Bally Class Action Defense Cases-Phillips v. Bally Total Fitness: Illinois State Court Affirms Dismissal Of Named Plaintiffs From Class Action Litigation Based On Lack Of Standing

Class Action Plaintiffs who are Residents of Colorado and Missouri Lacked Standing to Prosecute Class Action Complaint Alleging Violations of Illinois State Statutes

Plaintiffs filed a putative class action in Illinois state court against Bally Total Fitness for violations of the state’s Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) and Physical Fitness Services Act (Fitness Act). Phillips v. Bally Total Fitness Holding Corp., ___ N.E.2d ___ (Ill.App. March 26, 2007) [Slip Opn., at 1]. Defense attorneys moved to dismiss from the class action plaintiffs Aaron Stone of Colorado and Teresa Brown of Missouri on the grounds that they lacked standing as out-of-state residents to prosecute the class action, _id._, at 4; the trial court granted the motion and the appellate court affirmed, _id._, at 1. The class action complaint was not dismissed in its entirety because the defense had not challenged the standing of the two named plaintiffs who are residents of Illinois. _Id._

The class action complaint alleged that the principal place of business and corporate headquarters of Bally Total Fitness is in Illinois, and that Bally has 4 million members at 420 fitness centers in 29 states as well as international locations. Phillips, at 2. Plaintiff Stone joined a Colorado facility in March 2001, agreeing to pay $1900 for 3 years; he alleged that his contract was month-to-month and could be canceled at any time, and could be transferred to another fitness center if he moved. Id. When Stone moved to Denver, he could not find a Bally facility in his area and tried to cancel his membership; Bally refused to honor the cancellation request, demanded payment in full, and then sold the debt to a collection agency. Id. Stone’s contract gave a Colorado address for the company, and Bally’s statements and correspondence with Stone gave a California address. Id., at 2-3.

Class Action Court Decisions Uncategorized

24 CFR § 3500.16—Title Companies 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 title companies are set forth in § 3500.16, which provides:

Statutes & Rules Uncategorized

Labor Law Class Action Lawsuits Again Lead Weekly California State And Federal Court Class Action Filings

To assist California 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

Webloyalty.com Class Action Defense Case—In re Webloyalty.com: Judicial Panel On Multidistrict Litigation (MDL) Grants Motion To Centralize Class Action Litigation In The District Of Massachusetts

Judicial Panel Grants Request, Unopposed by Defense, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 Four class action lawsuits (three in Massachusetts and one in California) were filed against Webloyalty.com and various other defendants alleging that they “engaged in a scheme to defraud consumers whose personal and/or credit card information was accessed by Webloyalty during online transactions (with the defendant web retailer(s) involved in each action) as part of Webloyalty’s Reservation Rewards or other programs.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Cases—In re National Security Agency: Judicial Panel On Multidistrict Litigation (MDL) Denies Requests To Exclude Class Actions From Coordinated/Consolidated Pretrial Proceedings In The Northern District Of California

Judicial Panel Agrees with Government and Telecommunication Company Defense Attorneys that Six Additional Class Action Lawsuits Should be Transferred to Northern District of California for Pretrial Coordination or Consolidation with Class Actions Previously Transferred Pursuant to 28 U.S.C. § 1407

Several class action lawsuits were filed against the federal government challenging the government’s “surveillance of telecommunications activity and the participation in (or cooperation with) that surveillance by individual telecommunications companies.” In re National Security Agency Telecommunications Records Litig., ___ F.Supp.2d ___, 2007 WL 549355, *1 (Jud.Pan.Mult.Lit. February 15, 2007). In response to a motion to centralize that litigation, the Judicial Panel on Multidistrict Litigation (MDL) held in part that “centralization under Section 1407 was necessary in order to eliminate duplicative discovery, prevent inconsistent pretrial rulings (particularly with respect to matters involving national security),” and transferred the class action cases to the Northern District of California. _Id._ (citing _In re National Security Agency Telecommunications Records Litig._, 444 F.Supp.2d 1332, 1334 (Jud.Pan.Mult.Lit. 2006)). Plaintiffs in a class action pending in Missouri, together with defense attorneys involve in class actions pending in Connecticut, Maine, Missouri, New Jersey and Vermont, moved the Judicial Panel to vacate its orders conditionally transferring the affected class action cases to the Northern District of California for inclusion in the coordinated or consolidated pretrial proceedings; plaintiffs in the initially centralized actions joined in the motion, opposing transfer of the additional class actions. _In re NSA Telecommunications_, 2007 WL 549355 at *1. The United States and telecommunication company defendants opposed the motions to vacate.

The Judicial Panel denied the motions, reaffirming that these six class actions involve common questions of fact with the class actions previously centralized in the Northern District of California. In re NSA Telecommunications, 2007 WL 549355 at *1. The Panel concluded, “Transfer of these actions is appropriate for reasons expressed by the Panel in its original order directing centralization in this docket.” The Panel explained at page *1:

Class Action Court Decisions Multidistrict Litigation Uncategorized

State Farm Class Action Defense Cases-Rios v. State Farm: Iowa Federal Circuit Denies Defense Motion To Strike Nationwide Class Action Allegations From Complaint

Defense Motion to Strike Class Action Allegations Must be Denied Pending Further Discovery to Develop Facts Needed to Evaluate Commonality and Superiority Requirements for Class Action Certification Iowa Federal Court Holds

This class action – Rios v. State Farm Fire & Cas. Co., 469 F.Supp.2d 727 (S.D. Iowa 2007) – has a tortured procedural past. The initial class action complaint was filed in Iowa state court in August 2004. Defense attorneys removed the class action to federal court on the basis of diversity jurisdiction, but the federal court remanded the action to state court for failure to establish the $75,000 threshold. See Varboncoeur v. State Farm Fire & Cas. Co., 356 F.Supp.2d 935 (S.D. Iowa 2005). Plaintiffs then filed a motion to amend the complaint so as to seek certification of a nationwide class, whereas the original complaint alleged only a statewide class action. Defense attorneys again removed the class action to federal court, this time on the basis of the Class Action Fairness Act of 2005 (CAFA); the federal court again remanded the action, holding that until the state court ruled on the motion to amend, the federal court lacked jurisdiction. Rios, at 730. Once the state court granted the motion to amend the class action complaint, defense attorneys removed the class action to federal court under CAFA. Id.

Plaintiffs filed a putative class action alleging that State Farm paid homeowner’s insurance policy benefits for roof repairs by paying the insured the cost of a roof “overlay” upfront, but withholding the balance of the policy benefits otherwise available to cover the cost of a roof “tear-off” until the insured had actually completed such repairs. Rios, at 731. As the district court explained at page 731, “For example, if a policyholder incurred roof damage that was covered under the policy, and the total replacement cost of the roof damage was $3,000.00, then under the standard policy, State Farm would only pay the policyholder the cost to overlay the roof (hypothetically $1,800.00) upfront, and withhold the rest of the replacement cost (hypothetically $1,200.00), i.e., tear-off costs plus depreciation, until actual repairs were made on the roof.” This provided a financial benefit to the insurer, because “[i]f the policyholder did not make the tear-off repairs within the two-year time period provided under the policy, then State Farm would not have to pay the $1,200.00 tear-off costs to the policyholder.” Id.

Certification of Class Actions Class Action Court Decisions Uncategorized

RESPA Class Action Defense Cases-Benway v. Resource Real Estate Services: Maryland Federal Court Rejects Defense Arguments And Certifies Class Action Under RESPA (Real Estate Settlement Procedures Act)

Maryland Federal Court Redefines Class to Address Typicality Concerns In Federal Real Estate Settlement Procedures Act (RESPA) Class Action and then Certifies Class Action Alleging Illegal Kickbacks and Payment of Unearned Fees Under RESPA

Plaintiffs filed a class action in Maryland state court against various defendants alleging that they charged excessive fees in connection with mortgage brokerage, title or settlement services and would pay referral fees in violation of the federal Real Estate Settlement Procedures Act (RESPA); defense attorneys removed the class action to federal court. Benway v. Resource Real Estate Serv., LLC, 239 F.R.D. 419, 421 (D. Md. 2006). Plaintiffs moved to certify the lawsuit as a class action; defense attorneys objected that commonality, typicality and adequacy did not exist under Rule 23(a), and that the motion failed to establish that the requirements of Rule 23(b). Id., at 422. The district court granted the motion but limited the scope of the class action. Specifically, the court certified a class action on behalf of “All borrowers who entered into mortgage loan transactions using the services of Resource Real Estate where the HUD-1 Settlement Statement, or other documents in the loan file, included a charge for or payment to Clipper City Settlement Services, Inc.” Id., at 427.

The class action complaint alleged that Resource Real Estate Services provides real estate title and mortgage loan closing services and that Millard Rubenstein is its majority owner and its Managing Member, that Access One Mortgage Group provides mortgage broker services, and that Resource and Access One formed an affiliated business arrangement (ABA) called Clipper City Settlement Services “to appear on mortgage closing documents as an entity which had performed title work or settlement services.” Benway, at 421. The class action alleged “Resource and Access One conducted a scheme to extract referral fees from borrowers using ABAs like Clipper City”; specifically, Access One would refer borrowers to Resource for title work and Resource would perform the title work, but “the loan closing documents would attribute that work to Clipper City, and the fees charged for the work would exceed the customary fees charged by Resource.” Id. Plaintiffs also allege that Resource “would channel a portion of the fees collected by Clipper City to Access One as a referral reward, without notifying the borrower.” Id.

Certification of Class Actions Class Action Court Decisions RESPA/TILA Class Actions Uncategorized

PSLRA Class Action Defense Cases-In re EVCI Colleges: New York Federal Court Holds Safe Harbor Provision In Private Securities Litigation Reform Act (PSLRA) Inapplicable At Pleading Stage Of Securities Fraud Class Action

Federal Court Rejects Defense Motion to Dismiss Securities Fraud Class Action Holding that Class Action Complaint Satisfied Heightened Pleading Requirements Under PSLRA and that Applicability of PSLRA’s Safe Harbor Provision Required Factual Development Through Discovery

Plaintiffs filed a securities class action against EVCI and certain officers and directors for violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1924 and Rule 10b-5 alleging that defendants misstated EVCI’s financial condition and failed to accurately disclose negative information that would bear directly on EVCI’s profitability. In re EVCI Colleges Holding Corp. Securities Litig., 469 F.Supp.2d 88 (S.D.N.Y. 2006). Defense attorneys argued that the 203-paragraph class action complaint failed to satisfy the heightened pleadings requirements of the federal Private Securities Litigation Reform Act (PSLRA) and had failed to adequately plead scienter. Id., at 91. The district court observed that “[i]f read too literally, the statute would appear to impose on a securities plaintiff the almost insuperable burden of having to file a complaint that is as comprehensive as his closing argument after trial.” Id. The court concluded that the allegations in the class action complaint clearly satisfied the pleadings requirements under the PSLRA and Rule 9(b), and criticized defense attorneys for filing the motion to dismiss, which it characterized as “utterly lacking in merit.”

EVCI is a holding company that provides “on-campus career two year college education” through three entities. Its principal subsidiary is Interboro; this asset “generates the bulk of EVCI’s revenue” which “has grown substantially, from $8.6 million in 2000 to $50.4 million in 2005.” EVCI, at 92. The class action complaint alleged “pervasive fraud in the admissions process at EVCI’s Interboro College – the institution that generated nearly all of EVCI’s revenue during the asserted class period. Id. In brief, Interboro is two-year college, conditionally accredited by the State of New York, that primarily served “minority students from economically disadvantaged backgrounds” who had neither a high school diploma nor a GED, id., at 93. These students were required to pass an “ability-to-benefit” exam (ATB), and required federal and state grants to pay for their education at Interboro, and Interboro limited its tuition to the amounts of the student grants, id. “In other words, Interboro’s revenues derive in substantial part – 94%, to be precise – from publicly funded education grants awarded to students who are both poor and poorly prepared for higher education. And EVCI, in turn, derives nearly all its revenue from Interboro.” Interboro was subject to strict state and federal regulation, and to maintain its conditional accreditation the college had to meet several goals, id.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

CAFA/Hurricane Katrina Class Action Defense Case-Caruso v. Allstate: Removal Of Class Action Proper Under Class Action Fairness Act (CAFA) And Plaintiffs Failed To Establish Local Controversy Exception To Removal

Louisiana Federal Court Holds that Local Controversy Exception to Class Action Removal Under CAFA (Class Action Fairness Act of 2005) was not Established Because Two Defendants had been Named in Class Actions Alleging Similar Claims Within the Three Years Preceding the Filing of the Instant Class Action Complaint

Six property owners filed a single class action complaint in Louisiana state court against six insurers alleging violations of the state’s Valued Policy Law, breach of contract and bad faith; Allstate’s defense attorneys removed the class action to federal court asserting jurisdiction under CAFA (Class Action Fairness Act of 2005). Caruso v. Allstate Ins. Co., 469 F.Supp.2d 364, 365-66 (E.D. La. 2007). Plaintiffs moved to remand the class action to state court based on CAFA’s “local controversy” exception to removal, id., at 366. The district court denied the motion, agreeing with defense arguments that plaintiffs had not met their burden of proving the applicability of that exception.

The class action plaintiffs alleged that Hurricane Katrina caused substantial damage to their homes and they sued their homeowner’s insurance carriers to recover policy benefits. Caruso, at 365. Each plaintiff was insured by a different insurer, so the class action complaint named as defendants Allstate Insurance Company, State Farm Insurance Company, Republic Fire & Casualty Insurance Company, Auto Club Family Insurance Company, Lafayette Insurance Company and Louisiana Citizens Property Insurance Company. Id. Allstate timely removed the lawsuit to federal court under CAFA, and plaintiffs’ sought remand alleging that the “local controversy” exception applied. Id., at 366. The district court found that “the proposed class action undoubtedly satisfies the CAFA’s criteria for removal,” id.; the relevant inquiry was whether the local controversy exception applied.

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

24 CFR § 3500.15—Regulations Concerning Affiliated Business Arrangements Under Regulation X (Real Estate Settlement Procedures Act-RESPA)

For those 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 affiliated business arrangements are set forth in § 3500.15, which provides:

§ 3500.15. Affiliated business arrangements

(a) General. An affiliated business arrangement is defined in section 3(7) of RESPA (12 U.S.C. 2602(7)).

(b) Violation and exemption. An affiliated business arrangement is not a violation of section 8 of RESPA (12 U.S.C. 2607) and of § 3500.14 if the conditions set forth in this section are satisfied. Paragraph (b)(1) of this section shall not apply to the extent it is inconsistent with section 8(c)(4)(A) of RESPA (12 U.S.C. 2607(c)(4)(A)).

(1) The person making each referral has provided to each person whose business is referred a written disclosure, in the format of the Affiliated Business Arrangement Disclosure Statement set forth in Appendix D of this part, of the nature of the relationship (explaining the ownership and financial interest) between the provider of settlement services (or business incident thereto) and the person making the referral and of an estimated charge or range of charges generally made by such provider (which describes the charge using the same terminology, as far as practical, as section L of the HUD-1 settlement statement). The disclosures must be provided on a separate piece of paper no later than the time of each referral or, if the lender requires use of a particular provider, the time of loan application, except that:

(i) Where a lender makes the referral to a borrower, the condition contained in paragraph (b)(1) of this section may be satisfied at the time that the good faith estimate or a statement under § 3500.7(d) is provided; and

(ii) Whenever an attorney or law firm requires a client to use a particular title insurance agent, the attorney or law firm shall provide the disclosures no later than the time the attorney or law firm is engaged by the client. Failure to comply with the disclosure requirements of this section may be overcome if the person making a referral can prove by a preponderance of the evidence that procedures reasonably adopted to result in compliance with these conditions have been maintained and that any failure to comply with these conditions was unintentional and the result of a bona fide error. An error of legal judgment with respect to a person’s obligations under RESPA is not a bona fide error. Administrative and judicial interpretations of section 130(c) of the Truth in Lending Act shall not be binding interpretations of the preceding sentence or section 8(d)(3) of RESPA (12 U.S.C. 2607(d)(3)).

Statutes & Rules Uncategorized