Class Action Defense Cases-In re Initial Public Offering: Significant Defense Victory As Second Circuit Holds Federal Court Erred In Certifying Securities Class Action Against Wall Street Banks Arising Out Of Internet IPOs

Second Circuit Clarifies Standard of Proof for Certification of Class Action Under Rule 23 and Holds that IPOs are not “Efficient Markets” in Handing Defense Victory on Appeal

Beginning in 2001, hundreds of class action lawsuits were filed against Wall Street banks alleging violations of federal securities laws in connection with the initial public offerings of certain Internet companies. In re Initial Public Offering Securities Litig., 471 F.3d 24, 2006 WL 3499937, *1 (2nd Cir. December 5, 2006). Following the consolidation of 310 of the class action lawsuits, plaintiffs’ lawyers moved for class certification in six “focus cases.” Id., at *3. Defense attorneys objected to certification of a class action arguing primarily that individual issues predominate over common ones; the district court granted the motion finding that plaintiffs had made “some showing” of the elements required under Rule 23 to warrant certification, id., at *3-*5. The Second Circuit reversed, agreeing with defense attorneys that plaintiffs had not satisfied the requirements of Rule 23 and further that they could not satisfy those requirements.

The class action complaints alleged that underwriters, issuers and individual officers of the issuing companies defrauded investors through “tie-in arrangements, undisclosed compensation, and analyst manipulation” in connection with the IPOs of certain Internet companies, id., at *2. In certifying a class action, the district court perceived conflicting guidance in Supreme Court authority concerning the proper standard of proof required to warrant class action certification. Specifically, Supreme Court authority requires a “rigorous analysis” that may require the court to “probe behind the pleadings,” but a court may not “conduct a preliminary inquiry into the merits of a suit.” Id., at *4 (citations omitted). The district court rejected Fourth Circuit and Seventh Circuit authority requiring plaintiffs to “establish the requirements of Rule 23 by a preponderance of the evidence, even if resolving those issues requires a ‘preliminary inquiry into the merits . . ., or ‘overlap with issues on the merits.'” Id. (citations omitted). The court instead crafted an amorphous “some showing” test and, applying that new standard, concluded that plaintiffs had met their burden of proof. Id., at *4-*5.

Certification of Class Actions Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Morales-Arcadio v. Shannon Produce Class Action Defense Case: Defense Rule 68 Offer Of Judgment Served Prior To Opt-In Deadline For Class Action Under Fair Labor Standards Act (FLSA) Is Invalid Georgia Federal Court Holds

Georgia Federal District Court Holds that Offers of Judgment in FLSA (Fair Labor Standards Act) Class Action Cannot be made Prior to Expiration of Opt-In Period Because Rule 68 Requires that Offer be made on Adverse Parties and Class Members are not “Fully Identifiable” Until Opt-In Period Ends

Plaintiffs filed a putative class action on behalf of migrant farm workers against Shannon Produce Farms in July 2005 alleging violations of the Fair Labor Standards Act (FLSA), and in November 2005 they filed a motion for certification of a FLSA collective action pursuant to 29 U.S.C. § 216(b), which the district court granted. Morales-Arcadio v. Shannon Produce Farms, 237 F.R.D 700, 701 (S.D. Ga. 2006). Prior to the “opt-in” deadline for class members to join the class action, defense attorneys served an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure. Id. Plaintiffs’ lawyer moved to invalidate the offer of judgment. The district court summarized the competing arguments at page 701 as follows:

Plaintiffs contend that defendants’ offer of judgment is improper since defendants served it during the time period provided by the Court for other similarly-situated plaintiffs to join the instant FLSA collective action. . . . Plaintiffs argue, inter alia, that the offer short-circuits the collective action process, has no legal effect since it purports to extend to workers who are not parties to the action, and moots the certified collective action and court-authorized notice. . . . Defendants have filed an opposition to the motion contending that plaintiffs’ motion is premature since a motion to strike an offer of judgment is only proper at the conclusion of a case. . . . Defendants also contend that their offer of judgment is proper since it specifically contemplates and provides a recovery for additional opt-in plaintiffs who join the action by the opt-in deadline. . . . (Footnote omitted)

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense Cases-In re Seroquel: Judicial Panel On Multidistrict Litigation (MDL) Rejects Defense Opposition To Centralization Of Class Action Suits Involving Seroquel But Grants Co-Defense Request To Limit Order To AstraZeneca

Judicial Panel Grants Request for Pretrial Coordination of Products Liability Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 Over AstraZeneca Defense Objection but Grants Johnson & Johnson/Eli Lilly Defense Request to Separate and Remand Class Action Claims Against Them for Lack of Common Questions of Fact More than 120 federal court lawsuits, many of them class actions, against various pharmaceutical companies alleging that AstraZeneca’s Seroquel, an atypical antipsychotic medication, can cause diabetes and related disorders.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Mitchell-Tracey v. United General: Class Action Defense Case–Maryland Federal Court Rejects Defense Opposition And Certifies Class Action By Mortgagors Against Title Insurers For Alleged Overcharging

District Court Certifies Class Action Against Title Insurers for Allegedly Charging Premiums in Excess of State-Approved Rates

Plaintiffs filed a class action against First American Title and United General Title in Maryland state court alleging that, in connection with refinances, the insurers charged higher premiums than permitted by law. Defense attorneys removed the class action to federal court, and plaintiffs moved for class certification of two classes, one involving First American customers and one involving United General customers. Mitchell-Tracey v. United General Title Ins. Co., 237 F.R.D. 551, 553-55 (D. Md. 2006). The defense vigorously opposed class certification on four grounds, which the district court summarized as follows: (1) records do not exist by which plaintiffs could prove class membership, liability or damages; (2) specific fact questions present in each affected transaction will predominate over individual issues; (3) the calculation of monetary damages for class members will be “highly individualized and is neither typical nor common among all class members”; and (4) the parties will be unable to identify class members because the necessary records are “in the possession of hundreds of independent title insurance agents and the task of compiling such information to adequately determine class membership is virtually impossible.” Id., at 555. The court disagreed with defense arguments and certified the matter to proceed as a class action, concluding that “Application of the principles embodied in Rule 23 to the circumstances of this case compels the conclusion that the class action device is wholly appropriate.” Id., at 556.

As is common, Maryland law requires title insurers to file with the state information concerning rates and premiums to be charged in connection with the issuance of title insurance policies, and to charge only those rates approved by the state. Mitchell-Tracey, at 553 (citations omitted). Though not required by Maryland law, First American and United General also filed with the state discounted “reissue rates,” applicable if borrowers meet certain conditions. Id., at 554. The class action complaint alleged that defendants charged fees in excess of the reissue rates filed with and approved by the state, and sought declaratory relief and monetary damages. Id.

Certification of Class Actions Class Action Court Decisions Uncategorized

Class Action Defense Cases- In re Educational Testing: Attorney Fees Awardable To Class Counsel Following Settlement Of Class Action Should Be Determined From A “Benchmark Percentage” Rather Than Lodestar Louisiana Federal Court Holds

Louisiana Federal District Court Rejects Fifth Circuit Lodestar Approach to Determining Attorney Fee Award for Class Action Counsel and Utilizes Percentage Method Instead

Plaintiffs filed putative class action lawsuits against Educational Testing Service (ETS) seeking damages caused by its errors in grading state-required tests for teacher’s licenses; ETS erroneously reported more than 4000 “false failures” (reports that a person failed the licensing exam when in fact, upon re-scoring of the exam, they had passed) and 23,000 “low” pass scores (reports that a person passed but with a lower test score than, upon re-scoring, they had actually been entitled to receive). In re Educational Testing Serv. Praxis Principles of Learning & Teaching: Grades 7-12 Litig., 447 F.Supp.2d 612, 613-14 (E.D. La. 2006). After the Judicial Panel on Multidistrict Litigation centralized the various lawsuits in the federal court for the Eastern District of Louisiana, id., at 614-15, defense attorneys and class counsel reached a proposed $11.1 million settlement and sought certification of a class for purposes of settlement, id., at 615. Class counsel sought an attorney fee award of 40% of the settlement fund, id., at 618; the district court concluded that the amount sought was unreasonable and held that a “benchmark percentage” should be the starting point for attorney fee awards following the settlement of a class action rather than a lodestar.

In analyzing the attorney fee request, the district court recognized that it “must independently analyze the reasonableness of the attorneys’ fees proposed in the settlement agreement.” In re Educational Testing, at 628 (citations omitted). It also recognized the inherent conflict of interest when the attorney fees are paid from a common fund: “In a common fund settlement, in which the plaintiffs’ attorneys are paid out of the settlement proceeds, the interests of the attorneys conflict with those of the class. Put simply, the more money the attorneys get, the less the class gets.” Id. In the Fifth Circuit, district courts are instructed to consider 12 factors, essentially based on a “lodestar” approach, but the Louisiana district court refused to do so. It concluded that such an approach should no longer be followed due to “increasing criticism because of the practical difficulties in applying it” and the “‘inherent incentive to prolong the litigation until sufficient hours have been expended.'” Id., at 628-29 (citations omitted). The court also noted that “the vast majority” of sister circuits have rejected the lodestar method in favor of “the use of the percentage method.” Id., at 629 (citing cases from the First, Second, Third, Sixth, Ninth, Tenth, Eleventh and District of Columbia Circuits).

Class Action Court Decisions Uncategorized

UPS Class Action Defense Case-Bates v. UPS: Ninth Circuit Upholds Refusal To Decertify Class Action And Affirms Class Action Judgment Against UPS Based On ADA Claim, But Agrees With Defense That Unruh Act Violation Must Be Reversed

District Court did not Clearly Err in Finding UPS Violated Federal Americans with Disabilities Act (ADA) by Refusing to Hire Deaf Drivers, But Defense was Correct that Class Action Judgment Based on Violation of California’s Unruh Act Must be Reversed Ninth Circuit Holds

Plaintiff filed a putative class action in California federal court against United Parcel Service alleging violations of the federal Americans with Disabilities Act (ADA), and California’s Fair Employment and Housing Act (FEHA) and Unruh Civil Rights Act (Unruh Act) because it “categorically exclude[s] individuals from employment positions as ‘package-car drivers’ because they cannot pass a United States Department of Transportation (DOT) hearing standard that does not apply to the vehicles in question.” Bates v. United Parcel Serv., Inc., 465 F.3d 1069, 1073 (9th Cir. 2006). The district court certified the lawsuit as a class action. After a bifurcated trial, the district court ruled against the defense and found that UPS violated the ADA, the FEHA and the Unruh Act. On appeal, defense attorneys argued that “(1) Bates did not establish that any class members are ‘qualified’; (2) UPS satisfied its burden under the business necessity defense of the ADA; (3) the plaintiff class should be decertified; (4) the court’s injunction was an abuse of discretion; and (5) UPS did not violate the FEHA or the Unruh Act.” Id. The Ninth Circuit affirmed the judgment as to the ADA claim, reversed the judgment as to the Unruh Act, and refused to reach the FEHA claim finding it unnecessary in light of the fact that affirmance of the ADA claim “is sufficient grounds for affirming the injunction.” Id., at 1093 n.25.

Applicants for positions as UPS package drivers must, inter alia, pass the same physical exam that the United States Department of Transportation requires of prospective drivers of commercial vehicles, which includes a “forced whisper” test of the applicants’ hearing. Bates, at 1074. However, the DOT only requires a physical exam of those who will be driving vehicles with a gross weight in excess of 10,000 pounds. UPS, on the other hand, required the exam of all applicants, including the thousands of drivers operating vehicles weighing from 7100 to 9300 pounds. Id., at 1075. The class conceded that UPS may require the physical exam of who drive DOT-regulated vehicles, but argued that its blanket exclusion of deaf applicants violated state and federal laws. Id. The district court ruled in favor of the class, holding in part that UPS had failed to establish a business necessity defense to its actions. Id.

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

CAFA Class Action Defense CAFA Case-Morgan v. Gay: Class Action Fairness Act (CAFA) Must Be Read As Intended Rather Than Literally Third Circuit Holds

Third Circuit Joins 11th and 9th Circuits in Holding that “Not Less Than 7 Days” in § 1453(c) of CAFA (Class Action Fairness Act of 2005) Must be Read as “Not More Than 7 Days”

Plaintiffs filed a putative class action in New Jersey state court. Defense attorneys removed the action to federal court under the Class Action Fairness Act of 2005 (CAFA), but the district court granted plaintiffs’ remand motion on the ground that it lacked removal jurisdiction. Seven days later defense attorneys filed a petition with the Third Circuit for leave to appeal pursuant to 28 U.S.C. § 1453(c), which provides that the circuit court may accept such appeals “if application is made to the court of appeals not less than 7 days after entry of the order.” Morgan v. Gay, 466 F.3d 276, 277 (3rd Cir. 2006) (quoting § 1453(c)(1)). As a matter of first impression, the Third Circuit considered whether § 1453(c)(1) “should be interpreted by this Court to mean ‘not more than 7 days after entry of the order.'” Id. Like sister circuits, the Court of Appeals held that the statute should be read as Congress intended rather than honoring the strict language of a plainly typographical error. The Circuit Court summarized at page 277: “Because the uncontested legislative intent behind § 1453(c) was to impose a seven-day deadline for appeals, we conclude that the statute as written contains a typographical error and should be read to mean ‘not more than 7 days.'”

Certification of Class Actions Class Action Court Decisions Removal & Remand Uncategorized

Class Action Defense Cases- In re Electrical Carbon: Class Members Who Opt Out Of Class Action Settlement May Rejoin Class With Court Approval New Jersey Federal Court Holds

In Case of First Impression New Jersey Federal Court Permits Class Members Who Opted Out of Initial Proposed Class Action Settlement to Rejoin Class for Amended Class Action Settlement Finding it in the Best Interests of the Class Plaintiffs filed putative class action lawsuits against several defendants alleging a conspiracy to fix prices of electrical carbon products in violation of the Sherman Act following the investigation and criminal prosecution of various entities by the United States Department of Justice.

Certification of Class Actions Class Action Court Decisions Uncategorized

E*Trade Class Action Defense Case-Murray v. E*Trade: Illinois Federal Court Rejects Defense Objections To Motion For Certification Of Class Action Alleging Violations Of Federal Fair Credit Reporting Act (FCRA)

Rule 23 Requirements Met in Class Action Alleging FCRA (Fair Credit Reporting Act) Violations Against E*Trade Illinois Federal Court Holds

Plaintiff filed a class action against ETrade alleging violations of the federal Fair Credit Reporting Act (FCRA) arising out of a solicitation mailer he received stating that he was pre-approved for a home equity loan and stating that “[i]nformation from a consumer credit report was used in connection with this offer.” _Murray v. ETrade Fin, Corp._, 240 F.R.D. 392, 2006 WL 3354039, *1 (N.D. Ill. November 20, 2006). Defense attorneys filed a motion for judgment on the pleadings as to the claim for relief in the class action complaint that E*Trade violated the FCRA’s disclosure requirements; the district court granted the motion agreeing with the defense that no private right of action exists for such violations under 15 U.S.C. § 1681m(d). Id. The court denied defense efforts to obtain dismissal of the balance of the class action complaint. Plaintiff’s lawyer then moved the court to certify the lawsuit as a class action; the court rejected defense arguments in opposition to the motion and granted class action certification, finding that the requirements of Rule 23(a) were met and that the class action satisfied also the requirements of Rule 23(b)(3).

The district court analyzed each of the Rule 23 requirements for certification of a class action, but ” E*Trade refutes only the adequacy of Murray as class representative,” Murray, at *2, so we do not here discuss the court’s analysis supporting its finding that numerosity, commonality and typicality were met. See id., at *2-*4. With respect to the adequacy requirement of Rule 23(a)(4), a district court must examine the adequacy of both the proposed class representative and the proposed class counsel, and determine whether “the representative parties will fairly and adequately protect the interest of the class.” Id., at *5. The court readily concluded that proposed class counsel would adequately represent the class based on the firm’s class action experience, and noted that even E*Trade “praised” its experience. Id.

Certification of Class Actions Class Action Court Decisions FCRA Class Actions Uncategorized

Huber v. Taylor Class Action Defense Case: Third Circuit Reverses Order Granting Defense Motion For Summary Judgment In Malpractice Class Action Against Prior Class Counsel Because District Court’s Choice Of Law Determination Was Flawed

Class Action Plaintiffs’ Failure to Argue Choice of Law in District Court and in Opening Brief did not Waive Issue on Appeal, and District Court Erroneously Granted Defense Summary Judgment Motion and Erroneously Denied Class Certification in Breach of Fiduciary Duty Class Action Against Plaintiffs’ Prior Attorneys Based on its Incorrect Determination of Applicable Choice of Law

Based on a complicated fact pattern, plaintiffs filed a putative class action against some of their prior counsel in an asbestos mass action for breach of fiduciary duty, specifically, the breach of fiduciary duty of undivided loyalty and candor in the settlement of asbestos claims. Huber v. Taylor, ___ F.3d ___, 2006 WL 3071384, *4 (3rd Cir. October 31, 2006). In broad terms, the class action complaint alleged that prior counsel had negotiated settlements in which counsel received as attorney fees a smaller percentage of the payments made to putative class members than they received in fees from other clients in related actions, thus creating the incentive for counsel to negotiate higher settlements in cases in which they would receive a larger contingent fee. _Id._, at *3. Plaintiff’s lawyers sought class certification, which the District Court denied. The parties thereafter filed cross motions for summary judgment; the court agreed with defense attorneys that plaintiffs had failed to demonstrate actual harm – specifically, that the settlements received by plaintiffs would have been more favorable but for the alleged breaches of fiduciary duties – and therefore granted judgment for the defense. _Id._, at *4. The Third Circuit Court of Appeals reversed because the district court erred in its choice of law determination.

The Circuit Court opinion defines the “Northerners” as plaintiffs in asbestos actions filed in Pennsylvania, Ohio and Indiana, Huber, at *1, __and as “Southerners” those plaintiffs in asbestos actions filed in Mississippi and Texas, id., at *2. The class action complaint alleged that “Northerners received payouts that were between 2.5 and 18 times lower than those received by [Southerners],” id. In cases involving Northerners, class counsel had to share their attorney fee award with local counsel but they did not have to utilize local counsel in cases involving Southerners. The Court of Appeal summarized plaintiffs’ arguments at *2 and *3 as follows:

Certification of Class Actions Class Action Court Decisions Uncategorized