Class Action Defense Cases–Thomas v. Blue Cross: Eleventh Circuit Reverses Denial Of OSC For Contempt Against Absent Class Member Seeking To Prosecute Individual Claims Released As Part Of Class Action Settlement

District Court Abused its Discretion in Denying OSC for Contempt against Absent Class Member who Filed Lawsuit against Party Released under Class Action Settlement because Class Member’s Individual Claims Fell Within Scope of Release in Class Action Settlement Agreement Eleventh Circuit Holds

In May 2003, a group of physicians filed a putative nationwide class action Blue Cross and Blue Shield Association, and its member plans, alleging conspiracy and aiding and abetting under the Racketeer Influenced and Corrupt Organizations Act (RICO); the class action complaint prayed for declaratory and injunctive relief, and sought monetary damages. Thomas v. Blue Cross & Blue Shield Ass’n, ___ F.3d ___, 2010 WL 174765, *1 (11th Cir. January 20, 2010). According to the allegations underlying the class action complaint, defendants had “engaged in a conspiracy to improperly deny, delay, and/or reduce payments to physicians, physician groups, and physician organizations by engaging in several types of allegedly improper conduct.” _Id._ The parties negotiated a class action settlement on behalf of a nationwide class, which eventually secured the approval of the district court. _Id._ The class action settlement required members of the class “release the Blue Cross plans from all claims arising out of or related to matters referenced in the class action and settlement agreement,” _id._, at *1-*2. Thus, as part of the class action settlement, “[t]he district court permanently enjoined the releasing parties from filing or prosecuting ‘any or all Released Claims against one or more Released Parties,’” and “expressly retained jurisdiction as to matters relating to the interpretation, administration, and consummation of the settlement agreement, and the enforcement of extant injunctions.” _Id._, at *2. In January 2008, plaintiff Dr. Robert Kolbusz, a physician at the Center for Dermatology and Skin Cancer, and the Center filed a lawsuit in Illinois against Health Care Service Corporation (the “Corporation”) for breach of contract, tortious interference with contractual relationships and prospective economic advantage, and defamation; in part, the _Kolbusz_ complaint “alleged that the Corporation had made false statements to his patients regarding its reasons for refusing to pay for medical services that he had rendered.” _Id._ Under the class action settlement, Kolbusz is a releasing party and the Corporation is a released party; however, while Kolbusz was a member of the class, he failed to timely object to or opt out of the class action settlement. _Id._ The Corporation filed a motion with the district court alleging that the _Kolbusz_ complaint violated the permanent injunction and sought an OSC for contempt against Kolbusz. _Id._, at *3. The district court concluded that the tortious interference and defamation claims were not barred by the class action settlement, but found that the breach of contract fell within the scope of the class action release and ordered Kolbusz to drop the claim within 20 days to avoid being held in contempt. _Id._ Both parties appealed. The Eleventh Circuit dismissed Kolbusz’s appeal for lack of jurisdiction “because the decision to afford Kolbusz 20 days to withdraw his claim of breach of contract is not a final or otherwise appealable order,” and reversed the district court’s determination that Kolbusz’s tort claims were not barred by the class action settlement. _Id._, at *1.

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Starr v. Sony BMG: Second Circuit Reverses Dismissal Of Antitrust Class Action Holding Class Action Complaint’s Allegations Satisfied Twombly

District Court Erred in Dismissing Antitrust Class Action because Allegations in Class Action Complaint were Sufficient to “Plausibly Suggest” an Agreement Among Defendants in Violation of Sherman Act Second Circuit Holds

Several class actions were filed in various state and federal courts against numerous defendants, including Sony BMG Music Entertainment, EMI, Universal Music Group Recordings, Warner Music Group and others, alleging violations of Section 1 of the Sherman Act; specifically, the class action complaint alleged “a conspiracy by major record labels to fix the prices and terms under which [Digital Music] would be sold over the Internet.” Starr v. Sony BMG Music Entertainment, ___ F.3d ___ (2d Cir. January 13, 2010) [Slip Opn., at 2-3.] Ultimately, the Judicial Panel on Multidistrict Litigation centralized 28 class actions in the Southern District of New York, and plaintiffs eventually filed a Second Consolidated Amended Complaint that “brought claims under Section 1 of the Sherman Act and state antitrust and unfair and deceptive trade practices statutes. It also brought state common law claims for unjust enrichment.” _Id._, at 6-7. According to the allegations underlying the class action complaint, “Defendants produce, license and distribute music sold as digital files (‘Digital Music’) online via the Internet (‘Internet Music’) and on compact discs (‘CDs’),” and they together “control over 80% of Digital Music sold to end purchasers in the United States.” _Id._, at 3. Certain named defendants launched a service called “MusicNet”; others launched a service called “Duet” that was later renamed as “pressplay.” _Id._ The class action complaint alleged that “defendants signed distribution agreements with MusicNet or pressplay and sold music directly to consumers over the Internet through these ventures (the ‘joint ventures’),” and that “[b]oth the joint ventures and the Recording Industry Association of America (‘RIAA’) provided a forum and means through which defendants could communicate about pricing, terms, and use restrictions.” _Id._ Moreover, “[t]o obtain Internet Music from all major record labels, a consumer initially would have had to subscribe to both MusicNet and pressplay, at a cost of approximately $240 per year,” and “[b]oth services required consumers to agree to unpopular Digital Rights Management terms (‘DRMs’).” _Id._ Defense attorneys moved to dismiss the class action complaint for failure to meet the pleading requirements enunciated in _Bell Atlantic Corp. v. Twombly_, 550 U.S. 544 (2007). _Starr_, at 3, 7. The district court granted the motion, _id._, at 7. The Second Circuit reversed, concluding that the non-conclusory allegations in the class action complaint were adequate to survive the defense motion to dismiss. _Id._, at 2.

The Circuit Court summarized the basis of the class action’s claims at page 4 as follows: “For example, pressplay prohibited consumers from copying more than two songs from any particular artist onto a CD each month. Music purchased from MusicNet and pressplay would often ‘expire’ unless repurchased: A MusicNet consumer would need to repurchase music each year and a pressplay consumer who unsubscribed would immediately lose access to all of the music he or she had purchased. MusicNet and pressplay also did not allow consumers to transfer songs from their computers to portable digital music players like the iPod. One industry commentator observed that MusicNet and pressplay did not offer reasonable prices, and one prominent computer industry magazine concluded that ‘nobody in their right mind will want to use’ these services. [Citation.]” The class action complaint also alleged that “dramatic cost reductions” realized by the individual defendants were not passed on to consumers “as would be expected in a competitive market.” Starr, at 4. Moreover, defendants allegedly entered into “Most Favored Nation clauses (‘MFNs’) in their licenses that had the effect of guaranteeing that the licensor who signed the clause received terms no less favorable than the terms offered to other licensors.” Id., at 5. Defendants allegedly hid these agreements “because they knew they would attract antitrust scrutiny.” Id. At bottom, the class action alleged “that defendants engaged in a continuing conspiracy to ‘restrain the availability and distribution of Internet Music, fix and maintain at artificially high and non-competitive levels the prices at which they sold Internet Music and impose unreasonably restrictive terms in the purchase and use of Internet Music’” and that plaintiffs “were injured by paying more for Internet Music and CDs than they would have in the absence of an illegal agreement.” Id., at 6.

Class Action Court Decisions Uncategorized

Microsoft WGA Class Action Defense Cases–Johnson v. Microsoft: Washington Federal Court Dismisses All Class Action Allegations In Class Action Complaint And Requires Plaintiffs Pay Defense Fees Incurred Opposing Withdrawn Class Certification Motion

Class Action Complaint Challenging Microsoft’s “Windows Genuine Advantage” Software could be Amended to Withdraw Class Action Allegations Provided Plaintiffs Dismiss All Class Claims and Provided Plaintiffs Reimburse Microsoft the Attorney Fees Reasonably Incurred in Opposing Plaintiffs’ Class Action Certification Motion before Plaintiffs Voluntarily Withdrew that Motion Washington Federal Court Holds

In April 2009, plaintiffs filed a putative class action against Microsoft in Washington federal court alleging, in the second amended class action complaint, “claims for unjust enrichment, breach of End User License Agreement (‘EULA’) contracts, violation of Washington’s Consumer Protection Act, and trespass to chattels, nuisance and interference with property” arising out of “Microsoft’s distribution of Windows Genuine Advantage (‘WGA’) software.” Johnson v. Microsoft Corp., ___ F.Supp. 2d ___ (W.D.Wash. January 15, 2010) [Slip Opn., at 1-2.] In September 2008, plaintiffs filed a motion requesting that the district court certify the litigation as a class action; however, in November 2009, plaintiffs withdrew their class action certification motion and “indicated an intent to withdraw class allegations.” _Id._, at 2. Plaintiffs thereafter moved to file a third amended class action complaint “that would eliminate most (but not all) class allegations, add a new cause of action and related allegations, and specify injunctive relief sought.” _Id._ Defense attorneys opposed the motion with one exception: Microsoft did not oppose the motion to the extent it sought to withdraw class action claims, provided that plaintiffs did not seek to “re-inject them at a later point in the proceeding.” _Id._ In addition, defense attorneys requested permission “to file a fee petition for the expenses incurred as a result of defending against Plaintiffs’ class-certification motion,” _id._ The district court granted the motion in part and denied the motion in part.

The district court began by noting the well-settled rule that leave to amend is “generally allowed absent bad faith, undue delay, futility, or prejudice to the opposing party.” Johnson, at 2 (citing Eminence Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th Cir. 2003)). Nonetheless, the federal court denied plaintiffs’ request to add claims (and allegations in support of claims) for fraudulent misrepresentation, negligent misrepresentation and fraudulent concealment because defense attorneys opposed these amendments and plaintiffs agreed to withdraw them. Id., at 2-3. Similarly, Microsoft opposed plaintiffs’ request to seek additional forms of injunctive relief, and plaintiffs agreed to withdraw those proposed amendments. Id., at 3. Accordingly, the district court denied that portion of plaintiffs’ motion, id. For our purposes, the most important aspect of the district court’s order concerns the class action allegations, to which we now turn.

Certification of Class Actions Class Action Court Decisions Uncategorized

UCL Class Action Defense Cases–Webster v. Allstate: California Appellate Court Affirms Dismissal Of UCL Class Action Complaint Holding Plaintiff Lacked Standing And Conduct Not Violative Of UCL

Class Action Alleging Violations of California’s Unfair Competition Law (UCL) Properly Dismissed because Plaintiff Lacked Standing to Prosecute Class Action Claim California Appellate Court Holds

Plaintiff, the owner and operator of an auto body repair shop, filed a putative class action on behalf of California auto body repair shops against automobile insurers Allstate Insurance and Progressive Casualty Insurance California auto body repair shops for violations of California’s Unfair Competition Law (UCL) and the Cartwright Act, and for unjust enrichment, on the ground that the insurers paid class members “based on rates that were allegedly below their ‘actual repair rate.’” Webster v. Allstate Ins. Co., Case No. B211390 (Cal.App. January 11, 2010) [Slip Opn., at 1-2.] According to the allegations underlying the class action complaint, the insurers “unlawfully and unfairly steer customers away from plaintiff’s business and towards direct repair providers (DRPs) who have a contractual relationship with defendants.” Id., at 2. The class action further alleged that defendants paid class members “‘artificially low’ rates for auto body work,” based on “unlawful and unfair surveys of body shop rates that include rates charged by DRPs who provide volume discounts to defendants.” Id. Defense attorneys moved to dismiss the class action complaint; the trial court granted the motion, holding that plaintiff lacked standing to pursue the class action’s UCL claim for injunctive relief. Id. Plaintiff appealed. The Court of Appeal, in an unpublished opinion, affirmed that plaintiff lacked standing to prosecute the UCL claim and held that “plaintiff failed to allege unlawful or unfair conduct within the meaning of the statute.” Id. It further affirmed the dismissal of the class action’s unjust enrichment and Cartwright Act claims and, accordingly, affirmed.

The Court of Appeal explained that the class action sought “an injunction prohibiting defendants from using negotiated rates in their surveys to determine the prevailing auto body rate in a geographic area, treble damages for violations of the Cartwright Act, attorney fees, interest and costs,” and prayed additionally for “disgorgement of all benefits wrongfully taken from plaintiff and the class in an amount that defendants have been unjustly enriched.” Webster, at 4. Plaintiff conceded, however, that he could recover restitution under the class action’s UCL claim, id. “The purpose of the UCL is to protect consumers and competitors from unfair competition in commercial markets for goods and services.” Id., at 4-5 (citation omitted). Plaintiff is neither a consumer nor a competitor of defendants, but argued “he has standing to pursue a UCL cause of action even though he is not eligible for restitution,” and that defendants “engaged in both unlawful and unfair business practices.” Id., at 5. The appellate court rejected both claims.

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Arias v. DynCorp: District of Columbia Federal Court Dismisses With Prejudice Mass Action Plaintiffs Who Failed To Complete Defense Discovery Questionnaires

Repeated Failure of Mass Action Plaintiffs to Respond to Discovery Questionnaires from Defense Attorneys Warranted Dismissal of those Plaintiffs with Prejudice District of Columbia Federal Court Holds

Plaintiffs, “citizens and domiciliaries of Ecuador,” filed a mass action complaint against various defendants “alleging physical harm and property damage stemming from the defendants’ contract with the United States government to spray pesticides in order to eradicate Colombian cocaine and heroin farms.” Arias v. DynCorp Aerospace Operations, LLC, ___ F.Supp.2d ___ (D.D.C. January 12, 2010) [Slip Opn., at 1.] Defense attorneys served questionnaires on the class members, seeking specific information related to the claims; some individuals failed to respond at all. Other plaintiffs, however, provided incomplete responses and repeatedly failed to do so. The parties jointly moved to dismiss from the litigation 425 plaintiffs who fell within two categories: “(1) plaintiffs who have provided sufficient information about the alleged date(s) of their exposure to the defendants’ spray but who did not disclose sufficient information about their location at the time of their exposure; and (2) plaintiffs who did not provide sufficient information about their alleged damages.” _Id._, at 1-2. Plaintiffs’ counsel argued that the dismissal should be without prejudice; defense attorneys urged the district court to dismiss the plaintiffs’ claims with prejudice. _Id._, at 1, 2. The district court granted the motion and dismissed the plaintiffs with prejudice.

Defense attorneys argued that the plaintiffs falling within the two groups at issue should be dismissed with prejudice because they “have been ‘given several chances to provide the information ordered by the Court but [have] failed to do so.’” Arias, at 2. Plaintiffs’ counsel disagreed, arguing that the plaintiffs “provided sufficient information regarding either exposure location or damages.” Id., at 2-3. After summarizing the rules governing dismissals under Federal Rules of Civil Procedure 37 and 41, see id., at 3-4, the district court summarized the history of the discovery requests and the various court orders violated by plaintiffs, see id., at 4-5. The federal court explained at page 5, “It has been over two years since the plaintiffs were first directed to complete the defendants’ questionnaires. Multiple orders have directed the plaintiffs to respond in full to the questionnaires, and the plaintiffs received three extensions of time in which to do so.” Plaintiffs’ counsel argued that the information provided, while incomplete, was adequate to allow defendants to “draw their own conclusions” as to the plaintiffs’ claims. Id., at 6. The district court disagreed: “The plaintiffs essentially are asking the defendants to draw conclusions based on incomplete information. If a plaintiff meant “my farm” rather than “the farm,” that plaintiff simply should have stated so in his questionnaire. Despite the plaintiffs’ ample opportunity to fill in the information gaps, they now turn to the defendants to do this work for them. This, however, is not the defendants’ duty.” Id.

Class Action Court Decisions Uncategorized

Carfax Class Action Defense Cases–West v. Carfax: Ohio Appellate Court Reverses Trial Court Approval Of Class Action Settlement Holding Notice To Class Members Was Inadequate

Class Action Settlement Approved by Trial Court Warranted Reversal because Notice to Absent Class Members was not Best Practicable under the Circumstances Ohio Appellate Court Holds

In August 2004, plaintiff filed a putative class action in Ohio state court against Carfax and Center for Auto Safety alleging violations of Ohio’s Consumer Sales Practices Act (as well as common law claims) based on the central allegation that Carfax failed to advise consumers that its reports “did not contain all information regarding vehicles’ histories.” West v. Carfax, Inc., 2009-Ohio-6857, 2, ¶2 (Ohio App. December 24, 2009). (Around the same time, nine other class actions were filed against Carfax in seven other states. Id.) Two years later, in September 2006, plaintiff and Carfax entered into a proposed class action settlement; the trial court gave preliminary approval to the class action settlement the following month. Id., at 2, ¶3. The court order “gave preliminary approval to the proposed settlement, certified a class, appointed [plaintiff] the class representative, and ordered that class members be notified of the proposed settlement in the manner specified therein.” Id. Several objections were filed to the proposed class action settlement, including objections by a group of class members who sought received leave to intervene, and objections by co-defendant Center for Auto Safety. Id., at 3, ¶4. The fairness hearing concluded with the trial court ordering further settlement negotiations, id. A revised class action settlement was reached, which the trial court approved after rejecting objections to the settlement and denying a request to compel discovery. Id., at ¶¶5-6. A group of objectors appealed the trial court’s order, supported by an amicus brief filed by the State of Ohio. Id., at ¶6. The Ohio Court of Appeals reversed.

Appellants advanced three challenges to the class action settlement: (1) that the notice procedure failed to “take reasonable steps to provide individual notice to all class members”; (2) that the trial court failed to require disclosure of “the likely redemption rate, and, in particular, information about the number of claims made”; and (3) that the trial court erred in denying their motion to compel discovery as to claims information. West, at 3-4, ¶¶ 8-10. The appellate court first addressed whether the trial court abused its discretion in approving the notice procedures at issue, see id., at 4, ¶ 11. The Court explained that due process requires only that “individual notice be given all class members ‘who are identifiable through reasonable effort’” and that it be the “‘best notice practicable.’” Id., at 5, ¶13 (citations omitted). “In this case, the class consisted of all persons purchasing a Carfax Vehicle History Report directly from Carfax in the United States prior to the date the trial court gave its preliminary approval to the settlement agreement: i.e., October 27, 2006. This class may include people extending as far back as 1996.” Id., at ¶15. The settlement approved by the court required “(1) individual email notice to email addresses of purchasers in the Carfax database extending back to October 27, 2003; and, (2) publication, one time each, in Investor’s Business Daily and USA Today.” Id. According to defense attorneys, Carfax sent more than 1.77 million emails, 92% of which were not rejected, and the two publications had a combined circulation of 2.7 million readers per day. Id.

Class Action Court Decisions Uncategorized

RESPA Class Action Defense Cases–Mims v. Stewart Title: Fifth Circuit Reverses Class Action Certification Of RESPA Claim Holding Individual Issues Predominate

Class Action Alleging Illegal Fee Splitting of Title Insurance Premiums in Violation of RESPA (Real Estate Settlement Procedure Act) did not Warrant Class Action Treatment because Individual Inquiries Predominate as to Whether Section 8(b) Violation Occurred Fifth Circuit Holds

Plaintiffs filed a putative class action against their title insurer, Stewart Title Guaranty, alleging inter alia violations of the federal Real Estate Settlement Procedure Act (RESPA); the class action complaint alleged that Stewart Title failed to provide certain discounts to class members and split with its agents “the illegal, unearned charges on the policies.” Mims v. Stewart Title Guaranty Co., 590 F.3d 298, 2009 WL 4642631, *1 (5th Cir. 2009). According to the allegations underlying the class action complaint, “consumers who refinanced their home mortgages…[were entitled ] to receive a mandatory discount on their premiums for new title insurance policies acquired from Stewart” provided that the new title insurance policy “is issued within seven years of the closing of the prior mortgage.” Id. The class action alleged that Stewart Title “consistently failed to provide the reissue insurance discount” but, instead, split the savings with its agents, and that this conduct constituted illegal splitting of unearned fees in violation of § 8(b) of RESPA. Id., at *1-*2. Plaintiffs filed a motion to certify the litigation as a class action, id., at *2; defense attorneys opposed class action treatment, but the district court granted the motion, see id., at *1. Stewart Title sought permission to appeal the class action certification order. Id., at *2. The Fifth Circuit reversed, holding that “individual factual issues predominate the RESPA claim.” Id.

The Circuit Court first addressed Stewart Title’s claim that plaintiffs lacked standing to prosecute the class action’s RESPA claim, and explained that the challenge was more accurately denominated an attack on the merits of the claim rather than an issue of standing. See Mims, at *2. The Fifth Circuit stated at page *2, “There is no serious question that the plaintiffs have standing to bring this claim.” The defense argument went to the merits of the RESPA claim which – in light of the limited scope of review under Rule 23(f) – “may only be considered in this case if relevant to the class certification question.” Id., at *3. After summarizing Section 8(b) of RESPA, see id., at *4, the Circuit Court explained that the question is whether Stewart Title’s alleged failure to give consumers discounts represented the retention of a fee for services that were not performed, id. In sum, “plaintiffs’ argument thus rests on the theory that the title insurance premium can be split between the amount allowed under Rule R-8 after the appropriate discount is applied and the amount in excess of that amount; they argue that this excess amount represents a charge for which no services were actually performed.” Id. In the Fifth Circuit’s view, the class action alleged: “Stewart charged excessive premiums. Stewart gave, and title agents accepted, a portion of the excessive premiums. The portion accepted by the title agents was excessive and not ‘for services actually performed,’ but instead were in the nature of kickbacks or referral fees.” Id., at *5. The district court had denied Stewart Title’s previous motion to dismiss the RESPA claim because it would that the splitting of such fees “may” violate Section 8(b), depending on the circumstances. Id. The Circuit Court held that class action treatment of the RESPA claim was therefore inappropriate, “because the district court’s liability model for violations of RESPA § 8(b) requires an inquiry into the facts of each individual class member’s title insurance transaction.” Id. In other words, “The only way the overall practice may be proven to violate RESPA, consistently with the HUD liability standard, is to examine the reasonableness of payments for goods and services. This inquiry must be performed on a transaction-by-transaction basis, because a single finding of liability on an unreasonable relationship between goods and services does not necessitate the conclusion that such unreasonableness exists on a class-wide basis.” Id., at *6. Accordingly, the district court abused its discretion in granting class action treatment to the RESPA claim, id., at *8.

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

Bayer Class Action Defense Cases–In re Baycol: Eighth Circuit Affirms Injunction Against State Court Deciding Class Action Certification Motion Because Federal Court Rejected Class Action Treatment Of Identical Claims By Different Plaintiffs

Following Denial of Class Action Treatment, Federal Court did not Abuse Discretion in Granting Defense Motion to Enjoin State Court from Ruling on Class Action Certification Motion of Identical Claims brought by Different Plaintiffs Eighth Circuit Court Holds

Plaintiff George McCollins filed a putative class action against Bayer and other defendants, “who manufactured and produced Baycol, a prescription cholesterol lowering medication,” seeking damages for breach of warranties and violation of the West Virginia Consumer Credit and Protection Act (WVCCPA); Baycol was sold from 1997 to 2001, but was taken off the market following the deaths of 31 people. In re Baycol Products Litig., 593 F.3d 716 (8th Cir. 2010) [Slip Opn., at 2, 3.] McCollins’ class action complaint sought to represent residents of West Virginia, id., at 2. McCollins filed his complaint in West Virginia state court in 2001, but defense attorneys removed the class action to federal court on diversity grounds. Id., at 3. (The Circuit Court noted that had the class action been filed “a few years later,” it would have been removable under the Class Action Fairness Act (CAFA). Id.) Also in 2001, two other individuals (Keith Smith and Shirley Sperlazza) filed a similar class action in West Virginia state court, but it was not removed to federal court. Id., at 4. The Judicial Panel on Multidistrict Litigation (MDL) consolidated the McCollins class action with thousands of other individual and class action lawsuits involving Baycol, id., at 2, 3. As the sole putative class representative of West Virginia residents, plaintiff “had not experienced the side effect that led to Baycol’s withdrawal from the market[ and the] undisputed record evidence showed that he had physically benefitted from the drug.” Id., at 3. After extensive litigation, including the issuance of more than 160 pretrial orders, the district court rejected the motion by the Plaintiffs’ Steering Committee to certify the Master Class Action Complaint as a nationwide class action, “concluding that since such plaintiffs ‘would have to demonstrate that they were either injured by Baycol, or that Baycol did not provide them any health benefits[,]’ common issues did not predominate,” id., at 3. The district court later issued an order denying class action treatment to McCollins’ complaint on behalf of West Virginia residents, id., at 3, 4. Thereafter, Smith and Sperlazza sought class action certification in West Virginia state court of their Baycol class action; defense attorneys moved the federal court “to enjoin Smith and Sperlazza from relitigating in state court the certification of a West Virginia class.” Id., at 2. The district court granted the motion, and the Eighth Circuit affirmed. Id.

The Eighth Circuit explained that “the Anti-Injunction Act generally prohibits federal courts from interfering in state proceedings, [but] it permits injunctions necessary to ‘protect or effectuate its judgments.’” In re Baycol, at 5 (quoting 28 U.S.C. § 2283). The Circuit Court “review[ed] de novo the district court’s determination that the Act’s ‘relitigation exception’ applies…, and that it had personal jurisdiction over [Smith and Sperlazza],” id. (citations omitted). This, in turn, required an analysis of collateral estoppel requirements under West Virginia law. Id., at 6. The Circuit Court held that the issue presented by Smith and Sperlazza in their state court motion for class action treatment had been previously decided by the district court in connection with the McCollins action, and that they sought class action certification “on the same legal basis of the same class already denied in this case.” Id. The fact that West Virginia’s Rules of Civil Procedure Rule 23 would be applied in Smith and Sperlazza’s action rather than Fed.R.Civ.P. Rule 23 was of no moment, id. Put simply, “[T]he district court concluded that Baycol plaintiffs cannot state a claim under the WVCCPA without proof of harm or injury. Economic loss alone is insufficient. Certification under the state rule would undermine this conclusion of substantive state law properly made by the district court.” Id. (citation omitted).

Certification of Class Actions Class Action Court Decisions Uncategorized

Apple iPod Class Action Defense Cases–Birdsong v. Apple: Ninth Circuit Affirms Dismissal Of UCL Class Action Holding Risky Consumer Behavior Caused Any Damage Rather Than Apple’s iPod Design

UCL Class Action Alleging Apple iPod Created Unreasonable Risk of Hearing Loss Properly Dismissed for Failure to State a Claim because while iPod was Capable of Causing Hearing Loss it was Consumer Behavior that Proximately Caused Injury rather than iPod’s Design Ninth Circuit Holds

Plaintiffs filed a putative class action against Apple alleging inter alia violations of California’s Unfair Competition Law (UCL); specifically, the class action complaint alleged that Apple’s iPod “is defective because it poses an unreasonable risk of noise-induced hearing loss to its users.” Birdsong v. Apple, Inc., 590 F.3d 955 (9th Cir. 2009) [Slip Opn., at 16867, 16870.] Federal court jurisdiction was premised on the Class Action Fairness Act (CAFA). Id., at 16872 n.1. The class action originated in Louisiana, but it was transferred to California and a California resident was added as a putative class representative in the third amended class action complaint. Id., at 16871. According to the allegations underlying the class action complaint, the iPods were sold with “detachable ‘earbud’ headphones” (but other headphones and audio devices could be used for playback), and were capable of “producing sounds as loud as 115 decibels.” Id., at 16870. Each iPod can with a warning concerning the risk of hearing damage, id., at 16870-71. The class action alleged that iPod’s ability to produce 115 decibels was a “defect” that constituted a “breach of the implied warranty of merchantability and fitness for a particular purpose,” id., at 16870. Defense attorneys moved to dismiss the third amended class action complaint for failure to state a claim and on the ground that plaintiffs lacked standing to prosecute the class action’s UCL claim. Id. The district court granted the motion and dismissed the class action. Id., at 16871-72. The Ninth Circuit affirmed.

The Circuit Court first summarized California law concerning the implied warranty of merchantability. See Birdsong, at 16872-73. The district court dismissed that class action claim based on its determination that it was the manner in which a consumer used the iPod, not its design, that created the risk of hearing loss. Id., at 16873. The Ninth Circuit agreed, explaining at page 16873 that “the iPod has an ‘ordinary purpose of listening to music,’ and nothing [plaintiffs] allege suggests iPods are unsafe for that use or defective.” While iPods are capable of playing music at loud volumes, and capable of playing music for 12-14 hours before the batteries need to be recharged or replaced, the bottom line is that “users have the option of using an iPod in a risky manner, not that the product lacks any minimum level of quality.” Id.

Class Action Court Decisions Class Action Fairness Act (CAFA) Uncategorized

Class Action Defense Cases–Truk v. Wehlmann: Texas Federal Court Dismisses Securities Fraud Class Action Based On Cautionary Language In Public Offering Documents

Class Action Alleging Violations of Federal Securities Laws based on Oil Company’s “Proved Reserves” Estimates in Public Offering Documents Warranted Dismissal because Cautionary Language Warned Reasonable Investor of Risk of Lower Reserves Texas Federal Court Holds Plaintiff filed a putative class action against Cano Petroleum (an independent oil and natural gas company) and individual officers and directors of Cano, as well as defendants involved in the underwriting of Cano’s secondary public offering, alleging violations of federal securities laws; specifically, the class action complaint alleged that the documents issued in connection with the secondary public offering contained material misrepresentations in violation of Sections 11, 12 and 15 of the Securities Act of 1933.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized