CAFA Class Action Defense Cases–Brooks v. GAF: South Carolina Federal Court Remand Class Action To State Court For Lack Of Requisite Amount In Controversy But Expressly Prohibits Plaintiffs From Recovering Damages In Excess Of Prayer

As Master of Class Action Complaint Plaintiffs Successfully Limited Amount in Controversy so as to Preclude Removal Jurisdiction on Diversity Grounds or under CAFA (Class Action Fairness Act) Necessitating Remand of Class Action to State Court, but South Carolina Federal Court Expressly Limits Plaintiffs’ Individual and Class Action Recovery to Limits Pleaded in Class Action Complaint

Plaintiffs filed a putative class action lawsuit in South Carolina state court against GAF Materials “alleging claims for negligence, negligent representation, breach of warranty, breach of implied warranties, fraud, a violation of the South Carolina Unfair Trade Practices Act (‘SCUPTA’), and unjust enrichment.” Brooks v. GAF Materials Corp., 532 F.Supp.2d 779, 780 (D.S.C. 2008). The class action complaint alleges the class “suffered property damage as a result of the Defendant’s defective roofing materials” and seeks compensatory and punitive damages, but in order to avoid removal jurisdiction the class action complaint expressly states that the “amount in controversy for the entire proposed Class does not exceed five million dollars” and that “[t]he Plaintiffs’ individual recovery, as well as any putative Class Members individual recovery, exclusive of interest and costs, is not to exceed $74,999.00.” Id. Defense attorneys removed the suit to federal court under the Class Action Fairness Act (CAFA), and plaintiffs’ moved to remand the action to state court. Id. Defense attorneys originally removed the class action in May 2006, but the district court granted plaintiffs’ motion to remand “because the amount in controversy does not exceed $75,000, exclusive of interest and costs, for diversity jurisdiction under 28 U.S.C. § 1332.” Id., at 780. After plaintiffs amended their class action complaint, defense attorneys again removed the action to federal court but the district court remanded the action “for lack of jurisdiction based on the one-year cap on removal set forth in 28 U.S.C. § 1446(b),” id., at 780-81, but the court subsequently rescinded its remand order and requested briefing on whether the amount in controversy exceeded $5 million for purposes of CAFA removal jurisdiction, id., at 781.The district court granted the motion.

In analyzing whether the Class Action Fairness Act authorized removal of this lawsuit, the district court stressed that “Plaintiffs have placed a clear limitation on damages in their complaint.” Brooks, at 782. The Court held at page 782, “the court declines to ‘adopt any approach under which the court will be required to undertake its own independent review of the amount in controversy despite a specific limitation on damages in the plaintiff’s complaint.’” As the master of their complaint, plaintiffs are entitled to limit damages sought therein in order to avoid removal jurisdiction, and they effectively did so here. Id. Accordingly, the district court granted plaintiffs’ motion to remand the class action to state court, finding that the amount in controversy requirement had not been met. Id., at 782-83. However, the federal court expressly barred plaintiffs from playing games with removal. The court’s remand order expressly states, “with respect to all claims, the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney’s fees, exceeding five million dollars ($5,000,000), exclusive of interest and costs for the putative class action, and the Plaintiffs are barred from recovering a total amount of damages, including actual damages, punitive damages, treble damages, and statutory attorney’s fees, exceeding seventy-four thousand nine hundred ninety-nine dollars ($74,999.00), exclusive of interest and costs, for any individual claims.” Id., at 783.

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

PSLRA Class Action Defense Cases–Cornelia I. Crowell GST Trust v. Possis Medical: Eighth Circuit Affirms Dismissal Of Securities Fraud Class Action Holding Allegations In Class Action Complaint Failed To Meet PSLRA’s Heightened Pleading Requirements

District Court Properly Dismissed Securities Fraud Class Action Without Leave to Amend because Class Action Complaint Failed to Satisfy Private Securities Litigation Reform Act (PSLRA) Pleading Requirements Eighth Circuit Holds Plaintiff filed a class action complaint against Possis Medical and two individuals alleging securities fraud violations. The class action alleged that after Possis Medical decided in 2001 to study whether its non-surgical catheter system, designed to remove blood clots, could be used for other medical procedures, it “made several public statements regarding the study’s potentially favorable impact on company revenues”; however, in August 2004, Possis Medical released the results of its study “which did not support expanded…usage.

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

Class Action Defense Cases–Negrete v. Allianz Life: Ninth Circuit Reverses District Court Order Enjoining Class Action Defendant From Settling Class Actions Pending In Other State And Federal Courts

All Writs Act did not Permit District Court to Issue Injunction Prohibiting Class Action Defendant from Negotiating Settlements of Class Actions Pending in Other Federal Courts, and Anti-Injunction Act Barred District Court from Issuing Injunction Prohibiting Class Action Defendant from Negotiating Settlements of Class Actions Pending in State Court Ninth Circuit Holds

Plaintiff filed a class action complaint against Allianz Life Insurance Company of North America alleging inter alia violations of RICO (Racketeer Influenced and Corrupt Organizations Act) and breach of fiduciary duty arising out of defendant’s sale of fixed deferred annuities which, the class action alleged, was “‘an unsuitable financial product’ because the maturity date exceeded his life expectancy and restricted his access to principal without surrender charges.” Negrete v. Allianz Life Ins. Co. of North Am., 523 F.3d 1091, 2008 WL 1868993, *1 (9th Cir. 2008). The district court certified the litigation as a nationwide class action with respect to the RICO claims, and as a state-wide class action with respect to certain other claims, id. This class action was but one of several class actions filed against Allianz regarding the sales of annuities, including: Iorio v. Asset Marketing Inc., No. 05-CV-00633 (S.D.Cal.), filed in March 2005, in the United States District Court for the Southern District of California, and certified as a state-wide class action (covering a class that “partially overlaps the Negrete class”) in July 2006; Mooney v. Allianz Life Ins. Co. of North Am., No. 06-CV-00545, filed February 9, 2006, in the United States District Court for the District of Minnesota, and certified as a nationwide class action (covering a class that, according to defense attorneys, includes annuity transactions that “overlap those in Negrete”); and Castello v. Allianz Life Ins. Co. of North Am., Civ. No. MC03-20405, filed December 22, 2003, in a Minnesota state court and certified as a nationwide class action. Id. (The nationwide class action certification order in Negrete expressly excludes members of the nationwide class action certified in Castello, id., at *1 n.3.) In addition to these class actions, the Minnesota Attorney General filed State of Minnesota v. Allianz Life Ins. Co. of North Am., Civ. No. 07-581, on January 7, 2007, in a Minnesota state court (“the AG Action”), seeking “relief under Minnesota law on behalf of Minnesota residents who purchased Allianz’s fixed deferred annuity products” (covering a class that, according to defense attorneys, also may partially overlap the class certified in Negrete). Id., at *2. The district court entered an order “that effectively prevents [Allianz] from proceeding with any settlement negotiations on similar class action claims raised in any federal or state court without first obtaining permission from Negrete’s Co-Lead Counsel, and from finalizing a settlement in any other court ‘that resolves, in whole or in part, the claims brought in [the Negrete] action,’ without first obtaining the district court’s approval.” Id., at *1. The Ninth Circuit reversed.

The district court order arose as follows. Allianz entered into settlement discussions with the parties in Mooney, Castello, and the AG Action. Negrete, at *2. Plaintiffs’ lawyers in Negrete learned of these negotiations from a third party and requested that defense attorneys assure them that the settlement negotiations would not cover any of the claims addressed in or class members covered by the Negrete action; defense attorneys refused to provide such assurances so Negrete filed an ex parte application seeking an order that would prohibit Allianz from “settling, attempting to settle, negotiating, compromising, or releasing any claims, causes of action, or damages relating to any Allianz deferred annuity purchased by any Class Member in the Negrete/Healey matter during the relevant Class Period, in any other forum, including but not limited to, the Mooney matter, without the express approval of this Court and participation of Court appointed Co-Lead Counsel in the Negrete/Healey matter.” Id. While the district court order, issued without a hearing, “nominally” denied the application as “not authorized by the All Writs Act,” the court nonetheless ordered, “Any discussions of a settlement that would affect any claims brought in this litigation, other than claims of an individual plaintiff or class member, must be conducted or authorized by plaintiffs’ Co-Lead Counsel. Any proposed settlement that resolves, in whole or in part, the claims brought in this action shall first be subject to review and approval by the Court in this litigation.” Id. Defense attorneys appealed that order, id., at *3.

Class Action Court Decisions Uncategorized

Punitive Damages Class Action Defense Issues–City of Hope v. Genentech: California Supreme Court Affirms $300 Million Compensatory Award For Breach Of Contract But Reverses $200 Million Punitive Damage Award For Breach Of Fiduciary Duty

Punitive Damages for Breach of Fiduciary Duties Improper because Evidence Established Merely Contractual Relationship even though Plaintiff Entrusted Secret Scientific Discoveries to Defendant for Commercial Exploitation California Supreme Court Holds

Plaintiff City of Hope filed suit (not a class action) against Genentech alleging breach of contract and breach of fiduciary duties arising out of an agreement whereby “City of Hope, in return for royalties, entrusted a secret scientific discovery to Genentech to develop, to patent, and to commercially exploit.” City of Hope v. Genentech, Inc., ___ Cal.4th ___ (Cal. April 24, 2008) [Slip Opn., at 1]. Plaintiff prevailed at trial, and the jury awarded $300 million in compensatory damages and $200 million in punitive damages. _Id._ In a case of critical importance to class action and non-class action cases alike, the California Supreme Court addressed “whether, as the jury found, a fiduciary relationship necessarily arose” between City of Hope and Genentech. _Id._ The High Court held that it did not and, accordingly, reversed the punitive damage award. However, in a portion of the opinion that we do not summarize, the Supreme Court affirmed the $300 million damage award, concluding that “the evidence that City of Hope introduced at trial to prove that Genentech had breached a fiduciary duty [did not] so prejudice[] the jury as to require setting aside the jury’s award of compensatory damages for breach of contract.” _Id._, at 2. We again stress that this lawsuit was not a class action, but it involves a topic of significant importance to class action litigation.

In brief, scientists employed by City of Hope “developed a groundbreaking process for genetically engineering human proteins,” and filed a confidential application with the National Institutes of Health for a grant. City of Hope, at 2-3. Genentech was formed by a doctor who learned of the discovery and a venture capitalist “to commercially exploit biotechnology.” Id., at 3. Genentech contacted the City and offered to fund additional research and to secure the patents required for commercialization of the products developed; these discussions led to a draft agreement that left open the royalty rate because Genentech had not yet decided whether to accept the City’s proposal of a 2% flat rate. Id. Ultimately, the parties entered into a contract, see id., at 4-6 (summarizing salient terms), and “the rest is history,” so to speak. Genentech obtained various patents and granted various licenses, but it did not inform the City of all of those licenses. Id., at 6. Genentech also filed a lawsuit, which it settled for $20 million, alleging infringement of patents held by the City’s scientists, but it refused to share any of that award with the City. Id., at 8. That refusal precipitated the lawsuit by the City against Genentech for breach of fiduciary duty and breach of contract, id. As noted above, while the first trial ended deadlocked at 7-5 in favor of Genentech, the jury at the second trial ruled in favor of the City, id., at 8-9.

Class Action Court Decisions Uncategorized

New Labor Law Class Action Lawsuits Again Outstrip Other Categories Of Class Action Filings In Weekly List Of New Class Action Cases Filed In California State And Federal Courts

As a resource for California class action defense attorneys, so that they may anticipate the types of class actions against which they will have to defend, 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.

Class Actions In The News Uncategorized

Wal-Mart Class Action Defense Cases–Sepulveda v. Wal-Mart: In Unpublished Opinion Ninth Circuit Reverses Denial Of Class Action Treatment In Labor Law Class Action Filed On Behalf Of Assistant Managers

Fifth Circuit’s “Incidental Damages” Approach to Class Action Certification under Rule 23(b)(2) Inapplicable in Ninth Circuit and District Court Erred in Denying Class Action Treatment of Labor Law Class Action based on Conclusion that “Claims for Monetary Relief were Non-Incidental” Ninth Circuit Holds

Plaintiffs filed a class action against Wal-Mart on behalf of assistant managers alleging labor law violations. Plaintiffs filed a motion with the district court for class action certification, arguing that class action treatment was appropriate under Rule 23(b)(2) and 23(b)(3). In an order denying class action certification that may be found here, see Sepulveda v. Wal-Mart Stores, Inc., 237 F.R.D. 229 (C.D.Cal. 2006), the district court refused to certify the litigation as a class action on the grounds that (1) the claims for monetary relief in the class action complaint were not incidental, thus rendering certification under Rule 23(b)(2) inappropriate, and (2) the duties of associate managers “are not susceptible to collective proof,” thus rendering class action treatment under Rule 23(b)(3) inappropriate. Id., at 245-46 and 248-49. Plaintiffs appealed. Sepulveda v. Wal-Mart Stores, Inc., Case No. 06-56090 (9th Cir. April 25, 2008) [Slip Opn., at 1-2]. In an unpublished opinion, the Ninth Circuit reversed. In a single paragraph, the Circuit Court stated that the district court had “misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied certification under [Rule] 23(b)(2),” and cited a Ninth Circuit opinion that “refus[ed] to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998).” Id., at 2 (citing Molski v. Gleich, 318 F.3d 937, 949-50 (9th Cir. 2003)). Rather, the lower court should have “focus[ed] on the intent of the Plaintiffs in bringing suit.” Id. (citation omitted). By failing to do so, the district court abused its discretion in denying class action treatment under Rule 23(b)(2). Id. The Ninth Circuit instructed the district court to reconsider on remand whether class certification was appropriate under Rule 23(b)(2) and, further, to consider “using Rule 23(c)(4) to certify issues under the Rule 23(b)(2) standard.” Id. (citation omitted).

The author notes that the district court opinion contains the following discussion of Rule 23(b)(2):

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

Weyerhauser Loses Antitrust Class Action Lawsuit in Oregon As Jury Awards $28 Million

Oregon Jury Awards $28 Million in Antitrust Class Action Against Weyerhauser On April 29, 2008, Weyerhauser lost a class action lawsuit filed in Oregon; the class action complaint reportedly alleged antitrust violations in that Weyerhauser allegedly monopolized the market for finished alder lumber. A jury found against Weyerhauser and awarded nearly $28 million in damages, which will be trebled under antitrust laws. Weyerhauser has promised to appeal the judgment.

Class Actions In The News Uncategorized

Class Action Defense Cases–Ross v. Bank of America: Second Circuit Reinstates Antitrust Class Action Holding Cardholders Possessed Article III Standing To Pursue Class Action Claims Against Credit Card Issuers

District Court Erred in Dismissing Cardholder Class Action Against Credit Card Issuers, Alleging Conspiracy to Including Mandatory Arbitration Clauses in Credit Card Agreements in Violation of Federal Antitrust Laws, because Class Action Complaint Adequately Alleged Injury in Fact for Article III Standing Second Circuit Holds

Plaintiffs filed a putative class action against various credit card issuing banks for antitrust violations alleging that defendants “illegally colluded to force cardholders to accept mandatory arbitration clauses in their cardholder agreements.” Ross v. Bank of America N.A., ___ F.3d ___ (2d Cir. April 25, 2008) [Slip Opn at 4]. The class action complaint contained two antitrust claims based on violations of Section 1 of the Sherman Act: (1) that defendants “conspired to impose mandatory arbitration clauses,” and (2) that defendants “participated in a group boycott by refusing to issue cards to individuals who did not agree to arbitration.” _Id._, at 5-6. The class action prayed for an injunction and sought “to invalidate existing mandatory arbitration clauses, and to force the banks to withdraw all pending motions to compel arbitration.” _Id._, at 6. Defense attorneys moved to dismiss the class action under Rule 12(b)(1) and (b)(6) on the grounds that plaintiffs lacked standing to prosecute the antitrust class action claims, _id._ The district court granted the motions on the sole ground of lack of standing, and dismissed the class action complaint. _See_ _In re Currency Conversion Fee Antitrust Litig._, No. 05 Civ. 7116 (WHP), 2006 U.S. Dist. LEXIS 66986 (S.D.N.Y. September 20, 2006). (A copy of the district court order dismissing the class action may be found here

.) Plaintiffs appealed; the Second Circuit reversed and reinstated the class action.

The district court dismissed the class action complaint based on its belief that the injuries alleged by plaintiffs were “entirely speculative and, therefore, insufficient to establish Article III standing.” Ross, at 6 (quoting In re Currency Conversion, at *9, *12-13). As the Second Circuit explained at page 6, “Specifically, according to the district court, the cardholders’ injuries are ‘contingent on their speculation that someday (1) Defendants may engage in misconduct; (2) the parties will be unable to resolve their differences; (3) Plaintiffs may commence a lawsuit; (4) the dispute will remain unresolved; and (5) Defendants will seek to invoke arbitration provisions.’” Id., at 6-7 (quoting In re Currency Conversion, at *14-15). The district court also characterized any “alleged anticompetitive effects” as “inchoate.” Id., at 7 (quoting In re Currency Conversion, at *16). The Circuit Court disagreed.

Class Action Court Decisions Uncategorized

Class Action Defense News—Colorado State Court Grants Class Action Status To Complaint Against EchoStar

Eight Years After Filing of Class Action Complaint Against EchoStar, now Dish Network, Colorado State Court Grants Plaintiffs’ Motion to Certify Litigation as a Class Action The Denver Post reports that the Arapahoe County trial court has granted plaintiffs’ motion to certify a lawsuit against EchoStar as a class action. The class action complaint reportedly was filed by “thousands of [EchoStar’s] retail distributors” eight years ago. The trial court, Judge John Wheeler, is quoted by the Post of accusing defense attorneys of “a willingness and proclivity for drawing out legal proceedings as long as humanly possible and burying their opponents in paperwork and filings.

Class Actions In The News Uncategorized

Labor Law Class Action Defense Cases–Isner v. Falkenberg: California Court Affirms Summary Judgment In Favor Of Defense In Labor Law Class Action Holding Resident Employees Need Only Be Compensated For Carrying Out Assigned Duties

Class Action Alleging Failure to Pay Resident Employees for Time Spent “On Call” though not Performing Assigned Tasks Properly Subject to Summary Judgment in Favor of Defense California State Court Holds

Plaintiffs filed a putative labor law class action against their former employer, a property management company, alleging inter alia that it had failed to pay them for overtime and waiting time; specifically, the class action complaint alleged that defendant failed to pay its “resident employees” for “on-call” time. Isner v. Falkenberg/Gilliam & Associates, Inc., 160 Cal.App.4th 1393, 73 Cal.Rptr.3d 433, 434 (Cal.App. 2008). The class action alleged that the resident employee employment agreement signed by plaintiffs required that they be on call “on designated evenings from 5:00 p.m. until 8:00 a.m. and on designated weekends from 5:00 p.m. Friday evening until 8:00 a.m. Monday morning.” The agreement further required employees to “remain on the facility premises within hearing distance of the emergency alarms systems and telephone” while on call, but provided that they were “otherwise free to use on-call time as he or she chooses.” Id. The appellate court explained, “The gravamen of the complaint was that these resident employees were entitled to payment not just for the hours they spent responding to emergencies while on call, but for all the hours they were on call and thus confined to their apartment or the building office so as to remain within audible range of the telephone and alarm.” Id., at 436. Defense attorneys moved for summary judgment arguing that plaintiffs were entitled to wages only for time spent on the job; the trial court agreed that payment was due only for work “actually performed” and, accordingly, granted summary judgment on the class action complaint. Id. The appellate court affirmed.

The pertinent facts established that resident employees were allowed to arrange for another resident employee to “respond to emergency calls with the Employee, or in the place of the Employee” and that employees would be paid for “[a]ll time spent in responding to emergencies.” Isner, at 434. Moreover, if emergencies prevent an employee from obtaining 5 hours of “uninterrupted sleep,” then defendant agreed to “credit Employee with eight hours’ time worked under the terms of [the agreement].” Id., at 435. Plaintiffs were given an apartment to live in, and at least one of them stayed within range of the alarm and telephone while on duty or on call. Id. “While [plaintiffs] were on duty and on call, they slept, ate, talked on their personal telephone, used the internet, played computer games, read magazines or watched television in their apartment when they were not responding to an emergency.” However, while on duty or on call, plaintiffs could not go to the pool or walk around the apartment, because they would be unable to hear the alarm or telephone, and they could not leave the apartment. Id. It was plaintiffs’ responsibility to keep track of and bill their time with respect to “both their usual eight-hour work day and times spent responding to emergencies,” id. And while defendant permitted them to bill all time spent on the job, plaintiffs generally “recorded only the calls that took 15 minutes or more.” Id., at 435-36. “[T]here was never an occasion when [plaintiffs] were not paid for time they recorded on their time sheets.” Id., at 436.

Class Action Court Decisions Employment Law Class Actions Uncategorized