Class Action Defense Cases–Lindsay v. GEICO: District Court Erred In Refusing To Exercise Supplemental Jurisdiction Over State Law Claimants Who Did Not Opt In to FLSA Class Action

Certification of Class Actions and Supplemental Jurisdiction – District Court Improperly Denied Class Certification of State Law Claimants Who Did Not Opt In to Federal Class Action Under FLSA (Fair Labor Standards Act) D.C. Circuit Holds

The FLSA (Fair Labor Standards Act) requires that potential class members affirmatively opt in to class actions based on the overtime pay provision. See 29 U.S.C. §§ 207, 216(b). Certain class actions under Federal Rules of Civil Procedure Rule 23, however, require that potential class members opt out of class action cases. See Fed.R.Civ.Proc., Rule 23(b)(3), (c)(2)(B). On May 26, 2006, the D.C. Circuit Court of Appeals held as a matter of first impression that the district court erred in refusing to exercise supplemental jurisdiction over the claim of, and in denying class action certification to, those state law class action claimants who did not also opt in to a FLSA overtime class action. Lindsay v. Government Employees Ins. Co., 448 F.3d 416 (D.C. Cir. 2006).

Plaintiffs filed a putative class action alleging that GEICO willfully misclassified certain employees as “administrative” in order to avoid paying them overtime in violation of FLSA, 29 U.S.C. § 207(a), and sought certification to pursue an opt in class action under FLSA. Lindsay, at 418. Plaintiffs also alleged that GEICO’s conduct violated New York’s Minimum Wage Act, N.Y. Labor Law, §§ 650 et seq., and sought certification to pursue an opt out class action pursuant to Rule 23. Id. As the D.C. Circuit summarized at page 418:

The district court denied certification of the state law class, concluding that the FLSA class certification procedure requiring all class members to affirmatively opt in precluded it from exercising supplemental jurisdiction over those state law claimants who did not affirmatively join the FLSA claim. We disagree and therefore reverse the order denying certification and remand to the district court.

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Mirfasihi v. Fleet Mortgage — Defense of Class Action Cases

Class Action Settlement Approval of Nationwide Class Action Reversed and Remanded for District Court Failure to Analyze Value of Class Claims Under the State Laws of Each Applicable Jurisdiction Seventh Circuit Holds

On June 19, 2006, the Seventh Circuit Court of Appeals considered for the second time a proposed class action settlement of a nationwide class action against Fleet Mortgage brought under the Truth in Lending Act (TILA), the Fair Credit Reporting Act (FCRA) and various state laws. Mirfasihi v. Fleet Mortgage Corp., ___ F.3d ___, 2006 WL 1667802 (7th Cir. 2006) (“_Fleet II_”). As explained below, the class action involved two classes: a “telemarketing class,” and an “information-sharing class.” The Seventh Circuit previously reversed district court approval of a proposed settlement of the class action claims because “the district court failed to consider adequately the value of the claims of the so-called ‘information-sharing class’ (a class of consumers whose privacy interests were purportedly intruded upon, but who did not suffer any out-of-pocket damages).” Slip Opn., at 1-2 (citing _Mirfasihi v. Fleet Mortgage Corp._, 356 F.3d 781 (7th Cir. 2004) (“_Fleet I_”).

The class action involved claims that Fleet sold mortgage information to third-party telemarketers, and that Fleet “was an active collaborator in drafting the script that the telemarketers used and allowed direct billing of the fees for the telemarketers’ products onto the mortgage bill of its customers, without obtaining pre-approval from customers.” Slip Opn., at 2. The “telemarketing class” consisted of 190,000 people who purchased financial products from the telemarketers; the “information-sharing class” consisted of 1.4 million Fleet borrowers whose information had been sent to telemarketers but who had not purchased any services from them. Id., at 2-3.

The class action settlement approved by the district court in Fleet I provided for payments to the telemarketing class, but the information-sharing class “was left out in the cold and received nothing.” Slip Opn., at 3. (The terms of the class action settlement are detailed in Fleet I and Fleet II; we focus here only on the monetary recovery for each class.) Fleet I reversed the district court’s approval of the class action settlement because “the district court failed to consider with adequate specificity the reasonableness of an entire class receiving a ‘big fat zero’ in the settlement.” Slip Opn., at 4 (citing Fleet I, at 785). “Specifically, the district court did not canvass all potential avenues of recovery to determine whether the information-sharing class’s claims were indeed essentially hopeless (and thus worthless) under the pertinent controlling law.” Slip Opn., at 4.

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Recent Developments In California Class Action Defense

A New Twist On Fair Debt Collection Practices Act Class Actions California courts have been inundated with class actions alleging violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., and its California equivalent, the Rosenthal Fair Debt Collection Practices Act, California Civil Code § 1788 et seq. While California class action firms originally named the debt collection companies, the lawsuits were soon expanded to include California and out-of-state lawyers and law firms that assisted such debt collection companies in their efforts.

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Class Action Law Firm Milberg Weiss California Criminal Case Loses Fifth Federal Judge

California Federal Judges Recuse Themselves From Hearing Los Angeles Case Prior articles have discussed the California criminal case involving the federal indictment leveled against class action law firm Milberg Weiss Bershad & Schulman. Molly Selvin of the Los Angeles Times recently reported that yet another federal judge, U.S. District Court Judge R. Gary Klausner, has recused himself from hearing the case, bringing to five the number of judges who have bowed out.

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Stock Option Awards Scandals: Class Action Defense Issues

California Semiconductor Company In The News By now, the accounting scandals that have torn apart Wall Street are well known. The litigation fallout has pitted company against accounting firm against law firm, in a never-ending circle of passing the blame. California companies have not been immune; on the contrary, several California companies have been in the throes of such litigation. Eric Dash of the New York Times reported today on the continuing fight between Micrel Inc.

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Class Action Defense Cases: Kircher v. Putnam Funds Trust : Remand Of SLUSA Class Action To State Court Not Appealable Supreme Court Holds

Remand to State Court of Case Removed Under SLUSA (Securities Litigation Uniform Standards Act of 1998) Not Appealable U.S. Supreme Court Holds

CAFA (Class Action Fairness Act of 2005) and SLUSA (Securities Litigation Uniform Standards Act of 1998) are discussed in various separate articles. Removal and remand issues also are discussed in various articles, which set forth the general rule recently reiterated by the United States Supreme Court: “28 U.S.C. § 1447(d) limits appellate review of a district court order remanding a case from federal to state court.” Kircher v. Putnam Funds Trust, 547 U.S. ___, 126 S.Ct. 2145, 2150 (2006). The Supreme Court addressed the scope of appellate review of remand orders in Kircher. As the Supreme Court summarized, “The question here is whether an order remanding a case removed under [SLUSA] is appealable, notwithstanding § 1447(d). We hold it is not.” Kircher, at 2150 (italics added).

Kircher involves eight separate putative class actions by investors against mutual funds, investment advisers and an insurance company that alleged state law claims for damages (such as damages for negligence and breach of fiduciary duty) arising out of the practice of “market timing.” Kircher, at 2150 and n.4. The actions were removed to federal court on the grounds that they were “removable under and precluded by [SLUSA].” Id., at 2151. The investors moved to remand the lawsuits claiming the district court lacked subject matter jurisdiction; the district court agreed, and remanded the actions on the grounds that it lacked subject matter jurisdiction and that SLUSA did not preclude the claims asserted therein. Id.

The Seventh Circuit reversed, but only after concluding that it had appellate jurisdiction to hear the appeal. Kircher v. Putnam Funds Trust, 373 F.3de 847, 849-50 (7th Cir. 2004). In part, the Court concluded that the district court’s orders were not actually founded on lack of jurisdiction but on the substantive issue of whether the state law claims were precluded by SLUSA: accordingly, the Seventh Circuit concluded that appellate review was not barred by § 1447(d). Id., at 849-51. Having concluded that it had appellate jurisdiction, the Seventh Circuit then held further that SLUSA precluded the investors’ claims.

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Marrone v. Philip Morris — Defense of Class Action Cases

Ohio Supreme Court Rejection of Class Action Against Tobacco Company of Limited Value to Class Action Defendants On June 14, 2006, the Ohio Supreme Court issued an opinion reversing certification of a class action against a tobacco company for the allegedly “unfair, deceptive, and unconscionable practice[]” of labeling certain cigarettes as “light.” Marrone v. Philip Morris USA, Inc., ___ N.E.2d ___, 2006 WL 1584163 (Ohio 2006). While this victory has been widely reported in the press, it is of limited value to class action defendants.

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Labor Law Class Action Claims On The Rise

In an article entitled, “Defending and Preventing Class Actions Alleging Labor Law Violations,” I noted that labor law class actions are on the rise. This opinion was founded solely upon personal experience. A recent article by Kris Maher of the Wall Street Journal adds an objection basis supporting my subjective opinion. Maher observes that “[w]orkers are filing more lawsuits against employers they accuse of violating fair-wage laws that govern overtime and minimum pay.

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Indictment of Class Action Firm Implicates Special Problems With Governmental Requests for Waiver of Attorney-Client Privilege

Class action plaintiff firm Milberg Weiss Bershad & Schulman LLP was indicted in mid-May 2006 by federal prosecutors in Los Angeles, together with two of the firm’s top partners, David Bershad and Steven Schulman. Leigh Jones of The National law Journal reported yesterday that the government practice of demanding waivers of attorney-client communications in white-collar criminal cases raises “an especially prickly problem” in the Milberg Weiss case. Even before the class action firm’s indictment, some attorneys – defense and plaintiff – expressed concern about government prosecutors conditioning leniency on a corporate defendant’s willingness to waive the attorney-client privilege.

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Class Action Law Firm Losing Lawyers As Well As Clients

Milberg Weiss has been in the news frequently as of late. Following the indictment of the class action law firm and two of its partners, some of the firm’s clients elected to retain new counsel to prosecute their class actions. Now, Nathan Koppel and Peter Lattman report that partners are jumping ship as well. According to the article, “eight of the firm’s 46 partners have announced their departure, along with some associates.

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