FACTA Class Action Defense Cases–Leysoto v. Mama Mia: Florida Federal Court Denies Class Action Treatment Of FACTA Class Action Because Potential Liability Vastly Disproportionate To Actual Damages Suffered By Putative Class

FACTA Class Action Seeking $4.6 Million to $46 Million in Statutory Damages from Restaurant with Net Worth of $40,000 did not Warrant Class Action Treatment because Class Action not “Superior” Method of Resolving Dispute Florida Federal Court Holds

Plaintiff filed a putative class action in Florida state court against Mama Mia, “a local restaurant in Hollywood, Florida, with approximately $40,000 in net assets”; the class action alleged that defendant violated the Fair and Accurate Credit Transactions Act (FACTA), which requires that merchants truncate credit card and debit card numbers on electronically-printed customer receipts. Leysoto v. Mama Mia I., Inc., 255 F.R.D. 693, 694 (S.D.Fla. 2009). According to the allegations underlying the class action, the receipts defendant provided to customers “displayed both the expiration date and full number of [the customers’] credit card.” Id. (The district court noted that defendant “ceased this practice, and began truncating customer receipts to merely four (4) card numbers, no later than June 26, 2008.” Id.) The class action complaint sought “statutory and actual damages, as well as attorneys’ fees and costs,” id. Defense attorneys removed the class action to federal court, id., and plaintiff moved for class certification, arguing a Rule 23(b)(3) class action should be certified, id., at 694-95. Defense attorneys opposed class action certification on the grounds that class action treatment would expose defendant to statutory damages of $4.6 million – $46 million, even though plaintiff concedes he did not suffer any actual economic injury and even though there was no evidence that any member of the putative class suffered actual economic injury. Id., at 695 and n.5. The district court denied plaintiff’s motion.

The district court explained that the class certification motion “turns on two related questions: (1) whether potential class damages are a proper consideration at the motion to certify stage; and, if so; (2) whether the potential class damages in this matter preclude certification under Fed.R.Civ.P. 23(b)(3).” Leysoto, at 694. Of course, plaintiff bears the burden of establishing that class action treatment was warranted, id., at 695 (citations omitted). FACTA provides for recovery of actual damages or statutory damages of “not less than $100 and not more than $1,000.” Id. (citation omitted). This is important because under Eleventh Circuit authority the district court “may consider potential class damages in adjudicating Plaintiff’s Motion, and given the vast disparity between the requested statutory damages and the actual injury caused by Defendant, the class vehicle is not the superior method for fairly and efficiently adjudicating this dispute.” Id., at 694.

Certification of Class Actions Class Action Court Decisions Class Actions In The News FCRA Class Actions Uncategorized

Mercedes-Benz Class Action Defense Cases–In re Mercedes-Benz: New Jersey Federal Court Grants Class Action Treatment To Class Action Claims For Unjust Enrichment And Consumer Fraud Based On Analog-Based Tele Aid Sales

Nationwide Class Action Complaint Alleging Unjust Enrichment and Violations of New Jersey’s Consumer Fraud Act Claims Warranted Class Action Treatment because Sale by Mercedes of Analog-Based Tele Aid Systems Involved Common Issues that Predominated over Individual Issues and because Balance of Rule 23’s Requirements for Class Action Certification had been Satisfied New Jersey Federal Court Holds

Ten separate class action lawsuits were filed in six different states against Mercedes-Benz and other defendants arising from vehicles equipped with the “Tele Aid” emergency response system; Mercedes-Benz moved the Judicial Panel on Multidistrict Litigation to consolidate the class action complaints for pretrial purposes, pursuant to 28 U.S.C. § 1407. In re Mercedes-Benz Tele Aid Contract Litig., ___ F.Supp.2d ___ (D.N.J. April 27, 2009) [Slip Opn., at 5]. The Judicial Panel granted the motion, and the various class actions were transferred to New Jersey, _id._, at 5-6. (The district court observed that the amount in controversy exceeds $5,000,000 and that minimal diversity exists; accordingly, the court had jurisdiction under the Class Action Fairness Act (CAFA). _Id._, at 2.) Once the class actions were centralized, the district court appointed interim class counsel and directed counsel to file a consolidated amended class action complaint, _id._, at 6. The putative nationwide class action complaint alleged causes of action for common law unjust enrichment and violations of the New Jersey Consumer Fraud Act “premised on the contention that Mercedes made statements or omissions of material facts that it knew or should have known were false or misleading when promoting vehicles purchased by Plaintiffs that were equipped with ‘Tele Aid,’ an emergency response system which links subscribers to road-side assistance operators by using a combination of global positioning and cellular technology.” _Id._, at 2-3. At bottom, the class action claims are premised on the theory that Mercedes knew “that the analog network on which the Tele Aid systems contained in their vehicles depended would cease to function in 2008, but continued to market Tele Aid without disclosing that fact.” _Id._, at 6. Plaintiffs’ attorneys moved the district court to certify the litigation as a class action; defense attorneys argued against class action treatment. _Id._, at 1. The district court determined that class action treatment was warranted and therefore granted plaintiffs’ class action certification motion.

The district court explained that plaintiffs’ task at the class action certification stage was to demonstrate that the claims in the class action complaint were susceptible to common proof at trial rather than relying on evidence that is individual to the putative class members. In re Mercedes-Benz, at 4. Plaintiffs’ motion for class action treatment was supported in part by three expert reports; the experts supported plaintiffs’ claim that Mercedes failed to adequately inform customers that analog service would terminate at the end of 2007, even though “discontinuation of analog service in early 2008 was a regulatory certainty at the time the FCC finalized its rule on August 8, 2002.” Id., at 3. “Mercedes began including Tele Aid systems in most of its vehicles in 2000,” id., and “touted its ability to provide subscribers with emergency road-side assistance, remotely unlock doors, and track stolen vehicles,” id., at 7. Certain of these vehicles relied solely on analog signals over wireless telephone networks; the company subsequently sold vehicles that were capable of using both analog and digital signals. Id. We do not discuss the facts in greater detail here, see id., at 7-12. The basis of plaintiffs’ class action certification motion was that “this case is particularly well-suited to class treatment because (1) their claims ‘arise from a single course of conduct that affect[ed] large numbers of consumers,’ and (2) the costs to each class member of pursuing his or her suit would exceed any potential recovery.” Id., at 13. Defense attorneys opposed class action treatment because (1) a nationwide class should not be certified as the claims of each named plaintiff are governed by the laws of their respective home states, which differ in material ways, and (2) common questions of fact do not predominate. Id., at 13-14.

Certification of Class Actions Class Action Court Decisions Uncategorized

CAFA Class Action Defense Cases–In re Hannaford Bros.: First Circuit Affirms Remand Of Class Action Holding Home State Exception To CAFA (Class Action Fairness Act) Jurisdiction Applies

Class Action on Behalf of Florida Citizens Against Florida Corporation, Removed to Federal Court under Class Action Fairness Act (CAFA), Properly Remanded to State Court because Home State Exception to CAFA Jurisdiction Applies First Circuit Holds

Plaintiff filed a class action in Florida state court against Kash N’ Karry Food Stores (a chain of grocery stores in Florida) alleging “alleging that Kash N’ Karry had failed to adopt adequate security measures to protect its customers’ credit card information.” In re Hannaford Bros. Co. Customer Data Security Breach Litig., 564 F.3d 75 (1st Cir. 2009) [Slip Opn., at 3]. According to the allegations underlying the class action, a computer hacker stole from defendant the credit and debit card information of approximately 1.6 million Kash N’ Karry customers, and limited the class action’s definition to Florida residents, id., at 3-4. Defense attorneys removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA), and the Judicial Panel on Multidistrict Litigation coordinated plaintiff’s class action for pretrial purposes with two dozen other class actions in the District of Maine. Id., at 4. The other 24 class actions had been filed against entities that were related to Kash N’ Karry; specifically, its sister corporation Hannaford Brothers, and their common parent company, Delhaize America. Id. Plaintiff moved to remand his class action to state court under the home state exception to CAFA jurisdiction; the district court granted plaintiff’s motion and the First Circuit gave defendant leave to appeal. Id. The Circuit Court stated that this case “presents an issue of first impression for this circuit regarding the application of the home state exception to federal jurisdiction under [CAFA].” Id., at 2. Defense attorneys argued that the class action complaint had been drafted to defeat CAFA jurisdiction “in violation of congressional intent”; plaintiff responded that the home state exception to CAFA jurisdiction applied and, accordingly, that the district court order remanding the class action to state court was correct. Id. The Circuit Court affirmed the remand of the class action to state court, holding that the class action complaint fell squarely within the home state exception to CAFA jurisdiction.

CAFA’s home state exception “requires a federal court to decline to exercise jurisdiction if at least two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the state where the action was originally filed.” In re Hannaford, at 2 (citing 28 U.S.C. § 1332(d)(4)(B)). The First Circuit observed that plaintiff’s class action complaint limits the scope of the class to Florida citizens, and is brought against a single corporation, Kash N’ Karry, which also is a Florida citizen. Id. The district court remanded the class action to state court on the basis of the home state exception, and the Circuit Court affirmed, rejecting defense attorney claims that “the application of CAFA’s home state exception depends on a broader assessment of the claims brought by others who do not fall within the complaint’s class definition or of the claims available to the class against other possible defendants.” Id.

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

McDonald’s Class Action Defense Cases–In re McDonald’s French Fries: Illinois Federal Court Denies Class Action Treatment Of Consumer Fraud Class Action Complaint Because Individual Issues Predominate Over Common Issues

Class Action Complaint Alleging Consumer Fraud/Deceptive Practices Based on Alleged Misrepresentation by McDonald’s as to Whether its Potato Products Contained Certain Allergens did not Warrant Class Action Treatment because Individual Issues Predominate Illinois Federal Court Holds

Plaintiffs filed a nationwide class action against McDonald’s alleging “violations of all of the fifty states’ and the District of Columbia’s consumer fraud and/or deceptive trade practices acts, breach of express warranty, and unjust enrichment”; the class action complaint asserted that plaintiffs suffer from “certain medical conditions” and were deceived by McDonald’s as to the ingredients contained in its french fries and hash browns. In re McDonald’s French Fries Litig., ___ F.Supp.2d ___ (N.D. Ill. May 6, 2009) [Slip Opn., at 1]. According to the allegations underlying the class action, McDonald’s would par-fry (or blanch) its potato products “in an oil made of 99% vegetable oil and 1% natural beef flavor”; the beef flavor, in turn, contained “hydrolyzed wheat bran and hydrolyzed casein (a dairy product).” _Id._ McDonald’s would advertise its potato products, however, as “gluten, wheat, and dairy-free,” thus making McDonald’s representations (according to the class action) “at best incorrect, if not intentionally misleading” – claims that McDonald’s denied. _Id._, at 2. (However, McDonald’s later corrected its disclosures about its potato products.) Plaintiffs disclaimed any physical injury from eating the potato products but alleged economic harm in that they would not have purchased products with allergens (i.e., gluten, wheat or dairy) but for McDonald’s misrepresentations. _Id._ The class action sought to recover the “actual economic harm” suffered by the putative class – “(_i.e._, the purchase price of the Potato Products) based on the difference in value between the gluten, wheat, dairy, and allergy-free products plaintiffs wanted and the non-conforming products they actually received.” _Id._, at 2-3. Plaintiffs’ moved the district court to certify the litigation as a nationwide class action; defense attorneys argued against class action treatment. _Id._, at 3-4. The district court determined that class action treatment was not warranted and therefore denied plaintiffs’ class action certification motion.

Plaintiffs proposed to define the nationwide class to include “All persons residing in the United States…(i) who purchased Potato Products from McDonald’s restaurants on or after February 27, 2002 through February 7, 2006 and (ii) who at the time of purchase had 3 been medically diagnosed with celiac disease, galactosemia, autism and/or wheat, gluten or dairy allergies.” McDonald’s, at 4. After summarizing the Rule 23 requirements governing class action motions and noting the “broad discretion” afforded district courts in deciding whether to grant such motions, see id., at 3-4, the court noted that plaintiffs sought certification of a Rule 23(b)(3) class, which requires (in addition to the four elements set forth in Rule 23(a) of numerosity, commonality, typicality and adequacy of representation) that plaintiffs demonstrate “(1) common issues of law and fact predominate, and (2) a class action is superior to other forms of adjudication,” id., at 4 (citation omitted). But preliminarily, the district court observed that the proposed class is overly broad, as the definition includes people who never saw or heard anything from McDonald’s concerning whether the potato products were allergen free. Id., at 5. This was important given that none of the named plaintiffs suffered any physical reaction from eating McDonald’s potato products despite allergens, id., at 6. As the federal court concluded at pages 6 and 7, “It is fairly assumable…that many persons in the class as defined by plaintiffs have gone on eating defendant’s Potato Products since defendant corrected its disclosure. By any definition, these people have suffered no injury, not even the economic one claimed in this lawsuit.”

Certification of Class Actions Class Action Court Decisions Uncategorized

Unusually High Number Of New Class Actions Filed But Labor Law Class Actions Retain Top Spot Among Weekly Class Action Lawsuits Filed In California State And Federal Courts

In order 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

Class Action Defense Cases—In re Bayer: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs’ Motions To Centralize Class Action Litigation And Transfers Class Action To Eastern District Of New York

Judicial Panel Grants Plaintiffs’ Separate Requests for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Supported by Defendants, and Transfers Class Actions to Eastern District of New York Eight class actions – four in New Jersey, two in Illinois and one each in California and New York – were filed against various Bayer defendants “arising from Bayer’s marketing and sale of Bayer Aspirin with Heart Advantage or Bayer Women’s Low-Dose Aspirin Plus Calcium, or both.

Class Action Court Decisions Class Actions In The News Multidistrict Litigation Uncategorized

Bankruptcy Class Action Defense Cases–in re Bally Total Fitness: New York Bankruptcy Court Denies Motions By Class Action Plaintiffs To Permit Class Proof Of Claim, To Certify Class Actions Or To Lift Stay

Motions by Plaintiffs in Class Actions Asserting Labor Law Violations Denied because Class Action Device not “Superior” means of Resolving Employees’ Claims given Bankruptcy Proceeding and because Lifting Stay to Allow Class Action Litigation to Proceed would Waste Defendants’ Resources and Distract from Reorganization Efforts New York Bankruptcy Court Holds

Certain putative class action lawsuits were filed against Bally Total Fitness, which subsequently filed a petition for bankruptcy protection. In re Bally Total Fitness of Greater New York, Inc., 402 B.R. 616, 2009 WL 931537, *1 (S.D.N.Y. 2009). Plaintiffs in one of the class action lawsuits, the “Carrera” plaintiffs, “brought…a class action on behalf of thousands of employees” and alleged that Bally made employees work off-the-clock, failed to provide meal and rest periods, failed to provide timely itemized wage statements or final paychecks, and failed to reimburse business expenses. Id. Plaintiffs in another class action lawsuit, the “Flores” plaintiffs, “brought…a class action on behalf of Bally employees…for unpaid wages, failure to provide meal and rest periods mandated by California law and failure to reimburse business expenses.” Id., at *2. The Flores class action was originally filed in California state court, but defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act of 2005), id. Bally’s employees had entered into a written agreement with the company, the “Bally Total Fitness Corporation Employment Dispute Resolution Procedure” (EDRP), which required that employment-related claims be submitted to arbitration and which contained a class action waiver provision such that employment claims were required to be arbitrated individually. Id. In Carrera, Bally lost a motion to compel arbitration of the individual claims, and appellate proceedings were stayed due to the bankruptcy filing; in Flores, Bally’s motion to compel arbitration of individual claims was pending when the company filed bankruptcy, so a decision on that motion was stayed. Id. Plaintiffs in the Carrera class action moved the bankruptcy court to (1) permit them to file a “class proof of claim,” and (2) lifting the automatic stay so the class action could proceed in state court in order to “liquidate” the claims or, alternatively, certifying the litigation as a class action. Id., at *1. Plaintiffs in the Flores class action moved the bankruptcy court to certify the litigation as a class action. Id. The bankruptcy court denied each motion.

With respect to the Carrera plaintiffs’ request for leave to file a class proof of claim, the bankruptcy court noted that there is “no absolute right to file a class proof of claim under the Bankruptcy Code.” In re Bally, at *2 (citations omitted). Rather, in deciding whether to permit the filing of a class proof of claim, bankruptcy courts consider “a) whether the class claimant moved to extend the application of Rule 23 to its proof of claim; b) whether ‘the benefits derived from the use of the class claim device are consistent with the goals of bankruptcy’; and c) whether the claims which the proponent seeks to certify fulfill the requirements of Rule 23.” Id. (citation omitted). The bankruptcy court denied the motion because plaintiffs “failed to demonstrate that the requested relief would both be consistent with the goals of bankruptcy and satisfy the Rule 23 requirements.” Id. In this regard, the Court explained that class proofs of claim are consistent with the goals of bankruptcy “in two principal situations: (i) where a class has been certified pre-petition by a non-bankruptcy court; and (ii) where there has been no actual or constructive notice to the class members of the bankruptcy case and Bar Date.” Id., at *3. As neither situation applied to either the Carrera or Flores class action complaints, the Court denied the motion to permit the filing of a class proof of claim. Id.

Certification of Class Actions Class Action Court Decisions Uncategorized

FACTA Class Action Defense Cases–Harris v. Mexican Specialty: Eleventh Circuit Reverses Dismissal Of FACTA Class Actions Holding FCRA’s Statutory-Damages Provision Not Unconstitutional

District Court Erred in Dismissing FACTA Class Actions based on Conclusion that FCRA’s Statutory-Damages Provision was Unconstitutional Facially and As-Applied, Requiring Reversal of Court Order and Reinstatement of Class Actions Eleventh Circuit Holds

Plaintiffs filed two separate class action complaints against Mexican Specialty Foods and Rave Motion Pictures alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA), which is part of the federal Fair Credit Reporting Act (FCRA); the class action complaints asserted that the defendants willfully violated FACTA by providing customers with “electronically-generated receipt[s] [that] included more than the last five digits of the customer’s card number and/or its expiration date.” Harris v. Mexican Specialty Foods, Inc., 564 F.3d 1301, 2009 WL 944201, *1-*2 (11th Cir. 2009). FACTA provides, in pertinent part, that “no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” Id., at *1 (quoting 15 U.S.C. § 1681c(g)(1)). Each class action sought statutory damages, punitive damages and attorney fees and costs, pursuant to 15 U.S.C. § 1681n(a). Id., at *2. Defense attorneys in each class action moved for summary judgment on the grounds that the FCRA’s statutory-damages provision was unconstitutional, id.; the motion was directed toward that provision of the FCRA which authorizes the recovery of statutory damages “of not less than $100 and not more than $1,000.” Id., at *1 (quoting 15 U.S.C. § 1681n(a)(1)(A)). The federal government intervened as a party-plaintiff to argue in favor of the statute’s constitutionality. Id., at *2. The district court issued a single order covering both class actions: the court order “declar[ed] the FCRA’s statutory-damages provision unconstitutionally vague on its face and unconstitutionally excessive on its face and as applied to the defendants, in violation of the Fifth Amendment Due Process Clause.” Id. The district court therefore dismissed both class actions with prejudice, id. The plaintiffs in each class action appealed; the Eleventh Circuit consolidated the cases for purposes of appeal and reversed.

Reviewing the district court’s order de novo, the Eleventh Circuit first addressed whether the case “is ripe for adjudication,” that is, whether there is an actual case and controversy. Harris, at *3. This analysis required a determination of whether the district court found the statutory-damage provision unconstitutional on its face or as-applied, id. The Circuit Court held that the matter was ripe as to a facial challenge to the statute’s constitutionality, because the district court held that “the statute provides no guidance for juries in determining whether to award damages at the upper or lower end of the $100 to $1,000 statutory-damages range” thus leaving the amount of damages to be awarded “to the whim of the jury” creating the potential of inconsistent “willy nilly” verdicts. Id. However, the Eleventh Circuit held that the matter was not ripe for adjudication as to an as-applied challenge “[b]ecause such a challenge asserts that a statute cannot be constitutionally applied in particular circumstances, it necessarily requires the development of a factual record for the court to consider.” Id. (citation omitted). The district court’s ruling in this regard had been premised on a number of assumptions that the Circuit Court found to be unwarranted “because many of the court’s assumptions required the resolution of issues which are directly disputed.” Id., at *4. The Court therefore concluded that an as-applied challenge was not ripe for adjudication, id., at *5.

Class Action Court Decisions FCRA Class Actions Uncategorized

MetLife Class Action Defense Cases–Beavers v. Metropolitan Life: Fifth Circuit Affirms Dismissal Of Class Action Holding Class Action Complaint’s Claims Were Time-Barred

Class Action Complaint Alleging Breach of Contract Against MetLife Properly Dismissed because Four-Year Statute of Limitations Expired Long Before Plaintiffs Filed Class Action Fifth Circuit Holds

Plaintiffs filed a class action against their life insurer, Metropolitan Life, for breach of contract. Beavers v. Metropolitan Life Ins. Co., 566 F.3d 436, 2009 WL 1067035, *1 (5th Cir. 2009). According to the allegations underlying the class action, the insurance policies issued to plaintiffs, and managed by MetLife’s “Personal Insurance line of business” were investment vehicles as well as insurance policies, and called for MetLife’s policyholders “to receive dividends paid by Personal Insurance from the surplus accruing on their policies.” Id. The class action complaint alleged that MetLife “impermissibly allocate[ed] surplus profits from Personal Insurance to other lines of business.” Id. The class action thus alleged that MetLife “breached their investment contracts and deprived them of dividend income to which they were entitled.” Id. Plaintiffs filed the class action in 1998, and the district court certified the litigation as a class action in 2004. Id. Defense attorneys moved to dismiss the class action on the grounds that the claims were time-barred as they allegedly arose in the 1980s; the district court held that the discovery rule did not toll the statute of limitations and dismissed the class action complaint. Id. The Fifth Circuit affirmed.

Apply de novo review and the substantive law of Texas, see Beavers, at *2, the Fifth Circuit began by noting that a four-year limitations period applies to breach of contract claims in Texas, id. As the statute of limitations plainly ran long before plaintiffs filed the class action complaint, the question was whether the discovery rule or American Pipe doctrine tolled the limitations period. Id. With respect to the discovery rule, the Circuit Court noted that Texas permits only a “very limited exception to statutes of limitations.” Id. (citation omitted). A preliminary inquiry is whether the injury is “inherently undiscoverable.” Id. The Fifth Circuit further noted that “no Texas court has found a breach of contract to qualify as inherently undiscoverable, yet the Texas Supreme Court has not foreclosed the possibility.” Id., at *3 (citation omitted). In rejecting plaintiffs’ effort to bring their case within the scope of the discovery rule, the Circuit Court held that it was insufficient for plaintiffs – who conceded that MetLife did not have a fiduciary relationship with them – to claim to be in a “special relationship of confidence and trust” with MetLife. Id. Under Texas law, in the absence of a fiduciary relationship “contracting parties must verify each other’s performance.” Id. As a factual matter, the Court also held that plaintiffs could have discovered their alleged injury within the four-year limitations period, see id., at *3-*5.

Class Action Court Decisions Uncategorized

Quiznos Class Action Defense Cases–Harlow v. Sprint: Colorado Federal Denies Grants Class Action Treatment Of Class Action Complaint By Prospective Franchisees Against Quiznos Because Of Class Action Bar In Agreement

Class Action Bar in Franchise Agreement Precluded Class Action Certification of Lawsuit by Franchisees Against Quiznos because Class Action Bar was not Unconscionable under Colorado Law Federal Court Holds

Plaintiffs filed a class action against various Quiznos entities and others (collectively “Quiznos”) alleging defendants misled prospective franchisees; the class action complaint asserted that it was only after plaintiffs signed 30-page franchise agreements that defendants revealed the restaurant locations were “not as profitable as Quiznos had promised.” Bonanno v. The Quizno’s Franchising Co., LLC, ___ F.R.D. ___ (D.Colo. April 20, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, Quiznos also failed to provide plaintiffs with “any of the promised expert help,” but nonetheless demanded that they open restaurants within the one-year deadline set forth in the franchise agreements or the agreement would be terminated and Quiznos would keep the franchise fee. _Id._, at 2. The class action centered, then, on claims on behalf of “sold but not opened franchisees,” _id._ (Defendants conceded that “not every signed franchise agreement results in a functioning restaurant,” _id._, at 4.) Plaintiffs moved the district court to certify the litigation as a class action, _id._, at 3. Defendants opposed class action treatment, primarily on the ground that Section 21.4 of the franchise agreement prohibits class action lawsuits between the franchisor and the franchisee. _Id._, at 3. The district court held that class action waiver was enforceable and, accordingly, that class action certification was not warranted. The federal court therefore denied the motion. (We do not discuss in detail the 53-page opinion filed by the district court; it is well worth reading and it is available at the link following this article. For our purposes, the important issue is the enforceability of the class action waiver in the franchise agreement.)

Plaintiffs argued that “[t]he most significant issue…is whether, in light of the provision of the franchise agreements that purports to bar class actions, this case can be maintained as a class action in the first instance.” Bonanno, at 3. The district court held a hearing on the validity of the class action bar, and accepted supplemental briefing on the issue. Id., at 3-4. The district court’s order contains a lengthy discussion of the facts that “help elucidate the Court’s decision to enforce the class action bar.” Id., at 4. We do not summarize those facts here, see id., at 4-17, or the federal court’s summary of the standard of review, see id., at 17-19, or the court’s summary of the “history and evolution of class action litigation,” see id., at 20-25, because the district court held that the class action bar was enforceable and therefore did not address the merits of Rule 23, id., at 19.

Certification of Class Actions Class Action Court Decisions Uncategorized