Class Action Defense News—Brocade Agrees To Pay $160 Million To Settle Shareholder Class Action Lawsuit Involving Backdating Of Stock Options

Shareholder Class Action Against Brocade Communications Systems Arising out of Options Backdating Settled for $160 Million Mark Maremont and John Hechinger of the Wall Street Journal report today that Brocade Communications Systems has agreed to pay $160 million to settle a class action lawsuit filed by shareholders. The class action sought damages allegedly caused by the backdating of stock options. The settlement followed the San Francisco federal court’s ruling last month that Brocade was liable for the conduct of its former Chief Executive Officer, Gregory Reyes, who was sentenced last January to 21 months in federal prison for his role in the scandal.

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CAFA Class Action Defense Removal Cases–Springman v. AIG: Seventh Circuit Affirms Denial Of Plaintiff’s Motion To Remand Class Action To State Court Upholding Removal Jurisdiction Under Class Action Fairness Act (CAFA)

Amendment of Class Action Complaint to Add Party-Defendant Years after Plaintiff Learned Defendant’s Identity Constituted a New Action Under Class Action Fairness Act of 2005 (CAFA) thereby Creating CAFA Removal Jurisdiction over Class Action Seventh Circuit Holds

In July 2003, plaintiff file a putative class action in Illinois state court against AIG Claim Services and Illinois National Insurance Company for violations of state fraud and consumer protection laws; the class action complaint alleged that AIG Claim Services, in processing claims under Illinois National insurance policies, systematically underpaid accident insurance benefits. Springman v. AIG Marketing, Inc., 523 F.3d 685, 686 (7th Cir. 2008). In December 2003, defense attorneys disclosed that AIG had not adjusted plaintiff’s claim; plaintiff did not inquire further until October 2004, at which time he learned that at affiliate, AIG Marketing, had handled the claim underlying the class action. Id. Nonetheless, plaintiff waited another three years before seeking leave to file an amended class action complaint to sue AIG Marketing in place of AIG Claim Services, id. The state court granted the motion, and defense attorney removed the class action to federal court under the Class Action Fairness Act of 2005 (CAFA). Id. AIG Claim Services could not have removed the class action itself because the class action complaint had been filed well before CAFA’s effective date, id. Plaintiff’s lawyer moved to remand the class action to state court, but the motion was denied, id. The Seventh Circuit affirmed.

The question before the Circuit Court was whether the substitution of AIG Marketing for AIG Claim Services constituted “the commencement of a suit against AIG[ Marketing] within the meaning of the Class Action Fairness Act, thus enabling removal of the entire suit.” Springman, at 686-87 (citing 28 U.S.C. § 1453(b)). After reaffirming the Seventh Circuit’s law, adoption by all but one other circuit courts, that post-filing acts may affect whether a class action complaint is removable under CAFA, see id., at 687 (citations omitted), the Court reiterated the federal removal doctrine, which permits removal based on post-filings acts if, inter alia, the amended complaint “adds a new defendant.” Id. (citation omitted).

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

Class Action Defense News—Class Action Plaintiff Lawyer Melvyn Weiss Sentenced To 30 Months In Federal Prison

Melvyn Weiss, Noted Class Action Plaintiff Focusing on Securities Class Actions, Sentenced to 30 Months and Ordered to Pay $10 Million We have written several articles covering the criminal charges against Melvyn Weiss and his former law partners, David Bershad and Steven Schulman, as well as another former Weiss law partner, William Lerach. The final chapter in the criminal charges against Mr. Weiss came to a close on June 2, 2008, when the federal court sentenced the 72-year-old Mr.

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UCL Class Action Defense Cases–Williams v. Gerber: Ninth Circuit Holds Class Action Complaint Improperly Dismissed Because Class Action’s False Advertising Claims May Have Deceived Reasonable Consumer

Class Action Alleging False Advertising Claims Improperly Dismissed because Factual Questions Existed as to Whether Statements were Deceptive and because Accuracy of Ingredient List did not Insulate Defendant from Liability Based on Misleading Nature of Statements on Front of Product Box Ninth Circuit Holds

Plaintiffs filed a putative class action against Gerber Products Company alleging, inter alia, violations of California’s Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA); the class action complaint claimed that Gerber “deceptively marketed” its “Fruit Juice Snacks,” which are part of Gerber’s “Graduates for Toddlers” line of products. Williams v. Gerber Products Co., 523 F.3d 934, 936 (9th Cir. 2008). Defense attorneys moved to dismiss the class action, id. The district court granted the defense motion and dismissed the class action complaint; the court reasoned that the challenged statements “were not likely to deceive a reasonable consumer,” id., at 937. The Ninth Circuit reversed.

The Ninth Circuit summarized the class action claims at pages 936 an 937 as follows:

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Class Action Defense Cases–Sharp v. Next: California Court Affirms Trial Court Order Refusing To Disqualify Plaintiffs’ Class Action Counsel And Refusing To Remove All Plaintiffs From Serving As Class Action Representatives

Potential Conflict Between Labor Organization Financing Class Action Litigation and Individual Named Plaintiffs in Class Action Lawsuits did not Disqualification of Plaintiffs’ Class Action Counsel, Funded by Labor Organization, because Conflict Waivers Signed by Plaintiffs and Labor Group were Effective and Trial Court did not Err in Refusing to Disqualify Named Plaintiffs from Prosecuting Class Actions as Motion was Premature California State Court Holds

The Writers Guild of America is a labor organization that represents film, television, news and other media writers; the Guild held several meetings with writers of reality television programs because it believed that reality TV show employees were not provided breaks or overtime pay as required by California law. Sharp v. Next Entertainment, Inc., ___ Cal.App.4th ___ (Cal.App. May 28, 2008) [Slip Opn., at 4]. The Guild believed that class action litigation “would create economic pressure on those who paid illegal wages” and “could facilitate the Guild’s unionizing campaign.” _Id._, at 4-5. Ultimately, two class action lawsuits were filed (the _Sharp_ class action against Next Entertainment and others, and the _Shriver_ class action against Rocket Science Laboratories and others); the class action complaints were filed on behalf of 21 individuals, 16 of whom had attended the meetings referenced above, by a law firm that “had represented the Guild in a significant number of matters for many years.” _Id._, at 5. The class action plaintiffs signed conflict waivers, acknowledging that “the Guild would subsidize the attorney fees for the class action lawsuits and that the firm represented the Guild in other matters”; however, the named plaintiffs demanded, and received the Guild’s assurance, that they control the litigation, not the Guild. _Id._ Defense attorneys eventually moved to dismiss plaintiffs’ law firm arguing that the Guild’s interests and the law firm’s interests conflicted with the interests of the named plaintiffs, and that the law firm had divided loyalties. _Id._, at 9. The trial court denied the motion to disqualify plaintiffs’ counsel, but expressed concern about potential conflicts of interest and the possibility that the Guild would seek to control the litigation, and it issued verbal and written orders to plaintiffs and their counsel seeking to address this concern. _Id._, at 10-11. The trial court also ordered that four of the class action plaintiffs be removed from the litigation based on their deposition testimony that “one of their personal goals was to assist the Guild’s unionizing efforts.” _Id._, at 11. The trial court refused, however, to dismiss all 21 of the class action plaintiffs, _id._, at 12. Defense attorneys appealed the denial of the motions to disqualify and to remove all of the named plaintiffs from the class action litigation; plaintiffs cross-appealed, challenging certain of the verbal and written orders by the trial court, _id._ The appellate court affirmed the orders appealed by the defense, and reversed the orders appealed by the plaintiffs.

The vast majority of the Court of Appeal opinion concerns defendants’ appeal. See Sharp, at 13-32. The appellate court disagreed that the entire law firm representing plaintiffs had to be disqualified because the firm’s “duty of loyalty to the Guild creates actual and potential conflicts of interest because the Guild’s interest in furthering its organizing efforts is antithetical to the sole interests of absent class members, which is to maximize the recovery on the wage and hour claims.” Id., at 13. After providing a detailed summary of the law surrounding motions to disqualify and conflicts of interest, see id., at 13-21, the Court of Appeal’s comprehensive analysis led it to conclude that the conflict waivers signed by the named plaintiffs in the two class action lawsuits were effective, see id., at 21-30. The appellate court stressed, however, that “the class action procedures already include a system by which the court determines if the named class representatives can adequately represent the class,” and that “when plaintiffs seek to have the classes certified, they will have the burden of meeting these requirements.” Id., at 23. The Court of Appeal was also mindful that the motion to disqualify had been filed not by one of the class action plaintiffs, who allegedly suffer as a result of the purported conflict, “but by opposition parties who are not directly touched by the purported conflict.” Id., at 24.

Class Action Court Decisions Employment Law Class Actions Uncategorized

Employment-Related Class Action Lawsuit Filings Drop But Labor Law Class Actions Retain Top Spot Of Weekly Class Action Cases Filed In California State And Federal Courts

As a resource for 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 May 23 – 29, 2008, during which time 48 new class action lawsuits were filed.

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Class Action Defense Cases—In re PepsiCo: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Southern District of New York

Judicial Panel Grants Defense Motion, Unopposed by Any Class Action Plaintiff, for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 and Centralizes Class Actions in Southern District of New York Four class action lawsuits – two in New York, one in Tennessee and one in Texas – were filed against defendants PepsiCo and Pepsi Bottling Group alleging that defendants “misled consumers of its Aquafina bottled water into believing that the water source of Aquafina was something different from and better than tap water.

Class Action Court Decisions Multidistrict Litigation Uncategorized

Class Action Defense Removal Cases–Gerlinger v. Amazon.com: Ninth Circuit Affirms Dismissal Of Antitrust Class Action Because Plaintiff Lacked Standing To Pursue Class Action

Antitrust Class Action Properly Dismissed with Prejudice because Plaintiff Failed to Establish Injury-in-Fact Required for Article III Standing to Prosecute Class Action Ninth Circuit Holds Plaintiff filed a putative class action against Amazon.com and book-seller Borders Group alleging antitrust violations; the class action complaint alleged that, following unsuccessful attempts to operate its own online website, Borders entered into an agreement with Amazon to “direct[] shoppers to what is known as a mirror website, a site hosted by Amazon.

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Time Warner Class Action Defense Cases–Clark v. Time Warner: Ninth Circuit Affirms “Primary Jurisdiction” Dismissal of Class Action And Referral To FCC Of Issue Central To Class Action Complaint

District Court Dismissal of Class Action Complaint and Referral to Federal Communications Commission (FCC) of “Novel and Technical Question” of Issue Central to Class Action Claims was Proper Ninth Circuit Holds

Plaintiff filed a putative class action against Time Warner Cable alleging that it engaged in the practice of “slamming” in violation of 47 U.S.C. § 258(a); the class action complaint alleged further the Time Warner violated the parallel state statute. Clark v. Time Warner Cable, 523 F.3d 1110, 1112 (9th Cir. 2008). The class action advanced also state law claims, as well as RICO (Racketeer Influenced and Corrupt Organizations Act), id. According to the class action’s allegations, defendant telephoned plaintiff marketing a digital phone package; the package utilized Voice over Internet Protocol (VoIP) technology, rather than “the traditional public switched telephone network (PSTN). Id. Plaintiff alleges she rejected the invitation, but defendant disconnected her existing telephone service and sent a technician to install her new service. Id. Defense attorneys moved to dismiss the class action on the grounds that the FCC had not yet decided whether § 258(a) applies to VoIP providers as well as a “telecommunications carriers.” Id., at 1112-13. In addition to referring the § 258(a) class action claim to the FCC, the district court dismissed, without prejudice, plaintiff’s remaining claims. Id., at 1113. The Ninth Circuit affirmed.

The Circuit Court explained that this appeal presents the issue of “whether the doctrine of primary jurisdiction permits a district court to refer a claim raising a novel and technical question of federal telecommunications policy to the Federal Communications Commission for its consideration in the first instance.” Clark, at 1112. “The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency.” Id., at 1114. Put simply, the Telecommunications Act of 1996 “imposes a variety of obligations on telecommunications carriers,” id., at 1113, and expressly prohibits “slamming” – “the practice in which a telecommunications carrier switches a consumer’s telephone service without the consumer’s consent,” id., at 1112. Specifically, § 258(a) states that “[n]o telecommunications carrier shall submit or execute a change in a subscriber’s selection of a provider of telephone exchange service or telephone toll service except in accordance with such verification procedures as the [FCC] shall prescribe” (italics added). The Ninth Circuit explained at pages 1113 and 1114:

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Class Action Defense Issues–New York Attorney General Wins “Class Action” Against Dell Alleging Fraud, False Advertising And Deceptive Business Practices

In May 2007, New York State Attorney General Andrew Cuomo filed a lawsuit against Dell and Dell Financial Services (collectively “Dell”) on behalf of New York residents alleging that it advertised “attractively priced computer packages, promotional financing that typically features a no interest and/or no payment period, large rebates, and free or upgraded accessories,” but that “many of the benefits and inducements featured in Dell’s advertisements are illusory.” A copy of the lawsuit may be found here.

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