to dismiss the class action complaint on the grounds that the Private Securities Litigation Reform Act (PSLRA) required plaintiffs to plead facts sufficient to support a “strong inference” of scienter, and that the putative class action failed to do so. The district court granted the defense motion, but the Seventh Circuit reversed and reinstated the class action. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. , 127 S.Ct. 2499 (2007). The Supreme Court granted certiorari and reversed, and our article discussing that opinion may be found HERE. The High Court remanded the class action to the Seventh Circuit “with directions to consider whether the plaintiffs’ allegations of securities fraud in violation of section 10(b) of the Securities Exchange Act of 1934…and SEC Rule 10b-5…create the ‘strong inference’ of scienter, as defined by the Supreme Court in its opinion, that the [PSLRA] requires for the complaint to survive a motion to dismiss.” Makor Issues & Rights, Ltd. v. Tellabs, Inc., _ F.3d ___ (7th Cir. January 17, 2008) [Slip Opn., at 1-2]. On remand, the Seventh Circuit adhered to its prior determination and reinstated the class action.

The Supreme Court explained that the PSLRA “requires plaintiffs to state with particularity both the facts constituting the alleged violation, and the facts evidencing scienter, i.e., the defendant’s intention ‘to deceive, manipulate, or defraud.'” 127 S.Ct. at 2504 (citations omitted). Specifically, the PSLRA requires that the complaint “state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind,” 15 U.S.C. § 78u-4(b)(2), and the Supreme Court held at pages 2504 and 2505: “It does not suffice that a reasonable factfinder plausibly could infer from the complaint’s allegations the requisite state of mind. Rather, … a court governed by § 21D(b)(2)…must consider, not only inferences urged by the plaintiff, as the Seventh Circuit did, but also competing inferences rationally drawn from the facts alleged. An inference of fraudulent intent may be plausible, yet less cogent than other, nonculpable explanations for the defendant’s conduct. To qualify as ‘strong’ within the intendment of § 21D(b)(2), we hold, an inference of scienter must be more than merely plausible or reasonable – it must be cogent and at least as compelling as any opposing inference of nonfraudulent intent. (Italics added.) The newly-enunciated test requires a court “take into account plausible opposing inferences,” something the Seventh Circuit expressly refused to do. Id., at 2509. Accordingly, the High Court remanded the class action to the Seventh Circuit to consider these opposing inferences and answer, “would a reasonable person deem the inference of scienter at least as strong as any opposing inference?” Id., at 2511. Our summary of the Supreme Court opinion may be found here .

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

FLSA Class Action Defense Cases-Roe-Midgett v. CC Services: Seventh Circuit Affirms Summary Judgment In Favor Of Defense In FLSA Class Action Holding Employees Covered By Class Action Complaint Were Exempt

District Court Properly Granted Defense Motion for Summary Judgment as to Class Action Claims on Behalf of Insurance Claims Adjusters because Undisputed Facts Established that Class of Employees Covered by Action Fell Within FLSA’s Administrative Exemption Seventh Circuit Holds

Plaintiffs filed a class action lawsuit against their employer, CC Services, alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, the class action complaint alleged that defendant misclassified the class of employees on whose behalf the action was brought (four classes of insurance claims adjusters) in order to avoid paying them overtime. Roe-Midgett v. CC Services, Inc., ___ F.3d ___ (7th Cir. January 4, 2008) [Slip Opn., at 1-2]. Defense attorneys moved for summary judgment as to all of the class action claims, _id._, at 6. The district court granted the defense motion, _id._ In ruling against plaintiffs’ class action claims, the federal court applied “the Department of Labor’s so-called ‘short test’ for determining whether employees fall within the FLSA’s administrative exemption,” and “concluded that the primary duties of all four claims-processing positions involved matters (1) ‘directly related to management policies or general business operations’ and (2) ‘requiring the exercise of discretion and independent judgment.’” _Id._, at 2. Plaintiffs appealed, and the Seventh Circuit affirmed.

CC Services processes insurance claims for auto, home, commercial and farm insurers. Slip Opn., at 3. It operates out of 37 field offices, and in 2004 settled $600 million in claims, id. Each field office is staffed with Property Specialists, Field Claims Representatives, and Material Damage Appraisers (MDAs). Id. The Seventh Circuit noted that plaintiffs presented only limited arguments on appeal with respect to the district court’s summary judgment order concerning Property Specialists and Field Claims Representatives (II and III), id., at 2; as to those three classes, plaintiffs argued that material issues of disputed fact precluded summary judgment on the class action claims, “[b]ut they failed to identify any real factual dispute specific to these employees,” id. The Circuit Court focused, therefore, on the claim that the duties of MDAs failed to meet the requirements for exemption under the short test. Id. The Seventh Circuit summarized the jobs performed by MDAs and its conclusion at pages 2 and 3 as follows:

Class Action Court Decisions Employment Law Class Actions Uncategorized

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

Judicial Panel Grants Defense Request, Over Plaintiff Objection, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Agrees With Defense Request to Transfer Class Actions to Southern District of New York Ten individual and class action lawsuits, nine (9) in New York and one (1) in Illinois, were filed against various defendants alleging federal securities laws violations arising out of the collapse of Refco, Inc. In re Refco Securities Litig.

Class Action Court Decisions Multidistrict Litigation Uncategorized

FCRA Class Action Defense Cases-Killingsworth v. HSBC: Seventh Circuit Reverses District Court Orders Dismissing Of FCRA Class Action Lawsuits Holding FCRA Amendment Barring Private Rights Of Action Not Retroactive

Class Action Complaints Alleging FCRA Violations Erroneously Dismissed because FACTA Amendments Eliminating Private Rights of Action for FCRA § 1681m Violations cannot be Applied Retroactively to Class Action Claims Premised on Violations that Occurred Prior to FACTA’s Effective Date Seventh Circuit Holds

Plaintiff Linda Killingsworth filed a class action against Household Bank (now HSBC Bank Nevada) alleging that the prescreened credit card offer extended to her by the Bank prior to August 20, 2004 violated the federal Fair Credit Reporting Act (FCRA), and plaintiff Erick Sawyer separately filed a class action against his auto insurance carrier, Ensurance Insurance Services, alleging that in connection with issuing him an auto policy in October 2004 it “violated the FCRA by charging him a higher rate based on negative information in his credit report without giving him notice of that adverse action, and also by using his initial credit information for subsequent renewals of his policy when corrected credit information would have qualified him for a lower rate.” Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 616 (7th Cir. 2007). The class action complaints were filed in the Northern District of Illinois, and defense attorneys in each class action moved to dismiss the complaint based on Section 311 of the federal Fair and Accurate Credit Transactions Act (FACTA), which amended the FCRA to eliminate certain private rights of action under the FCRA. Id., at 617 (citing 15 U.S.C. § 1681m(h)(8)). In each case, the district court agreed and dismissed the class action complaint, id. Both plaintiffs appealed and the Seventh Circuit consolidated the appeals and issued a single opinion address the question of whether Section 311, which became effective on December 1, 2004, “impairs rights [plaintiffs] possessed prior to the new statute’s effective date and therefore has an impermissible retroactive effect if applied to them.” Id. The Seventh Circuit reversed the dismissal of Killingsworth’s class action, concluding that the retroactive application of Section 311 was improper as to her claims, but the Circuit Court remanded for further proceedings as to Sawyer’s class action complaint, concluding that “the retroactivity question cannot be decided at the pleading stage because the conduct alleged in his [class action] complaint straddles FACTA’s effective date.” Id.

The issue before the Seventh Circuit was “whether an amendment to the [FCRA] eliminating private rights of action has an impermissible retroactive effect when applied to FCRA claims that accrued prior to the amendment’s effective date.” Killingsworth, at 616. Section 311 of FACTA added subsection (h) to FCRA § 1681m so as to eliminate private rights of action for violations of § 1681m. Killingsworth received an offer of credit prior to August 20, 2004, but did not file her class action lawsuit until October 2005. Id., at 617. Her class action alleged a violation of § 1681m(d), and defense attorneys moved to dismiss the class action on the ground that no private right of action existed based on Section 311’s amendment to the FCRA. Id., at 617-18. The district court agreed and dismissed Killingsworth’s class action, id., at 618. For his part, Sawyer applied for auto insurance in October 2004, his auto policy took effect on December 20, 2004, and it was renewed twice at six-month intervals. Id., at 618. Sawyer also filed his class action lawsuit after the effective date of Section 311; his class action alleged a violation of § 1681m(a). Id. However, the class action alleged further that “Ensurance failed to consider interim changes to his credit rating and instead relied on his initial credit score when subsequently renewing his policy,” thus implicating acts taken after Section 311’s effective date. Id. As in Killingsworth, defense attorneys moved to dismiss Sawyer’s class action on the ground that no private right of action existed; the federal court agreed and dismissed Sawyer’s class action. Id.

Class Action Court Decisions FCRA Class Actions Uncategorized

Securities Class Action Defense Cases-Stoneridge Investment v. Scientific-Atlanta: Supreme Court Affirms Dismissal Of Securities Class Action Claims Against Third Parties Finding No Reliance By Investors On Third Party Statements

Class Action Claims Alleging Securities Exchange Act of 1934 § 10(b) and Rule 10b-5 Violations Against Customers and Suppliers of Charter Communication for Allegedly Aiding Charter’s Scheme to Publish Misleading Financial Statements Properly Dismissed because Class Action Plaintiffs-Investors did not Rely on any Representations by Customers/Suppliers U.S. Supreme Court Holds

Plaintiffs filed a class action lawsuit against Charter Communications and others, including Scientific-Atlanta and Motorola as customers and suppliers of Charter Communications, alleging securities violations under § 10(b) of the Securities Exchange Act of 1934 (the Act) and SEC Rule 10b-5; specifically, the class action alleged that the customers/suppliers “agreed to arrangements that allowed the investors’ company [Charter Communications] to mislead its auditor and issue a misleading financial statement affecting the stock price.” Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., ___ U.S. ___, 128 S.Ct. 761, 2008 WL 123801, * 2 (January 15, 2008). Defense attorneys for Scientific-Atlanta and Motorola moved the district court to dismiss the class action complaint against them for failure to state a claim, and the court granted the defense motion. _Id._, * 4. Plaintiffs’ appealed, and the Eighth Circuit affirmed concluding, “the allegations did not show that [Scientific-Atlanta and Motorola] made misstatements relied upon by the public or that they violated a duty to disclose,” _id._ The Supreme Court granted review of this issue, critical to numerous class actions pending throughout the country, to “consider the reach of the private right of action…implied in § 10(b) [of the Act]…and SEC Rule 10b-5.” _Id._, at *2. The High Court affirmed the Eighth Circuit’s decision.

The class action complaint alleged that Charter Communications, a cable operator, “engaged in a variety of fraudulent practices so its quarterly reports would meet Wall Street expectations for cable subscriber growth and operating cash flow.” Stoneridge, at *3. As the Supreme Court explained at page *3; “The fraud included misclassification of its customer base; delayed reporting of terminated customers; improper capitalization of costs that should have been shown as expenses; and manipulation of the company’s billing cutoff dates to inflate reported revenues.” The theory underlying the class action claims against Scientific-Atlanta and Motorola was that in 2000, after Charter realized that it would miss cash flow estimates by $15-$20 million despite the fraud described above, Charter altered its arrangements with Scientific-Atlanta and Motorola in an effort to mislead Arthur Andersen: specifically, “Respondents [Scientific-Atlanta and Motorola] supplied Charter with the digital cable converter (set top) boxes that Charter furnished to its customers. Charter arranged to overpay respondents $20 for each set top box it purchased until the end of the year, with the understanding that respondents would return the overpayment by purchasing advertising from Charter. The transactions, it is alleged, had no economic substance; but, because Charter would then record the advertising purchases as revenue and capitalize its purchase of the set top boxes, in violation of generally accepted accounting principles, the transactions would enable Charter to fool its auditor into approving a financial statement showing it met projected revenue and operating cash flow numbers.” Id. Scientific-Atlanta and Motorola allegedly agreed to this arrangement, and participated in drafting documentation “to make it appear the transactions were unrelated and conducted in the ordinary course of business.” Id. Neither Scientific-Atlanta nor Motorola played any role “in preparing or disseminating Charter’s financial statements,” and both of them “booked the transactions as a wash, under generally accepted accounting principles.” Id., at *4.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

FEMA Class Action Defense Cases-Ridgely v. FEMA: Fifth Circuit Reverses District Court Order Granting Preliminary Injunction Against FEMA Regarding Rental Assistance Benefits To Hurricane Victims

District Court Erred in Granting Preliminary Injunction in Class Action Against FEMA Alleging Arbitrary Denial of Continuing Rental Assistance Benefits for Individuals Displaced from Homes Following Hurricanes because Recipients did not have Property Interest in Those Benefits Fifth Circuit Holds

Plaintiffs filed a class action lawsuit against the Federal Emergency Management Agency (FEMA) arising out of FEMA’s administration of, and termination of benefits under, a rental assistance program instituted for individuals displaced from their homes by Hurricane Katrina and Hurricane Rita: specifically, the class action was brought “a class of individuals who received rental assistance payments from the federal government after Hurricanes Katrina and Rita, [and] alleg[ed] various constitutional and statutory deficiencies in the process by which the rental assistance program is administered.” Ridgely v. Federal Emergency Management Agency, 512 F.3d 727, 2008 WL 54799, *1 (5th Cir. 2008). The class action complaint alleged that FEMA could not terminate benefits under the program “until certain notice, hearing, and appeal procedures have been provided,” and plaintiffs’ lawyer moved for a preliminary injunction in order to require FEMA to continue making payments under the program until a decision on the merits of the class action claims. Id. Defense attorneys opposed the motion, arguing that recipients of benefits under the rental assistance program did not have a due process property interest in continued benefits thereunder, id. The district court issued the preliminary injunction requested by plaintiffs. Id. Defense attorneys filed an interlocutory appeal only from the issuance of the injunction, not from the granting of class action status, and the Fifth Circuit reversed.

Following Hurricanes Katrina and Rita, FEMA provided rental assistance “to individuals displaced from their homes on account of either storm” that was to be used by recipients “to rent alternate housing.” Ridgely, at *1. This program is governed by the Stafford Act, 42 U.S.C. § 5121 et seq. and FEMA’s implementing regulations, id. FEMA’s practice is to provide benefits in three-month blocks – that is, FEMA gives recipients “a single payment designed to cover rent for three months”; if assistance is needed beyond the three-month benefit provided, an application may be made for continued rental assistance which, if granted, are again made in three-month blocks. Id. After FEMA denied plaintiffs’ applications for continued rental assistance, id., at *2, they filed a class action “alleg[ing] due process violations in the process by which FEMA makes eligibility determinations for these additional awards.” Id., at *1.

We do not here discuss the provisions of the Stafford Act or FEMA’s regulations, or the process by which individuals qualify for assistance under the rental assistance program. See Ridgely, at *1. For present purposes, it is sufficient to note that FEMA has been “flexible” in its administration of the program, at times requiring minimal or even no documentation from applicants, and at other times requiring more detailed documentation in order to receive benefits or continued benefits. Id. The class action alleged that FEMA’s administration of the program is “arbitrary” and violates the Due Process clause, id., at *2. Specifically, the class action complaint “charged that FEMA: (1) denies applications for continued rent assistance by issuing notices containing only confusing codes, instead of understandable explanations; (2) operates an unresponsive system that precludes effective challenges to FEMA decisionmaking before the loss of assistance; and (3) fails to publish eligibility standards.” Id.

Class Action Court Decisions Uncategorized

Class Action Defense Cases-Grife v. Allstate: Eleventh Circuit Affirms Dismissal Of Class Action Complaint Against Insurer Holding Class Action Claims Fell Within Scope Of Exclusion To Coverage

District Court did not Err in Granting Defense Motion for Judgment on the Pleadings in Class Action Alleging Breach of Contract Claims Against Insurer Eleventh Circuit Holds Plaintiff filed a class action lawsuit against his condominium owner’s insurer, Allstate, for breach of contract Grife v. Allstate Floridian Ins. Co., 512 F.3d 1302, 2008 WL 89948, *1 (11th Cir. 2008). The class action complaint alleged his insurance policy obligated Allstate to “pay [plaintiff’s] share of any special assessments charged against the condominium owners by the association” as a result of damage to property collectively owned by the condominium association.

Class Action Court Decisions Uncategorized

Best Buy Class Action Defense Cases-In re Best Buy: Judicial Panel On Multidistrict Litigation (MDL) Denies Plaintiff Motion To Centralize Class Action Litigation Agreeing With Defense That Class Actions May Proceed Separately

Judicial Panel Denies Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 because Only Two Class Actions were Pending, Issues were not “Sufficiently Complex and/or Numerous” to Warrant Centralization, and Alternatives Existed to Minimize Risk of Duplicative Discovery or Inconsistent Pretrial Rulings Two class action lawsuits were filed against Best Buy Stores and Best Buy Co. (one in Florida and one in Illinois) arising out of defendants’ business practices in charging restocking fees; Illinois plaintiff’s lawyer filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Insurance Class Action Defense Cases-Record-A-Hit v. National Fire Insurance: Illinois Court Reverses Dismissal Of Third-Party Complaint Against Insurance Companies Seeking Defense Of Class Action Complaint Against Insured

Third-Party Complaint Against Insurers Seeking Declaratory Relief as to Duty to Defend and Indemnify Class Action Defendant Adequately Stated a Claim under State Law Illinois Court Holds

Plaintiff filed suit in Illinois state court against various insurance companies alleging they owed a duty to defend and indemnify their insured, Tri-State Hose and Fitting, against the class action plaintiff had filed against Tri-State. Record-A-Hit, Inc. v. National Fire Ins. Co. of Hartford, 880 N.E.2d 205, 2007 WL 3377263, *1 (Ill.App. 2007). The class action complaint against Tri-State, also filed in Illinois state court, alleged violations of the federal Telephone Consumer Protection Act (TCPA) and the state’s Consumer Fraud and Deceptive Practices Act, as well as conversion. Id. Defense attorneys moved to dismiss the lawsuit, arguing that plaintiff’s effort to secure defense of the class action “constitutes an impermissible direct action against liability insurance carriers” (a claim abandoned on appeal, see id., at *2), and that the complaint fails to adequately plead a claim for declaratory relief, id., at *1. The defense also argued that the lawsuit should be dismissed because there was “another action pending between the same parties for the same cause” and because plaintiff lacked standing to bring a third party action seeking defense of the class action on behalf of Tri-State. Id. The trial court granted the motion on the ground that it failed to state a claim, id. The Appellate Court reversed.

The gravamen of the underlying class action was that Tri-State sent junk faxes in violation of the TCPA, and the class action complaint alleged that Tri-State’s conduct caused “property damage.” Record-A-Hit, at *1. Plaintiff’s lawsuit against the insurers alleged that that had insured Tri-State against claims for property damage and advertising injury, but that they had wrongly refused to defend or indemnify Tri-State against plaintiff’s class action. Id. Tri-State had not filed suit against its insurers, and plaintiff was not a party to any other action seeking to establish Tri-State’s rights against its insurers with respect to the class action complaint. Id. The only issue before the court of appeal was whether the complaint against the insurers stated a claim for declaratory relief. Id. The Appellate Court held that under Illinois state law a claim for declaratory relief adequately had been pleaded.

Class Action Court Decisions Uncategorized