Class Action Defense Cases–Holk v. Snapple: Third Circuit Reverses Dismissal Of Class Action Holding Class Action’s State Law Claims Regarding “All Natural” Label Not Preempted By Federal Nutrition Labeling And Education Act

District Court Erred in Dismissing Class Action because Class Action’s State Law Claims Alleging Snapple’s Use of Term “All Natural” was Deceptive were not Impliedly Preempted by Federal Nutrition Labeling and Education Act Third Circuit Holds

Plaintiff filed a putative class action in New Jersey state court against Snapple Beverage Corporation alleging inter alia violations of the state’s Consumer Fraud Act; specifically, the class action complaint alleged that plaintiff purchased a Snapple beverage advertised as “All Natural” when in truth the beverage “contained high fructose corn syrup (‘HFCS’), an ingredient manufactured from processed cornstarch.” Holk v. Snapple Beverage Corp., 575 F.3d 329 (3rd Cir. 2009) [Slip Opn., at 1, 5-6]. According to the allegations underlying the class action complaint, “the FDA has acknowledged[] ‘[t]he word “natural” is often used to convey that a food is composed only of substances that are not manmade and is, therefore, somehow more wholesome.’” Id., at 5. The class action therefore alleged that use of the phrase “All Natural” was deceptive because the beverages contain HFCS. Id., at 6, 7. Defense attorneys removed the class action to federal court under the Class Action Fairness Act (CAFA), id., at 7. Eventually, defense attorneys moved to dismiss the class action’s claims on the grounds that they were preempted by federal law, id. Ultimately, the only issue before the district court was “the claim that Snapple products containing HFCS were deceptively labeled ‘All Natural.’” Id. The district court agreed that plaintiff’s claims were preempted and dismissed the class action, id., at 7-8. The district court rejected the express preemption argument, but concluded that plaintiff’s claims were “impliedly preempted by the detailed and extensive regulatory scheme established by the [FDCA] and the FDA’s implementing regulations.” Id., at 8. The Third Circuit reversed.

The Third Circuit noted that Congress has regulated food and beverage labeling for more than 100 years.” Holk, at 3. The statute implicated by this class action is the Nutrition Labeling and Education Act (NLEA), enacted in 1990. Id., at 5. The Circuit Court also noted that there is “a presumption against preemption.” Id., at 11 (citation omitted). Additionally, health and safety issues, including the labeling and branding of food and beverage, has “traditionally fallen within the province of state regulation.” Id. (citation omitted). The federal government became involved in this field only 100 years ago, id., at 11-12. And finally, the Third Circuit held that Snapple’s arguments in the district court waived the express preemption ground as a basis for affirming the judgment on appeal, id., at 12-15, and that “field preemption” did not apply, id., at 15-22. So the Court turned to the issue of implied preemption.

Class Action Court Decisions Class Action Fairness Act (CAFA) Uncategorized

Class Action Defense Cases–Vasilas v. Subaru: New York Federal Court Denies Motion To Dismiss Class Action For Violation Of Federal Odometer Act Holding Class Action Complaint Adequately Alleged Fraud

Class Action Complaint Alleging Violation of Federal Odometer Act Survives Defense Motion to Dismiss because Class Action’s Claim under the Act Pleaded Fraud with Requisite Particularity New York Federal Court Holds

Plaintiffs filed a putative class action against Subaru of America alleging violations of the Federal Odometer Act and related state laws; specifically, the class action complaint alleged that Subaru manufactured vehicles “with defective odometers that deliberately overstated the vehicles’ mileage.” Vasilas v. Subaru of America, Inc., ___ F.Supp.2d ___ (S.D.N.Y. August 5, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, Subaru’s conduct resulted in “shortening the life span of the vehicles’ warranty coverage, decreasing the resale value of their automobiles, and penalizing plaintiffs with unwarranted ‘excessive mileage’ charges on leased automobiles.” _Id._ Defense attorneys moved to dismiss the class action on the grounds that the Odometer Act “is inapplicable to original factory-installed odometers which, regardless of their inaccuracy, are performing consistent with the manner that they were designed and manufactured to operate.” _Id._ The district court denied the motion, ruling that a claim for relief may be pursued for alleged violations of the Odometer Act.

The district court noted that the class action complaint did not allege that the odometers installed by Subaru were defective; rather, the gravamen of the class action was that “Subaru knowingly and purposefully (a) used, (b) installed or (c) had installed into the vehicle a device that biased, altered and inflated the mileage recorded on the vehicle’s odometer from the actual mileage traveled by the vehicle.” Vasilas, at 2. Further, when customers began complaining about possible inaccuracies in the mileage reported, “Subaru expressly, but falsely, represented to its customers that its odometers accurately recorded the actual mileage,” id. In considering Subaru’s motion to dismiss, the federal court noted that “a private plaintiff suing for violations of the Odometer Act must adequately plead that defendant acted with an intent to defraud,” i_d._, at 3-4 (citation omitted), and that fraud must be pleaded with particularity under Rule 9(b), id., at 4.

Class Action Court Decisions Uncategorized

RESPA Class Action Defense Cases–Tubbs v. North American Title: New Jersey Federal Court Dismisses Class Action RESPA Claim And Dismisses Balance Of Class Action After Declining Jurisdiction Over Class Action’s State Law Claims

Class Action Alleging Improper Charges for Settlement Services Failed to State Claim under Real Estate Settlement Practices Act (RESPA) because Class Action Described an “Overcharge” Rather than a “Markup” or a “Fee Split” and Remaining Class Action State Law Claims Dismissed without Prejudice because Court Refused to Exercise Supplemental Jurisdiction over them New Jersey Federal Court Holds

Plaintiffs filed a putative class action against various North American Title entities alleging inter alia violations of the federal Real Estate Settlement Practices Act (RESPA) and the New Jersey Consumer Fraud Act; specifically, the class action complaint alleged that defendants charged improper fees in connection with the refinancing of residential mortgages. Tubbs v. North Am. Title Agency, Inc., 622 F.Supp.2d 207, 207-08 (D.N.J. 2009). According to the allegations underlying the class action complaint, defendants acted as closing agent when plaintiffs refinanced home loans that they had with Wachovia Bank, id., at 208. Among the closing costs charged by defendants was “release recording fee” of $150, but defendants “did not actually record the release of the mortgages”; instead, “Wachovia prepared and recorded the necessary documents…, and passed through to the borrower the $40 per mortgage recording fee charged by the County.” Id. Defense attorneys moved to dismiss the class action, and plaintiffs filed an amended class action complaint that largely tracked the original. Id., at 208-09. Defense attorneys again moved to dismiss the class action, id., at 209. The district court granted the motion.

The federal court explained that the gravamen of the class action’s RESPA claim was that defendants “violated RESPA by charging a settlement fee for which no services were performed.” Tubbs, at 209. Relying on Santiago v. GMAC Mortgage Group, Inc., 417 F.3d 384 (3d Cir. 2005), plaintiffs argued that defendants’ charge for recording a release was a “markup” prohibited by Section 8(b) of RESPA. Tubbs, at 209. But the district court explained that Santiago drew a distinction between a “markup” and an “overcharge,” which “occurs when the settlement service provider charges the consumer a fee, of which only one portion is a fee for the reasonable value of ‘services rendered.” Id. (citing Santiago, at 387). The distinction is important because under Santiago “the plain language of Section 8(b) does not provide a cause of action for overcharges.” Id., at 210 (citation omitted). Defendants did not actually engage in “fee splitting” because the fee charged by Wachovia “was not for the same settlement service.” Id. The district court explained at page 210 that the $40 fee charged by Wachovia was “not a fee for any service Wachovia was providing” but represented “the actual cost of recording the discharge with the Camden County Clerk’s office” and Wachovia “was passing on the county recording fee for the mortgage satisfaction as permitted by New Jersey Statute.” Further, the $25 fee charged by Wachovia was “for its work in preparing the mortgage satisfaction and arranging for its recording.” Id.

Class Action Court Decisions Class Actions In The News RESPA/TILA Class Actions Uncategorized

New Unfair Competition Law (UCL) Class Action Lawsuits Tie Labor Law Class Action Lawsuits In Weekly Class Action Filings In California State And Federal Courts

As a resource to California class action defense attorneys,we provide weekly, unofficial summaries of the legal categories for new class action lawsuits 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. This report covers the time period from August 21 – August 27, 2009.

Class Actions In The News Uncategorized

Class Action Defense Cases—In re Park West Galleries: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation But Selects Western District Of Washington As Transferee Court

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over the Objections of Class Action Plaintiffs, but Transfers Class Actions to Western District of Washington Four class actions – two in Florida and one each in Michigan and Washington – were filed against various defendants, including Park West Galleries and Fine Art Sales, alleging “that defendants operated a fraudulent scheme to sell fake, worthless, or low-value artwork at shipboard auctions or in private sales through the use of phony appraisals and/or other sales-related documentation.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Cases–Martinelli v. Petland: Arizona Federal Court Dismisses RICO Class Action Alleging Sale Of “Mill Bred” Puppies As “Finest Available” But Grants Leave To Amend Class Action Complaint

Class Action Complaint Alleging RICO and State Consumer Protection Law Violations Arising from Sale of “Mill Bred” Puppies to “Unsuspecting Consumers” who Believed they were Acquiring the “Finest Available” Puppies Failed to State Claims Against Defendants Arizona Federal Court Holds

Plaintiffs filed a putative class action against Petland and Hunte Corporation, purportedly on behalf of a class of “residents of various states who bought a Petland puppy, alleging violations of Racketeer Influenced and Corrupt Organizations Act (RICO) [“predicated on alleged violations of the federal mail and wire fraud statutes”], conspiracy, violations of various state consumer protection laws, and violation of Ohio’s Consumer Sales Practices Act.” Martinelli v. Petland, Inc., ___ F.R.D. ___ (D.Ariz. August 7, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, Petland, “a large national retailer of pets,” and Hunte, which “supplies many of the puppies sold at Petland stores,” promised to sell puppies that were “bred under safe and humane conditions by a reputable breeder with proper canine husbandry practices” but were, instead, bred at a “puppy mill,” described by the class action complaint as “a dog breeding operation in which the health of the dogs is disregarded in order to maintain a low overhead and maximize profits.” _Id._, at 1. The class action alleged that, because of the manner in which they were bred, “their puppies were sick at the time of purchase or became ill shortly thereafter.” _Id._ The class action alleged a “scheme” to sell mill-bred puppies to “unsuspecting consumers” who believed they were buying “the finest available” puppies from USDA-approved “professional and hobby breeders who have years of experience in raising quality family pets.” _Id._, at 2. Plaintiffs also claimed that an 8-month investigation by the Humane Society “confirm[ed] Petland’s practice of misrepresenting and concealing the origin of puppy mill puppies.” _Id._ Defense attorneys moved to dismiss the class action, _id._, and the district court granted the motion but with leave to amend.

The federal court first addressed Petland’s motion. Petland, at 3. Defense attorneys argued the RICO and state consumer protection claims failed because “ (i) the alleged misrepresentations are mere puffery, rather than actionable statements of material fact, (ii) the allegations of non-disclosure…fail to state a claim for relief, and (iii) the allegations of fraud have not been pled with particularity.” Id. Also, Petland argued that the class action failed to allege injury or causation, and that as a matter of law the unjust enrichment claim failed. Id. The district court agreed. As to the RICO claim, plaintiffs argued that Petland failed to disclose the origins of its puppies, but plaintiffs failed to allege “that Petland has an independent duty to disclose to consumers the origin of Petland puppies.” Id. Similarly, the RICO claims predicated on alleged misrepresentations failed because plaintiffs failed to plead with particularity the manner in which the “finest available” statements were made. Id., at 4-6. The federal court further agreed that plaintiffs failed to adequately allege proximate cause for their alleged damages, id., at 6-8, and because “proximate causation is an essential element of claims brought under state consumer protection statutes,” id., at 8, the district court granted the motion to dismiss those class action claims as well, id., at 9. Finally, because the unjust enrichment claim is also premised on fraud, that claim failed as well, id.

Class Action Court Decisions Uncategorized

Class Action Defense Cases–DeBlasio v. Merrill Lynch: New York Federal Court Grants Motion To Dismiss Fraud Class Action Against Brokerages Finding Class Action Complaint’s Allegations Failed Under Rules 9(b) and 12(b)(6)

Defense Motions to Dismiss Class Action Granted because Allegations in Class Action Complaint Failed to Meet Rule 9(b)’s Requirements for Pleading Fraud with Specificity and because Class Action’s Allegations Failed under Rule 12(b)(6) New York Federal Court Holds Plaintiffs filed a putative class action against Merrill Lynch entities, Morgan Stanley entities, Citigroup entities, Charles Schwab entities and Wachovia entities, alleging inter alia violations of the Investment Advisers Act (IAA), the Sherman Antitrust Act, and New York’s General Business Law § 349; the class action complaint alleged that defendants violated state and federal laws by “engaged in ‘deceptive and misleading’ practices relating to a series of ‘Cash Sweep Programs’ that were offered as part of Plaintiffs’ brokerage accounts.

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Greenwich v. Countrywide: New York Federal Court Remands Class Action To State Court Holding Class Action Complaint Fell Within Exception To CAFA (Class Action Fairness Act) Removal

Class Action Complaint Satisfied Amount in Controversy and Minimal Diversity Requirements for Removal under Class Action Fairness Act (CAFA), but Remand Warranted because Plaintiffs Met Burden of Establishing Exception to Removal Jurisdiction in that Class Action Related Solely to Securities New York Federal Court Holds

Plaintiffs, the holders of mortgage-backed securities certificates issued by various trusts, filed a putative class action in New York state court against various Countrywide entities seeking declaratory relief; specifically, the class action complaint alleged inter alia that Countrywide violated the federal Truth-in-Lending Act (TILA). Greenwich Fin. Servs. Distressed Mtg. Fund 3, LLC v. Countrywide Fin. Corp., ___ F.Supp.2d ___ (S.D.N.Y. August 18, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, the Attorneys General for 7 states sued Countrywide in 2008 alleging violations of predatory lending laws; Countrywide settled those lawsuits with “a multistate settlement, requiring it to modify the terms of numerous mortgage loans that it currently services – including at least some of the loans it services on behalf of plaintiffs.” _Id._, at 2-3. Plaintiffs argued that the loan modifications caused them to suffer monetary damage, and that Countrywide was required to repurchase the loans that it modified “at a price equal to the unpaid principal and accrued interest thereon” in order to make plaintiffs whole. _Id._, at 2-3. Defense attorneys removed the class action to federal court; Countrywide argued that removal was proper under the Class Action Fairness Act of 2005 (CAFA), and further argued that the class action was removable “because plaintiffs’ claims raise substantial, disputed federal questions under the Truth-in-Lending Act [(TILA)],” _id._, at 1. Plaintiffs moved to remand the class action to state court. _Id._ The district court held that neither CAFA nor TILA provided subject-matter jurisdiction over the dispute and remanded the class action as requested.

The district court first examined whether removal jurisdiction existed under CAFA, which authorizes removal of class actions where the amount in controversy exceeds $5 million and where minimal diversity exists. Greenwich, at 4. (A more detailed discussion of CAFA may be found HERE.) Plaintiffs conceded that the requirements for removal had been met, but countered that their class action fell within an exception to removal – viz., a class action that “solely involves a claim…that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security.” Id. (quoting 28 U.S.C. § 1332(d)(9)(C)). The burden of establishing that the exception applied rests with plaintiffs, id. Relying on the Second Circuit decision in Estate of Barbara Pew v. Cardarelli, 527 F.3d 25 (2d Cir. 2008), the district court held that the class action fell squarely within the scope of the exception to CAFA removal jurisdiction, see Greenwich, at 4-8, and rejected Countrywide’s arguments to the contrary, see id., at 8-11.

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

FLSA Class Action Defense Cases–Boucher v. Shaw: Ninth Circuit Affirms Dismissal Of Labor Law Class Action Claims Against Individual Managers But Reverses As To Class Action’s FLSA Claims Against Individuals

Labor Law Class Action Seeking to Hold Individual Managers Liable for Wages due Employees Properly Dismissed as to Class Action Claims under Nevada State Law, but Improperly Dismissed as to Class Action Claims under Federal Fair Labor Standards Act (FLSA) Ninth Circuit Holds

Plaintiffs, former employees and their local union, filed a putative class action in Nevada state court against individual managers of the Castaways Hotel, Casino and Bowling Center alleging violations of state and federal labor laws; specifically, the class action complaint alleged that That the three individual managers – the Chairman and CEO, who had a 70% ownership interest in Castaways, the CFO, who had a 30% ownership interest in the Castaways, and the head of labor and employment matters for the Castaways – were personally liable for the state and federal labor law violations because “each defendant had custody or control over the ‘plaintiffs, their employment, or their place of employment at the time that the wages were due.’” Boucher v. Shaw, ___ F.3d ___ (9th Cir. July 27, 2009) [Slip Opn., at 9731, 9734-36]. According to the allegations underlying the class action, plaintiffs were not paid for their final pay period or were paid late, and were not paid for accrued vacation and holiday time. _Id._, at 9735. Plaintiffs had filed the lawsuit against the individuals because the Castaways was in Chapter 11 bankruptcy proceedings at the time the plaintiffs were fired, and subsequently went through a Chapter 7 liquidation. _Id._ Defense attorneys removed the class action to federal court, and moved to dismiss the class action complaint for failure to state a claim. _Id._, at 9736. The district court dismissed the class action because it found “that the defendants were not ‘employers’ under Nevada law, Local 226 lacks standing to bring a claim under Nevada law and the plaintiffs cannot maintain a cause of action under the Fair Labor Standards Act [(FLSA)] against the defendants.” _Id._ The Ninth Circuit affirmed in part, but reversed as to the class action’s FLSA claim.

The Ninth Circuit opened its opinion as follows: “This appeal raises three issues: (1) whether the Castaways’ individual managers can be held liable for unpaid wages under Nevada law; (2) whether the union has standing to raise the state law claim; and (3) whether the managers can be held liable under the Fair Labor Standards Act (FLSA).” Boucher, at 9734. Because the question of whether individual managers may be liable under Nevada law for unpaid wages was a matter of first impression, the Circuit Court certified the issue to the Nevada Supreme Court – the Nevada Supreme Court held that “individual managers cannot be held liable as ‘employers,’ and therefore that claim was properly dismissed by the district court.” Id., at 9734, 9737-38. That decision rendered moot the second issue on appeal, as it did not matter whether the local union had standing to raise a state law claim that did not exist. Id., at 9734-35. The issue became, then, whether individual managers may be held liable under the FLSA. Id., at 9735. 9738-39. This was not a matter of first impression in the Ninth Circuit. The Court noted at pages 9739 and 9740 that in Lambert v. Ackerley, 180 F.3d 997, 1011-12 (9th Cir. 1999) (en banc), the Ninth Circuit held:

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Actions Alleging Employment-Related Claims Maintain Top Spot Among Weekly Class Action Lawsuits Filed In California State And Federal Courts

To assist class action defense attorneys anticipate the types of cases against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in the state and federal courts located in 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 preceding week.

Class Actions In The News Uncategorized