Class Action Defense Cases–Anthony v. AIG: Eleventh Circuit Certifies Questions To Georgia Supreme Court Following Dismissal Of Class Action Complaint Challenging Excessive Notary Fees Charged In Connection With Refinance

Propriety of Dismissal of Class Action Challenging Notary Fees Charged by Lender in Connection with Refinance of Home Loan that were in Excess of Maximum Allowed by Georgia State Law Turned on Issues not yet Clearly Resolved by Georgia Courts Eleventh Circuit Holds, thereby Warranting Certification of Questions to Georgia Supreme Court

Plaintiff filed a putative class action against American General Financial Services, with whom they had refinanced their home loan, alleging violations of various Georgia-state laws; each of the claims in the class action complaint were premised on a charge for notarial fees allegedly “in excess of the statutory maximum established by OCGA § 45-17-11(b).” Anthony v. American General Financial Services, Inc., 583 F.3d 1302, 1304 (11th Cir. 2009). According to the allegations underlying the class action complaint, plaintiffs “executed a standard loan agreement specifying certain fees that they must pay as part of the transaction, including a $350.00 ‘notary fee,’” which the loan documents stated were “reasonable and necessary.” Id. American General did not disclose that under OCGA § 45-17-11, the maximum permissible notarial fee is $4.00. Id. Plaintiffs paid the $350 notary fee, and their class action complaint followed. Id. Defense attorneys moved to dismiss the class action complaint, id. The district court granted the motion finding (1) a private right of action does not exist under OCGA § 45-17-11, (2) Georgia’s “voluntary payment statute,” see OCGA § 13-1-13 (2002), barred the contract claims, and (3) the four-year statute of limitations barred other claims. Id. On appeal, the Eleventh Circuit expressed “doubt [as to] the correct application of state law in this case,” id.; accordingly, the Circuit Court certified those questions to the Georgia Supreme Court.

The Eleventh Circuit explained that “[t]he Supreme Court of Georgia may review a question of law certified by this Court when it is ‘determinative of the case’ and there are ‘no clear controlling precedents in the decisions of the Supreme Court.’” Anthony, at 1305 (citing OCGA § 15-2-9(a)). Because the Circuit Court found “no clear controlling precedent” as to several issues dispositive of the appeal, the Court certified the following questions to the Georgia Supreme Court:

Class Action Court Decisions Uncategorized

Class Action Defense Cases–Schachter v. Citigroup: California Supreme Court Affirms Defense Judgment In Labor Law Class Action Holding Forfeiture Of Restricted Stock Shares Upon Termination Did Not Violate California Labor Code

Trial Court Properly Granted Summary Judgment in Favor of Employer in Class Action Alleging Failure to Pay Wages under Labor Code because Prospective, Bilateral Agreement between Employer and Employee to Pay a Portion of Compensation in Restricted Stock Shares that were Forfeited upon Resignation or Termination for Cause Prior to Expiration of Two-Year Vesting Period did not Violate Labor Code California Supreme Court Holds

Plaintiff, a former stockbroker at Smith Barney (a subsidiary of Citigroup), filed a putative class action in California state court against Citigroup and others alleging violations of California’s labor laws; specifically, the class action complaint alleged that Citigroup’s voluntary employee incentive compensation plan, which permitted employees to obtain “shares of restricted company stock at a reduced price in lieu of a portion of that employee’s annual cash compensation,” violated California law because the plan provided that if the employee resigns or is fired then he forfeits any shares of stock that had not yet vested. Schachter v. Citigroup, Inc., 47 Cal.4th 610 (Cal. 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, plaintiff, “along with officers and other key individuals in the company’s employ,” participated in the plan – receiving restricted stock in lieu of a portion of their salary. Id., at 3. The stock would not vest for two years, and if an employee was fired without cause prior to that time then “the employee forfeited his or her restricted stock, but received in return, without interest ‘a cash payment equal to the portion of his or her annual compensation that had been paid in the form of such forfeited [r]estricted [s]tock.’” Id. However, if the employee voluntarily resigned or was terminated for cause prior to that time, then “the employee forfeited his or her restricted stock as well as the percentage of annual income designated by the employee to be paid as shares of restricted stock.” Id. Plaintiff resigned before all of his stock vested, and therefore fell within this latter group, forfeiting his stock and that portion of his income that he directed to be paid as stock. Id., at 4. His class action complaint followed, id. Defense attorneys moved for summary judgment but the motion was denied, id. After several years of litigation, and after the trial court certified the litigation as a class action, the trial court reconsidered its summary judgment ruling sua sponte and concluded that the plan’s forfeiture provision did not violate California law; accordingly, it granted defendants’ motion for summary judgment. Id., at 5. The California Court of Appeal affirmed, see id., at 5-6, and the California Supreme Court granted review, id., at 7. The Supreme Court affirmed, concluding that “the forfeiture provision does not run afoul of the Labor Code because no earned, unpaid wages remain outstanding upon termination according to the terms of the incentive plan.” Id., at 1.

The issue before the Supreme Court was whether employees “would be owed – and therefore would be required to forfeit – any ‘earned and unpaid’ wages upon resigning or being terminated for cause.” Schachter, at 8. Plaintiff argued “the percentage of his annual compensation he directed be paid to him in the form of shares of restricted stock constitutes a wage that remained earned but unpaid following his resignation.” Id., at 9. The Supreme Court disagreed, holding that the shares of restricted stock constituted wages. Id. The controlling factor was that the employer and employees had entered into a bilateral agreement after the employees had been hired: “It cannot be questioned that employers and employees are free to prospectively and bilaterally alter the terms of employment.” Id., at 11. Here, plaintiff specifically requested that he be paid in part in restricted stock shares, and contractually agreed that “his resignation or termination for cause before the end of the two-year vesting period would result in forfeiture of the restricted stock and the percentage of his compensation that he ‘authorized to be paid in the form of such restricted stock.’” Id. The Supreme Court summarized its holding at page 13:

Class Action Court Decisions Employment Law Class Actions Uncategorized

Class Action Defense Cases–Williams v. Geithner: Minnesota Federal Court Denies Preliminary Injunction In Class Action Based On Home Affordable Modification Program (HAMP) Holding It Unlikely Class Action Claims Will Prevail

Class Action Alleging Denial of Loan Modifications under HAMP (Home Affordable Modification Program) Violate Constitutional Right to Procedural Due Process Unlikely to Succeed on the Merits because Federal Regulations did not Create Property Right in Loan Modifications so Plaintiffs’ Request for Preliminary Injunction Denied Minnesota Federal Court Holds Plaintiffs filed a putative class action against various defendants – including various banks and federal government agencies – seeking a preliminary injunction. Williams v.

Class Action Court Decisions Uncategorized

Labor Law Class Actions Continue To Dominate Categories Of New Class Action Lawsuits Filed In California State And Federal Courts

To assist class action defense attorneys anticipate the types of lawsuits 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 relevant timeframe.

Class Actions In The News Uncategorized

FSLA Class Action Defense Cases—In re Enterprise: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation But Selects Western District Of Pennsylvania As Transferee Court

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Over Objection of Common Class Action Defendants, but Transfers Class Actions to Western District of Pennsylvania Seven class actions – two in the Northern District of Illinois, and one each in the Middle and Southern Districts of Florida, the Northern District of Georgia, the Southern District of New York and the Western District of Pennsylvania, – were filed against various Enterprise Rent-A-Car entities alleging labor law violations.

Class Action Court Decisions Employment Law Class Actions Multidistrict Litigation Uncategorized

PSLRA Class Action Defense Cases–Zerger v. Midway Games: Illinois Federal Court Dismisses Securities Fraud Class Action Holding Class Action Complaint’s Allegations Failed To Meet PSLRA’s Pleading Requirements

Class Action Complaint Alleging Securities Fraud Violations Failed to Allege Facts (as Opposed to Conclusions) or Adequately Plead Scienter under Heightened Pleadings Requirements of Private Securities Litigation Reform Act (PSLRA) Illinois Federal Court Holds

Plaintiffs filed a putative class action against various officers and directors of Midway Games alleging violations of federal securities laws; specifically, the class action complaint “alleg[ed] that the executives artificially inflated the market value of Midway stock by deceiving the public about the company’s financial position.” Zerger v. Midway Games, Inc., ___ F.Supp.2d ___ (N.D. Ill. October 19, 2009) [Slip Opn., at 1]. (Plaintiffs also filed a class action against Midway Games, but voluntarily dismissed it after Midway filed for bankruptcy protection. _Id._, at 2.) According to plaintiffs, the allegations underlying the class action complaint established violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934, and of SEC Rule 10b-5. _Id._, at 1. Defense attorneys moved to dismiss the class action complaint for failure to meet the heightened pleading requirements established by the PSLRA (Private Securities Litigation Reform Act), _id._ The district court granted the motion and dismissed the complaint.

Over the course of 20 years, Midway developed more than 400 video games for various platforms, including home-console, handheld, coin-operated and PC. Zerger, at 2. In 2001, the company decided to focus on home-console and handheld devices, such as Xbox, Game Cube, Game Boy and PlayStation. Id. In 2005, the company “announced its first profitable quarter in five years,” id. But in the words of the Circuit Court, “all was not well with Midway’s business model.” Id., at 3. And while the company “repeatedly assured the market that Midway had sufficient working capital to fund day-to-day operations and to continue product development,” in September 2005 it had to borrow money to fund its day-to-day operations. Id. The class action complaint outlined other alleged omissions, see id., at 3-5, concluding that defendants took advantage of the false impression they had given the market to sell 800,000 shares of stock, nearly all of them in a 3-week period, id., at 5. Plaintiffs also blamed Sumner Redstone (chairman of Viacom and controlling shareholder of Midway) for the inflated stock prices because he had announced that he was “evaluating Midway as a potential acquisition target for Viacom” and had purchased millions of shares of stock in the company. Id. Analysts expressed concern that these purchases caused Midway’s stock to be “somewhat overvalued” and warned that if Redstone decided to sell his shares then the stock price would drop. Id. Redstone later announced that Viacom would not acquire Midway, and the stock “immediately began to lose value” ultimately falling more than 50%. Id., at 5-6.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

SLUSA Class Action Defense Cases–Segal v. Fifth Third Bank: Sixth Circuit Affirms Dismissal Of Class Action Complaint Holding Class Action Claims Fell Within Scope Of SLUSA

District Court Properly Found Class Action’s State Law Claims Fell within Scope of Securities Litigation Uniform Standards Act (SLUSA) Sixth Circuit Holds

Plaintiff filed a putative class action against Fifth Third Bank and its holding company, Fifth Third Bancorp., alleging breach of fiduciary duty and breach of contract. Segal v. Fifth Third Bank, N.A., 581 F.3d 305, 308 (6th Cir. 2009). According to the allegations underlying the class action complaint, Fifth Third “ breached its fiduciary and contractual duties to the class in three ways: (1) It invested fiduciary assets in proprietary (and often higher-fee) Fifth Third mutual funds rather than superior funds operated by the Bank’s competitors; (2) it promised trust beneficiaries that their fiduciary accounts would receive ‘individualized’ management and breached that agreement by providing standardized and largely automated management…, often by ‘relatively inexperienced’ and ‘low-level’ employees…; and (3) it invested too many of the funds’ assets in low-yielding investments in order to cover the accounts’ near-term tax liabilities.” Id. Defense attorneys moved to dismiss the class action on the grounds that the state law claims were preempted by the Securities Litigation Uniform Standards Act of 1998 (SLUSA); the district court agreed and dismissed the class action complaint. Id. The Sixth Circuit affirmed.

The Sixth Circuit explained that Congress enacted Private Securities Litigation Reform Act (PSRLA) to “curb[] ‘perceived abuses’ of federal class-action securities litigation by imposing special requirements and obstacles on claimants filing such actions.” Segal, at 308 (citations omitted). However, “some claimants responded by ‘avoid[ing] the federal forum altogether,’ bringing ‘class actions under state law, often in state court’ instead.” Id., at 309 (citation omitted). Because this “was not what Congress had in mind,” it enacted SLUSA: its purpose was to “‘prevent certain State private securities class action lawsuits alleging fraud from being used to frustrate the objectives of’ PLSRA…[by] expressly prohibit[ing] certain state law class actions,” id. (citation omitted). The Circuit Court explained that “SLUSA prohibits a claimant from filing a class action when four things are true: (1) the class action is ‘covered,’ which means it involves more than fifty members; (2) the claims are based on state law; (3) the action involves a ‘covered security,’ which means a nationally listed security; and (4) the complaint alleges ‘an untrue statement or omission of a material fact in connection with’ buying or selling a covered security or a ‘manipulative or deceptive device or contrivance in connection with’ buying or selling a covered security.” Id. (citations omitted). The parties agreed that the first three of these requirements were satisfied by the class action – the question on appeal was whether the last requirement had been met. Id.

Class Action Court Decisions Class Actions In The News PSLRA/SLUSA Class Actions Uncategorized

PSLRA Class Action Defense Cases–Indiana State District Counsel v. Omnicare: Sixth Circuit Affirms Dismissal Of Securities Fraud Class Action Noting Bad Corporate News Does Not Automatically Mean Securities Fraud

Class Action Alleging Securities Fraud Properly Dismissed because Class Action Complaint Failed to Meet Heightened Pleading Requirements Established by Private Securities Litigation Reform Act (PSLRA) Sixth Circuit Holds

Plaintiffs filed a putative class action against Omnicare and individual officers and directors of Omnicare alleging violations of federal securities laws; in the words of the Sixth Circuit, “Seizing on a few vague statements from management, the plaintiffs try to turn bad corporate news into a securities class action.” Indiana State Dist. Counsel of Laborers, etc. v. Omnicare, Inc., 583 F.3d 935 (6th Cir. 2009) [Slip Opn., at 1, 2]. We do not here summarize the “sprawling and repetitive” allegations underlying the class action complaint, id., at 3; interested readers may find the Circuit Court’s summary at pages 3 through 7 of the opinion. Defense attorneys moved to dismiss the class action, which the district court granted. See id., at 7-8. Reviewing the district court’s decision de novo, id., at 8, the Sixth Circuit affirmed. The Court summarized its holding at page 2 as follows, “Because the Private Securities Litigation Reform Act (‘PSLRA’) forbids such alchemy, we generally affirm the district court’s dismissal, although we reverse its disposition regarding the claims brought under the Securities Act of 1933.”

The Sixth Circuit began its analysis by explaining that § 10(b) securities fraud claims must be pleaded with the same specificity as fraud claims under FRCP Rule 9(b). Omnicare, at 9. The Court further explained, “Bolstering this rule of specificity, the PSLRA imposes further pleading requirements…. First, the complaint must ‘specify each statement alleged to have been misleading’ along with ‘the reason or reasons why the statement is misleading.’… Second, plaintiffs must ‘state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.’” Id. (citations omitted). Under this standard, the Sixth Circuit affirmed. The Circuit Court concluded that the statements challenged by the class action complaint were not material, see id., at 9-11, or failed to adequately allege loss causation, see id., at 11-12, or failed to establish that defendants knew Omnicare’s claims of “legal compliance” were false when made, see id., at 13-16.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases– Pineda v. Williams-Sonoma: California Appellate Court Affirms Dismissal Of Song-Beverly Class Action Holding Zip Codes Not “Personal Identification Information” Under The Act

Class Action Alleging Violations of California’s Song-Beverly Act Properly Dismissed because Zip Codes are not “Personal Identification Information” Within the Meaning of the Statute California Appellate Court Holds Plaintiff filed a putative class action against Williams-Sonoma alleging inter alia violations of California’s “Song-Beverly” Act, which “prohibits merchants that accept credit cards in transacting business from requesting and recording ‘personal identification information’ concerning the cardholder.” Pineda v. Williams-Sonoma Stores, Inc., ___ Cal.

Class Action Court Decisions Uncategorized

Class Action Lawsuits Alleging Labor Law Claims Maintain Grip On Top Spot Among Weekly Class Action Lawsuits Filed 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 October 30 – November 5, 2009, during which time 48 new class action cases were filed in these California state and federal courts.

Class Actions In The News Uncategorized