FACTA Class Action Defense Cases-Arcilla v. Adidas: California Federal Court Rejects Defense Challenge To Constitutionality Of FACTA And Permits Class Action To Proceed Past Pleading Stage

Whether FACTA Class Action Violates Due Process Because Statutory Damages are Grossly Disproportionate to Actual Harm Suffered must be Challenged by Defense at Motion to Certify Class Action Rather than by Defense Motion to Dismiss California Federal Court Holds

Plaintiff filed a class action in California federal court against Adidas alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA) for failing to remove credit card expiration dates from receipts given customers following credit card purchases. Arcilla v. Adidas Promotional Retail Operations, Inc., 488 F.Supp.2d 965, 967-68 (C.D. Cal. 2007). Defense attorneys moved to dismiss the class action complaint or to strike the prayer for punitive damages, id., at 968. The district court rejected the defense challenges to the class action complaint.

FACTA is part of the Fair Credit Reporting Act (FCRA), and provides in part, “[N]o 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.” 15 U.S.C. § 1681c(g). The statute became effective December 4, 2006, and since that time literally hundreds of putative class action complaints have been filed alleging violations of FACTA; indeed, the district court noted that the putative class action before it was “one of as many as 70” FACTA class action lawsuits filed in the Ninth Circuit alone. Arcilla, at 967. The class action allegations in the instant class action complaint “resemble those in the others”: the putative class action alleges that plaintiff purchased merchandise from defendant and received a credit card receipt that disclosed the expiration date of his credit card, id. The class action alleged that defendant provided similar receipts to other customers, and alleged further that some of those receipt included “more than the last five digits of the card numbers,” id., at 968. The class action complaint prayed for statutory damages, punitive damages, and attorney fees, and alleges that defendant’s conduct resulted in an “increased risk of identify theft.” Id.

The district court summarized the defense arguments at page 968 as follows: “(1) it could not have willfully violated the FACTA because the statute is vague and ambiguous; (2) the Complaint seeks statutory damages that would be constitutionally excessive and thus violate due process because no actual harm has been suffered; (3) the statutory damages would violate ‘principles of tort law’ because Plaintiff and the potential class members have suffered no actual harm; (4) the request for punitive damages is improper because any such damages would be excessive absent an allegation of actual harm.” The district court disagreed, concluding that the allegations of the class action complaint were sufficient to survive the defense motions, and that certain challenges to the class action had to be brought in response to a motion to certify the litigation as a class action.

Class Action Court Decisions FCRA Class Actions Uncategorized

Class Action Defense Cases-Arias v. Superior Court: California Court Holds State Unfair Competition Law (UCL) Representative Claims Must Be Brought As Class Action Because UCL Suits Must Comply With Class Action Statute

Because California’s Unfair Competition Law (UCL) Requires Compliance With State’s Class Action Statutes, UCL Representative Claims Must be Brought as Class Action Lawsuits California Court Holds, but PAGA (Private Attorney General Act) Representative Actions under Labor Code need not Satisfy Class Action Pleading Requirements Plaintiff filed suit in California state court against his employer, Angelo Dairy, and others alleging, inter alia, that he was not paid overtime and did not receive meal and rest breaks required by law; the action purported to be a representative action under California’s Unfair Competition Law (UCL) and under the Private Attorney General Act (PAGA) contained in the state’s labor code.

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

15 U.S.C. § 78ff—Penalties Under The Federal Private Securities Litigation Reform Act (PSLRA) Governing Individual And Class Action Securities Lawsuits For False And Misleading Statements And Failure To File Documents

As a resource to class action defense lawyers who defend securities class action lawsuits, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress set forth the penalties under the PSLRA for false and misleading statements and for the failure to file information, documents or reports in 15 U.S.C. § 78ff, which states:

§ 78ff. Penalties

(a) Willful violations; false and misleading statements

Any person who willfully violates any provision of this chapter (other than section 78dd–1 of this title), or any rule or regulation thereunder the violation of which is made unlawful or the observance of which is required under the terms of this chapter, or any person who willfully and knowingly makes, or causes to be made, any statement in any application, report, or document required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title, or by any self-regulatory organization in connection with an application for membership or participation therein or to become associated with a member thereof which statement was false or misleading with respect to any material fact, shall upon conviction be fined not more than $5,000,000, or imprisoned not more than 20 years, or both, except that when such person is a person other than a natural person, a fine not exceeding $25,000,000 may be imposed; but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation.

Statutes & Rules Uncategorized

Labor Law Class Actions Easily Retain Top Spot In Weekly Class Action Filings In California State And Federal Courts

As a resource to California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the relevant timeframe. This report covers the time period from August 17 – August 23, 2007.

Class Actions In The News Uncategorized

Class Action Defense Cases—In re Depo-Provera: Judicial Panel On Multidistrict Litigation (MDL) Agrees with Defense And Denies Motion To Centralize Personal Injury Cases With Class Action Litigation

Judicial Panel Denies Request, Opposed by Defense, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 Because Centralization will not Further Efficient Conduct of Class Action Litigation Three lawsuits, including one class action, were filed against Pfizer and others alleging products liability claims. In re Depo-Provera Products Liab. Litig., ___ F.Supp.2d ___, 2007 WL 2301928, *1 (Jud.Pan.Mult.Lit. August 6, 2007). Plaintiff’s lawyers in the two California actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.

Class Action Court Decisions Multidistrict Litigation Uncategorized

FDCPA Class Action Defense Cases–Gonzales v. Arrow Financial: California Federal Court Holds Debt Collection Letter Violated FDCPA And California Rosenthal Act And Denies Defense Motion To Decertify Class Action

Federal Court Holds Least Sophisticated Debtor would be Misled by Language in Debt Collection Letter thus Entitling Plaintiff in FDCPA Class Action to Summary Judgment and Finds Fact Plaintiff was not Misled Irrelevant to its Decision or to Defense Motion to Decertify Class Action

Plaintiff filed a class action in California federal court against Arrow Financial Services alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and its state-law equivalent, California’s Rosenthal Act, in that debt collection letters sent by defendant failed to comply with the applicable laws. Gonzales v. Arrow Fin. Servs. LLC, 489 F.Supp.2d 1140, 1143 (S.D. Cal. 2007). The class action complaint was premised on the following language in defendant’s “form collection letters”: “Upon receipt of the settlement amount and clearance of funds, and if we are reporting the account, the appropriate credit bureaus will be notified that this account has been settled.” Id. Plaintiff alleged this violated the FDCPA and the Rosenthal Act because the debt underlying defendant’s collection effort had been charged off more than 7 years ago and “a credit bureau cannot report a debt charged off more than 7 years previously,” id. An unsophisticated consumer thus may be misled by the form letter into believing that “payment or nonpayment of the claimed debt may impact the consumer’s credit reporting, when that is not true.” Id., at 1143-44. After the district court certified the lawsuit as a class action, defense and plaintiff attorneys filed cross-motions for summary judgment, and defense attorneys moved to decertify the class, id., at 1144. The district court denied both defense motions, and granted partial summary judgment in favor of plaintiff.

After summarizing the FDCPA and the “least sophisticated debtor” standard applied in the Ninth Circuit, Arrow, at 1146, a determination made by the court, not a jury, measured by an “objective standard,” id., and after setting forth the relevant section of the Rosenthal Act, id. (quoting Cal. Civil Code, § 1788.13(f)), the district court turned to the defense motion for summary judgment. Defense attorneys argued that the debt collection letters did not violate the FDCPA or the Rosenthal Act because the letters are not false or misleading – the letters did not “illegally threaten[] any action” or mislead or deceive anyone, and “Arrow does not have a policy to report debts such as plaintiff’s debts to the credit bureaus and in no way seeks to use credit reporting as a means to illegally collect debts.” Id., at 1147. The defense also relied on plaintiff’s deposition testimony that (1) he knew he did not have to pay the debt and that Arrow would not report such a failure to credit bureaus, and (2) he was not confused by the letter he received from Arrow, id. The federal court noted that it had already found the letters to be misleading or deceptive because “without any explanation detailing what debts are likely to be reported or even if the subject debt is one that is reportable, ‘the least sophisticated debtor could likely believe his [or her] debt is reportable just because the letters indicate the credit bureaus will be notified’” and that even though the letters did not expressly threaten to contact credit bureaus they implied that “the status of the debt may have already been or may, at some later date, be submitted to the credit bureaus” and that such conduct “is actionable under the Act.” Id., at 1148 n.1.

Certification of Class Actions Class Action Court Decisions FDCPA Class Actions Uncategorized

CAFA Class Action Defense Cases–Babasa v. LensCrafters: Ninth Circuit Holds Defense Knew Damages Sought In Labor Law Class Action Exceeded Jurisdictional Limit Under Class Action Fairness Act So Removal Was Untimely

Letter from Plaintiff’s Counsel Sent as Part of Effort to Settlement Labor Law Class Action and Estimating Damages at $10 Million Placed Defense on Notice that Class Action Sought Damages in Excess of Amount Required by Class Action Fairness Act (CAFA) Requiring Removal of Class Action to Federal Court Within 30 Days of Letter Ninth Circuit Holds In April 2005, plaintiffs filed a class action lawsuit in California state court against LensCrafters alleging violations of various labor laws.

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

Arbitration Class Action Defense Cases-Douglas v. U.S. District Court: Ninth Circuit Holds Class Action Plaintiff Cannot Be Compelled To Arbitrate Class Action Dispute Against Long Distance Telephone Service Carrier If Not Told Of Contract Modifications

Modification of Telephone Service Contract to Include Class Action Waiver and Arbitration Clause not Binding on Class Action Plaintiff Where Customer did not Receive Notice of Change in Contract Terms Ninth Circuit Holds, Reversing District Court Order Compelling Arbitration in Favor of Telephone Company in Class Action Challenging New, Undisclosed Charges

Plaintiff filed a putative class action in California federal court against Talk America, his long distance telephone service company, alleging violations of the Federal Communications Act, breach of contract, and violations of various California consumer protection laws based on its unilateral revision of the service contract, without notice, to add additional service charges. Douglas v. U.S. District Court, 495 F.3d 1062, Slip Opn., at 2 (9th Cir. 2007). Defense attorneys moved to compel arbitration based on another unilateral revision to the service contract that added, without notice to customers, an arbitration clause as well as a class action waiver. Id. The district court granted the motion, and plaintiff petitioned for a writ of mandate because the Federal Arbitration Act does not authorize interlocutory appeals. Id., at 2-3.

Talk America acquired AOL’s long distance telephone service, and then modified the terms of the service contract with former AOL customers to add four provisions: “(1) additional service charges; (2) a class action waiver; (3) an arbitration clause; and (4) a choice-of-law provision point to New York law.” Douglas, at 2. The class action complaint alleged that Talk America did not provide notice of these revisions to its customers, and that the revised contract was only available on Talk America’s website. Id., at 4. The class action alleged that a customer would only learn of the revisions to the service contract if he visited the website and compared the terms of the contract online with prior versions of the contract, id. The district court “seems to have assumed” plaintiff did this as it noted that the contract was available on “the web site on which Plaintiff paid his bills,” id.; but plaintiff argued that “he authorized AOL to charge his credit card automatically and Talk America continued this practice, so he had no occasion to visit Talk America’s website to pay his bills” and that in any event “he would have had no reason to look at the contract posted there” as he was not notified that the terms of the contract had been changed. Id.

Arbitration Class Action Court Decisions Uncategorized

Arbitration Class Action Defense Cases–Shroyer v. New Cingular: Ninth Circuit Holds Class Action Arbitration Waiver Unconscionable Under California Law And Federal Arbitration Act Does Not Preempt Enforceability Of Class Action Waiver Provision

Enforceability of Class Action Arbitration Waiver Clause is Governed by State Law and District Court Erred in Granting Defense Motion to Compel Arbitration and Dismiss Class Action Complaint because Class Action Arbitration Waiver in Consumer Contract was Unconscionable under California Law Ninth Circuit Holds

Last Friday, the Ninth Circuit held that a class action arbitration waiver in a cellular telephone service contract is unconscionable under California law, and that the Federal Arbitration Act (FAA) did not protect the class action waiver. Shroyer v. New Cingular Wireless Services, Inc., 498 F.3d 976, Slip Opn., at 9993 et seq. (9th Cir. 2007). Plaintiff filed a class action in California state court against New Cingular Wireless and AT&T alleging that cellular phone service “deteriorated significantly” following the merger of the two companies, id., at 9997-98. The class action complaint alleged in part various violations of California’s unfair competition law, id., at 9998, and defense attorneys removed the class action to federal court, id., at 10000. Defense attorneys then moved the district court to compel arbitration and dismiss the class action; arguing that the arbitration clause is enforceable under the FAA; the district court agreed and plaintiff appealed. Id., at 10000-01. The Ninth Circuit reversed.

The Ninth Circuit summarized the case as requiring it to consider “whether a class arbitration waiver in New Cingular Wireless Service Inc.’s standard contract for cellular phone services is unconscionable under California law, and whether the [FAA] preempts a holding that the waiver is unenforceable.” Shroyer, at 9997. The cellular service contract plaintiff signed with AT&T in 2000 and 2003 apparently did not contain class action waiver; but when he switched his account to Cingular in January 2005 – which he did via telephone – the contract he agreed to included a binding arbitration clause that included a class action waiver. Id., at 9998-10000. The Ninth Circuit held that, under the FAA, whether the class action arbitration clause was enforceable turned on state law, and that under Discover Bank v. Superior Court, 36 Cal.4th 148 (Cal. 2005), the class action arbitration provision in plaintiff’s service contract was “both procedurally and substantively unconscionable and, therefore, unenforceable.” Id., at 10002.

The Circuit Court summarized California and Ninth Circuit case law regarding unconscionability of class action arbitration waivers, culminating in the three-part test set forth in Discover Bank. Shroyer, at 10002-05. That test requires court determine (1) whether the consumer contract is one of adhesion, (2) whether the contract involves disputes of “predictably…small amounts of damages,” and (3) whether the alleged intent of the contract is to permit the company to “carr[y] out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.” Id., at 10005 (quoting Discover Bank, at 162-63). The Ninth Circuit found each of these tests satisfied in this case, id. at 10006-08.

Arbitration Class Action Court Decisions Uncategorized

15 U.S.C. § 78ee—Transaction Fees And The Federal Private Securities Litigation Reform Act (PSLRA) Governing Individual And Class Action Lawsuits For Securities Fraud

To assist class action defense attorneys in defending against securities class action lawsuits, we provide the text of the Private Securities Litigation Reform Act of 1995 (PSLRA). Congress addressed transaction fees under the PSLRA in 15 U.S.C. § 78ee, which provides as follows:

§ 78ee. Transaction fees

(a) Recovery of cost of services

The Commission shall, in accordance with this section, collect transaction fees and assessments that are designed to recover the costs to the Government of the supervision and regulation of securities markets and securities professionals, and costs related to such supervision and regulation, including enforcement activities, policy and rulemaking activities, administration, legal services, and international regulatory activities.

(b) Exchange-traded securities

Subject to subsection (j) of this section, each national securities exchange shall pay to the Commission a fee at a rate equal to $15 per $1,000,000 of the aggregate dollar amount of sales of securities (other than bonds, debentures, other evidences of indebtedness, security futures products, and options on securities indexes (excluding a narrow-based security index)) transacted on such national securities exchange.

Statutes & Rules Uncategorized