CLASS ACTION DEFENSE BLOG
Welcome to Michael J. Hassen's Blog. Here you will find over 2,000 articles related to class actions.
We have previously reported on the 540-page district court opinion certifying a class action against Philip Morris USA alleging fraud under the Racketeer Influenced and Corrupt Organizations Act (RICO) arising out of the advertising and sale of “light cigarettes.” See Schwab v. Phillip Morris USA, Inc., 449 F.Supp.2d 992 (E.D.N.Y. 2006). That articule may be found here. The Second Circuit today reversed that district court opinion because “under RICO, eachplaintiff must prove reliance, injury, and damages.
Class Actions In The News Uncategorized
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In Considering Class Action Certification in 28 Labor Law Class Action Lawsuits Centralized by the Judicial Panel on Multidistrict Litigation, 19 Cases Satisfied Class Action Prerequisites but 9 other Putative Class Actions would Require Individualized Inquiries Sufficient to Defeat Class Action Treatment Indiana Federal Court Holds
Numerous class action lawsuits were filed against FedEx Ground alleging that the company misclassified its pickup and delivery drivers as independent contractors rather than employees; the Judicial Panel on Multidistrict Litigation consolidated the class actions in the Northern District of Indiana, and the plaintiffs in the class action cases characterized as “Wave 1,” “Wave 2” and “Wave 3” moved the district court for class action certification. In re FedEx Ground Package System, Inc., Employment Prac. Litig., ___ F.Supp.2d ___ (N.D. Ind. March 25, 2008) [Slip Opn., at 1]. As the federal court summarized, these class action plaintiffs “assert that although FedEx Ground represents to its drivers that they are only partnering with FedEx Ground and will essentially own their own businesses, all FedEx Ground drivers sign the FedEx Ground Operating Agreement, which actually reserves to FedEx Ground the right to exercise pervasive control over the method, manner, and means of the drivers’ work,” _id._ FedEx opposed class action treatment, arguing that “the plaintiffs’ claims turn on individualized issues, including whether contractors should be classified as employees under the states’ statutory tests, and whether any individual contractor can meet the high bar for rescission of his individual contract.” _Id._, at 2. In a 164-page opinion, the district court certified the Wave 1, Wave 2 and Wave 3 cases as class actions with respect to cases involving drivers from Alabama, Arkansas, California, Florida, Indiana, Kentucky, Maryland, Minnesota, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, West Virginia and Wisconsin; the court denied class action treatment for drivers from Illinois, Iowa, Massachusetts, Michigan, Mississippi, Missouri, Montana, South Dakota and Virginia. _Id._, at 3. The district court noted that it had previously granted class action certification with respect to drivers from Kansas, _id._, at 9, bringing to 20 the total number of states for which class action treatment has been approved.
Given the extraordinary length and detail of the district court opinion, we provide here only a broad outline of its holdings. Because it had previously granted class action treatment on behalf of the Kansas drivers, the district court used its prior ruling as a benchmark against which it considered the new class action certification motions. In re FedEx Ground, at 9. The court held that class action complaints containing only former drivers as named-plaintiffs could still proceed as class actions on behalf of former and current drivers because “courts have held that former employees have standing to represent a class consisting of both current and past employees.” Id., at 10 (citations omitted); see also, e.g., id., at 24-25 and 30. But with respect to defense attorney efforts to defeat class action treatment on the ground that individual inquiries would be required to determine whether the Operating Agreements were valid and the manner and extent to which the “right to control” will impact the validity of the Operating Agreements, the federal court rejected this argument with respect to the laws of certain states, see, e.g., id., at 14-16 (Tennessee), 25-27 (Arkansas) and 39-42 (Texas), but agreed with FedEx Ground that common questions would not predominate under the laws of other states, see, e.g., id., at 18-20 (Montana), 20-23 (Mississippi) and 80-84 (Michigan). For example, with respect to the Missouri putative class action, the district court explained that class action certification was not warranted because “Whether FedEx Ground has the right to control its drivers within the meaning of Missouri agency law cannot be resolved by simple reference to the Operating Agreements and corporate policies.” Id., at 105. Rather, “Missouri courts define the ‘right to control’ with reference to the actual exercise of control, [citation], which will require a driver-by-driver, terminal-by-terminal, supervisor-by-supervisor analysis that is unnecessary in most other states.” Id., at 105-06. This presented the primary basis for the difference among states for which the court certified class actions and states for which it denied motions for class certification.
Certification of Class Actions Class Action Court Decisions Employment Law Class Actions Uncategorized
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Defendant in Securities Fraud Class Action Failed to Establish Grounds to Transfer Class Action to New York, Particularly in Light of Defendant’s Waiver in Deposit Agreement to Right to Challenge Venue California Federal Court Holds Plaintiffs filed a class action in California federal court against Himax Technologies alleging securities fraud in connection with the initial public offering of Himax stock; a related class action, entitled Oh v. Chan, CV 07-4891 DDP (AJWx), also has been filed, and a motion seeking “to certify a securities class action for substantially similar claims” is pending in that action.
Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized
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Class Action Treatment Warranted for Class Action Claims Against Health Clubs based on Violations of State Law but not as to Class Action Complaint’s Unjust Enrichment Claim Pennsylvania Federal Court Holds
Plaintiffs filed a putative class action in Pennsylvania state court against three health clubs (Holiday Universal, Scandinavian Health Spa and Bally Total Fitness) alleging violations of Pennsylvania’s Health Club Act and Unfair Trade Practices and Consumer Protection Law (UTPCPL); defense attorneys removed the class action to federal court. Allen v. Holiday Universal, ___ F.Supp.2d ___ (E.D. Pa. March 11, 2008) [Slip Opn, at 1]. The class action complaint alleged that plaintiffs entered into “Retail Installment Contract” prepared by defendants that required payment of a membership fee ($632 for one of the named plaintiffs, which she financed at 17.50% interest, and $1275 for the other named plaintiff, which he financed at 13% interest) and monthly dues; the health club memberships renewed automatically. _Id._, at 3. The theory underlying the class action was that the health clubs charged “grossly excessive initiation fees” in violation of Pennsylvania state law. _Id._ Plaintiffs moved the district court to certify the litigation as a class action, _id._, at 2; defense attorneys opposed the motion. The federal court found the elements of Rule 23 satisfied and granted plaintiffs’ request for class action treatment.
The defense first argued that the definition of the proposed class was overly broad because it included within its sweep individuals who suffered no damage because they wanted, accepted and benefited from the health club memberships. Allen, at 6-8. The district court disagreed, holding that if the initiation fees were excessive under Pennsylvania law then every member of the proposed class action suffered damage, regardless of whether they wanted and utilized the health club services, id., at 8. The district court also rejected a claim that the class action’s definition of the class was improper because it created a “‘fail/safe’ class, that is, membership in a portion of the Class depends upon a finding for Plaintiffs’ on the merits.” Id., at 15. In essence, the defense argued that inclusion in the class turned on whether a particular health club was owned by defendant Bally Holding; plaintiffs countered that club ownership was not the “central issue of liability” presented by the class action and, accordingly, there was no improper “fail/safe” class. Id., at 15-16. The district court agreed with plaintiffs, and noted that “the question of whether any particular health club in Pennsylvania is owned by the Health Clubs is a question of fact not central to the question of liability and easily answered through further discovery.” Id., at 16. However, the federal court made it clear that it “expect[ed] the parties to promptly clarify any remaining confusion as to this issue.” Id. (The court also rejected a “ratification” argument, but that is not summarized here. See id., at 8-15.)
Certification of Class Actions Class Action Court Decisions Uncategorized
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Securities Class Action Claims Pending in California Paralleled Class Action Claims in Delaware and Colorado River Factors Supported Stay of California Class Action California Federal Court Holds
Several class action lawsuits were filed against Countrywide Financial Corp. and others alleging violations of various state and federal securities laws, including class action complaints that were filed in the United States District Court for the Central District of California. In re Countrywide Financial Corp. Derivative Litig., ___ F.Supp.2d ___ (C.D. Cal. March 28, 2008) [Slip Opn., at 2-3]. Last Friday, the California district court addressed three separate motions that “generally relate to the series of cases before [it] and other courts involving Countrywide…, Bank of America…, and several current and former Countrywide directors and officers.” _Id._, at 1. The district court summarized four separate categories of class action lawsuits that had been filed in state and federal courts against Countrywide prior to the announced merger with Bank of America, _see id._, at 3-6, as well as the various state and federal class action complaints filed immediately after the announced merger, _see id._, at 7-8. One of the pre-merger series of class action lawsuits “consolidated under _Arkansas Teachers_, No. CV-07-06923,” were filed in the California federal court “alleging that Countrywide directors engaged in an extensive pattern of misconduct in disregard of their fiduciary duties to the corporation,” _id._, at 6, and plaintiffs a 200-page amended consolidated class action complaint after the announcement of the merger to add class action claims against Bank of America, _id._, at 8-9.
The district court first addressed the defense motion to stay Arkansas Teachers in favor of litigation pending in Delaware. In re Countrywide, at 9. The court concluded that “the federal and state class action merger claims are substantially similar,” id., at 10-11; accordingly, “the ‘parallelism requirement for a [Colorado River Water Conservation Dist. V. United States, 424 U.S. 800 (1976)] stay is easily met due to the striking similarity of the class action claims in Arkansas Teachers and Freedman,” id., at 11. The federal court next held that partial stays are permissible under Colorado River, id., at 12-13, and that it would issue such a stay in this case because “while the class action claims are sufficiently parallel, the Delaware case does not contain the derivative claims present in this case,” id., at 11-12. The court’s Colorado River analysis may be found at pages 14 through 16 of the slip opinion.
Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
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As a resource to defense attorneys who defend class actions in California, we provide weekly, unofficial summaries of the legal categories of 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 March 21 – 27, 2008, during which time 38 new class action lawsuits were filed (down substantially from the 58 new class action filings of the preceding week).
Class Actions In The News Uncategorized
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Order Denying Motion to Dismiss ADEA (Age Discrimination in Employment Act) Class Action Claims did not Warrant Interlocutory Appeal Minnesota Federal Court Holds
Plaintiffs filed a class action lawsuit against their employer, Seagate, alleging age discrimination in violation of the federal Age Discrimination in Employment Act (ADEA). Peterson v. Seagate U.S. LLC, 534 F.Supp.2d 996, 2008 WL 398968, *1 (D.Minn. 2008). The putative class action also sought “declaratory relief relating to the enforceability of a purported release and waiver that was signed by many of the plaintiffs upon the termination of their employment with Seagate.” Id. Defense attorneys moved to dismiss the class action as to “the claims of those named plaintiffs that signed a release and waiver”; the district court denied the motion, as well as a subsequent motion for reconsideration. Id. Defense attorneys requested that the district court certify the issue for interlocutory appeal, id. The district court denied the motion.
Defense attorneys sought certification on two grounds: “1) whether nineteen plaintiffs who failed to file an EEOC charge properly exhausted their administrative remedies with respect to their age discrimination claims; and 2) whether the SIRP Release that plaintiff Paul Calcagno signed in connection with Defendants’ 2004 voluntary early retirement program is valid and enforceable.” Peterson, at *1. The district court noted that such certification is only appropriate if the order “involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” Id. (quoting 28 U.S.C. § 1292(b)). The court concluded that this test was not satisfied.
Class Action Court Decisions Employment Law Class Actions Uncategorized
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Defense Motion for Summary Judgment in Labor Law Class Action Properly Granted because Employee Incentive Compensation Plan did not Violate California law by Providing for Forfeiture of Stock for Following Resignation or Termination for Cause During Plan’s Two-Year Vesting Period California State Court Holds
Plaintiffs filed a putative class action against their employer, Citigroup, alleging violations of California’s Labor Code; specifically, the class action alleged that the financial brokerage company’s voluntary incentive compensation plan – which “allows participants the option of using a portion of their annual earnings to purchase shares in the company’s stock at a price below the stock’s publicly-traded market price” but provides further that “[i]f the participating employee resigns or is terminated for cause within a two-year vesting period, the employee forfeits the stock as well as the money used to purchase it” – violates California law because the money used to purchase the shares were wages and their forfeiture constituted a conversion of wages. Schachter v. Citigroup, Inc., 159 Cal.App.4th 10, 70 Cal.Rptr.3d 776, 778 (Cal.App. 2008). Defense attorneys moved for summary judgment; the trial court granted the motion and dismissed the class action. The Court of Appeal affirmed.
The appellate court framed the issue as follows: “Do the forfeiture provisions of this voluntary incentive compensation plan violate Labor Code sections 201 and 202, which require an employer to pay its employee all earned but unpaid compensation following the employee’s discharge or his or her voluntary termination of employment?” Schachter, at 778 (footnote omitted). In brief, the Plan permitted employees to purchase company stock “at a 25 percent discount below the stock’s then-current market price,” but the stock “could not be sold, transferred, pledged or assigned during a two-year period, which commenced on the date the stock was initially acquired.” Id., at 779. During this two-year vesting period, the employees received any stock dividends and exercised the right to vote their shares. At the end of the two-year period, the stock fully vested in the employee, but if “the employee voluntarily terminated his or her employment or was terminated for cause during the two-year period, he or she forfeited the shares, as well as the money used to purchase them.” Id. The employee could contribute from 5-25% of their compensation to the program, id. n.4, and employees who retired or were involuntarily terminated without cause were not subject to the forfeiture provisions of the Plan, id. n.7. The appellate court concluded at page 778, “As a matter of economic reality, employees who elect to participate in the plan’s stock-purchase program are paid all the wages they designate to invest in company stock. Thus, the plan’s forfeiture provisions do not violate the Labor Code; and the trial court in this case properly granted summary judgment in favor of the brokerage company.”
Class Action Court Decisions Employment Law Class Actions Uncategorized
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Trial Court Erred in Holding that Class Action Under California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA) Alleging Failure to Disclose Artificial Coloring of Farm Raised Salmon was Preempted by Federal Law because Congress Allows “Identical” State Laws and did not Preclude Private Rights of Action to Enforce such State Laws California Supreme Court Holds
Class action lawsuits were filed against various grocery stores alleging violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA) by “[selling] artificially colored farmed salmon without disclosing to consumers the use of color additives”; ultimately, the separate class actions were coordinated and in March 2004 a coordinated class action complaint was filed. Farm Raised Salmon Cases, ___ Cal.4th ___, 72 Cal.Rptr.3d 112, 116 (Cal. 2008). The coordinated class action complaint that alleged “fish farmers feed farm-raised salmon the chemicals astaxanthin and canthaxanthin to obtain a color of flesh resembling that of wild salmon,” that without these chemicals the farm-raised salmon would appear “grayish,” and that “consumers believe the color of salmon is an indication of its origin, quality, freshness, flavor, and other characteristics.” _Id._ According to the class action allegations, consumers are misled into believing that colored farm-raised salmon is actually wild salmon, _id._ The class action further alleged that artificially colored salmon raises health concerns, and that state and federal laws “require food labeling to state that farmed salmon is artificially colored and defendants failed to comply with those requirements.” _Id._ Defense attorneys demurred to the class action complaint in part on the ground that the state law claims were preempted by the federal Food, Drug, and Cosmetic Act (FDCA), which precludes private enforcement; the trial court agreed and dismissed the class action. _Id._, at 116-17. The Court of Appeal also held that plaintiffs’ state law claims were preempted by the FDCA because they are “predicated on a violation of the FDCA”; it therefore affirmed the judgment in favor of the defendants. _Id._, at 117. The California Supreme Court reversed.
After summarizing that the FDCA prohibits the misbranding of any food, and that “a food is…deemed misbranded if ‘[i]t bears or contains any … artificial coloring … unless it bears labeling stating that fact ….,’” the Supreme Court noted that “FDA regulations permit the use of the chemical substances astaxanthin and canthaxanthin in ‘the feed of salmonid fish’ as color additives ‘to enhance the pink to orange-red color of the flesh of salmonid fish.’” Farm Raised Salmon, at 117 (citations omitted). The FDA provides various means of disclosing the existence of these chemicals, the presence of which “must be declared as prescribed by the FDA,” id., at 117-18 (citations omitted). Congress also enacted the Nutrition Labeling and Education Act of 1990 (NLEA) “to create uniform national standards regarding the labeling of food and to prevent states from adopting inconsistent requirements with respect to the labeling of nutrients.” Id., at 118 (citation omitted). The NLEA thus expressly preempts state laws that affect “any food in interstate commerce,” including “any requirement for the labeling of food of the type required by section … 343(k) of this title that is not identical to the requirement of such section,” id. (citation omitted). Thus, state laws impliedly “may establish their own requirements pertaining to the labeling of artificially colored food so long as their requirements are identical to those contained in the FDCA in section 343(k).” Id.
Class Action Court Decisions Uncategorized
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Defense Judgment in Class Action for Kickback and Markup Violations of RESPA (Real Estate Settlement Procedures Act) Proper because Increased Credit Report Fee Requested by Lender was Passed through to Borrowers and no Additional Business was Given in Exchange for New Pricing Policy Requested by Lender Eleventh Circuit Holds
Plaintiffs filed a class action lawsuit against Countrywide Home Loans and Landsafe Credit (each subsidiaries of Countrywide Financial) alleging violations of the federal Real Estate Settlement Procedures Act (RESPA); the class action complaint alleged that Countrywide obtained virtually all of its credit reports from Landsafe, that prior to August 2002 Landsafe charged Countrywide $25 per credit report, and that Countrywide passed this fee on to borrowers who “locked in” or obtained a loan from Countrywide, but absorbed the fee if the loan did not go through. Krupa v. Landsafe, Inc., 514 F.3d 1153, 1154-55 (11th Cir. 2008). The class action alleged further that Countrywide asked Landsafe to modify its pricing policy in order to allow Countrywide to avoid absorbing credit report fees; specifically, “Countrywide asked Landsafe to change its pricing policy to charge more for the cost of credit reports on applicants who locked in loans and nothing for the reports on applicants who did not.” Id., at 1155. Landsafe modified its pricing schedule in August 2002, charging $35 for the credit report if a loan closed, and nothing if the loan did not; Countrywide passed the $35 fee on if a loan closed. Id. The class action alleged that this modification violated the anti-kickback and anti-markup provisions of RESPA; defense attorneys moved for and obtained summary judgment, with the district court agreeing that the challenged conduct was not improper. Id., at 1155. The Eleventh Circuit affirmed.
In discussing the pricing change, the Eleventh Circuit noted at page 1155, “The price point was set so that the new pricing policy would be ‘revenue-neutral,’ and it achieved that goal: Landsafe’s revenues from the credit reports it sold to Countrywide were the same after the new policy was implemented as they had been before.” Nonetheless, plaintiffs complained that Landsafe was giving Countrywide “free credit reports” in connection with loan transactions that did not close. Krupa, at 1155_._ The district court had held “that the revised pricing policy did not violate RESPA’s anti-kickback provision because it is undisputed that: (1) Landsafe made no more or less money as a result; and (2) Countywide purchased the same percentage (virtually all) of the credit reports it needed from Landsafe as it had before the change”; and the Circuit Court agreed. _Id._ RESPA prohibits paying a kickback in return for referral of business, but here Landsafe already received virtually all of Countrywide’s business: “In order for there to have been a forbidden kickback, there would have to have been an agreement between the two that Countrywide would give Landsafe more of its credit reporting business than it was giving Landsafe before the agreement, or at least an agreement that it would not give Landsafe any less of that business.” _id._, at 1156. Even if Countrywide received “value” by the changed pricing schedule, it could not constitute a forbidden kickback unless Countrywide promised Landsafe that it would receive business in return. _Id._ As plaintiffs conceded that this was not the case, the district court did not err in concluding that the class action kickback claim failed as a matter of law. _Id._
Class Action Court Decisions RESPA/TILA Class Actions Uncategorized
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