Class Action Defense Cases-Masters v. Wilhelmina Model Agency: In Approving Class Action Settlement District Court Should Have Considered Whether To Award Class Members Treble Damages And Based Attorneys Fee Award On Total Funds Second Circuit Holds

Second Circuit Holds that District Court Erred in Failing to Exercise Discretion to Award Class Members Treble Damages in Sherman Act Class Action Settlement and Erred in Calculating Attorneys Fee Award on Percentage of Settlement Funds Claimed by Class Members Rather than on Total Amount of Settlement Proceeds Negotiated by Counsel

Plaintiffs filed a class action against several modeling agencies alleging violations of the federal Sherman Act and of New York state laws for conspiring to “uniformly charge models a commission of 20%” rather than 10% based on a “collusive scheme” to characterize themselves as “managers” and therefore exempt from the 10% cap imposed on “employment agencies” under New York state law. Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423, 2007 WL 28983, *1 (2d Cir. 2007). After extensive litigation, the district court certified the lawsuit as a class action and, eventually, the parties reached a settlement, id., at *1-*5. The district court approved the proposed settlement, but refused to exercise discretion to award class members treble damages under the Sherman Act based on its belief that under the terms of the settlement it did not have the discretion to do so, id., at *5-*6. The court also awarded attorney fees, but based the award on a percentage of the total funds claimed by class members rather than on the total amount of funds negotiated by plaintiffs’ counsel, id., at *7-*8.. The Second Circuit affirmed in part and reversed in part. We discuss below only those parts of the opinion that reversed the district court.

Plaintiffs argued that it was error for the district court “to award single, rather than treble, damages” and not “to award prejudgment interest” to class members. Masters, at *9. The district court refused plaintiffs’ request for these awards based on its belief “that the unambiguous terms of the Settlement Agreement made no provision for the distributions sought and that it was bound under the circumstances to approve or disapprove the Settlement negotiated by the parties.” Id. In fact, in denying reconsideration, the district court explained that the “four corners” of the 30-page settlement agreement were silent on treble damages or prejudgment interest, and that it refused to award them because “it would have been wrong to do so.” Id., at *11-*12. The Second Circuit disagreed, concluding that the “the District Court was not aware of its discretion, failing to recognize that it was empowered to allocate funds to the members of the class as treble damages.” Id., at *11. The Circuit Court agreed that prejudgment interest could not be awarded because such an award required a finding under the Clayton Act of “bad faith . . . causing a material delay,” id., at *12, but it could have awarded treble damages because of the existence of a cy pres fund and the requirement that such funds be placed to the “next best compensation use,” id. The Court therefore remanded the action to the district court to consider whether to award Excess Funds to class members as treble damages. Id., at *11.

Class Action Court Decisions Uncategorized

Saab v. Home Depot-Class Action Defense Cases: Class Action Fairness Act (CAFA) Does Not Permit Appellate Review Of Federal Court Order Denying Motion To Remand Action Removed On Grounds Of Diversity Jurisdiction Eighth Circuit Holds

Eighth Circuit Holds that CAFA (Class Action Fairness Act) Authorizes Appellate Review of Remand Orders Only Where Removal was Based on CAFA so Circuit Court could not Review Denial of Motion to Remand Class Action Removed on Grounds of Diversity Jurisdiction

Plaintiff filed a putative class action against Home Depot in Missouri state court, and defense attorneys removed the action to federal court on the grounds of diversity jurisdiction under 28 U.S.C. § 1332(a). Plaintiff filed a motion to remand the class action to state court, but the motion was denied. Plaintiff then asked the Eighth Circuit to accept an appeal of the district court’s order, arguing that CAFA (Class Action Fairness Act) authorizes appellate review of remand orders in all class action cases. Saab v. Home Depot U.S.A., Inc., 469 F.3d 758, 759 (8th Cir. 2006). Defense attorneys had not sought to remove the class action under CAFA, and “made no assertion of jurisdiction under CAFA,” id., at 759 n.2. Nonetheless, plaintiff argued that CAFA should be read “expansively” so as “to give federal courts of appeal the jurisdiction to review the grant or denial of a motion to remand any class action.” Id. The Eighth Circuit disagreed.

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

12 U.S.C. § 2605–Servicing Of Mortgage Loans And Administration Of Escrow Accounts Under The 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 here the text of that statute. The most detailed provision of RESPA is 12 U.S.C. § 2605, which provides for the servicing of mortgage loans and the administration of escrow accounts. Section 2605 provides as follows:

§ 2605. Servicing of mortgage loans and administration of escrow accounts

(a) Disclosure to applicant relating to assignment, sale, or transfer of loan servicing

Each person who makes a federally related mortgage loan shall disclose to each person who applies for the loan, at the time of application for the loan, whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.

(b) Notice by transferor of loan servicing at time of transfer

(1) Notice requirement

Each servicer of any federally related mortgage loan shall notify the borrower in writing of any assignment, sale, or transfer of the servicing of the loan to any other person.

(2) Time of notice

(A) In general

Except as provided under subparagraphs (B) and (C), the notice required under paragraph (1) shall be made to the borrower not less than 15 days before the effective date of transfer of the servicing of the mortgage loan (with respect to which such notice is made).

(B) Exception for certain proceedings

The notice required under paragraph (1) shall be made to the borrower not more than 30 days after the effective date of assignment, sale, or transfer of the servicing of the mortgage loan (with respect to which such notice is made) in any case in which the assignment, sale, or transfer of the servicing of the mortgage loan is preceded by–

(i) termination of the contract for servicing the loan for cause;

(ii) commencement of proceedings for bankruptcy of the servicer; or

(iii) commencement of proceedings by the Federal Deposit Insurance Corporation or the Resolution Trust Corporation for conservatorship or receivership of the servicer (or an entity by which the servicer is owned or controlled).

Statutes & Rules Uncategorized

12 U.S.C. § 2604–Preparation And Distribution Of Special Information Booklets Under The 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 the statute. Congress provided for the preparation and distribution of special information booklets in 12 U.S.C. § 2604, which provides as follows:

§ 2604. Special information booklets

(a) Distribution by Secretary to lenders to help borrowers

The Secretary shall prepare and distribute booklets to help persons borrowing money to finance the purchase of residential real estate better to understand the nature and costs of real estate settlement services. The Secretary shall distribute such booklets to all lenders which make federally related mortgage loans.

(b) Form and detail; cost elements, standard settlement form, escrow accounts, selection of persons for settlement services; consideration of differences in settlement procedures

Each booklet shall be in such form and detail as the Secretary shall prescribe and, in addition to such other information as the Secretary may provide, shall include in clear and concise language–

(1) a description and explanation of the nature and purpose of each cost incident to a real estate settlement;

(2) an explanation and sample of the standard real estate settlement form developed and prescribed under section 2603 of this title;

(3) a description and explanation of the nature and purpose of escrow accounts when used in connection with loans secured by residential real estate;

(4) an explanation of the choices available to buyers of residential real estate in selecting persons to provide necessary services incident to a real estate settlement; and

(5) an explanation of the unfair practices and unreasonable or unnecessary charges to be avoided by the prospective buyer with respect to a real estate settlement.

Statutes & Rules Uncategorized

Employment Law Class Action Cases Regain Top Spot In Weekly Class Actions Facing California Defense Attorneys

To aid California class action defense attorneys in anticipating claims against which they may have to defend, each week we provide an unofficial summary of legal categories for 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. This report covers the time period of from December 28, 2006 – January 4, 2007. We include only those categories that contain 10% or more of the class action filings during the relevant timeframe.

Class Actions In The News Uncategorized

Class Action Defense Cases-Lao v. Wickes: California Federal Court Holds As Matter Of First Impression That Defense Must Establish Removal Under CAFA (Class Action Fairness Act) And Must Disprove CAFA Exceptions To Jurisdiction

As Matter of First Impression in Ninth Circuit, California District Court Holds that Defense must not only Establish Prima Facie Case for Removal Under Federal Class Action Fairness Act (CAFA) but must Establish Further that CAFA’s Local Controversy and Home-State Rule Exceptions to Removal Jurisdiction do not Apply

Plaintiffs filed a putative class action against their former employer, Wickes Furniture Company, for violations of California’s state labor code, and defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Lao v. Wickes Furniture Co., Inc., 455 F.Supp.2d 1045, 1048 (C.D. Cal. 2006). Plaintiffs filed a motion to remand the class action to state court on the ground that it fell within CAFA’s “local controversy” exception or home-state rule provision to federal court jurisdiction. Id. The federal court agreed with the defense that once it established a prima facie case for removal under CAFA, the burden shifted to plaintiffs to demonstrate the applicability of the local controversy or home-state rule. Id., at 1050 et seq. The district court concluded that plaintiffs had met their burden, and remanded the class action to state court.

Plaintiffs worked as commissioned salespersons for Wickes, and filed a state law employment class action on the grounds that they allegedly “regularly performed non-sales (and, hence uncompensated) work, such as attending meetings . . ., cleaning the stores, and researching the prices charged by Wickes’ competitors” Lao, at 1048. The class action complaint alleged further that Wickes improperly stripped salespersons of earned commissions, id. Defendants removed the action to federal court on the basis of CAFA jurisdiction, and plaintiffs’ lawyers filed a motion to remand the action to state court. Id., at 1048-49. Preliminarily, the federal court concluded that defendant had adequately established the requisite $5 million amount in controversy. Id., at 1049-50. Defendants argued that the amount in controversy was $6,000,000, id., and while the district court was “not unsympathetic” to plaintiffs’ claim that this sum was inflated, it found that “some of the blame lies with how plaintiffs drafted their complaint,” id., at 1050.

Certification of Class Actions Class Action Court Decisions Removal & Remand Uncategorized

Class Action Defense Cases-Eakins v. Pella: North Carolina Federal Court Holds Once Defense Establishes Prima Facie Case For Removal Under Class Action Fairness Act (CAFA) Burden Shifts To Plaintiff To Prove Exception To Removal Jurisdiction

District Court Holds as Matter of First Impression in Fourth Circuit that CAFA Shifts Burden of Proof to Establish Local Controversy Exception to Removal Jurisdiction and Denies Motion to Remand

Plaintiff filed a putative class action in North Carolina state court against Pella Corporation, a window manufacturer, for unfair business practices and products liability based on the allegation that the blazing system utilized on defendants’ windows was defective, leading to water damage following rain. The defense removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Eakins v. Pella Corp., 455 F.Supp.2d 450, 451 (E.D. N.C. 2006). Plaintiffs filed a motion to remand the class action to state court on the ground that it fell within CAFA’s “local controversy” to federal court jurisdiction. Id. The district court agreed with defense attorneys that plaintiff bore the burden of establishing the applicability of the local controversy exception, and denied the motion for remand.

The federal court found the law clear that “the party requesting removal to federal court has the burden of proving that such removal is warranted,” but in cases of class actions removed to federal court under the Class Action Fairness Act of 2005, “[l]ess clear is which party bears the burden of proving an exception to CAFA requires remand.” Eakins, at 452. Because this was a matter of first impression in the Fourth Circuit, the district court relied on decisions out of the Fifth, Seventh and Eleventh Circuits which “have held that once the removing party proves the prima facie case for removal, the burden shifts to the plaintiff to prove that the local controversy exception should apply.” Id. (citations omitted). The district court found “no reason to depart” from those cases, and held that plaintiff had the burden of establishing that the class action should be remanded to state court by virtue of the local controversy exception. Id.

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

Class Action Defense Cases-DiTolla v. Doral Dental: Second Circuit Holds Class Action Fairness Act (CAFA) 60-Day Deadline For Issuing Opinion Runs From Grant Of Permission To Appeal And That Removing Party Bears Burden Of Proving Jurisdiction

Court Holds as Matter of First Impression in Second Circuit that CAFA does not Modify Burden of Proof to Establish Removal Jurisdiction, and Affirms Remand of Class Action to State Court because Defense Failed to Establish Requisite Amount in Controversy

Plaintiff filed a putative class action against the third party administrator of a pool funded by Medicaid and Medicare, seeking ‘”an accounting of all amounts by which the Pool has been funded and reduced”; defense attorneys estimated this amount to be $40 million (though the complaint was silent as to the amount), and argued that plaintiff had placed that entire amount at issue. The defense removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), but the district court remanded the action to state court. DiTolla v. Doral Dental IPA of New York, LLC, 469 F.3d 271, 272-73 (2d Cir. 2006). On appeal, defense attorneys argued that the $5 million “amount in controversy” test was satisfied. Id., at 273. The Second Circuit disagreed.

Preliminarily, the Second Circuit considered the statutory requirement that, absent an extension of time under 28 U.S.C. § 1453(c)(3), the appellate court issue an opinion within 60 days of the granting of an appeal from an order granting or denying remand. DiTolla, at 274. Under 28 U.S.C. § 1453(c)(4), the appeal is deemed denied if a final judgment is not issued within that 60-day window. In DiTolla, defense attorneys sought permission to appeal in May 2006, and permission was granted in July 2006. The defense team filed their brief on August 17, 2006, and a month later, on September 21, 2006, the parties stipulated to extend time for issuance of a opinion. Id. Plaintiff argued that the appeal was “filed” in May, and that the Circuit Court therefore lacked authority to grant permission to appeal because that order came 66 days after the “filing” of the appeal. Id. The Second Circuit disagreed, holding at page 274: “We reject this interpretation . . . and hold that the ‘filing’ of the appeal for CAFA purposes occurs on the date in which this Court issues an order granting permission to appeal.” The Court observed at page 275 that its interpretation is consistent with case law out of the Fifth, Seventh, Ninth and Eleventh Circuits.

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

Parks v. General Motors Class Action Defense Case: South Carolina Federal Court Agrees With GM Defense Team That Class Action Should Not Be Certified Because Car Dealership Failed To Meet Commonality And Predominance Requirements

Court Holds that Affirmative Defenses Preclude Finding of Commonality and Alternatively Finds that Determination of Liability and Damages would Involve Individual Issues of Fact and Law Thereby Defeating Commonality and Predominance Requirements of Rule 23

Plaintiff car dealership filed a putative class action against General Motors seeking injunctive relief and damages arising out of the allegation that GM cleaned a shipment of 2500 vehicles that arrived in the U.S. “covered in a foreign substance” resulting in damage to parts of the vehicles, and then sought to “conceal the extent of the damages from its dealers and the public by making cosmetic repairs and by disposing of the more severely damaged vehicles by auction in Florida.” Parks Auto. Group, Inc. v. General Motors Corp., 237 F.R.D. 567, 569 (D. S.C. 2006). Dealers were not permitted to unilaterally refuse shipment of the repaired vehicles. Moreover, “It is uncontested that GM did not provide a uniform, total repurchasing program for these vehicles. Dealerships were told that any such repurchasing requests would be directed to the regional level on a case by case basis.” Id. Defense attorneys argued that the lawsuit should not be certified as a class action because the complaint did not present common questions of law or fact as required by Rule 23(a)(2). Id., at 570. The district court agreed and denied plaintiff’s motion for class certification. Id., at 573.

The federal court noted that the plaintiff bears the burden of establishing each of the required elements for certification of a class action under Rule 23. Parks, at 570. Plaintiff argued that GM had engaged in a pattern of conduct that was applicable to all class members, id.; but even though the district court recognized that there need only be a single common question of law or fact, id., the court found this argument insufficient to establish commonality. First, the court agreed that GM’s affirmative defenses of accord and satisfaction peculiar to plaintiff defeats commonality, as does its affirmative defenses of release, waiver and comparative negligence as to the remaining putative class members, as the defenses “would require individualized inquiry for each class member.” Id., at 570. As the district court observed, Fourth Circuit case law holds that “where individual affirmative defenses may be asserted against one plaintiff, but not the entire class, class certification is precluded.” Id. As the court explained at page 570, “Although it is difficult to determine with any precision, the court finds that GM’s affirmative defenses are not without merit and would require individualized inquiry in at least some cases. Accordingly, the court finds that class certification would be erroneous.”

Certification of Class Actions Class Action Court Decisions Uncategorized

Public Accommodation/ADA Class Action Lawsuits Surge To Top Spot In Weekly Class Action Filings In California State And Federal Courts As Labor Law Class Action Claims Take Christmas Break

Defense attorneys in California will face a new wave of public accommodation/ADA (Americans with Disabilities Act) class action cases, as employment law class actions – the usual frontrunner in weekly filings – fall to a distant third. In an effort to assist 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.

Class Actions In The News Uncategorized