DirecTV Class Action Defense Case-Cohen v. DirecTV: Class Action Waiver In Arbitration Clause Unconscionable And Unenforceable California Court Holds

In Action Alleging California Consumers Legal Remedies Act (CLRA) and Unfair Business Practices (UCL) Claims, California Court of Appeal Affirms Trial Court Order Denying Defense Motion to Compel Arbitration of Under Arbitration Clause that Prohibited Class Action Litigation

Philip Cohen filed a putative class action in California state court against DirecTV under California’s Consumers Legal Remedies Act (CLRA) and unfair business practices (UCL) on the grounds that DirecTV broadcast to its HDTV customers a “below-standard signal, contrary to its advertisements.” Cohen v. DirecTV, Inc., 142 Cal.App.4th 1442, 1445 (Cal.App. 2006). Defense attorneys moved to compel arbitration; plaintiff’s lawyer argued that the arbitration clause was unconscionable because it prohibited class action litigation of claims, and that the arbitration clause was not binding on plaintiff because of the manner in which it had been added to DirecTV’s customer agreement. The trial court denied the defense motion on the grounds that the arbitration provision was “procedurally and substantively unconscionable, against public policy and unenforceable.” Id., at 1446. DirecTV appealed, and the Court of Appeal affirmed.

Arbitration Class Action Court Decisions Uncategorized

NLRB Decision In Oakwood Healthcare, Inc., 348 NLRB No. 37, Clarifies Definition Of “Supervisor” Under Section 2(11)–Class Action Defense Issues

The NLRB issued a broad and long-awaited decision on September 29, 2006 which affects the definition of “supervisor” under the National Labor Relations Act (the “Act”). Oakwood Healthcare, Inc., 348 NLRB NO. 37, and two other companion cases, impact all industries and could undermine the power of labor unions as millions of employees could potentially be re-classified as “supervisors.” As “supervisors,” these employees would be precluded from joining unions and would no longer be covered by collective bargaining agreements. Not surprisingly, labor unions are in an uproar over the Oakwood Healthcare decisions. They have called them “outrageous” and are threatening strikes against employers who re-classify employees under the new decisions.

Section 2(11) of the Act defines a supervisor as an employee who has the authority to perform any of 12 tasks in the interest of the employer while using independent judgment. In 2001, the U.S. Supreme Court provided general guidance on the definition of “supervisor” under Section 2(11) in NLRB v. Kentucky River Community Care, 532 U.S. 706 (2001). Using Kentucky River‘s guiding principles, the NLRB clarified the definition of “supervisor” under Section 2(11). In a well-written and thorough decision, the NLRB defines previously ambiguous terms such as “assign,” “responsibly to direct,” and “independent judgment” as used in Section 2(11).

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense Cases-Glauser v. EVCI: New York Federal Court Grants Motion To Consolidated Class Action Lawsuits Under Private Securities Litigation Reform Act (PSLRA) And to Appoint Lead Plaintiff And Lead Counsel

Federal Court Grants Motion to Consolidate PSLRA Class Actions, and Pursuant to PSLRA Appoints Plaintiff With Largest Financial Investment as Lead Plaintiff and Confirms Lead Plaintiff’s Choice of Lead Counsel

Six securities fraud class action lawsuits were filed against a corporation and three of its officers and directors alleging that defendants violated §§ 10(b) and 20(a) of the federal Securities Exchange Act of 1934 and Rule 10b-5 by making false and misleading statements concerning the corporations earnings and enrollment growth. A separate derivative action also was filed. Plaintiffs’ attorneys in five of the class actions sought consolidation of the lawsuits and appointment of Lead Plaintiff and Lead Counsel. Glauser v. EVCI Career Colleges Holding Corp., 236 F.R.D 184, 186 (S.D.N.Y. 2006). The defense apparently took no position on the motions, each of which were granted by the district court.__

With respect to the consolidation motion, the federal court held that “consolidation is particularly appropriate in the context of securities class actions if the complaints are ‘based on the same “public statements and reports.”’” Glauser, at 186 (citation omitted). Because the class actions involved “common issues of law and fact” the Court consolidated those lawsuits “for all purposes,” including trial; the derivative action was consolidated for all pretrial purposes, and the Court reserved a decision on whether to consolidate it for trial as well. Id.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

In re Tobacco II Cases-Class Action Defense Cases: California Court Properly Denied Class Action Of CLRA Claims Against Tobacco Companies And Properly Decertified Class As To UCL Claims

Class Action Against Tobacco Companies for Labeling Cigarettes “Light” Allegedly to Mislead Smokers Into Believing They were Less Harmful Than Regular Cigarettes was not Superior Method of Resolution Because Individual Issues Would Predominate California Court Holds

In 1997, smokers filed a putative class action against numerous tobacco companies arising out of “marketing and advertising activities in California” and seeking “to recover economic losses resulting from purchasing cigarettes.” In re Tobacco II Cases, ___ Cal.App.4th ___, 47 Cal.Rptr.3d 917, 919 (Cal.App. September 5, 2006). Eventually, in October 2000, the sole remaining plaintiff sought class certification of his seventh amended complaint, which a Consumer Legal Remedies Act (CLRA) claim, an Unfair Competition Law (UCL) claim, and a false advertising claim. Defense attorneys previously had persuaded the court to deny a motion to certify a class action on common law and CLRA claims because “individual issues of causation and injury predominate over common issues.” _Id._ The trial court refused to certify a class on the CLRA claim because it was an improper motion for reconsideration “and found that individual issues relating to causation, injury, reliance, materiality, exposure to the alleged misstatements, statutes of limitations, and choice of law predominate.” However, the court **_granted_** class certification as to the UCL and false advertising claims as they “do not require the individualized determinations as to reliance.” _Id._

Certification of Class Actions Class Action Court Decisions Uncategorized

Class Action Defense Cases-McCall v. Drive Financial: Class Action Statutory Damages Under Federal Fair Debt Collection Practices Act (FDCPA) Can Exceed $500,000 Pennsylvania Court Holds

Pennsylvania Federal District Court Holds that Named Class Action Plaintiffs may Recover Damages Under the FDCPA (Fair Debt Collection Practices Act) Both Individually and as a Member of the Class

A class action was filed in federal court against Drive Financial Services and Drive G.P. alleging violations of the Fair Debt Collection Practices Act (FDCPA) in that defendants allegedly sent letters “on the ostensible letterhead” of an attorney for the purpose of collecting a debt. McCall v. Drive Fin. Serv., L.P., 440 F.Supp.2d 388, 388-89 (E.D. Pa. 2006). Plaintiff’s lawyer filed a motion in limine to determine the amount of statutory damages that would be available under 15 U.S.C. § 1692k(a)(2)(B). Id. The district court rejected the argument by defense attorneys that the named class action plaintiff could not also recover as a member of the class, and held the maximum amount of statutory damages available at trial to be $501,000. Id., at 391.

Class Action Court Decisions FDCPA Class Actions Uncategorized

Schwab v. Phillip Morris-Class Action Defense Cases: New York Federal Court Certifies Class Action Against Tobacco Companies For Selling “Light” Cigarettes

Smokers Duped Into Believing that “Light” Cigarettes were Less Harmful New York Court Holds

As anticipated, Judge Jack Weinstein of the United States District Court for the Eastern District of New York issued his ruling this morning on the plaintiffs’ motion to certify a class action against Philip Morris USA, R.J. Reynolds Tobacco Co., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co., Ligget Group, American Tobacco Co., Altria Group, and British American Tobacco, in a case that alleged the tobacco companies duped smokers into believing that “light” cigarettes were less harmful to them. Schwab v. Phillip Morris USA, Inc., 449 F.Supp.2d 992 (E.D.N.Y. 2006). The court summarized the theory of the case at page 1018 as follows:

Certification of Class Actions Class Action Court Decisions Class Actions In The News Uncategorized

Class Action Defense Cases-Wagner v. First Horizon: Eleventh Circuit Holds As A Matter Of First Impression That If Nonfraud Securities Claim Is Part Of Allegedly Fraudulent Conduct Then It Must Be Pleaded With Particularity

Federal Securities Claims Without Fraud Element Must Still be Pled with Particularity if Nonfraud Securities Claim is Part of Defendant’s Alleged Fraudulent Conduct Under the Exchange Act and Rule 10(b)-5

Plaintiffs filed a putative class action under the Securities Act, 15 U.S.C. § 77a et seq., and the Exchange Act, 15 U.S.C. § 78a et seq., alleging that defendant “employed a fraudulent scheme to control the revenue growth; defense attorneys filed a motion to dismiss for failure to meet the pleading requirements of FRCP Rule 9(b) and the federal Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. § 78u-4(b). The federal court granted the motion to dismiss, and required that plaintiffs pay defense costs and fees incurred in connection with the motion to dismiss as a prerequisite to plaintiffs’ filing a motion to amend their class action complaint. Wagner v. First Horizon Pharm. Corp., 464 F.3d 1273, 1275-76 (11th Cir. 2006). Rather than pay these defense costs, plaintiffs allowed the complaint to be dismissed and then appealed. Id., at 1276.

The Eleventh Circuit first observed that Section 11 of the Securities Act creates “virtually absolute [liability], even for innocent misstatements,” as does Section 12(a)(2); thus, “neither allegations of fraud nor scienter are necessarily part of either of these claims.” Wagner, at 1277. The Circuit Court therefore characterized claims under Sections 11 and 12(a)(2) as “nonfraud” claims, and noted: “The question presented . . . [is] whether there are circumstances when [Rule 9(b)] would require nonfraud securities claims to be pled with particularity.” Id. While noting that sister circuits are split on this issue, the Eleventh Circuit adopted the conclusion of the majority of the circuits that have addressed the question and held “Rule 9(b) applies when the misrepresentation justifying relief under the Securities Act is also alleged to support a claim for Fraud under the Exchange Act and Rule 10(b)-5, id. The Circuit Court explained its holding at page 1278 as follows:

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

McKell v. Washington Mutual-Class Action Defense Cases: Defense Motion To Dismiss Class Action Improperly Granted As To Breach of Contract And UCL Claims Based On Federal RESPA Violations California Court Holds

California Court Holds as Matter of First Impression that RESPA Prohibits Lender from Marking Up Costs of Another Provider’s Services Without Providing Additional Services of its Own

Plaintiffs filed a putative class action lawsuit against Washington Mutual Bank in California state court alleging inter alia violations of California’s unfair competition laws (UCL), Consumers Legal Remedies Act (CLRA), and breach of contract. “The basis of all causes of action was defendants’ overcharging plaintiffs for underwriting, tax services, and wire transfer fees in conjunction with home loans. Defendants charged plaintiffs more for these services than defendants paid the service providers.” McKell v. Washington Mutual Bank, ___ Cal.App.4th ___, 2006 WL 2664130 (Cal.App. September 18, 2006) [Slip Opn., at 2]. Plaintiffs’ UCL claim was premised upon alleged violations of the California Residential Mortgage Lending Act (CRMLA) and the federal Real Estate Settlement Procedures Act (RESPA) and Regulations X, among other state and federal laws. Slip Opn., at 5. The trial court granted a defense motion to dismiss the class action complaint, presumably on the ground that the claims “turn on the alleged existence of an agreement requiring Washington Mutual to charge no more than pass-through costs for underwriting, tax services, and wire transfers,” _id._, at 3, which plaintiffs could not do. The California Court of Appeal affirmed in part and reversed in part. We do not here discuss those aspects of the trial court’s ruling that the divided appellate court opinion affirmed. Rather, we focus on the Court of Appeal’s holdings that plaintiffs had adequately pleaded UCL and breach of contract claims.

The appellate court first held that the trial court did not err “in requiring plaintiffs to plead a factual basis for implying an agreement by [the Bank] to charge only pass-though costs,” Slip Opn., at 8. But in analyzing the UCL claims, the Court of Appeal explained at page 10,

Class Action Court Decisions RESPA/TILA Class Actions Uncategorized

Cavin v. Home Loan Center-Class Action Defense Cases: Federal Fair Credit Reporting Act (FCRA) Prohibits Private Right Of Action For Violations Of § 1681m’s Disclosure Requirement Illinois District Court Holds

Illinois Federal Court Grants in Part Motion to Certify Class Action but Dismisses FCRA § 1681m Disclosure Violation Claim

Plaintiffs filed a class action against Home Loan Center alleging that it violated the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., by accessing their credit. Cavin v. Home Loan Center, Inc., 236 F.R.D. 387 (N.D. Ill. 2006). The plaintiffs’ lawyer filed a motion for class certification, together with a motion to compel discovery; defense lawyers argued inter alia that FCRA does not permit private rights of action for alleged violations of the disclosure requirements imposed by FCRA § 1681m. The district court granted in part and denied in part both motions. The court also dismissed plaintiffs’ § 1681m claim, agreeing with defense attorneys that no such claim could be maintained.

The lawsuit arose out of three letters sent to plaintiffs by Home Loan Center concerning a “‘prescreened’ offer of credit [that] is based on information in your credit report indicating that you meet certain criteria.” Unless authorized by the consumer, the FCRA prohibits credit reporting agencies from disclosing consumer information unless “the request is in connection with a ‘firm offer of credit.’” Cavin, at 390 (citing 15 U.S.C. § 1681b(c)(1)(B)). Plaintiffs alleged that the letters were not “firm offers of credit” and, accordingly, the lender violated § 1681n, and they alleged further that the letters violated the disclosure requirements contained in § 1681m. Id. Plaintiffs sought certification of a class action under Rule 23(b)(3), which the district court granted for reasons summarized in the Note below.

Class Action Court Decisions FCRA Class Actions Uncategorized

Class Action Defense Cases-In re New Motor Vehicles: Federal Court Lacks Authority To Give “Preliminary Approval” To Proposed Settlement Of Class Action Maine District Court Holds

Maine Federal Court Denies Joint Motion for “Preliminary Approval” of Proposed Settlement of Class Action Finding that it Lacked Authority Under Rule 23 to Grant the Motion or to Make a “Preliminary Fairness Determination”

In connection with class action lawsuits against General Motors, Toyota, and other car companies, transferred to the District of Maine by the Judicial Panel on Multidistrict Litigation for pretrial purposes, the defense and plaintiff attorneys in the Toyota lawsuit requested that the federal court preliminarily approve a proposed settlement of the class action. In re New Motor Vehicles Canadian Export Antitrust Litig., 236 F.R.D. 53, 55 (D. Maine 2006). The district court denied the request, holding that “Rule 23 does not provide for ‘preliminary approval’ or a ‘preliminary fairness determination.’” Id. The court acknowledged that the Complex Litigation Manual uses that phrase to describe “what a court does in deciding to order notice to the class of a settlement,” but explained that while “it makes sense for a judge to say that a particular settlement has no chance of approval . . . there is criticism of calling this ‘preliminary approval.’” Id., at 55-56 (citations omitted).

Class Action Court Decisions Uncategorized