DHL Class Action Defense Case-Synfuel v. DHL: Illinois District Court Abused Its Discretion In Approving Class Action Settlement Seventh Circuit Holds

Seventh Circuit Reverses Order Approving Settlement of Class Action Finding District Court Failed to Critically Analyze Fairness of Settlement Because it Failed to Determine the Value of the Plaintiff’s Case or the Value of the Settlement to the Class

Plaintiff filed a class action against Airborne Express (now DHL) alleging that its practice of charging customers the cost of shipping a five-pound package as a “default rate” if the customer failed to write down the weight of the package violated federal common law. In practice, this meant that if a customer used an Airborne envelope intended for shipping eight ounces or less (called “Letter Express”) but the customer failed to note the actual weight of the package or write the number “1” in the weight section, then Airborne charged the customer “a default rate equivalent to the cost of sending a five pound shipment,” which was approximately $5 more than the regular rate for such envelopes. Synfuel Technologies, Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 648-49 (7th Cir. 2006). After the district court denied a defense motion to dismiss the class action complaint, the parties reached a settlement. The district court approved the settlement, but the Seventh Circuit reversed.

Class Action Court Decisions Uncategorized

Winig v. Cingular Wireless-Class Action Defense Cases: California Federal Court Denies Defense Motion To Compel Arbitration Under Agreement Barring Class Action Lawsuits Holding Arbitration Clause Unconscionable

California Court Holds that Arbitration Clause Barring Class Action Lawsuits in Contract Governed by Federal Arbitration Act (FAA) Unconscionable and that FAA does not Preempt State Law Against Class Action Waivers

Plaintiff filed a putative class action against his cellular telephone provider – for, inter alia, violations of the Federal Communications Act, and California’s unfair competition laws (UCL) and Consumers Legal Remedies Act (CLRA) – alleging that it charged his cell phone calls to himself (primarily to check his voicemail) against his “limited number of ‘anytime minutes’” instead of treating them as part of his “unlimited free ‘mobile to mobile’ calls,” contrary to promises made to him by Cingular representatives when he entered into the service contract. Winig v. Cingular Wireless LLC, ___ F.Supp.2d ___, 2006 WL 2766007, *1 (N.D. Cal. September 27, 2006). Defense attorneys moved to compel arbitration under a clause governed by the Federal Arbitration Act (FAA), _id._; that arbitration clause required customers to bring claims only in an “individual capacity,” thereby precluding participation in class action lawsuits, _id._, at *3. The district court denied the motion.

Arbitration Class Action Court Decisions Uncategorized

Class Action Defense Cases-Otto v. Pocono Health: Federal Court Grants Defense Motion To Dismiss State Law Overtime Class Action Claims As Incompatible With Federal Overtime Class Action Claims Because Of Conflict Between Opt-In/Opt-Out Requirements

Pennsylvania Federal Court Agrees With Defense that Fair Labor Standard Act (FLSA) Opt-In Requirement for Overtime Class Actions is “Inherently Incompatible” with Rule 23 Opt-Out Requirement for State Law Overtime Class Action Cases Mandating Dismissal of State Claims Former employees filed a putative class action in Pennsylvania federal court against Pocono Health System and Pocono Medical Center alleging violations of the federal Fair Labor Standard Act (FLSA), and of Pennsylvania’s Minimum Wage Act and Wage Payment and Collection Law, because defendants paid overtime on an “8 and 80” plan, requiring overtime if employees work more than 8 hours in a day or more than 80 hours over a two-week period.

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

Class Action Defense Cases-Achtman v. Kirby: Defense Motion To Dismiss Malpractice Class Action Against Class Counsel Properly Granted Because Failure To Sue Arthur Andersen Was Not Negligent Second Circuit Holds

Second Circuit Holds Federal District Court that Approved Settlement of Class Action had Supplemental Jurisdiction Over Subsequent Class Action Against Class Counsel Alleging Malpractice and Properly Granted Defense Motion to Dismiss

Class members in a securities fraud class action against Bennett Funding Group (BFG) filed a putative class action against the attorneys who served as class counsel in the BFG action alleging negligence in failing to name Arthur Andersen as a defendant. Defense attorneys moved to dismiss the lawsuit. The district court granted the motion and plaintiffs appealed. The Second Circuit remanded the matter to allow the district to explain the basis of federal court jurisdiction, and then affirmed both the existence of jurisdiction and the judgment of dismissal. Achtman v. Kirby, McInerney & Squire, 464 F.3d 328, 330-31 (2d Cir. 2006). The 1996 class action against BFG alleged a Ponzi scheme that cheated investors out of $500 million. Two law firms were appointed as lead counsel, Kirby, McInerney & Squire, and Bernstein, Litowitz, Berger & Grossman. While counsel named several co-defendants, they did not name Arthur Andersen “which had audited BFG’s allegedly misleading 1989 and 1990 financial statements.” Id., at 331. The district court ultimately approved a $139 million settlement of that class action, which included a $14 million settlement with the accounting firm that succeeded Arthur Andersen as BFG’s auditor. Id. Some individual BFG investors “met some success” in suing Arthur Andersen, but when efforts were made in 1999 to bring a class action against the company, the federal court dismissed the complaint as time-barred. The malpractice class action against Kirby and Bernstein followed premised upon (1) the failure to name Arthur Andersen as a defendant, (2) the failure to name Arthur Andersen in the Notice of Pendency as a party who could be sued but had not been sued, and (3) the failure to advise class members of the statute of limitations for claims against Arthur Andersen. As noted above, the federal courts agreed with defense attorneys that the complaint failed to state a claim. Id., at 331-32.

Class Action Court Decisions Uncategorized

Class Action Defense Cases-In re Farmers Insurance Exchange: Employer Properly Classified Insurance Claims Adjusters As Exempt From Overtime Requirements Of Federal Fair Labor Standard Act (FLSA) Ninth Circuit Holds

Ninth Circuit Directs District Court to Enter Judgment in Favor of Defense in Overtime Class Action Because 29 C.F.R. § 541.203 Exempts Insurance Claims Adjusters from FLSA Overtime Requirements

Insurance claims adjusters filed several overtime class action lawsuits against Farmers Insurance Exchange alleging failure to pay overtime under the federal Fair Labor Standard Act (FLSA). Defense attorneys argued that claims adjusters are exempt from FLSA’s overtime provisions. The district court created a “$3,000 in claims paid per month rule” and, under this new rule, found that some of the adjusters were exempt from overtime while others were not. On appeal, plaintiff and defense attorneys agreed that this rule “is neither workable nor supported by the evidence.” The Ninth Circuit agreed, holding that FLSA expressly exempts claims adjusters and directing that judgment be entered in favor of the defense in the class action. In re Farmers Ins. Exch., 466 F.3d 853, 855-56 (9th Cir. 2006).

In its capacity as an inter-insurance exchange, Farmers “performs all the functions of a typical insurance company,” including adjusting claims. In re Farmers Ins. Exch., at 856. In fact, approximately half of its 10,000 employees are claims adjusters categorized into five different types, which the Ninth Circuit summarized at pages 856 and 857 as:

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense Cases-Aguiar v. Cintas: Trial Court Erred In Failing To Consider Use Of Subclasses In Labor Law Class Action California Court Holds

California Court Reverses Order Denying Class Certification in Employment Law Class Action Because Bases for Trial Court’s Decision Could be Resolved Through Use of Subclasses

Plaintiffs, individuals and the international workers’ union UNITE, filed a putative employment law class action against Cintas for alleged violations of the Los Angeles Living Wage Ordinance (LWO), which “prescrib[es] a minimum level of compensation be paid to employees of private firms who work on service contracts benefiting the City” – as well as sick leave, vacation, etc. – provided that the employees worked on a service contract for at last 20 hours during the month. The LWO does not apply to employees who did not work on a service contract, or who worked on a service contract for less than 20 hours, during the month. Aguiar v. Cintas Corp. No. 2, ___ Cal.App.4th ___, 2006 WL 2744773, *1-*2 (Cal.App. September 27, 2006). The LWO requires employers awarded service contracts to provide the City with “forms listing all subcontractors and employees working on the agreement and notify each current employee, and each new employee at the time of hire, of his or her rights under the LWO.” _Id._, at *2. Defense attorneys opposed certification of the lawsuit as a class action. The trial court agreed with the defense that class action treatment was inappropriate because the class was not ascertainable, the class lacked community of interest, and class action treatment was not the superior method to resolve the dispute. _Id._, at *1. The Court of Appeal reversed.

Certification of Class Actions Class Action Court Decisions Uncategorized

Smith v. The Thomson Corporation-Class Action Defense Cases: Defense Wins Cross-Appeal In Fraud Class Action Based On Overcharges Because Plaintiff Failed To Prove Damages

Illinois Appellate Court Reverses Judgment in Favor of Class Action Plaintiff Because Evidence Demonstrated that Plaintiff Suffered no Damages and Because Trial Court’s Calculation of Damages was Flawed

A law firm filed a class action in Illinois state court against suppliers of legal products to law firms alleging Illinois and Minnesota statutory consumer fraud claims based on the allegation the defendants “add[ed], on a pro rata basis, a $6 per CD-ROM shipping-and-handling charge to the monthly billing statements sent to the plaintiff pursuant to a subscription agreement . . . without identifying the added charge and in contravention of the defendants’ previous practice of not charging customers for shipping and handling.” Smith, Allen, Mendenhall, Emons & Selby v. The Thomson Corp., ___ N.E.2d ___, 2006 WL 2947653 (Ill.App. October 26, 2006) [Slip Opn., at 2]. Following a bench trial, the court entered an $8.5 million judgment in favor of plaintiff, but denied prejudgment interest and attorney fees. Plaintiff appealed the limitation on its award; defense attorneys cross-appealed from the underlying judgment. _Id._, at 1. The Appellate Court reversed the underlying judgment, rendering plaintiff’s appeal moot.

Class Action Court Decisions Uncategorized

Class Action Defense Cases-Insurance Industry Discriminatory Sales Practices: Judicial Panel On Multidistrict Litigation (MDL) Agrees With Defense And Denies Request To Centralize Actions

Plaintiffs Fail to Establish Grounds for Centralization of Lawsuits Under 28 U.S.C. § 1407 In conjunction with two class action lawsuits – one pending in the Eastern District of Louisiana and the other pending in the Western District of Texas – plaintiffs filed a motion with Judicial Panel on Multidistrict Litigation (MDL) pursuant to 28 U.S.C. § 1407 seeking centralization of the actions for pretrial purposes, and defense attorneys opposed the request.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Tmesys v. Eufaula-Class Action Defense Cases: Circuit Court Has Jurisdiction To Review District Court Order Remanding Class Action To State Court Based On Finding That CAFA (Class Action Fairness Act) Does Not Apply Eleventh Circuit Holds

As a Matter of First Impression, Eleventh Circuit Holds that Jurisdiction Exists to Review District Court Order Based on Finding that Class Action Fairness Act of 2005 (CAFA) does not Apply and Agrees with District Court Decision to Remand Class Action to State Court Plaintiff filed a putative class action in Alabama state court against health insurer alleging breach of contract. Defense attorneys removed the action to federal court based on the Class Action Fairness Act of 2005 (CAFA).

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

Kim v. Citigroup-Class Action Defense Cases: Forfeiture Aspect Of Capital Accumulation Plan Did Not Violate State’s Wage Act Illinois Court Holds

Trial Court Erred in Finding that Employees Voluntary Participation in a Capital Accumulation Plan Violated Illinois Wage Act Because of Two-Year Forfeiture Period

Plaintiff filed a class action against Citigroup, Travelers Group, Primerica Financial Services, Salomon Smith Barney Holdings and Salomon Smith Barney alleging that a voluntary capital accumulation plan (CAP), whereby a portion of employee compensation and wages were paid in the form of restricted stock, violated Illinois labor laws because the CAP contained a two-year forfeiture period. Kim v. Citigroup, Inc., ___ N.E.2d ___, 2006 WL 2796362 (Ill.App. September 29, 2006). Plaintiff argued that the forfeiture of a portion of the stock upon termination of employment violated the Illinois Wage Payment and Collection Act (“the Act’), which requires that employees be paid all earned wages upon termination of employment. Defense attorneys argued that the CAP program is for the benefit of employees and does not violate state law. The trial court sided with plaintiff, but the appellate court reversed.

Plaintiff was a financial consultant for Salomon Smith Barney with responsibility for managing $30-$40 million in assets. He voluntarily agreed to participate in the CAP, which he believed to be “an innovative and attractive savings vehicle.” Slip Opn., at 2. Plaintiff elected to have 10% of his compensation paid in the form of restricted stock, which allowed him to receive Citigroup stock at a 25% discount subject to a two-year vesting period. Id., at 2-3. When plaintiff left to join UBS Paine Webber, Salomon Smith Barney kept the unvested shares of his CAP stock, which represented approximately $18,000 in earned wages. Id., at 3.

Class Action Court Decisions Employment Law Class Actions Uncategorized