Class Action Defense Cases–Rojas v. Brinderson:  California Federal Court Dismisses Labor Law Class Action For Failure To Allege Facts Necessary To Establish Class Action Claim

Class Action Claim on which Federal Court’s Original Jurisdiction was Based Dismissed for Failure to Plead Necessary Elements, and Supplemental Jurisdiction over Remaining Labor Law Class Action Claims will not be Exercised California Federal Court Holds

Plaintiffs-employees filed a labor law class action against Brinderson Constructors; the class action complaint contained five wage and hour claims, and a claim for alleged violation of California Labor Code section 2810.  Rojas v. Brinderson Constructors Inc., 567 F.Supp.2d 1205, 1207 (C.D. Cal. 2008).  With respect to the wage-and-hour claims, “[a] class action involving these very claims has been pending in California state court since 2004.”  Id.  Defense attorneys moved to dismiss the class action’s Labor Code section 2810 claim, which the district court had previously dismissed with leave to amend.  Id.  The district court granted the defense motion to dismiss the class action’s sixth cause of action, and then declined to exercise supplemental jurisdiction over the class action’s remaining state law claims and, accordingly, dismissed the class action complaint in its entirety.  Id.

Because the district court found Section 2810 to be unambiguous, the court found it unnecessary to consider the statute’s legislative history.  Rojas, at 1208.  The federal court explained at page 1208, “Under Section 2810(a), an entity is liable ‘where the entity knows or should know that the contract or agreement [it entered] does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws.’”  According to the statute, liability is predicated on an entity “entering into a contract with actual or constructive knowledge of the insufficiency of the funds,” thus requiring that the class action allege not only that Brinderson violated labor laws but that the Refinery Defendants “knew or should have known that their contracts with Brinderson did not include sufficient funds for Brinderson to comply with those laws.”  Id., at 1208-09.  The district court found that “Plaintiffs’ scattered allegations and incongruous arguments firmly ground this claim in conjecture.”  Id., at 1209.  Based on the court’s analysis, see id., at 1209-10, it held that “Plaintiffs may not proceed with this claim based on such vacuous allegations,” id., at 1210.

Class Action Court Decisions Employment Law Class Actions Uncategorized

iPhone Class Action Defense Cases–In re Apple & AT&TM: California Federal Court Denies Motions To Dismiss Antitrust Class Action And To Compel Individual Arbitration Of Class Action Claims

Class Action Complaint Adequately Alleged Antitrust and Consumer Protection Law Violations Arising out of Marketing and Sale of iPhones, and Class Action Waiver in AT&T Arbitration Agreement was Unconscionable thereby Requiring Denial of Motion to Dismiss Class Action Claims and Compel Arbitration of Individual Claims, California Federal Court Holds

Plaintiffs filed a class action against Apple and AT&T Mobility (ATTM) alleging violations of federal antitrust laws and other consumer protection statutes arising out of the sale of iPhones; the class action complaint alleged that “consumers were offered iPhones only if they signed a two-year service agreement with AT&T Mobility” and that “unknown to consumers, the companies had agreed to technologically restrict voice and data service in the aftermarket for continued voice and data services, i.e., after the initial two-year service period expired.” In re Apple & AT&TM Antitrust Litig., ___ F.R.D. ___ (N.D. Cal. October 1, 2008) [Slip Opn., at 1]. According to plaintiffs’ class action, ATTM entered into a written agreement with Apple to serve as the exclusive provider of wire and data services to iPhone customers for a period of five years, _i.e._, through 2012. _Id._, at 2. Under this agreement, until 2012 “iPhone purchasers who want voice and data services must sign a two-year service contract with ATTM.” _Id._ The Revised Amended Consolidated Class Action Complaint alleged _inter alia_ violations of Section 2 of the Sherman Antitrust Act and breach of warranty under the Magnuson-Moss Warranty Act, _id._; an itemized list of the 10 claims for relief may be found at page 5 of the opinion. ATTM’s defense attorneys filed a motion to dismiss the class action and compel arbitration pursuant to the Federal Arbitration Act (FAA), and Apple’s defense attorneys filed a motion to dismiss the class action complaint. _Id._, at 5-6. The district court denied the motions.

By way of background, the district court explained at page 1: “In the cellular telephone market, it has become a common practice for an equipment manufacturer and a voice and data supply company to join together to introduce a new cellular telephone to the market. Often, to obtain a particular model of telephone at a given price from a given manufacturer, purchasers must sign a contract with the joined service provider for voice and data services of a stated period of time. This case concerns such an arrangement between Apple, Inc. and AT&T Mobility upon the introduction to the market of the iPhone.” But according to the class action complaint, purchasers were not told that iPhone use would be restricted to the AT&T network even after the two-year service period expired. In re Apple, at 1. The class action further alleged (1) Apple and ATTM share revenue arising from iPhone use, (2) iPhone purchasers must use ATTM as their provider for 5 years “despite initially being required to agree to only a two-year contract,” (3) Apple agreed to enforce ATTM’s exclusivity agreement by “locking” iPhones, (4) Apple controlled all modifications to and software for iPhones, (5) ATTM charges an early termination fee even though it does not subsidize iPhone purchases, (6) Apple and ATTM agreed to take prevent people from unlocking iPhones, and (7) Apple agreed to delay developing a CDMA version of the iPhone. Id., at 3. Finally, the class action alleged that, after it was learned that people had successfully unlocked iPhones, Apple issued an “upgrade” of the iPhone’s operating software that was intended to disable iPhones that had been unlocked or on which users had downloaded software that had not been approved by Apple, and that Apple thereafter denied warranty claims on disabled or damaged iPhones on the ground that customers “had breached their warranty agreements by unlocking their phones or by downloading unapproved TPAs.” Id., at 4. The district court was presented with the question of whether these allegations sufficiently alleged claims for relief for violations of the Sherman Act and Magnuson-Moss Warranty Act. Id. The federal court held that class action allegations survived defendants’ motion to dismiss.

Arbitration Class Action Court Decisions Uncategorized

Arbitration Class Action Defense Cases–Pleasants v. American Express: Eighth Circuit Affirms Order Dismissing Class Action And Compelling Arbitration Of Individual Claim Holding Class Action Waiver In Arbitration Clause Enforceable Under FAA

District Court Properly Dismissed Class Action and Granted Defense Motion to Compel Plaintiff to Arbitrate her Claims on an Individual Basis, Rather than as a Class Action, because Class Action Waiver in Arbitration Clause was not Substantively or Procedurally Unconscionable Eighth Circuit Holds

Plaintiff filed a putative class action against American Express Company and American Express Incentive Services (AEIS) alleging violations of the federal Truth in Lending Act (TILA); specifically, the class action complaint alleged that American Express violated TILA by “issuing pre-loaded, stored-value cards without making the disclosures required under the TILA.” Pleasants v. American Express Co., 541 F.3d 853, 855 (8th Cir. 2008). Defense attorneys moved to dismiss American Express Company on the ground that it was not a “creditor” within the meaning of TILA; plaintiff did not oppose the motion and the district court dismissed American Express Company from the putative class action. Id. Defense attorneys then moved to compel arbitration of plaintiff’s claims pursuant to an arbitration provision governed by the Federal Arbitration Act (FAA) that contained a class action waiver, id. The district court rejected plaintiff’s claim that the class action waiver was unconscionable, dismissed the class action and compelled plaintiff to arbitrate her individual claims against AEIS. Id. The Eighth Circuit affirmed.

Briefly, AEIS sent plaintiff three pre-paid cards, in the amounts of $25, $10, and $5, in return for her participation in online surveys; the cards could be used at any establishment that accepted American Express credit cards. Pleasants, at 855. Along with the cards, AEIS sent plaintiff the “Card Terms and Conditions,” which included a “Participant Agreement” that provided in part that any claims would be resolved by arbitration and that the parties “WILL NOT HAVE THE RIGHT TO PARTICIPATE IN A REPRESENTATIVE CAPACITY OR AS A MEMBER OF ANY CLASS OF CLAIMANTS PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION,” id. A separate provision reiterated that all claims “shall be arbitrated on an individual basis” and that there “shall be no right” for any claims “to be arbitrated on a class action basis,” id., at 855-56. Plaintiff’s class action complaint alleged that at a time when the cards had a combined remaining balance of $25, she used the cards at a restaurant to pay for a $20 meal “but the restaurant processed one or more of the cards for $45 more than their stored value.” Id., at 856. AEIS demanded that plaintiff pay the $45 difference; when she failed to do so, AEIS sent her another letter requesting not only the $45 difference but, pursuant to the terms and conditions of the card usage agreement, a late fee of $10 and a transaction fee of $25. Id. Plaintiff disputed the charge and filed the class action when AEIS continued with collection efforts, id.

Arbitration Class Action Court Decisions RESPA/TILA Class Actions Uncategorized

Class Action Defense Cases–Shirk v. Fifth Third Bancorp: Ohio Federal Court Certifies ERISA Class Action Holding Rule 23’s Class Action Requirements Were Met And That ERISA Breach Of Fiduciary Duty Claims Are Appropriate For Class Action Treat

ERISA Class Action Claims Satisfied Requirements for Class Action Treatment because “Federal Courts have Overwhelmingly Held that ERISA Breach of Fiduciary Duty Claims are Appropriate for Class Action Treatment” Ohio Federal Court Holds

Plaintiffs, former employees of Fifth Third Bancorp and participants in the company’s profit sharing plan, filed a class action against various defendants alleging breach of fiduciary duties under ERISA; specifically, the class action complaint asserted that the company’s stock was an “imprudent investment” during the proposed class period. Shirk v. Fifth Third Bancorp, ___ F.R.D. ___ (S.D. Ohio September 30, 2008) [Slip Opn., at 1-2]. According to the class action, defendants “knew or should have known that the merger of Fifth Third with Old Kent Financial Corp. severely strained Fifth Third’s infrastructure and exposed a widespread breakdown in Fifth Third’s internal controls, … [which] ultimately led Fifth Third to take an $81 million dollar pre-tax charge for its erroneous accounting reconciliation.” _Id._, at 2. Thus, the district court explained at page 2 that “[t]he quintessential claim is that Fifth Third stock was an imprudent investment for the Plan throughout the class period.” Plaintiff filed a motion with the federal court for certification of the litigation as a class action; the district court granted the motion.

Preliminarily, the federal court stated that “federal courts have overwhelmingly held that ERISA breach of fiduciary duty claims are appropriate for class action treatment.” Shirk, at 3 (footnote omitted). The district court readily found the class action numerosity requirement had been met because the proposed class contained 20,000 people. Id., at 3-4. The court also found that the commonality and typicality requirements for class action treatment had been satisfied, id., at 4-5, and that plaintiff was an adequate class representative, id., at 5-6. Finally, analyzing the class action requirements of Rule 23(b), the federal court concluded that ERISA breach of fiduciary duty class actions are properly certified under Rule 23(b)(1)(B), which states that courts may certify a lawsuit as a class action if “the prosecution of separate actions by or against individual members of the class would create a risk of * * * adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.” Id., at 7. Accordingly, the district court granted plaintiff’s class action certification motion. Id., at 9.

Certification of Class Actions Class Action Court Decisions Employment Law Class Actions Uncategorized

UCL Class Action Defense Cases–Hewlett-Packard v. Superior Court: California Court Denies Writ Seeking Reversal Of Class Action Certification Order In Unfair Competition Law (UCL) Class Action

Class Action Complaint Alleging Violations of California’s Unfair Competition Law (UCL) Properly Certified as Class Action because Class Action’s Product Defect Claims were Susceptible of Common Proof and Objection to Class Action Treatment went to Merits of the Lawsuit California Appellate Court Holds

Plaintiff filed a class action complaint against Hewlett-Packard alleging inter alia violations of California’s Unfair Competition Law (UCL); specifically, the class action alleged that HP sold laptop computers knowing that they contained a manufacturing defect that “the computers had defective inverters that could potentially cause dim displays,” but HP failed to disclose this fact to prospective purchasers. . Hewlett-Packard Co. v. Superior Court, ___ Cal.App.4th ___, 83 Cal.Rptr.3d 836 (Cal.App. September 26, 2008) [Slip Opn., at 1-2]. The class action complaint alleged violations of California’s UCL and Consumer Legal Remedies Act, as well as breach of express warranty and unjust enrichment. _Id._, at 2. Plaintiff first moved the trial court to certify the litigation as a class action in August 2005; defense attorneys opposed class action treatment on the grounds that “plaintiffs had not shown either that common issues of fact and law predominated or that there was an ascertainable class” because “[out] of the approximately 118,514 class model computers sold under the Pavilion brand name, [only] approximately 4,716 were reported to need repairs due to display screen problems.” _Id._, at 3. The trial court denied the motion, finding that the proposed definition of the class was unworkable but stated that it would consider a new motion for class action certification if plaintiff cured the defect. _Id._ Plaintiff again sought class action certification, but the trial court expressed concern that the class definition failed to include the specific type of inverter underlying the putative class claims and gave plaintiff an additional opportunity to correct the definition. _Id._, at 4. Eventually, after several months and additional briefing to address various concerns, the trial court granted the motion and certified the lawsuit as a class action. _Id._, at 4-5. Defense attorneys filed a petition for a peremptory writ of mandate seeking to vacate the class action certification order on the ground that the required “community of interest” principles enunciated in _Daugherty v. American Honda Co., Inc._ (2006) 144 Cal.App.4th 824 were not met, thus class action treatment was inappropriate. _Id._, at 1. In certifying the class, the trial court stated that it was not considering the impact of the _Daugherty_ opinion because the holding in that case went to “whether individual class members are entitled to recover, not whether there is a sufficient class.” _Id._, at 5. The California Court of Appeal denied the writ.

After the California Supreme Court’s denied a petition for review in Daugherty, defense attorneys filed a motion with the trial court for decertification of the class action. Hewlett-Packard, at 5. The trial court denied the motion on the ground that decertification was “premature,” but the court requested plaintiff to “submit[] a revised proposed class action notice” which it subsequently approved. Id. Defense attorneys filed a petition for writ of mandate, id. After discussing class actions in general and noting that it reviewed the trial court’s order for abuse of discretion, see id., at 5-7, the appellate court explained that “the primary issue in dispute is whether the trial court abused its discretion in concluding that common issues predominate necessitating class treatment,” id., at 7. Defense attorneys argued that Daugherty compelled denial of class action treatment; Daugherty held that claims for breach of express warranty do not extend product defect claims beyond the warranty period, and the defense argued that under the reasoning of Daugherty, the class action claims involve individual issues rather than issues subject to common proof. Id. Defense attorneys argued that the trial court therefore “erred in refusing to apply the principals of Daugherty to the determination of class certification.” Id. The appellate court disagreed.

Certification of Class Actions Class Action Court Decisions Uncategorized

Slow Week For Class Actions Dominated By Labor Law Class Action Lawsuits In New Class Action Filings In California State And Federal Courts

As a resource for 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 preceding week. This report covers October 3 – 9, 2008, during which time only 27 new class action lawsuits were filed.

Class Actions In The News Uncategorized

FLSA Class Action Defense Cases–Roussell v. Brinker International: Texas Federal Court Decertifies FLSA Class Action Holding Central Question Could Not Be Resolved Fairly In Single Collective Proceeding

Class Action Alleging Employer Coerced Restaurant Employees to Share Tips in Violation of Federal Fair Labor Standards Act (FLSA) Decertified as Class Action because “Critical Questions of Fact” in Proposed Class Action “Vary from Plaintiff to Plaintiff and Restaurant to Restaurant” Texas Federal Court Holds Plaintiff filed a class action against her employer, Brinker International, alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, plaintiff alleged that at its Chili’s restaurants, defendant required that servers share their tips with “Quality Assurance employees (QAs).

Certification of Class Actions Class Action Court Decisions Employment Law Class Actions Uncategorized

PSLRA Class Action Defense Cases–Little Gem v. Orphan Medical: Eighth Circuit Affirms Dismissal Of Securities Class Action Holding Class Action Complaint Failed To Meet Heightened Pleading Requirements Under PSLRA

Securities Class Action Properly Dismissed for Failure of Allegations in Class Action Complaint to Meet PSLRA’s Heightened Pleading Standards because Defendants were Under no Legal Duty to “Search out and Disclose” Raw Data of FDA Clinical Trials Prior to FDA Issuing Results of Drug Trial Eighth Circuit Holds

Plaintiff filed a class action against Orphan Medical and two of its officers for violations of federal securities laws; specifically, the class action complaint alleged that defendants “negligently failed to disclose material information to Orphan’s stockholders before asking the stockholders to approve Orphan’s merger with [Jazz Pharmaceuticals], in violation of §§ 14(a) and 20(a) of the Securities Exchange Act of 1934…, and Securities and Exchange Commission (SEC) Rule 14a-9.” Little Gem Life Sciences LLC v. Orphan Medical, Inc., 537 F.3d 913, 914 (8th Cir. 2008). Defense attorneys moved to dismiss the class action complaint on the grounds that the class action’s allegations “failed to meet the heightened pleading standards required by the Private Securities Litigation Reform Act (PSLRA)”; the district court agreed and dismissed the class action. Id. On appeal, plaintiff argued that the district court should have converted the motion to dismiss into a motion for summary judgment, and that the allegations in the class action complaint satisfied the PSLRA. Id., at 914-15. The Eighth Circuit affirmed.

According to the class action complaint, Orphan, a pharmaceutical company, sought a merger because it was experiencing financial difficulties. At the time, the company’s future profitability was uncertain, largely because it was unclear whether its drug Xyrem, upon which it heavily relied, had broader medical uses. In particular, Orphan was testing whether Xyrem could be used to treat fibromyalgia, and it initiated Phase I of its FDA clinical trials in June 2004, which it passed. Xyrem still had to pass Phase II and Phase III trials before it could obtain FDA approval to treat fibromyalgia. Little Gem, at 915. The gravamen of the class action was that shareholders voted on the merger in June 2005, and in July 2005 it was announced that Xyrem successfully passed Phase II: plaintiff alleges that defendants should have disclosed the successful completion of Phase II before the shareholders voted on the merger with Jazz. Id., at 915-16. In support of its motion to dismiss the class action, defendants “asserted factual allegations that went beyond the face of [the class action] complaint.” Id., at 916. The district court did not consider those factual allegations in holding that the class action “failed to meet the heightened pleading standards mandated by the PSLRA.” Id.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases–In re Dynamic Random Access Memory: Ninth Circuit Affirms Dismissal Of Antitrust Class Action For Lack Of Subject Matter Jurisdiction Under Foreign Trade Antitrust Improvement Act (FTAIA)

Congressional Amendments in Foreign Trade Antitrust Improvement Act (FTAIA) to Sherman Act’s Jurisdiction Barred Foreign Plaintiff Corporation’s Antitrust Class Action Claims Ninth Circuit Holds

Plaintiff, a British computer manufacturer, filed a class action complaint against “U.S. and foreign manufacturers and sellers of DRAM, a type of high-density memory used in personal computers and other electronic devices” for violations of federal antitrust laws and Section 1 of the Sherman Act; the class action complaint alleged violations of Sections 4(a), 12 and 16 of the Clayton Act, and sought injunctive relief and damages In re Dynamic Random Access Memory (DRAM) Antitrust Litig., 538 F.3d 1107, 1109 (9th Cir. 2008). Plaintiff alleged a “global conspiracy to fix DRAM prices, raising the price of DRAM to customers in both the United States and foreign countries.” Id., at 1109-10. Defense attorneys moved to dismiss the class action for lack of subject matter jurisdiction under the Foreign Trade Antitrust Improvement Act of 1982 (FTAIA), which amended the Sherman Act; plaintiff’s theory was that “defendants could not have raised prices worldwide and maintained their global price-fixing arrangement without fixing the DRAM prices in the United States.” Id., at 1110. The district court granted the motion and denied plaintiff leave to file an amended class action complaint, finding that plaintiff did not meet the jurisdictional prerequisites under the FTAIA “because it had not sufficiently alleged that its foreign injury was directly linked to the domestic effect of higher U.S. prices for DRAM.” Id. The Ninth Circuit affirmed.

The Ninth Circuit explained that Congress amended the jurisdictional language of the Sherman Act in 1982 by enacting the FTAIA: the FTAIA amended the Sherman Act so as to exclude “anti-competitive conduct that causes only foreign injury.” In re DRAM, at 1110 (citation omitted). The FTAIA accomplished this purpose by declaring that the Sherman Act “shall not apply to conduct involving trade or commerce … with foreign nations.” Id. (citing § 6a). It carves out an exception, known as the “domestic injury exception,” for foreign conduct that “(1) has a ‘direct, substantial, and reasonably foreseeable effect’ on domestic commerce,” id. (citation omitted). Quoting the U.S. Supreme Court, the Ninth Circuit explained at page 1111 that the FTAIA’s language as:

Class Action Court Decisions Uncategorized

PSLRA Class Action Defense Cases–Silverman v. Motorola: Illinois Federal Court Grants Defense Motion To Dismiss Certain Claims In Securities Class Action Finding Some Class Action Allegations Inadequate Under PSLRA

Defense Motion to Dismiss Securities Class Action Claims Granted in Part, but Class Action Plaintiffs Adequately Alleged Existence of Certain Omissions or Misrepresentations as to Most Defendants as well as Control Person Liability as to All Individual Defendants Illinois Federal Court Holds

Plaintiffs filed a class action against Motorola and some of its officers and directors alleging violations of federal securities law; the class action complaint alleged that defendants artificially inflated the company’s stock price by issuing statements that omitted important facts or contained material misrepresentations in violation of Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5. Silverman v. Motorola, Inc., ___ F.Supp.2d ___ (N.D.Ill. September 23, 2008) [Slip Opn., at 1-2]. Count I of the class action complaint was premised on the Section 10(b) and Rule 10b-5 violations (material misrepresentations and omissions); Count II of the class action complaint was premised on the Section 20(a) violation (asserting control person liability). _Id._, 1-2. The allegations in the class action centered on Motorola’s development of its third generation cell phones, or “3G” cell phones. _Id._, at 3. Defense attorneys moved to dismiss the class action complaint for failure to satisfy the heightened pleading requirements under the PSLRA (Private Securities Litigation Reform Act), _id._, at 2. The federal court granted defendants’ motion in part, but refused to dismiss the class action in its entirety.

After detailing the statements underlying the class action complaint, see Silverman, at 3-12, the district court noted that plaintiffs’ misrepresentation claims fall into two categories: (1) the drop in price of the company’s RAZR cell phones, and (2) the delayed rollout of the company’s new 3G cell phones, id., at 15. The federal court readily rejected the RAZR category, noting that the company had expressly discussed the price drop in the RAZR line and the reasons for the price reductions. See id. “Therefore, any allegations of fraud based on statements regarding the RAZR price decrease are dismissed.” Id. With respect to the 3G cell phone claims in the class action complaint, the district court agreed that some of the alleged misrepresentations were “mere puffery,” see id., at 15-16, and that company representations concerning projected sales and revenue were protected as “forward-looking statements,” see id., at 18-19. However, the federal court rejected the puffery defense as to other company statements, finding that representations such as whether new products will be “competitive” and “on track” would be material if defendants knew these statements to be untrue, id., at 16-17, and found that the “forward-looking” safe harbor did not apply to statements of present or future facts that could have materially affected an investor’s decisions, id., at 18-19. Similarly, omissions concerning potential delays in the 3G rollout could be actionable, id., at 17-18, particularly as the delay severely impacted sales during the Christmas holiday season, see id., at 27.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized