Class Action Defense Settlement Cases–In re Grand Theft Auto: New York Federal Court Decertifies Class Action Holding Proposed Settlement Class In Nationwide Consumer Protection Law Class Action Lacked “Cohesiveness” Required By Rule 23(b)(3)

Certification of Putative Class Action for Purposes of Settlement Required Satisfaction of Rule 23 Class Action Requirements, and Class Proposed for Settlement of Nationwide Class Action Failed to Meet Rule 23(b)(3)’s Predominance Test Requiring Decertification of Class Action New York Federal Court Holds

In 2005, four class action lawsuits were filed against Take-Two Interactive Software and its wholly-owned subsidiary, Rockstar Games; the complaints sought nationwide class action status and alleged, inter alia, violations of the consumer protection statutes of each state and the District of Columbia based on the “inclusion of an interactive, sexual minigame…in their premier product, Grand Theft Auto: San Andreas.” In re Grand Theft Auto Video Game Consumer Litig. (No. II), ___ F.Supp.2d ___ (S.D.N.Y. July 30, 2008) [Slip Opn., at 1]. The Judicial Panel on Multidistrict Litigation coordinated the various class action lawsuits, together with tag-along class action complaints, in the Southern District of New York. _Id._, at 2. Soon thereafter, the court appointed lead counsel for the putative class and a consolidated, amended class action complaint was filed. _Id._, at 2-3. The amended class action alleged that defendants marketed and sold Grand Theft Auto with an improper “content rating,” which they obtained by “withholding pertinent information from the entity charged with assigning content ratings to video games, the Entertainment Software Ratings Board”; specifically, the class action complaint charged that defendants failed to disclose that Grand Theft Auto “contained the Sex Minigame…, a game-within-the-game that allowed players to control the protagonist’s movements as he engaged in various sexual acts” and that purchasers could access the Sex Minigame through what came to be known as the “Hot Coffee Mod.” _Id._, at 3. Defense attorneys moved to dismiss the class action to the extent it advanced claims “under the laws of states where the named plaintiffs did not purchase” the game; the district court denied the motion, holding that a determination of whether to certify the litigation as a class action “was logically antecedent to the standing issues raised therein.” _Id._, at 4. Plaintiffs thereafter moved the federal court to certify the litigation as a nationwide class action; defense attorneys opposed class action treatment, “challenging the propriety of a nationwide class action that asserts claims under the disparate laws of the fifty states.” _Id._, at 4-5. Before the court ruled on that motion, the parties negotiated a settlement of the class action claims, _id._, at 5. In December 2007, the federal court conditionally certified a nationwide class action for settlement purposes and gave preliminary approval to a settlement of the class action, _id._, at 1, 5-6. However, in light of the Second Circuit Court of Appeal’s subsequent opinion in _McLaughlin v. American Tobacco Co._, 522 F.3d 215 (2d Cir. 2008), the district court decertified the settlement class. _Id._ (A summary of the _McLaughlin_ opinion may be found here.)

We cut to the chase of the district court’s 58-page opinion. The district court correctly noted that even for purposes of settlement, the plaintiffs were required to meet the class action criteria set forth in Rule 23(a) – viz., numerosity, commonality, typicality and adequacy of representation – as well as, in this case, Rule 23(b)(3). In re Grand Theft Auto, at 9-10. This latter requirement means that plaintiffs “must show that ‘questions of law or fact common to [Settlement Class] members predominate over any questions affecting only individual members,’ and that the class action ‘is superior to other available methods for fairly and efficiently adjudicating the controversy.’” Id., at 10 (quoting Fed. R. Civ. P. Rule 23(b)(3)). While the proposed settlement is relevant, it goes merely to whether class action treatment would create manageability problems, id. “Trial-manageability issues aside, however, the ‘requirements [of Rule 23(a) and (b)] should not be watered down by virtue of the fact that the settlement is fair or equitable.’” Id. (quoting Denney v. Deutsche Bank AG, 443 F.3d 253, 270 (2d Cir. 2006)).

Certification of Class Actions Class Action Court Decisions Uncategorized

Class Action Defense Cases–Parra v. Bashas’: Ninth Circuit Reverses Denial Of Class Action Treatment Of Labor Law Class Action’s Pay Discrimination Claim And Remands For Consideration Of Remaining Class Action Factors

District Court Erred in Finding Lack of Commonality Among Proposed Class in Labor Law Class Action Alleging Pay Discrimination Ninth Circuit Holds but Remands Class Action to District Court for Further Consideration because Lower Court had not Addressed Remaining Rule 23 Class Action Requirements

Plaintiffs, current and former Hispanic employees Bashas’, filed a putative class action against Bashas’ alleging violations of Title VII of the 1964 Civil Rights Act; specifically, the class action alleged that Bashas’ discriminated against members of the putative class on the basis of their national origin in that their “pay and working conditions [were] based on their national origin.” Parra v. Bashas’, Inc., ___ F.3d ___ (9th Cir. July 29, 2008) [Slip Opn., at 9636]. According to the class action complaint, Bashas’ operates 150 grocery stores under the trade names of Bashas’, A.J.’s Fine Foods and Food City, _id._, at 9637. The demographics of both the patrons and the employees differ substantially; for example, 15% of the Bashas’ and A.J.’s workforce is Hispanic, but 75% of the Food City workforce is Hispanic. _Id._ The class action alleged that, while the clientele differed, the employee job requirements at the three stores were “practically indistinguishable,” and that in 2003 Bashas’ implemented a program to equalize the pay scales at the stores over a period of time. _Id._ The class action complaint further alleged that the pay discrepancies ranged from $300-$6000 per year, with Hispanic employees generally receiving less pay than employees at Bashas’ and A.J.’s, _id._ Plaintiffs moved the district court to certify the litigation as a class action; the federal court granted class action treatment with respect to the “working conditions” claim, but ruled that plaintiffs had failed to adequately establish commonality to support class action treatment of the “pay discrimination” claim. _Id._, at 9636. The Ninth Circuit granted plaintiffs’ request for leave to appeal the district court’s order, _id._, at 9638, and reversed.

The Circuit Court focused solely on the district court’s conclusion that plaintiffs “failed to establish commonality among the proposed class members for their pay discrimination claim.” Parra, at 9639. To find commonality under Ninth Circuit authority, “‘[t]he existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies.’” Id., at 9640 (citations omitted). The Court noted at page 9641 that “the district court found past pay disparities for similar jobs at Bashas’, Inc.’s three brand stores,” and that it “noted there significant conclusions conceded by Bashas’, Inc.” – (1) that a higher percentage of its employees work for Food City, (2) that during the relevant time period the pay scale at Food City was lower than at Bashas’ and A.J.’s, and (3) that Hispanic employees were paid a lower hourly rate for similar jobs. The district court found these facts insufficient because ”pay disparities no longer existed at the time the order [denying class action certification] was written.” Id., at 9641. This ruling was error, because the court also should have considered “evidence of past pay disparities and discrimination common to the Hispanic workers at Food City.” Id.

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

Gap Narrows And Percentage Of Labor Law Class Action Lawsuits Filed During Past Week Declines, But Labor Law Class Actions Continue To Top List Of New Class Actions 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 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.

Class Actions In The News Uncategorized

FDCPA Class Action Defense Cases–Yack v. Washington Mutual: California Federal Court Dismisses Class Action Complaint Because Plaintiffs Lacked Standing To Prosecute Class Action Claims

Plaintiffs Lacked Standing to Prosecute Class Action because Underlying Events Occurred Prior to Filing of Chapter 7 Bankruptcy Proceeding by Plaintiffs and Plaintiffs Failed to Disclose Existence of Class Action Claims in Bankruptcy California Federal Court Holds Plaintiffs filed a class action against Washington Mutual and other defendants alleging inter alia violations of the federal Fair Debt Collection Practices Act (FDCPA); specifically, the class action complaint alleged that defendants improperly froze plaintiffs’ checking account funds.

Class Action Court Decisions FDCPA Class Actions Uncategorized

ERISA Class Action Defense Cases–Lanfear v. Home Depot: Eleventh Circuit Reverses Dismissal Of ERISA Class Action Holding District Court Had Subject-Matter Jurisdiction Because Class Action Sought Benefits Not Damages

Class Action Complaint for Breach of Fiduciary Duty Regarding the Diminution of Value of a Defined Contribution Retirement Plan States a Claim for Benefits under ERISA Eleventh Circuit Holds, Requiring Reversal of District Court Dismissal of ERISA Class Action

Plaintiffs filed a class action against their former employer, Home Depot, and certain of its officers and directors, alleging breach of fiduciary duty under ERISA (Employee Retirement Income Security Act of 1974); the class action complaint alleged that plaintiffs received benefit payments under a defined contribution retirement plan, but “that the payment were less than they should have been” because defendants had engaged in conduct that “artificially inflated the value of Home Depot stock.” Lanfear v. Home Depot, Inc., ___ F.3d ___ (11th Cir. July 31, 2008) [Slip Opn., at 1, 4]. Defense attorneys moved to dismiss the class action claim for lack of subject-matter jurisdiction because (1) the class action sought “damages,” not “benefits,” and (2) plaintiffs were not “participants” entitled to sue for breach of fiduciary duty. _Id._, at 1. The district court agreed and dismissed the class action complaint, _id._ Additionally, none of the class action plaintiffs pursued administrative remedies before filing the complaint, _id._, at 5; accordingly, the federal court alternatively concluded that plaintiffs failed to exhaust their administrative remedies, _id._, at 2, but the court did not rule on the impact of that failure on the class action complaint – specifically, “the district court did not decide whether it should dismiss the complaint without prejudice on that ground or stay the action to allow the former employees to pursue their administrative remedies,” _id._, at 2-3. The Eleventh Circuit affirmed in part, reversed in part, and remanded the class action for further consideration by the district court.

The class action presented an issue of first impression in the Eleventh Circuit: “whether a complaint for breach of fiduciary duty regarding the diminution of value of a defined contribution retirement plan states a claim for benefits under [ERISA].” Lanfear, at 1. The Circuit Court explained that participant payments under a defined benefits plan are not affected by the value of the plan’s assets; however, participant payments under a defined contributions plan are so affected because “[t]he participant is entitled to the value of the assets in his account, whatever that value may be.” Id., at 4. According to the class action complaint, “Home Depot violated its fiduciary duty by allowing the plan to invest in Home Depot stock even though corporate officials were backdating stock options and making fraudulent transactions, which artificially inflated the value of Home Depot stock.” Id. The complaint sought to restore to the plan the losses allegedly suffered as a result of this conduct. Id., at 4-5.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense Cases–In re Apollo: Arizona Federal Court Vacates Jury Verdict In Securities Fraud Class Action And Enters Judgment In Favor Of Defendants Because No Proof Of Loss Causation

Defense Motion for Judgment as a Matter of Law Granted because Plaintiff’s Evidence Failed to Establish Loss Causation so Jury Verdict could not Stand Arizona Federal Court Holds

Plaintiffs filed a class action against Apollo Group and certain of its officers and directors the Bank and other defendants alleging violations of federal securities law; the class action complaint asserted that defendants made false or misleading statements concerning a Department of Education (DOE) program review at Apollo Group’s wholly-owned subsidiary, University of Phoenix (UOP). In re Apollo Group, Inc. Securities Litig., ___ F.R.D. ___ (D.Ariz. August 4, 2008) [Slip Opn., at 1]. The class action claims relied on two analyst reports, published in September 2004 (“the Flynn reports”) that allegedly disclosed the truth to the market, _id._ The Policemen’s Annuity and Benefit Fund of Chicago represented the class; the district court certified the litigation as a class action and the matter proceeded to a jury trial. _Id._ The jury ruled in favor of the plaintiff, and defense attorneys moved the court for judgment as a matter of law or, alternatively, for a new trial. _Id._ The district court granted the motion for judgment as a matter of law.

The district court set forth the entirety of the facts relevant to its determination in a single paragraph: “On February 5, 2004, as part of its ongoing program review at the UOP, the DOE sent Apollo a program review report that preliminarily found that the UOP had violated DOE regulations. Apollo was not required to immediately disclose the report, and it chose not to do so. But on six different occasions thereafter, between February 27, 2004 and September 7, 2004, Apollo misrepresented the actual state of affairs surrounding the program review by making public statements at odds with the existence and contents of the DOE report. On September 14 and 15, 2004, the contents of the DOE report were widely disseminated for the first time through various newspapers articles, including articles in The Wall Street Journal, The Arizona Republic, and the Chicago Tribune. The market did not react to the disclosure of this news in any significant way. Five days later, the Flynn reports were issued. These reports downgraded Apollo’s stock for various reasons, some of which PABF argued at trial were necessary to reveal the truth of Apollo’s prior misrepresentations. Apollo’s stock price fell significantly thereafter.” In re Apollo, at 2.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Fairness Act Cases–Bullard v. Burlington Northern: Seventh Circuit Affirms Denial Of Remand Motion Holding Suit On Behalf Of 144 Plaintiffs Was A Mass Action Within Meaning Of Class Action Fairness Act

As Matter of First Impression, Class Action Fairness Act Permitted Removal of Suit as a “Mass Action” because Plaintiffs’ Counsel Designed the Lawsuit as a “Class Action Substitute” Seventh Circuit Holds

Plaintiffs filed a complaint in Illinois state court against four defendants alleging that they had “designed, manufactured, transported, or used chemicals that allegedly escaped from a wood-processing plant and injured people living nearby”; defense attorneys removed the complaint to federal court, arguing that federal court jurisdiction existed under the Class Action Fairness Act (CAFA). Bullard v. Burlington Northern Santa Fe R.R. Co., 535 F.3d 759 (7th Cir. 2008) [Slip Opn., at 1-2]. Specifically, defense attorneys argued that the litigation constituted a “mass action” within the meaning of the Class Action Fairness Act, _id._¸ at 2. (Under the Class Action Fairness Act, “mass actions” also may be removed to federal court; the Seventh Circuit summarized the definition of “mass actions” under CAFA as cases “involving the claims of 100 or more litigants – if at least one plaintiff demands $75,000, the stakes of the action as a whole exceed $5 million, and minimal diversity of citizenship exists.” Id., at 2 (citing 28 U.S.C. § 1332(d)(11)).) Plaintiffs’ moved the district court to remand the case to state court; they conceded that the diversity and amount-in-controversy tests had been met, but argued that the lawsuit was not a “mass action” under the Class Action Fairness Act. Id. The district court denied the motion, and the Seventh Circuit granted leave to appeal “because the legal issue is novel” and “has not been addressed in this or any other circuit.” Id. The Circuit Court affirmed.

The Class Action Fairness Act permits removal of “mass actions” when “monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that plaintiffs’ claims involve common questions of law or fact.” Bullard, at 2. Plaintiffs argued that this means “defendants may remove a ‘mass action’ only on the eve of trial, once a final pretrial order or equivalent document identifies the number of parties to the trial.” Id. The Circuit Court characterized the lawsuit as “a class-action substitute.” Id., at 3. The Court explained at page 3, “Their complaint alleges that several questions of law and fact are common to all 144 plaintiffs; it provides no more information about each individual plaintiff than an avowed class [action] complaint would do. No one supposes that all 144 plaintiffs will be active; a few of them will take the lead, just as in a class action, and as a practical matter counsel will dominate, just as in a class action. Nonetheless, plaintiffs say, they are entitled to litigate in state court because the Class Action Fairness Act has a loophole.” The loophole envisioned by plaintiffs, however, would prevent the application of the removal of “mass actions” until just before trial. As the Seventh Circuit noted, this reading would eviscerate the statute. “Courts do not read statutes to make entire subsections vanish into the night.” Id., at 3.

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

Class Action Defense Cases–In re Scrap Metal: Sixth Circuit Affirms $34 Million Class Action Judgment In Antitrust Class Action Case Holding District Court Properly Certified Litigation As A Class Action

Jury Verdict in Antitrust Class Action Affirmed because Plaintiffs Satisfied Rule 23(b)(3) Predominance Requirement for Class Action Certification and because Notice to Absent Class Members was Adequate Sixth Circuit Holds

In 2002, plaintiffs filed a class action against various defendants, including Columbia Iron and Metal Company, alleging violations of federal antitrust laws. The class action complaint sought to represent the interests of plaintiffs and “a class of industrial scrap-generating companies in Northeastern Ohio.” In re Scrap Metal Antitrust Litig., 527 F.3d 517, 523 (6th Cir. 2008). According to the class action, plaintiffs sell unprocessed scrap metal, generated as a byproduct of their manufacturing, to brokers and dealers, “who then haul, clean, sort, and process the scrap before selling it to end users, such as steel mills.” Defendants allegedly violated the Sherman Act by “agreeing not to compete with one another, submitting rigged bids, setting prices for the purchase of unprocessed scrap metal, and imposing financial penalties on co-conspirators for disobeying allocation agreements.” Id. In March 2004, the district court certified the litigation as a class action, id., at 523-24. In 2005, Columbia’s defense attorneys moved to decertify the class on the grounds that notice to the class was inadequate, but the district court denied the motion. Id., at 524. A jury awarded plaintiffs more than $20 million, including $11.5 million against Columbia which the district court trebled, pursuant to 15 U.S.C. § 15(a). Id., at 524. Columbia appealed the jury verdict; the Sixth Circuit affirmed.

The Circuit Court explained at page 523, “The movement of unprocessed scrap from generators to dealers generally works as follows: The dealers submit bids to the generators for the purchase of unprocessed scrap during a specified time period at a set price. In setting their bid price, dealers consult various trade publications, which report the prevailing prices that dealers can expect to charge users for the scrap after they have processed it. To ensure that they turn a profit, dealers set their bid price for the unprocessed scrap below the amount they will ultimately charge the users for the processed scrap. If the bid is accepted by the scrap generator, the generator and the dealer enter into a contract at the bid price for the bid period.” As noted above, the class action complaint alleged that defendants conspired to deflate the prices they paid for scrap metal. Defense attorneys raised several arguments, but we focus only on the claim that the district court should not have permitted the litigation to proceed as a class action. Specifically, Columbia argued that the district court erred in certifying a class action because the “predominance” test of Rule 23(b)(3) had not been satisfied as “damages could not be calculated on a class-wide basis.” Id., at 535. Columbia also challenged the notice given to absent class members on the ground that it failed to adequately inform them of “the binding effect of a class judgment.” Id., at 536.

Certification of Class Actions Class Action Court Decisions Uncategorized

New Class Action Lawsuits Involving Employment-Related Maintain Top Spot Among 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 preceding week. This report covers July 25 – 31, 2008, during which time 50 new class action lawsuits were filed.

Class Actions In The News Uncategorized

MDL Class Action Defense Cases—In re Levaquin: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiffs’ Motion To Centralize Individual And Class Action Lawsuits In District of Minnesota

Over Objection of Defendants in Products Liability Individual and Class Action Lawsuits, Judicial Panel Grants Plaintiffs’ Request for Pretrial Coordination of Individual and Class Action Cases Pursuant to 28 U.S.C. § 1407 and Transfers Actions to District of Minnesota Fifteen (15) individual and class action lawsuits were filed in seven (7) different federal district courts against Johnson & Johnson, Ortho-McNeil-Janssen Pharmaceuticals, Inc., and Johnson & Johnson Pharmaceutical Research & Development, among others, alleging “that the antibiotic Levaquin causes tendon rupture, and the warnings provided by defendants informing Levaquin users of this risk were inadequate”; an additional six (6) individual and class action lawsuits subsequently were filed and were treated as tag-along actions by the Judicial Panel on Multidistrict Litigation (MDL).

Class Action Court Decisions Multidistrict Litigation Uncategorized