Indictment of Class Action Law Firm and Lawyer Fuels Debate on Prosecution of Corporations

David Bershad and Steven Schulman along with class action plaintiff firm Milberg Weiss Bershad & Schulman LLP, were indicted in mid-May 2006 for paying millions of dollars in kickbacks to clients to serve as plaintiffs. Brooke Masters of The Washington Post reports that the case breaks a familiar trend of corporate defendants cooperating with government prosecutors “such as Computer Associates International Inc., accounting firm KPMG LLP and drugmaker Bristol-Myers Squibb Co.

Class Actions In The News Uncategorized

New Allegations Surface Regarding Indicted Class Action Law Firm and Lawyer

Class action plaintiff firm Milberg Weiss Bershad & Schulman LLP and two of the firm’s top partners,David Bershad and Steven Schulman, were indicted in mid-May 2006 for paying millions of dollars in kickbacks to clients to serve as plaintiffs. Lynnley Browning of the New York Times reports that one of the lead plaintiffs in the class action against accounting firm KPMG claims “that he was offered a financial incentive to serve as plaintiff.

Class Actions In The News Uncategorized

Class Action Defense Cases–Evans v. Walter Industries: Plaintiff Bears Burden Under Class Action Fairness Act of 2005 (CAFA) Of Establishing Local Controversy Exception To Removal of Class Action

CAFA (Class Action Fairness Act of 2005) Places Burden of Proof on Plaintiff to Establish Local Controversy Exception to Removal Eleventh Circuit Holds CAFA contains several provisions that still require judicial interpretation. On May 22, 2006, the Eleventh Circuit considered as a matter of first impression for any Circuit Court of Appeals “the specific question of which party should bear the burden of proof on CAFA’s local controversy exception.” Evans v.

Class Action Court Decisions Class Action Fairness Act (CAFA) Class Actions In The News Removal & Remand Uncategorized

Class Action Fairness Act – Special CAFA Rules for Appealability of Remand Orders Lawyers Should Know

When defending against a class action, it is important to understand that special rules apply under Class Action Fairness Act (CAFA) concerning the appealability of remand orders. Whether a federal district court order remanding an action to state court may be reviewed on appeal is important to any defendant, but special rules apply if the action has been removed to federal court under the Class Action Fairness Act of 2005. Because the focus of this article is on appellate review of district orders granting motions to remand a lawsuit to state court a case removed under CAFA, removal and remand are not discussed here; discussions of each may be found in separate articles, as is a discussion concerning appellate review of remand orders in non-CAFA cases.

Class Action Fairness Act (CAFA) Uncategorized

Considerations Regarding Removal to Federal Court: Defense Of Class Action Claims Alleging RESPA Violations Part III

Part III Considerations Regarding Removal to Federal Court

A lender that must defend itself against a class action alleging violations of RESPA may benefit from removing the case to federal court. A defendant may remove a case to federal court if there is any “separate and independent” claim subject to federal question jurisdiction: “A federal court has removal jurisdiction if the plaintiff’s claims are either exclusively federal or there is a separate and independent federal question. 28 U.S.C. § 1441. In order for a defendant to remove, the federal claims must appear on the face of plaintiff’s well-pleaded complaint. Tingey v. Pixley-Richards West, Inc., 953 F.2d 1124, 1129 (9th Cir. 1992).” Lyons v. Alaska Teamsters Emplr. Serv. Corp., 188 F.3d 1170, 1171 (9th Cir. 1999). A separate article considers removal under CAFA (Class Action Fairness Act of 2005).

In federal court, Rule 23 of the Federal Rules of Civil Procedure governs class actions. Federal courts examine the numerosity, commonality, and typicality of the plaintiff’s claims. The courts also consider whether separate lawsuits would create a risk of inconsistent adjudications that would require the defendant comply with incompatible directions. In state court, however, California Code of Civil Procedure section 382 governs class actions. The “community of interest” requirement for class certification in state court consists of three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. While the standards may appear to be substantively identical, they are quite different in practice. In my opinion, the federal law governing class actions is much better developed than California state law. It is also my opinion that a corporate defendant is well served to remove a case to federal court whenever possible.

Once removed, the federal court may, in its discretion, adjudicate the entire case, including state claims that could not be adjudicated under the federal court’s original jurisdiction. 28 U.S.C. § 1441(c). Removal is proper even if the plaintiff’ federal claim is meritless, see Barraclough v. ADP Auto. Claims Services, 818 F. Supp. 1310, 1312 (N.D. Cal. 1993), and removal is proper even if the relief the plaintiff seeks is unavailable under the federal claim, see Caterpillar Inc. v. Williams, 482 U.S. 386, 391, n.4 (1987).

With respect to RESPA claims, RESPA requires a lender to provide a HUD-1 or HUD-1A settlement statement to “clearly itemize all charges imposed upon the Borrower,” and that this settlement statement is required by 12 U.S.C. § 2603(a). A lender is required also to provide borrowers with “a Good Faith Estimate” (the “GFE”) to include “estimates of the amounts or ranges of all settlement costs likely to be incurred at the closing,” and the GFE is required by 12 U.S.C. § 2604(c) and Regulation X, 24 C.F.R. section 3500.7(a). Thus, if the Complaint alleges that the lender surprised borrowers with additional closing costs, then the basis of the lawsuit is an alleged violation of federal law: if the lender had disclosed properly all closing costs as required by RESPA and Regulation X, then the plaintiff would not have been injured.

RESPA/TILA Class Actions Uncategorized

Federal Court versus State Court Jurisdiction: Defense Of Class Action Claims Alleging RESPA Violations Part II

Defending Class Action Claims Alleging RESPA Violations

Part II Federal Court versus State Court Jurisdiction

Even though RESPA is a federal statute, many class action lawsuits against lenders alleging RESPA violations are filed in state court. Defending class action RESPA claims requires a careful analysis of the specific statute(s) at issue, as this will dictate whether the action may be removed to federal court. While RESPA grants concurrent jurisdiction to state courts as to certain matters, Congress expressly limited concurrent jurisdiction to those sections of RESPA governed only by sections 2605, 2607 and 2608. 12 U.S.C. § 2614. Otherwise, federal jurisdiction is exclusive.

That Congress afforded state courts concurrent jurisdiction only over certain portions of RESPA and retained exclusive federal court jurisdiction over the balance of RESPA is not unique. For example, as the Ninth Circuit has held, “Bankruptcy courts have exclusive jurisdiction over nondischargeability actions brought pursuant to 11 U.S.C. § 523(a)(2), (4), (6) and (15),” Rein v. Providian Fin. Corp., 270 F.3d 895, 904 (9th Cir. 2001) (citations omitted) (italics added), but “Bankruptcy courts and state courts have concurrent jurisdiction over all [other] nondischargeability actions,” id., at n.15 (italics added). “For example, there is concurrent state and federal jurisdiction over § 523(a)(5) nondischargeability actions,” id., at 904 n.15 (citations omitted) (italics added), but a creditor could not seek relief from stay and pursue in state court a nondischargeability claim “with regard to its § 523(a)(2) claims because state courts lack jurisdiction to adjudicate § 523(a)(2) actions,” id., at 904 (italics added).

Plaintiffs’ alleged violations of 12 U.S.C. sections 2603 and 2604 must be heard in federal court because state courts lack jurisdiction to consider them. To hold otherwise would be to conclude that Congress idly specified limitations in 12 U.S.C. § 2614 on the scope of concurrent jurisdiction when it intended that no such limitations exist.

RESPA/TILA Class Actions Uncategorized

Overview of Statute and Summary of Jurisdiction: Defense Of Class Action Claims Alleging RESPA Violations Part I

Defending Class Action Claims Alleging RESPA Violations Part I Overview of Statute and Summary of Jurisdiction Many lenders have had to defend themselves against class actions alleging violations of RESPA. In simplest terms, the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. sections 2601 et seq., and Regulation X (24 C.F.R. sections 3500 et seq.) governs disclosures to borrowers of the closing costs associated with residential loan transactions. RESPA is a “consumer protection” statute, enacted in 1974 to protect borrowers whose loans will be secured by a mortgage against one-to-four family residential property.

RESPA/TILA Class Actions Uncategorized

Class Action Firm Indicted for Paying Kickbacks to Clients to Serve as Plaintiffs

Class action plaintiff firm Milberg Weiss Bershad & Schulman LLP learned on May 18, 2006, that it had been indicted by federal prosecutors in Los Angeles for paying more than $11 million in kickbacks to clients to serve as plaintiffs. The 102-page, 20-count criminal indictment also names two of the firm’s top partners, David Bershad and Steven Schulman. Nathan Koppel and Peter Lattman of the Wall Street Journal reported on the fallout from the indictment, including “the Ohio attorney general firing the powerhouse law firm as counsel in a class-action case.

Class Actions In The News Uncategorized

Hardy v. Regions Mortgage Class Action Defense Case: Eleventh Circuit Holds No Private Right Of Action Under RESPA

District Court Properly Granted Defense Motion for Judgment on the Pleadings in Class Action Because no Private Right of Action Exists Under Federal Real Estate Settlement Practices Act (RESPA) Eleventh Circuit Holds On May 26, 2006, the Court of Appeals for the Eleventh Circuit affirmed a judgment entered on a motion for judgment on the pleadings in a putative class action alleging RESPA (Real Estate Settlement Practices Act) violations on the ground that no private right of action exists under Section 10 of RESPA.

Class Action Court Decisions RESPA/TILA Class Actions Uncategorized

Class Action Defense Cases–Buckeye Check Cashing v. Cardegna

Arbitration Agreements: Who Decides Legality of Arbitration Clause? On February 21, 2006, the United States Supreme Court addressed “whether a court or an arbitrator should consider the claim that a contract containing an arbitration provision is void for illegality.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. ___, 126 S.Ct. 1204, 1207 (2006). Plaintiffs filed a putative class action alleging that the interest rates in various deferred-payment transactions with Buckeye Check Cashing “in which they received cash in exchange for a personal check in the amount of the cash plus a finance charge” were usurious.

Arbitration Class Action Court Decisions Uncategorized