MARK YOUR CALENDARS – CLASS ACTION DEFENSE CONFERENCE COMING TO SAN FRANCISCO

The American Conference Institute is sponsoring a two-day seminar entitled, “Defending Consumer Protection Class Actions.” The conference will be held at the Fairmont Hotel in San Francisco on May 21 and 22, 2007. The conference promises to be well worthwhile. More information about the American Conference Institute may be found at its website: www.americanconference.com.

Class Actions In The News Uncategorized

CAFA Class Action Defense Cases-Lowdermilk v. U.S. Bank: Ninth Circuit Holds Class Action Fairness Act (CAFA) Requires Defense Prove Certainty of Jurisdictional Amount For Removal When Class Action Claims Less Than $5 Million

As Matter of First Impression, if Class Action Complaint Alleges Less than $5 Million in Damages then Defense Bears Burden of Proving “Legal Certainty” that Jurisdictional Amount Required by CAFA (Class Action Fairness Act of 2005) is Satisfied Ninth Circuit Holds

Plaintiff filed a class action against her former employer in Oregon state court alleging violations of state labor laws and stating that the damages sought would not exceed $5 million. Lowdermilk v. U. S. Bank Nat’l Ass’n, 479 F.3d 994, 995 (9th Cir. 2007). Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA); plaintiff filed a motion to remand the class action to state court, arguing that the amount in controversy did not exceed $5 million based on the allegations in the class action complaint. The district court held that unless plaintiff’s $5 million limitation on the amount in controversy was made in bad faith, then it was bound by the limitation stated therein; accordingly, it remanded the class action on the ground that the defense had not demonstrated that the damages limitation had been made in bad faith so the amount in controversy did not meet the $5 million threshold required by CAFA, id., at 996. The Ninth Circuit granted the employer’s request for leave to appeal. Id. As a matter of first impression, the Ninth Circuit held that when a class action complaint specifically alleges less than $5 million in damages, then CAFA requires that “the party seeking removal must prove with ‘legal certainty’ that the amount in controversy is satisfied, notwithstanding the prayer for relief in the complaint.” Id.

The Ninth Circuit concisely summarized the issue as follows: “In this case we are called upon to resolve a question of first impression: Under the Class Action Fairness Act of 2005 . . ., when the plaintiff has pled damages less than the jurisdictional amount, what must the defendant prove in order to remove the case to federal court?” Lowdermilk, at 995-96. The Circuit Court began its analysis by noting that the defense bears the burden of establishing removal jurisdiction, id., at 997 (citing Abrego Abrego v. Dow Chemical Co., 443 F.3d 676, 685 (9th Cir. 2006) (per curiam)), and that it was not disputed that CAFA’s minimal diversity and numerosity requirements had been met, id.

The class action complaint sought damages “in total, less than five million dollars” plus attorney fees. Lowdermilk, at 997-98. The defense submitted evidence that the damages will exceed $5 million, and argued additionally that attorney fees should be included in determining the amount in controversy. Id., at 998. The Ninth Circuit began its analysis by rejecting defense claims that plaintiff failed to specify an amount in controversy; rather, it held that this case presented the precise situation reserved in Abrego Abrego – “What proof must the defendant adduce to contradict the plaintiff’s claim that her damages are less than the jurisdictional amount?” Id. It answered this question of first impression by requiring “that where the plaintiff has pled an amount in controversy less than $5,000,000, the party seeking removal must prove with legal certainty that CAFA’s jurisdictional amount is met.” Id., at 1000.

Certification of Class Actions Class Action Court Decisions Uncategorized

Amex Class Action Defense Cases-Sanchez v. American Express: Illinois Court Affirms Summary Judgment In Favor Of Defense In Unfair Business Practice Class Action

Class Action Alleging Failure to Disclose Profit in Currency Exchange Transactions Fails Illinois Court Holds

Plaintiffs filed a class action in Illinois state court against various American Express Travel Related Services Company alleging violations of the state’s Consumer Fraud and Deceptive Business Practices Act in connection with foreign currency conversions services; specifically, the class action challenged Amex’s failure to disclose the exchange rate at which it would convert currency purchased from its customers. Sanchez v. American Express Travel Related Servs. Co., Inc., ___ N.E.2d ___ (Ill.App. March 29, 2007) [Slip Opn., at 1-3]. A defense motion to dismiss the class action was denied, _id._, at 3-4. Defense attorneys then moved for summary judgment arguing that each travel office sets the per transaction fee it charges, that the per transaction fee is not intended to be a representation that Amex will not receive any additional profit out of the transaction, and that Amex could not disclose the “float” because it buys and sells currency in bulk and does not know at the time it exchanges currency for a customer the rate that it will receive for that currency. _Id._, at 5-8. The deposition testimony elicited during discovery in the class action revealed further that the mark-up on the sale of currency to customers varies from travel office to travel office, and that the exchange rate for the purchase of currency is set by each travel office based on the local market and competition. _Id._, at 10-13. Further, Amex admitted that it hoped to profit by more than $3 per transaction, _id._, at 13-14. The trial court granted the defense summary judgment motion because plaintiff had no evidence that Amex represented the $3 transaction fee to be its net profit, _id._, at 14-15, and because plaintiff failed to prove that he suffered any damage, _id._, at 17. The appellate court affirmed.

The class action complaint alleged that, in addition to the posted $3 service fee for each currency exchange, Amex profited from the “float” between the rate it paid for the foreign currency and the rate at which it sold the currency. Sanchez, at 2-3. The appellate opinion quotes from the class action complaint at page 3 as follows: “In addition to profiting by charging each of its customers a ‘fee’ for the [foreign currency exchange service], American Express also profits by skimming the difference between the exchange rate it receives and the exchange rate it uses to convert a customer’s currency. The difference between the two exchange rates is a hidden, undisclosed charge it assesses to each of its customers that use the Service (hereafter ‘the Money Skimming Scheme’).”

Class Action Court Decisions Uncategorized

24 CFR § 3500.18 and § 3500.19—Validity Of Contracts And Liens And Enforcement Proceedings Under Regulation X (Real Estate Settlement Procedures Act-RESPA)

As a resource for class action defense attorneys who defend against RESPA (Real Estate Settlement Procedures Act) class actions, we provide the text of Regulation X. Congress gave authority to the Secretary of the Department of Housing and Urban Development (HUD) to promulgate regulations for RESPA, and the regulations are set forth in 24 CFR § 3500.1 et seq. The regulations concerning the validity of contracts and liens under RESPA are set forth in § 3500.

Statutes & Rules Uncategorized

Once Again Labor Law Class Action Lawsuits Lead Weekly Class Action Filings In California State And Federal Courts

To assist California class action defense attorneys in anticipating the claims against which they may have to defend, we provide weekly, unofficial summaries of the legal categories for new class actions filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant timeframe.

Class Actions In The News Uncategorized

Class Action Defense Cases-Warlop v. Lernout: Massachusetts Federal Court Grants Defense Motion To Dismiss Securities Class Action On Grounds Of Forum Non Conveniens

Class Action on Behalf of Purchasers of Stock on NASDAQ Europe More Properly Brought in Belgium, Warranting Dismissal of Class Action on Grounds of Forum Non Conveniens Massachusetts Federal Court Holds

Plaintiffs, three individuals from Belgium, filed a putative securities class action against Lernout & Hauspie N.V., a Belgian company that developed speech recognition software, and other defendants on behalf of those who purchased L&H securities on the European EASDAQ stock exchange for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and of Rule 10b-5. Warlop v. Lernout, 473 F.Supp.2d 260, 261 (D. Mass. 2007). This class action was but one of several class actions filed against L&H, and this court opinion is but one of “several extensive opinions concerning the alleged fraudulent scheme causing the collapse of L&H,” id., at 261-62 (citations omitted). Defense attorneys for Belgian defendants KPMG-Belgium, the Outside Directors, Vanderhoydonck and Willaert moved to dismiss the class action under Rule 12(b)(6) on the grounds of forum non conveniens. The district court granted the motion.

Briefly, L&H was at one time very successful, and traded simultaneously on both Europe’s EASDAQ market (known as “NASDAQ Europe”) and NASDAQ. Warlop, at 262. The class action complaint alleged that the company’s success was founded on misrepresentions by its directors concerning L&H’s finances, and on “the fraudulent creation of sham firms in Belgium and elsewhere which licensed software,” id. The fraud was discovered in August 2000 and EASDAQ suspending trading of the company’s securities; ultimately L&H collapsed. Id. A criminal investigation followed, leading to the arrest by the Belgian government of three L&H directors – Lernout, Hauspie and Willaert; by operation of Belgian law, all civil cases were stayed during the pendency of the still on-going criminal investigation, including a civil action by the class action plaintiffs in this case that essentially tracks the allegations in the class action complaint. Id. As noted above, several securities class actions were filed in various federal courts; the actions were eventually consolidated before the District of Massachusetts, and the consolidated amended class action complaint limited the scope of the class action to individuals who purchased L&H stock on NASDAQ. Id.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Issues-Murphy v. Kenneth Cole: California Supreme Court Holds Three-Year Limitations Period Applies To Labor Code § 226.7 Additional Pay Awards

In Case that will have Direct and Substantial Impact on Labor California Law Class Action Cases, California Supreme Court Rejects Defense Argument that Additional Pay Awards under Labor Code § 226.7 Constitute “Penalties” Subject to One-Year Statute of Limitations and Holds that such Awards Constitute “Wages” Subject to Three-Year Statute of Limitations

Plaintiff, a store manager at a Kenneth Cole Productions clothing store, filed an individual (not class action) lawsuit against his former employer seeking unpaid overtime and waiting penalties, and for meal and rest period and itemized pay statement violations, because he regularly worked 9-10 hours days and rarely took meal or rest breaks. Murphy v. Kenneth Cole Productions, Inc., ___ Cal.4th ___ (Cal. April 16, 2007) [Slip Opn., at 2-3]. The trial court ruled against the employer and, in part, awarded “an additional hour of pay” under California Labor Code section 226.7, and applied to three-year statute of limitations to this award. _Id._, at 4. Defense attorneys appealed, and the appellate court reversed in part, holding that awards under § 226.7 constituted “penalties” rather than “wages,” and were therefore subject to a one-year limitations period. _Id._ at 4-5.

Plaintiff initially filed a wage claim with the state’s Labor Commissioner seeking overtime and waiting time penalties; the Commissioner ruled in plaintiff’s favor, and KCP filed for a trial de novo, thereby vesting jurisdiction in the Superior Court. Murphy, at 3. Plaintiff sought additional relief in this civil action, adding claims for failure to provide meal and rest periods and for itemized pay statement violations. Id., at 3-4. The trial court allowed plaintiff to add the additional claims to his action, and ultimately entered judgment in favor of plaintiff. Id., at 4. Of critical importance, the trial court concluded that the “additional hour of pay” awardable under § 226.7 for failing to provide meal or rest periods constituted “wages” rather than “penalties” and so awarded damages for meal and rest period violations dating back to October 2000, id. This issue had been unsettled in California, with the majority of appellate court holding that these damages constituted penalties. The Supreme Court, however agreed with the trial court.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense Cases-Griffith v. Javitch: Ohio Court Holds Debtor’s Federal Fair Debt Collection Practices Act (FDCPA) Class Action Claim Belongs To Bankruptcy Trustee And Approves Settlement Of Individual Claim

FDCPA Class Action Claim Belonged to Bankruptcy Estate and Settlement of Individual Claim Appropriate because Trustee could not Prosecute Class Action Ohio Federal Court Holds

After a law firm filed an action to collect a debt from her, plaintiff filed a putative class action against the law firm alleging violations of the federal Fair Debt Collection Practices Act (FDCPA). Griffith v. Javitch, Block & Rathbone, LLP, 358 B.R. 338, 340 (S.D. Ohio 2007). Shortly thereafter, plaintiff and her husband filed a Chapter 7 bankruptcy petition in the federal court for the Southern District of Ohio, staying the underlying action, and plaintiff listed the class action as a contingent claim her creditor, Great Seneca Financial Corporation, but did not separately list her class action against the law firm. Id. The bankruptcy trustee determined that it was a no-asset case, and plaintiff and her husband received a bankruptcy discharge in October 2004; less than a month later, the underlying lawsuit was reopened. Id. The parties jointly requested a stay pending a decision by the federal Court of Appeals for the Sixth Circuit in a case concerning “several defenses to an FDCPA suit that are raised by [the law firm] here on essentially identical factual allegations,” id. (citing Todd v. Weltman, Weinberg & Reis, 434 F.3d 432 (6th Cir. 2006). The underlying class action again became active in June 2006.

Defense attorneys moved for dismissal or summary judgment, arguing that the class action claim belonged to the bankruptcy trustee because it was not properly listed on the bankruptcy petition schedules; accordingly, the defense argued, plaintiff lacked standing to prosecute the class action. Griffith, at 340. Plaintiff countered that a “class action claim” had been listed on the petition, and advised the court that the bankruptcy trustee would be filing a formal abandonment of the claim so that her class action could proceed; instead, the trustee advised plaintiff’s lawyer that it would not be in the best interests of the bankruptcy estate to abandon the claim. Id. The court issued an order to show cause why the complaint should not be dismissed for lack of standing, but the defense motions were held in abeyance pending further bankruptcy court proceedings. Id. The trustee moved to reopen the bankruptcy case, and to hire plaintiff’s lawyer to prosecute the class action on behalf of the estate. Id.

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

Class Action Defense Cases-Phason v. Meridian Rail: Federal WARN Act Applies If Employer Terminates Employees Before Sale Of Assets Closes Warranting Reversal Of Judgment In Favor Of Defense In Class Action Seventh Circuit Holds

Second Circuit Holds in Putative Class Action that Federal Worker Adjustment Retraining and Notification (WARN) Act Applies if Sale of Assets to New Company is Delayed until One Week After Termination of Employees even if Employees cannot Demonstrate any Economic Harm

Plaintiffs filed a putative class action against their former employer, Meridian Rail, alleging violations of the federal Worker Adjustment Retraining and Notification Act of 1988 (WARN) arising out of the closure (through sale) of one of its operations sites. Phason v. Meridian Rail Corp., 479 F.3d 527, 528 (7th Cir. 2007). The district court entered judgment for defendant, holding that the WARN Act did not apply. Based on that holding, the district court found it unnecessary to determine whether the putative class action should in fact proceed as a class action. The Seventh Circuit reversed.

On December 31, 2003, Meridian Rail disclosed to its employees that it was immediately ceasing operations in Chicago Heights, Illinois, and “invited them to apply for jobs with NAE Nortrak, Inc., which had agreed to buy the assets.” Phason, at 578. Nortrak previously had issued an identical invitation in mid-December after “Nortrak and Meridian shook hands on the deal.” Id. However, the sale did not close until January 8, 2004, 8 days after Meridian had “severed all ties to the former workers.” Id. Because the WARN Act requires that an employer give 60 days’ notice before subjecting at least 50 of them to “employment loss,” this class action lawsuit was filed. The district court described the theory behind the class action as “simple,” explaining at page 579: “One statutory trigger is a ‘plant closing,’ which 29 U.S.C. § 2101(a)(2) defines as any ‘permanent or temporary’ shutdown that ‘results in an employment loss at the single site of employment during any 30-day period for 50 or more employees’.”

Defense attorneys argued, and the district court held, that the WARN Act does not apply because Nortrak hired all but about 45 Meridian Rail employees. Phason, at 528-29. Meridian Rail relied upon the last sentence of Section 2101 (b)(1), which provides: “Notwithstanding any other provision of this Act, any person who is an employee of the seller (other than a part-time employee) as of the effective date of the sale shall be considered an employee of the purchaser immediately after the effective date of the sale.” The Circuit Court explained at page 529 that “[t]his sentence is the linchpin of Meridian’s position.” According to Meridian Rail, “It sold the plant to Nortrak, and as Nortrak soon hired many of the workers (leaving fewer than 50 disappointed applicants), no ‘employment loss’ occurred.” Id. Plaintiffs countered that the relevant inquiry was “how many people lost their jobs on December 31, 2003, rather than the difference between that number and how many found work later,” and it was undisputed that if December 31 is the relevant date than over 50 lost employment. Id., at 529.

Uncategorized

Class Action Defense Issues–California Supreme Court Holds That Additional Hour Of Pay Under Labor Code Is Subject To 3-Year Statute Of Limitations

“On Additional Hour of Pay” under California Labor Code Section 226.7 Constitutes Wage or Premium Pay Subject to Three-Year Statute of Limitations Period, not a Penalty Subject to One-Year Limitations Period, California Supreme Court Holds In a case that will have a substantial and immediate impact on labor law class action cases, the California Supreme Court today issued its long-awaited decision in Murphy v. Kenneth Cole Productions, Inc., which addressed two issues: “first, whether the ‘one additional hour of pay’ provided for in Labor Code section 226.

Class Action Court Decisions Employment Law Class Actions Uncategorized