 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
Archived Blog Postings
The following is an archive of blog postings from an earlier version of my website. The postings are arranged in chronological order and span the time period from October 13, 2005 to July 18, 2007.
Ninth Circuit Holds that CAFA Commencement Occurs When Case is Filed in State Court, Not When it is Removed
10/13/2005On October 6, 2005, in Bush v. Cheaptickets, Inc., the Ninth Circuit joined the Seventh and Tenth Circuits (see Knudsen v. Liberty Mutual Ins. Co., 411 F.3d 805 (7th Cir. 2005); Pritchett v. Office Depot, 404 F.3d 1090 (10th Cir. 2005)) in holding that CAFA commencement occurs when a suit is initially filed in state court. In this case, plaintiffs filed their claim against Cheaptickets, on February 17, 2005, one day before CAFA became effective. Defendants removed the case to federal court, asserting jurisdiction under CAFA, but the district court remanded the case to state court, holding that removal was improper because the case was filed before CAFA was effective. Cheaptickets argued that the CAFA commencement date should be the date the case was removed to federal court or, alternatively, the date process was served on defendants. The Ninth Circuit rejected both arguments, and further held that defendants' concerns about procedural problems in cases in which there is a long delay between filing and service of process were "largely hypothetical" and would soon phase out. See also CAFAblog's comments here. - L.C.
Eastern District of Michigan Holds that Case Commenced for CAFA Purposes on Date New Claim was Filed
10/19/2005On October 17, 2005, in Price v. Berkeley Premium Pharmaceuticals, 2005 WL 2649205 (E.D. Mi. 2005), District Judge Avern Cohn held that the commencement date of this class action was the date plaintiffs filed their new claim in federal court under CAFA, not the earlier date on which the original claim was filed in state court. Plaintiffs filed a claim in state court in March 2004. The court erroneously removed the case to federal court at Defendant's request that August. Plaintiffs, who initially sought state court jurisdiction, then sought to remove to federal court, voluntarily dismissing the original complaint and filing a new claim under CAFA in April 2005. The defense, relying upon the Tenth Circuit's decision in Pritchett v. Office Depot, 420 F.3d 1090 (10th Cir. 2005) (case commenced for CAFA purposes when it was filed in state court, not when it was removed), argued that Plaintiffs did not meet CAFA requirements because commencement occured in March 2004, before CAFA was effective. The court disagreed. It distinguished the case at bar from Pritchett because in this case the federal court never had jurisdiction over the original claim and the plaintiffs exercised their right to dismiss the original claim and file a new one. - L.C.
Removal of Countrywide Home Loans action
10/20/2005On Thursday, the U.S. Circuit Court of Appeals for the Seventh Circuit affirmed removal under the Class Action Fairness Act, of class action claims against Countrywide Home Loans, Inc. involving alleged violations of the federal Telephone Consumer Protection Act (TCPA), 47 USC 227. Writing for the panel (which also included Judges Posner and Rovner), Judge Easterbrook held that removal was proper under CAFA because Countrywide’s concession that it had sent at least 3,800 unsolicited advertising faxes meant that the amount in controversy exceeded CAFA’s $5 million amount in controversy requirement (the TCPA allows for awards of $500 per fax, which can be trebled to $1500/fax for willful behavior). The court held that Countrywide was not required to show that a judgment against it would result in an award in excess of $5 million, but merely that it was possible for such an award to be made on the face of the pleadings.
The Seventh Circuit decision contains two key holdings:
1. A defendant invoking federal jurisdiction has the burden of proving it exists. This is contrary to CAFA's legislative history and several district court opinions holding the burden of proof is on the plaintiff resisting removal.
2. TCPA cases can be removed under CAFA even though the federal statute appears to restrict jurisdiction to state courts.
Fireside Bank v. Superior Court
10/21/2005In Fireside Bank v. Superior Court, real party in interest Gonzalez had filed class claims against Fireside, a bank holding car leases, under the Rees-Levering Motor Vehicle Sales and Finance Act. Fireside concurrently filed claims against the class representative in her individual capacity. The court reached and rejected the merits of Fireside’s claim against Gonzalez before certifying the class. Fireside appealed, arguing that under California precedent known as the Home Savings cases, any ruling on the merits in a class action before notice is sent to the class is impermissible. In an exhaustive ruling, the the California Court of Appeals 6th Division rejected this strict reading of Home Savings in this context, noting in particular that this ruling was only on the merits of Fireside’s claim against the individual class representative and was not a ruling on any of the class’s claims.
New action against Pixar
10/22/2005Milberg Weiss filed a shareholder suit against Pixar alleging that Pixar and Disney provided "misleading" projections of revenue from home video sales, despite knowing of a slowdown in the home video sales market.
iPod nano scratch action
10/24/2005A class action was filed against Apple Computer today in U.S. District Court in San Jose, claiming that Apple’s newly released iPod Nano is defective because the screen scratches easily with normal use.
Lerach opens NYC office
10/26/2005Lerach Coughlin, the San Diego-based class action firm that split with Milberg Weiss last year, opened an office in New York City this week, run by Patrick Daniels. Prior to the split, Milberg Weiss was the largest firm in the country to specialize in class action shareholder suits. The two firms are now stubborn competitors. After the split, Lerach Coughlin came away with the Enron shareholder class action, through which it has collected settlements of $7 billion. Lerach Coughlin has approximately 150 attorneys. Milberg Weiss has over 120. Lerach Law Firm Lands in City, New York Sun.
Chamber of Commerce report critical of securities class actions
10/27/2005The U.S. Chamber of Commerce released a report today arguing that U.S. securities laws and the class actions that stem from these laws primarily benefit large institutional investors, not individual investors. The report argues that because institutional investors are diversified, their losses from investing in fraud-plagued companies are typically offset by their gains from selling other artificially inflated investments. Class action remedies therefore overcompensate them. Non-diversified individual investors are therefore more likely to sustain serious damage from financial fraud. Institutional investors and plaintiffs lawyers contest these conclusions. See Critics of Shareholder Suits Aim at Big Holders, New York Times, October 27, 2005.
NY Appellate Court Says No Class Action Allowed Under
10/28/2005Finding that the Telephone Consumer Protection Act (47 U.S.C. 227) contains no statutory authorization for class recovery, the Appellate Division of the New York Supreme Court unanimously affirmed Thursday a lower court's dismissal of class action claims seeking statutory damages and injunctive relief under the TCPA. Leyse v. Flagship Capital Services Corp.
Institutional Investors Secure $651 million Settlement Against WorldCom Investment Banks 10/28/2005
More than 65 institutional investors, including CalPERS, secured a $651 million settlement against WorldCom's former investments banks for losses on purchases of WorldCom stocks and bonds. The 32 individual lawsuits brought by the funds were some of the last pieces of the litigation stemming from the $11 billion accounting fraud that led to WorldCom's bankruptcy three years ago, and were separate from a $6.1 billion class-action settlement last month won by WorldCom investors. William Lerach, lawyer for the plaintiffs, said that the class-action settlement would only have netted his clients $352 million in overall recovery.
Ninth Circuit vacates anti-suit injunction
10/30/2005In a lengthy 2-1 decision, the U.S. Court of Appeals for the Ninth Circuit vacated an anti-suit injunction issued by a federal court in Oregon that had barred a state court in Minnesota from entering part of a jury award there. Sandpiper Village Condominium Assoc. v. Louisiana-Pacific Corp. The Oregon court had overseen the settlement of a 1996 nationwide class action concerning defects with defendant's exterior siding product; by 2003, L-P had paid out $509 million to 142,000 claimants nationwide. In 2002, a Minnesota state jury awarded Lester, a Minnesota builder not a member of the settlement class $29.6 million in damages for siding failure. The Oregon class action court then barred the Minnesota court from entering part of this judgment pursuant to its authority under the All-Writs Act, concluding that it fit into two exceptions in the Anti-Injunction Act. The Ninth Circuit reversed, holding that the injunction fit neither exception because it was not necessary to protect the Oregon court's jurisdiction nor necessary to preclude relitigation. Judge Richard Clifton authored the decision, with Judge Barry Silverman concurring. Judge Stephen Reinhardt wrote a lengthy dissent noting the tension between Congress' extension of federal class action jurisdiction and this decision's limitation on the capacity of federal courts to protect their class action outcomes.
Ohio court denies certification on numerosity
10/30/2005In Fahey v. Encore Financial, an Ohio district court denied class certification in a Fair Debts Collection Practices Act case. Plaintiff had based his claim of numerosity on the defendant’s national network of offices and the dollar value of its activity. The court found this proof insufficient to demonstrate that enough people had actually received similar communications from the Defendant.
10th Cir. Affirms Adequacy Of Notice Procedures Under 23(C)(2)(B)
10/31/2005In Dejiulius v. New England Health Care Emps. Pension Fund , the U.S. Court of Appeals for the 10th Circuit okayed a class notice program even though some members did not receive notice. As all settlement notices were sent nearly two weeks prior to the settlement hearing, the Court found that the program comported with both Rule 23 and the Due Process Clause, stating that the mailings as a whole "were sufficient to flush out any objections that might arise [as] to the fairness of the settlement."
Class Action Suit Filed Against Army Corps Over Katrina
10/31/2005New Orleans litigation law firm Maples and Kirwan have filed a class action alleging that the US Army Corps of Engineers' Mississippi River Gulf Outlet, a shortcut from St. Bernard Parish to the port of New Orleans for deep-draft vessels, helped amplify the height of Katrina’s surge by up to three feet and doubled the surge’s velocity. St. Bernard Parish Tangles with Army Corps over Gulf Outlet, Washington Post, Oct 31 2005.
New German Law Facilitates Securities Class Actions
10/31/2005A new German law protecting shareholders became effective today. The new law enables any ten shareholders to come together and file a class action against companies that have presented "false, misleading, or incomplete capital market information," either in annual reports or prospectuses. Bigger powers for Big Shareholders, Financial Times (London), October 31, 2005.
11th Circuit Enforces Arbitration Agreement Barring Class Actions
10/31/2005Interpreting Georgia law, the U.S. Court of Appeals for the 11th Circuit rejected the argument that an employer's dispute resolution policy was unconscionable because it prohibited class actions. Caley v. Gulfstream Aerospace Corp. The Court held that the class action bar served arbitration's goals of simplicity, informality, and expedition embraced by the Supreme Court in Gilmer v. Interstate/Johnson Lane Corp, 500 U.S. 20 (1991). The Court acknowledged that the 9th Circuit had held otherwise in Ingle v. Circuit City Corp., 328 F.3d 1165 (2003), but reasoned that California and Georgia law differed in their approaches to unequal bargaining contracts.
Toyota and Goodyear Face Class Action
11/01/2005Claimants filed a class action against Toyota and Goodyear claiming that run-flat tires, sold to buyers of Toyota’s Sienna minivan, are defective for wearing out after 10,000 miles.
DHB Industries Named in Securities Class Action
11/01/2005Brodsky & Smith LLC have filed a securities class action against DHB Industries Inc. in the Eastern District of New York on behalf of shareholders who purchased stock in the company between April 21, 2004 and August 29, 2005. The complaint alleges that DHB issued false and misleading statements regarding its financial performance and business operations. DHB Industries Inc. engages in the manufacturing and marketing of protective body armor.
Federal Judge Gives Preliminary Approval to $195 Million Settlement by KPMG LLP
11/01/2005Judge Dennis Cavanaugh of the U.S. District Court in Newark tentatively approved a $195 million settlement between KPMG, the fourth largest accounting firm, and hundreds of former clients who bought tax shelters later declared illegal, despite objections from some attorneys that plaintiffs' counsel Milberg Weiss had colluded with KPMG in brokering the deal. A hearing to finalize the agreement is set for February 24, 2006.
Qwest Communications Announces Tentative $400 Million Settlement of Securities Class Action
11/02/2005Qwest entered into a settlement with shareholders to resolve a securities class action suit resulting from an accounting scandal that forced Qwest to restate billions of dollars of revenue. Arthur Andersen, a co-defendant in the suit, would contribute $10 million to the settlement, which still needs court approval to become effective.
Bush Calls Upon Congress to Protect Vaccine Makers from Liability
11/03/2005During a press conference about the nation's preparedness for Asian bird flu, President Bush suggested that a "flood of lawsuits" over the last decades has caused the number of vaccine manufacturers to dwindle. The President called on Congress to "to remove one of the greatest obstacles to domestic vaccine production: the growing burden of litigation," by passing liability protection measures. Economists debated the merits of this proposal. Legal Worries Stoke Flu Issue, Newsday, November 2, 2005.
Netflix Offers Customers Free Month of Rentals or Service Upgrade to Settle Class Action
11/03/2005The Internet DVD rental service was sued for false marketing based on its promises of unlimited DVD rentals and one-day delivery. The settlement, filed in California Superior Court in San Francisco, covers persons who subscribed to the service as of January 14. Netflix Settles Class Action Suit, Contra Costa Times, November 3, 2005. Plaintiffs' counsel will get $2.5 million in fees if the settlement is approved at a fairness hearing scheduled for January 18, 2006.
Class Action Filed Against Halliburton
11/03/2005Five workers seeking class action status filed suit against Halliburton in Houston Federal Court claiming over 20,000 workers were cheated out of overtime pay. Newport Beach firm Lopez, Hodes, Restaino, Milman & Skikos represents the plaintiffs.
6th Circuit Bankruptcy Court Says FRCP 6(a) Not Applicable to Date Specific Deadlines
11/04/2005In Violette v. P.A. Days, Inc, the 6th Circuit Bankruptcy Court reversed and remanded the district court decision that allowed two class members to opt out of a class settlement despite postmarking the requisite forms two days after the Saturday, February 14th deadline. Citing Fleischauer v. Feltner, the Panel held that FRCP Rule 6(a) only applies where litigants are required to file papers within a given number of days. As in this case, where the deadline is a set day, litigants will not be afforded extra time if the deadline falls on a day where the court is closed.
China to Draft Rules Permitting Class Suits in Corporate Governance Cases
11/04/2005In an attempt to encourage investment by providing greater investor protection, the chairman of the China Securities Regulatory Commission announced his intention to establish rules allowing class suits in corporate governance cases. These rules will be a part of broader capital market reform to take place in China.
Competing Class Actions Filed Against Guidant Corp.
11/07/2005Both Scott + Scott LLC and Charles J. Piven, P.A. have filed securities fraud class actions against Guidant in United States District Court for the Southern District of Indiana. The suits allege that Guidant artificially inflated stock prices by concealing defect and liability issues concerning key products.
New Law Journal Symposium on Class Actions
11/07/2005The Fall 2005 edition of the Georgetown Journal of Legal Ethics (Volume XVIII, Number 4) features over 200 pages of articles on topics including: "Special Ethics Concerns in Class Action Litigation;" "Class Actions As an Alternative to Regulation;" "Empirical Analysis of Class Action Trends;" and "The Ethics Behind Due Process In Class Action Notice." The issue also includes four articles concerning coupons settlements and two articles addressing the relationship of government enforcement to the superiority requirement in private class certifications.
ABA Class Action Conference
11/07/2005The American Bar Association will be holding a conference on The Future of Class Action Litigation in America from November 9-11 at the Ritz Carlton in Washington, D.C.
Northern Ireland Police Officers Launch Class Action Against Government
11/07/2005Police officers in Northern Ireland have filed a class action suit seeking compensation for the trauma they suffered during decades of terrorist violence. Lawyers for the officers argue that the government failed to accurately diagnose and treat injuries including depression and post-traumatic stress injuries.
Former Milberg Weiss Expert Witness Plea Agreement Does Not Include Promise to Cooperate with Prosecutors
11/08/2005John Torkelsen, formerly an expert witness for Milberg Weiss, pled guilty to making false statements to the Small Business Administration, and in return prosecutors from the U.S. Attorney's Office recommended a 70 month prison term. Despite expectations that Torkelsen's plea agreement might include a promise to help Los Angeles prosecutors in their suit against Milberg Weiss, there was no clear language in the agreement to that effect.
Objectors Appeal KPMG Settlement
11/08/2005Three plaintiffs' class-action firms have vowed to appeal the $225 million ($195 million in compensation and $30 million in attorney's fees) settlement of a class action against KPMG and Sidley Austin Brown & Wood. The objectors seek to disqualify lead counsel Milberg Weiss, accusing the firm of collusion and conflicts of interest.
Class Suit Against Pfizer Dismissed For Lack of Jurisdiction
11/09/2005In Ajudu Ismaila Adamu v. Pfizer, the U.S. District Court in the Southern District of New York dismissed a class action suit against Pfizer for lack of subject matter jurisdiction. 2005 U.S. Dist. Lexis 26804. The plaintiffs sought jurisdiction under the Alien Tort Statute claiming that a team of Pfizer executives, scientists, and doctors treated Nigerian minors with an “untested and unproven drug” without ever obtaining informed consent. The Court denied jurisdiction under the ATS and further supported dismissal on forum non conveniens grounds finding Nigeria to be a more appropriate forum.
Illinois District Court Disallows Written Interrogatories to Absent Class Members
11/09/2005On November 7, 2005, holding that “communications with absent class members is a major source of concern for courts in class action litigation” because discovery must be limited to protect harassment of absent class members and maintain the advantage of streamlined discovery of a class action suit, the Western District Court of Illinois found in Bell v. Woodward Governor, Co., 2005 U.S. Dist. LEXIS 26757 (N.D. Ill. 2005), that the Defendant did not meet its burden of showing that absent class member discovery was necessary at this point in the case. The court dismissed Defendant’s arguments that it would be forced to conduct all of its discovery on the eve of trial and that Plaintiffs were aiming to “ambush” the Defense, noting that Plaintiffs had complied with all of the court’s orders and that the court had already granted Defendant 40 additional depositions. -L.C.
Hospital Giant HCA Sued for Allegedly Inflating Stock Price
11/09/2005A recently-filed class action alleges that HCA directors and officers falsely told investors that the company had been experiencing positive operating trends during the class period, from January 12 to July 12, 2005. During this period, HCA's stock increased by nearly 50%, and the defendants purportedly profited by selling almost $48 million in shares. The SEC and the Department of Justice have opened investigations into possible insider trading.
Guidant Defibrillator Suits Consolidated in Minnesota District Court
11/09/2005The Judicial Panel on Multidistrict Litigation transferred six actions to Judge Donovan Frank in the U.S. District Court in St. Paul, Minnesota, noting that over 60 related actions could tag along. Guidant had sought transfer to the Northern District of Illinois. The suits stem from defects with Guidant's implantable cardioverter defibrillator (ICD). The company recently recalled or issued warnings on approximately 88,000 ICDs and almost 200,000 pacemakers.
Hurricane Victims File Class Action Against FEMA
11/10/2005Attorneys have filed a class action lawsuit on behalf of victims of Hurricane Katrina against FEMA in U.S. District Court in New Orleans. The suit alleges that FEMA failed to provide adequate housing assistance by imposing retroactive rules on applicants and denying claims from large families sharing the same address. The plaintiffs are seeking immediate assistance in the form of housing and money. FEMA stated that it could not comment because it had not read the complaint. Plaintiffs are represented by Howard Godnick, of the law firm of Schulte, Roth, and Zabel.
Southern District of New York Approves Supplemental Jurisdiction Over the Assigned Claims for Diversity Purposes
11/11/2005On November 7, 2005, relying on the recent Supreme Court case , Exxon Mobil Corp. v. Allapattah Services, Inc., Judge Charles Haight, Jr. in Feinberg v. Katz, 2005 U.S. Dist. LEXIS 26954 (S.D.N.Y. 2005) found supplemental jurisdiction over 64 assigned claims that did not individually meet the amount of controversy requirement for diversity purposes. The case has a complicated procedural history lasting over four years and reaching Circuit Court level, but the jurisdictional issue concerns claims assigned to Feinberg by creditors of the corporation that Feinberg and Katz once co-owned. Of the 70 creditors who assigned claims to Feinberg, only 6 had the requisite amount in controversy to meet diversity jurisdiction. The court first examined whether the claims could be aggregated and found that Supreme Court precedent Zahn v. International Paper and Snyder v. Harris disallowed aggregation, even in a non-class action suit such as this one. However, the court held that Exxon allowed supplemental jurisdiction over the 64 claims that did not meet the amount in controversy in class action and non-class action situations, even where the claims had been assigned to one plaintiff. The court also rejected Katz's argument that the it should decline to exercise supplemental jurisdiction under 1367(c)(2) because no state case law, policies or concerns predominate the federal claims. -L.C.
Maine District Court Judge Awards Attorneys 25% Fee in Class Action
11/11/2005On November 10, U.S. District Court Judge D. Brock Hornby awarded plaintiffs' attorneys 25% of the $3.3 million settlement in a strip search class action, Nilsen v. York County. Noting that most circuits used a multifactor approach to determine reasonableness of attorney's fees, Judge Hornby rejected that approach as unpredictable (in this case it would support any award from 16% to 33%), potentially inconsistent with the factors underlying a percentage fee award, and a poor use of judicial resources. The judge instead followed the market rate approach of the Seventh Circuit and found 25% to be a fair number based on standard contingency fees and median attorney's fees in federal and Maine cases. The attorneys had requested 30% of the award.
Class Actions Challenge Sony Anti-Piracy Software
11/14/2005Los Angeles attorney Alan Himmelfarb has filed a class action suit in a California Superior Court against Sony BMG, alleging that "rootkit" type anti-piracy software (operating with "virus-like techniques") on some of the company's recently released CD's violates computer tampering, fraud, trespass, and false advertising laws. The Los Angeles suit covers all affected Californians, while New York attorney Scott Kamber plans to file a similar suit on behalf of a nation-wide class and the Electronic Frontier Foundation is considering legal action as well.
Class Action Filed Against Barrier Therapeutics
11/14/2005Milberg Weiss has filed a class action lawsuit against Barrier Therapeutics, Inc. and certain of its directors and officers in the U.S. District Court of New Jersey. The lawsuits alleges that the defendants made false and misleading statements about their dermatological products. The case seeks to certify a class of those who purchased common stock between April 29, 2004 and June 29, 2005.
Securities Class Action Filed Against Spectrum
11/15/2005Atlanta law firm Chitwood Harley Hanes has filed a securities class action lawsuit against Spectrum Brands, Inc. and certain of its officers and directors, in U.S. District Court for the Northern District of Georgia. The lawsuit alleges violations of sections 20(a) and 10(b) of the Securities Exchange Act of 1934 concerning purchases of common stock from January 4, 2005 until November 11, 2005.
Class Action Filed Against Wells Fargo
11/15/2005Stull, Stull, and Brody has filed a class action lawsuit against Wells Fargo bank in Northern California U.S. District Court. The suit alleges that during a five year period from June 2000-June 2005, Wells Fargo brokers aggressively pushed Wells Fargo mutual funds to clients even though such investments were not in the clients' best interests, violating securities laws.
Delaware District Court Dismisses Consolidated Class Action Against Zeneca Pharmaceuticals 11/16/2005
On November 8, U.S. District Court Judge Sue L. Robinson (D. Del.) dismissed a consolidated class action against Zeneca Pharmaceuticals for failure to state a claim upon which relief could be granted. Pa. Emple. Benefit Trust Fund v. Zeneca, Inc., 2005 U.S. Dist. LEXIS 27444. The plaintiffs alleged that Zeneca’s marketing strategy of the drug Nexium misled consumers, resulting in “billions of dollars of unnecessary drug expenditures” and hundreds of thousands of patients unnecessarily taking Nexium. The plaintiffs sought recovery under three separate theories: 1) violation of the Delaware Consumer Fraud Act; 2) unjust enrichment; and 3) negligent misrepresentation. The court found none of the claims to be viable despite the permissive standards of FRCP 12(b)(6).
Texas Court Approves $150 Million Securities Settlement Against TXU Corp.
11/16/2005On November 8, U.S. District Court Judge Ed Kinkeade entered final approval of a class settlement resolving consolidated securities class actions brought against TXU Corp. in 2002. 2005 U.S. Dist. Lexis 27077. The settlement agreement establishes a $149,750,000 fund available to eligible class members who make timely claims, and also imposes various reforms against TXU in an attempt to improve the Company’s corporate governance and financial controls. Lead counsel Lerach Coughlin Stoi Geller Rudman and Robins committed that the plaintiffs' attorneys would seek fees not in excess of 22.2% (or roughly $33 million). Gilardi & Co., LLC is responsible for administrating the claims.
Illinois District Court Denies Certification of Class Action Against GMAC Mortgage Corp.
11/16/2005On November 8, U.S. District Court Judge Samuel Der-Yeghiayan (E.D. Ill.) denied certification of a Fair Credit Reporting Act case for failure to meet the requirements of 23(a)(4) and 23(b)(3). Murray v. GMAC Mortgage Corp., 2005 U.S. Dist. Lexis 27254. The Court held that 23(a)(4) was not met because, inter alia, plaintiff's counsel did not seek actual damages or individual damages for the named plaintiff and instead entered class settlement negotiations with the defendant. The Court found the class form not superior because of the small claims involved, compared to the "handsome sum" counsel might receive.
This is arguably the worst class action decision of 2005. The judge appears to understand nothing about class action practice. For starters, he analyzes counsel's adequacy under Rule 23(a)(4) - memo to Illinois: Rule 23 was amended in 2003 and counsel's adequacy is now analyzed under Rule 23(g).
What's worse, he pulls out the mindless sound-bite that the class action will yield a small recovery for each plaintiff, at great expense to the defendant, with large attorney fees. Of course, it is precisely this situation - a large set of small harms - that requires certification. Would it be better to not certify and permit the defendant to escape even the possibility of liability?
In fairness to the Court, the judge seemed provoked by the fact that GMAC alleged - and plaintiff apparently did not deny - that she, her spouse, and children are "participants in more than fifty assorted suits seeking compensation for violations of FCRA which are all being handled by the same firm." (I'm assuming "participants" means that they are class representatives or named plaintiffs.) The court reasoned that certifying such a class would only serve to encourage professional plaintiffs and class action law firms to bring suits as a “profitable enterprise” and not as a “vehicle to vindicate class members’ rights.”
Plaintiff's counsel is a well-established Chicago class action firm. If Congress hoped (in enacting CAFA) that moving class actions to federal court would sound their death-knell, this decision (of a case arising under federal law) supports that presumption. - Ed.
Sony Settles Play Station 2 Suit
11/16/2005Sony Computer Entertainment of America recently settled a class action suit alleging that some Play Station 2 consoles worked improperly. Those affected can fill out claims by February 16, 2006 to receive a $25 check or a free video game from a selected list.
Class Action Filed Against UCI Medical Center Over Liver Transplant Program
11/16/2005Attorney Lawrence Eisenberg filed a class action suit in California Superior Court (Orange County) against the University of California Irvine Medical Center alleging fraud, misrepresentation, and conspiracy in the handling of liver transplants. The suit claims UCI improperly rejected donated livers and failed to inform patients that most would never receive a transplant.
Federal Court Approves $75 Million Settlement in Suit Against Drug Maker Organon
11/16/2005On November 9, U.S. District Court Judge Faith Hochberg approved a settlement in a class action suit brought against the manufacturer of Remeron, an anti-depressant. In re Remeron Direct Purchaser Antitrust Litig. The suit alleged that the manufacturer schemed to delay the market availability of cheaper, generic versions of Remeron, causing consumers to pay artificially inflated prices for the drug. Class counsel - including Bruce Gerstein of Garwin, Gerstein & Fisher and Linda Nussbaum of Cohen, Milstein, Hausfeld & Toll - received one third of the settlement amount, plus interest and expenses. This was over 1.8 times class counsel's lodestar amount of approximately $13.4 million. The two class representatives each received $30,000 for their service in the case.
Dismissal of CAFA-Invoking Defendants Does Not Require Remand
11/16/2005On November 9, U.S. District Court Judge D. Brock Hornby (D. Me.) ruled that a plaintiff may not undo CAFA removal by dismissing the defendants upon whom federal jurisdiction hinged. Dinkel v. Gen. Motors Corp. The underlying lawsuit was filed in state court in Kansas on Feb. 17, 2005 -- the day before CAFA took effect -- alleging a conspiracy by car companies to restrict illegally the importation of cars from Canada. However, several of the Kansas defendants were not served within the 90 days that Kansas allows, so the case against them did not "commence" until they were served during the summer of 2005. These defendants were therefore able to remove the entire action to federal court under CAFA. The plaintiff then dismissed his claims against these particular defendants and sought remand to Kansas state court. Judge Hornby ruled that the burden was on the plaintiff to demonstrate an absence of federal jurisdiction and then held that because jurisdiction existed at the point of removal, it was not defeated by the later dismissal of the key defendants.
No matter what the legislative history of CAFA says, the Court is likely wrong on the first point (that the party opposing federal jurisdiction has the burden to show its absence) and right on the second (that jurisdiction is assessed at the moment of removal and does not disappear with later developments). While the Court might have used its discretion to remand, there'd be no great equity in doing so here since the plaintiff's lawyers lost the advantage of his Feb. 17 filing date when he failed to perfect service. This case demonstrates the timeless principle, "you schnooze, you lose." - Ed.
Class Action Filed Against Interlink Electronics for Securities Violations
11/16/2005The law firm of Brodsky & Smith, LLC has filed a class action complaint in U.S. District Court for the Central District of California alleging Interlink, a manufacturer of media interface products, engaged in improper accounting and issued false and misleading statements to shareholders, causing shares to drop by 40%. The proposed class consists of all purchasers of common stock between April 24, 2003 and November 1, 2005.
Ohio Prison Health Care Suit Settlement Approved
11/17/2005U.S. District Court Judge Sandra Beckwith of the Souther District of Ohio gave final approval yesterday to a multimillion dollar settlement that will add nearly 300 medical positions to serve the state's 45,000 inmates. The Ohio Justice and Policy Center filed the suit, alleging that health care in the prison system was constitutionally inadequate.
Blind Sue Social Security Administration for Failing to Provide Visually Accessible Notice of Benefits Termination
11/17/2005A proposed class action, filed yesterday in the U.S. District Court for the Northern District of California, alleges that the Social Security Administration communicates with its visually impaired recipients in print that they cannot read. Consequently, the plaintiffs allege, the agency terminated benefits to some recipients, although they never received notice that there was a problem. The suit demands that the agency offer correspondence in alternative formats for the visually impaired. Plaintiffs' counsel includes Arlene Mayerson of the Disability Rights Education and Defense Fund, and attorneys from the National Senior Citizens Law Center, the Oregon Advocacy Center, and Heller Ehrman, LLP.
Securities Class Action Brought Against Blockbuster Video, Viacom
11/17/2005Baron & Budd, P.C. has filed suit alleging that Blockbuster provided misinformation to investors in connection with its exchange offer of Viacom stock for 144 million shares of Blockbuster and in relation to the finances and operations of its video rental stores. The lawsuit was filed in the U.S. District Court for the Northern District of Texas and assigned to Judge David Godbey.
Hospital Bed Maker to Pay $337.5 Million to Settle Antitrust Charges
11/18/2005The Indiana-based Hillenbrand Industries, which controls 90% of the market for regular hospital beds, has announced that it will pay $337 million to settle class action charges. The lawsuit, filed in South Carolina District Court, alleged that Hillenbrand's practices of discounting its hospital beds in connection with its sales and rentals of specialty beds harmed competition and led to increased prices. The company denied all wrongdoing and reported that the settlement does not require it to change current business practices. Finalization of the settlement is not expected until early 2006.
Court Certifies Class In Staples Wage Claim Suit
11/19/2005Staples reported in an SEC filing that a California state court has certified a class action in a suit alleging that the company violated the California wage and labor law by not paying its store managers overtime. Staples vowed to appeal the ruling. The report also noted that a loss at trial could cost the company $10 to 150 million, excluding interest and attorneys' fees.
Humana Agrees to Pay Physicians $40 Million Settlement
11/20/2005Humana, Inc. announced that it has reached an agreement with a class of more than 700,000 physicians who alleged that a number of managed care companies (including Humana) conspired to reduce or deny physicians' payments and failed to pay claims in a timely manner. The settlement also includes up to $18 million in legal fees, and is subject to approval by U.S. District Judge for the District of Miami Federico Moreno. The settlement recognizes that Humana has spent more than $75 million to correct deficiencies in its operation.
Class Action Settlement Requires Illinios to Increase Medicaid Payments for Children from Low- Income Families
11/20/2005U.S. District Judge Joan Lefkow finalized a settlement, to take effect January 1, 2006, that doubles Medicaid payment rates for some types of doctor and dentist office visits by children from low-income families. The settlement raises reimbursement rates statewide, and it is hoped this will encourage doctors to better serve poor children.
Alabama Appeals Court Dismisses Class Claims; Refuses to Apply Class Action Tolling Rule 11/20/2005
In Redman Homes, Inc. v. Surtees, the Court of Civil Appeals of Alabama affirmed the dismissal of claims brought by Redman Homes against the commissioner of the Alabama Department of Revenue, seeking refunds of franchise taxes declared unconstitutional. The dismissed claims were not timely filed, but plaintiffs claimed that the class action tolling rule (triggered by the filing in a different suit, Patterson v. Gladwin Corp.) applied to its claims. The Court held, however, that where members of the class know or should know that the administrative proceeding constitutes the exclusive method of obtaining the relief they seek, the class action tolling rule cannot operate to toll the statute of limitations for filing the administrative proceeding.- A.S.
Texas Supreme Court Remands Claims Against BMG for Class Certification Determination 11/20/2005
In BMG Direct Marketing, Inc. v. Peake, the Texas Supreme Court remanded class claims against BMG, a marketer of music, directing the trial court to determine whether the voluntary-payment doctrine defense raised by BMG precluded class certification under Rule 23(a) becuase of the predominance of individual issues triggered by the defense. However, the Court declined to join other courts' determination that the application of the voluntary-payment rule always causes individual issues to predominate, finding that such a rule would unfairly allow a defendant to preclude class certification simply by alleging voluntary payment.
EFF Files Class Action Against Sony
11/21/2005Despite Sony's recall of its copy-protected CDs, the Electronic Frontier Foundation, a nonprofit group, filed a class action lawsuit against Sony in federal district court in Los Angeles, along with two nationally recognized class action law firms, Green Welling and Lerach Coughlin. The suit alleges that Sony's music CDs contained "rootkits" that degrade the performance of computers and make them vulnerable to viruses. Sony is facing at least six similar suits nationwide and an action by the Texas Attorney General.
Southern District Of New York Approves Settlement Agreements in WorldCom ERISA Class Action 11/22/2005
In In re Worldcom, 2005 U.S. Dist. Lexis 28686, Southern District of New York Judge Denise Cote approved separate settlement agreements between former WorldCom employees and Merrill Lynch, trustee of WorldCom's pension plan, and Scott Sullivan, former WorldCom CFO, respectively, in litigation over 401(k) investments in WorldCom stock. Plaintiffs had reached a settlement agreement with defendants WorldCom and former CEO Bernie Ebbers in June 2004 for $47.15 million. This past summer, plaintiffs settled with Merrill Lynch for $200,000 and with Sullivan for 10% of the proceeds from the sale of his house and of the balance of his 401(k) plan. Judge Cote found that both the Merrill Lynch and Sullivan settlements should be approved given that there was no suggestion the settlements were tainted by collusion, no class members had objected to the settlement, and plaintiffs would not likely have recovered more from Merrill Lynch or Sullivan given a summary judgment finding for Merrill on all claims and Sullivan's limited resources. Judge Cote also approved a payment of $450,000 from Bernie Ebbers to the class in satisfaction of an unsecured promissory note, and attorney's fees of 20% of the total recovery of $49 million. -L.C.
New York District Court Approves Preliminary Settlement Agreement in Luxottica Group Securities Litigation
11/23/2005On November 15, 2005 U.S. District Court Judge Jack B. Weinstein preliminarily approved partial settlement of a securities class action brought against Luxottica Group S.p.A. and Sunglass Hut International Inc. 2005 WL 3046686. The Garden City Group, Inc. has been approved as claims administrator to supervise and administer the notice procedure and processing of claims. The final settlement hearing is scheduled for February 9, 2006.
New York District Court Approves Settlement in Ashanti Fields Securities Litigation
11/23/2005On November 15, 2005 U.S. District Court Judge J. Trager approved settlement of a securities class action against Ashanti Goldfields Company Limited. 2005 WL 3050284. The settlement creates a $15 million dollar cash settlement fund for plaintiffs. $4.125 million (27.5%) of the fund is to be awarded in attorney’s fees, along with $1.35 million awarded to reimburse counsel for expenses. The court deemed the percentage of attorney’s fees reasonable after subjecting the percentage to the 2nd Circuit “Goldberg Test” which considers: 1. the time and labor expended by counsel; 2. the magnitude and complexities of litigation; 3. the risk of the litigation; 4. the quality of representation; 5. the requested fee in relation to the settlement; and 5. public policy considerations.
CA District Court Approves Settlement in Veritas Software Securities Litigation
11/23/2005On November 15, 2005 U.S. District Court Judge J. Chesney approved a settlement to resolve the class action suit brought against Veritas Software Corporation on behalf of shareholders who alleged violation of the Securities Exchange Act of 1934. 2005 WL 3096079. The settlement provides for distribution of $35 million to persons who purchased stock in the company between January 3, 2001 and January 16, 2003. $6 million (17%) of the fund is to be awarded in attorney’s fees along with over $500,000 in expenses. The court affirmed the settlement as “fair, reasonable, and adequate” after balancing the eight factors articulated in Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). The court also reduced the attorney’s fees from $8.1 (23%), as stipulated in the proposed settlement, to $6 million (17%) based on the amorphous 9th Circuit standard which merely requires fees be reasonably related to the plaintiffs’ recovery.
WA District Court Certifies Class Action Against Dept. of Social and Health Services
11/23/2005On November 15, 2005 U.S. District Court Judge J. Shea granted plaintiffs’ motion for class certification against the Department of Social Health Services under FRE 23(a) and 23(b)(2). 2005 WL 3050388. The complaint alleges the DSHS demanded entry into day care services and demanded copies of business and personal records without advising the day care operator of the right to refuse consent to search or to contact an attorney. In certifying the class, the court rejected defendant’s argument that a showing of “necessity” of class certification is required by Rule 23. - J.J.
CA District Court Denies Certification of Pfizer Class
11/23/2005On November 15, 2005 U.S. District Court Judge J. Phillips denied class certification of a suit brought against Pfizer alleging adverse side affects resulting from use of the drug that were never communicated to the FDA. 2005 WL 3074602. The court held that although the “numerosity” and “commonality” requirements of 23(a) were satisfied, the plaintiffs’ failed to establish “typicality” and “adequacy.” Although not necessary, the court continued to deny certification on grounds that the plaintiff’s failed to satisfy the “predominance” and “superiority” requirements of 23(b)(3). - J.J.
Eastern District of New York Allows Fluid Recovery Litigation
11/24/2005On November 14, 2005, Judge Jack B. Weinstein of the Eastern District of New York allowed a class action suit to move forward against Phillip Morris, USA, rejecting defendant's argument that plaintiff's fluid recovery proposal required denial of certification and dismissal. Schwab v. Philip Morris USA, 2005 U.S. Dist. LEXIS 27649 (E.D.N.Y. 2005). Plaintiff's plan provided that damages against Philip Morris be decided on an aggregate level and then allocated based upon the number of "light" cigarettes each class member purchased. The court engaged in a lengthly discussion of judicial evaluation of fluid recovery plans, noting that though some federal appellate courts have expressed opposition to the use of such plans in certain cases, concerned with Due Process or Seventh Amendment violations, fluid recovery has been accepted in some context by all of the federal circuits that have considered the issue and endorsed by most state courts that have confronted it as well. After carefully considering Second Circuit case law in particular, the court ultimately concluded that the use of fluid recovery was appropriate in the instant case and did not violate Defendant's right to Due Process under the law or to a trial by jury under the Seventh Amendment. -L.C.
Securities Class Action Brought Against GM
11/25/2005On November 23, 2005, the law firm of Pomerantz, Haudek, Block, Grossman & Gross filed a class action suit against General Motors in U.S. District Court in Eastern Michigan, alleging false and misleading statements regarding the company's growth and balance sheet strength during the period of April 18, 2001 until November 9, 2005. -L.C.
BankBoston Settlement Funds Unclaimed; Nonprofits Stand to Gain
11/28/2005According to court documents, so far only about 58,000 people have filed $25 claims they are entitled to under a $12.5 million class action settlement with Bank of America, which alleged that BankBoston customers were notified too late about merger- related changes to their accounts. Attorneys are seeking more than $3 million for costs and fees, leaving around $8 million at this point to be split among three nonprofits that receive any unclaimed money under the terms of the agreement.
Judge Certifies Class in AT&T Unlawful Credit Report Pulling Action
11/29/2005In Thomas Murray v. New Cingular Wireless Services Inc., U.S. District Judge for the Northern District of Illinois Ruben Castillo certified a class of plaintiffs in a lawsuit accusing AT&T Wireless of unlawfully pulling the credit reports of more than 700,000 Illinois residents. The Judge found that the named plaintiffs met all FRCP 23 requirements, in particular rejecting arguments that plaintiff was not adequate because of recurrent memory loss. Finding this loss not as serious as defendants purported, the Judge held that it was not important that plaintiff know as much about the case as attorneys. "Understanding the minutia of a case is not a prerequisite to being a class representative," Judge Castillo wrote. The judge also rejected the argument, adopted by U.S. District Judge for the Northern District of Illinois Samuel Der- Yeghiayan in Murray v. GMAC Mortgage Corp., that plaintiff was disqualified as a "professional plaintiff." Judge Castillo wrote, 'While the Murrays have participated in numerous class actions, we have no evidence of any improper actions by Mr. Murray or his attorneys." - A.S.
Eastern District of California Denies cy pres Distribution for Unclaimed Funds
11/30/2005On November 21, 2005, in Moore v. California, 2005 U.S. Dist. LEXIS 29092 (E.D. Ca. 2005), Judge David F. Levi ordered that the $22,400 in unclaimed funds resulting from two overtime class actions escheat to the state, denying plaintiffs request that the funds be distributed to a nonprofit public interest law firm under the cy pres doctrine. The court, relying on the Ninth Circuit's decision in Six Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301 (9th Cir. 1990) held that a distribution to the nonprofit would not provide the required "next best" result for the class members since the organization primarily represented low income workers in San Francisco while the class was comprised of middle income workers scattered throughout California. The court held that the escheat to the state would ultimately increase the probability that the unlocated class members receive their awards. -L.C.
Gymboree Settles Class Action Lawsuit for $2.3 million
12/01/2005On November 23, 2005, the children's retailer tentatively settled the wage and hour lawsuit filed in California state court, which will be reflected in its third quarter statements in a $1.5 million after tax charge. -L.C.
Jury Awards $120 Million to Victims of Oil Pollution in Chicago Suburb
12/01/2005The Cook County jury award will go to approximately 6,000 households located near a now closed oil refinery owned by Premcor. The suit, filed 10 years ago, alleged that the oil refinery interfered with homeowners' ability to enjoy their property. In 1994, the refinery allegedly released 10 tons of pollution into the air after a power outage. For health problems suffered in connection with that incident, the jury also awarded a separate class of 1,200 students and staff at a nearby school $100,000.
Connecticut Suit Calls for State to Increase Funds to Schools
12/02/2005The lawsuit, filed in Hartford Superior Court on behalf of 15 schoolchildren, their families, and the Connecticut Coalition for Justice in Education Funding, alleges that the state has failed to offer a "suitable and substantially equal" education in its schools, in violation of state constitutional mandates. The suit calls for the state to increase its aid to localities by as much as $2 billion. Two Democrats running for governor are named plaintiffs in the case; Republican Governor M. Jodi Rell is a defendant.
Illinois Supreme Court Dismisses State Farm Class Suit Filed in "Judicial Hellhole" for Forum Shopping
12/05/2005On November 17, Illinois' high court dismissed on grounds of forum non conveniens a class action suit against State Farm Mutual Automobile Insurance Co. filed in Madison County, which the American Tort Reform Association designated as last year's "worst judicial hellhole". Noting that the lead plaintiff was a Louisiana resident, the suit arose in Louisiana, and implicated Louisiana law, the Court ruled that private and public interest factors favored Louisianaas a forum. The Court found that the lower court had abused its discretion in weighing so heavily the fact that State Farm's headquarters was in Illinois. Tort reform advocates frustrated by class action forum shopping applauded the decision. The suit alleged that State Farm fraudulently sold "total loss" cars without proper salvage titles.
South Dakota Supreme Court Knocks Down Plaintiffs' Attorneys' Fees in Microsoft Antitrust Class Action
12/06/2005On November 16, South Dakota's high court overruled and remanded the lower court's order that Microsoft should pay attorneys' fees and expenses totaling over $2.2 million to the law firms Barnow & Associates; William J. Harte, Ltd.; Harold B. Gold, P.C. ; and Vahldiek, Cano & Petroski. In re S. Dakota Microsoft Antitrust Litig., 2005 S.D. LEXIS 174. Noting that it could not determine the precise number of hours that the attorneys had worked on the case because they had commingled their hours with the hours they worked in a total of eight suits against Microsoft, the Court allowed the attorneys to claim one eighth of their hours instead of the 20% that the lower court awarded. The Court, however, found no abuse of discretion in the lower court's determination that a lack of local expertise in antitrust class actions permitted it to depart from the standard of using local attorneys' rates to determine the fees for out-of-state counsel. Finally, the Court overruled the lower court's method of doubling the attorneys' lodestar amount, finding that the attorneys' fees it awarded, almost 50% of the value of the benefits that the suit created, was a "windfall" and that the modest benefit conferred upon the class did not make the suit an "exceptional success".
Attorney Files Securities Class Actions Against Blockbuster, Helen of Troy, Universal American Financial Corp., and Great Wolf Resorts
12/08/2005The law of offices of Charles J. Piven, P.A. announced on Friday that it had filed four class actions, all alleging violations of federal securities law through materially false and misleading statements having the effect of artificially inflating the market price of the companies' securities. The action agains Blockbuster, Viacom, and its controlling shareholder was filed in U.S. District Court for the Northern District of Texas. The action agains Helen of Troy, Ltd. was filed in U.S. District Court for the Western District of Texas. The action against Universal American Financial Corp. was filed in U.S. District Court for the Southern District of New York. The action against Great Wolf Resorts, Inc. was filed in U.S. District Court for the Western District of Wisconsin. Great Wolf Resorts also faces similar class actions filed by Scott + Scott LLP and by Millberg Weiss.
Washington District Court Decertifies Compensation Class in Boeing Race Discrimination Case 12/09/2005
In Williams v. Boeing Co., 2005 U.S. Dist. LEXIS 27481, the United States District Court for the Western District of Washington granted partial summary judgment on November 4 as to the named plaintiffs' individual compensation discrimination claims, finding that there was no evidence these particular plaintiffs had been discriminated against and hence concluding that they lacked standing to pursue their compensation claims. Having found that the named plaintiffs did not have viable claims, the Court ruled that they logically could not have "typical" claims and that they could not therefore represent the class. The remaining class action allegations - concerning promotions, not compensation - will nonetheless proceed to trial in December.
Eastern District of Pennsylvania Certifies "Professional Plaintiffs" as Class Representatives 02/01/2006
On February 1, 2006, Judge Harvey Bartle III of the Eastern District of Pennsylvania certified a securities class action over defendant’s objection to the adequacy of the proposed class representatives (three Massachussetts pension and annuity funds). In Re Vicuron Pharmaceuticals, Inc. Defendant argued that a provision in the Private Securities Litigation Reform Act barred plaintiffs from serving as class representatives because they were "professional plaintiffs" involved in between up to eight other class actions as representatives. The court found defendant’s reliance upon the PSLRA provision misplaced because it applied only to lead plaintiffs, not to class representatives. Moreover, the court held that plaintiffs’ use of money managers to purchase the Vicuron stock did not bar them from being class representatives because trustees of investment funds would likely violate their fiduciary duties if they invested the assets without professional guidance. -L.C.
Louisiana District Court Orders Opt-Out Notice Sent to Class in Hurricane Katrina Oil Spill Suit 02/07/2006
Plaintiffs opposed sending the notice because an appeal challenging the class certification was still pending. Turner v. Murphy Oil USA, Inc., 2006 U.S. Dist. LEXIS 4472 (E.D. La. Feb. 6, 2006). Judge Eldon E. Fallon of the Eastern District of Louisiana acknowledged that a change to the class definition could require plaintiffs to send further notices in the future. He nonetheless required the sending of notice, observing that most class members who might opt-out at this early stage in the litigation might do so to join the defendant's settlement program; and therefore, they should know the consequences of this decision. - A.L.
Southern District of New York Reduces Attorney's Fees to 17% of Settlement Fund
02/08/2006On February 8, 2006, Judge Harold Baer, Jr. awarded attorneys fees of roughly $800,000, about $200,000 less than requested, in a class action against a law firm for illegitimate tax advice. Ling v. Cantley & Sedacca, 2006 U.S. Dist. LEXIS 4711 (S.D.N.Y. 2006). The court examined the six factors articulated by the Second Circuit in Goldberger v. Integrated Res. Inc., 209 F.3d 43 (2d Cir. 2000) -- 1) time and labor employed, 2) magnitude and complexity of litigation, 3) risk of litigation, 4) quality of representation, 5) requested fee in relation to settlement, and 6) public policy -- and found that Class Counsel could not justify an award over the lodestar amount. -L.C.
District Court Holds that California's Amended Rosenthal Act Authorizes Class Actions
02/09/2006On Feb. 7, in Gonzeles v. Arrow Financial Services LLC, United States District Judge for the Southern District of California John Houston certified a class in litigation alleging that defendant sent form collection letters violating the Fair Debt Collection Practices Act and California's Fair Debt Collection Practices Act. Rejecting defendant's argument, the court held that the legislative history of a 1999 amendment to the Rosenthal Act "demonstrates the legislature intended to allow class actions for violations of the Rosenthal Act." After finding the class satisfied FRCP 23(a) and 23(b), the court certified the class.- A.S.
Tenth Circuit Affirms Dismissal of Disability Discrimination Claims Against Postal Service
02/11/2006In Ransom v. United States Postal Service, the EEOC had granted relief on plaintiff's individual discrimination claim. Later, after she filed class claims on behalf of disabled postal workers, the EEOC stated that she had to seek class counseling. Finding that plaintiff had not done so witin the forty- five day period allowed, the district court dismissed the complaint. On Feb. 10 the Tenth Circuit affirmed, noting that "[f]ederal courts do not have jurisdiction to review Title VII and ADA claims not exhausted administratively" and held that plaintiff's failure to seek class counseling was a failure to exhaust those claims. The court also held that claims should be dismissed because a pro se cannot litigate on behalf of a class.- A.S.
Eastern District of New York Denies Motion to Amend Class Claims in JC Penney Racial Discrimination Litigation
02/15/2006On Feb. 14, in Pierre v. JC Penney, United States Magistrate Judge for the Eastern District of New York Viktor Pohorelsky denied plaintiff's motion to amend her complaint and join various persons as additional plaintiffs in claims "arising out of an alleged 'pattern and practice' of consumer racial profiling" by JC Penney employees. The court rejected "plaintiff's contention that addressing the issue of 'class certification' is premature on a motion to amend," holding that its proper role on a motion to amend is to determine the likelihood that the proposed class will be certified. Finding such certification unlikely, the court denied the motion.- A.S.
Second Circuit Holds Magistrate Judge's Denial of Motion to Intervene Insufficient to Constitute a Final Judgment
02/22/2006In Stackhouse v. McKnight, a magistrate judge had preliminarily approved the class settlement, after which objectors- appellants filed motions to intervene and to vacate the reference of the proceedings to the magistrate judge. The motions were referred to the magistrate judge, who denied both motions. On Feb. 21, the Second Circuit, noting that a magistrate judge's decision can constitute a final judgment only on the consent of all parties to the dispute, found no consent by the objectors. The court thus found that the magistrate judge's "order denying the motion to intervene was the equivalent of a report and recommendation" subject to de novo review by the district judge, vacated the magistrate judge's denial, and remanded for the district judge to decide the intervention motion directly or permit the proposed intervenors to file objections before deciding the motion.- A.S.
Texas District Court Refuses to Convert Products Liability Class to a Limited Fund Class
02/24/2006Plaintiffs asked the court to convert their class certification into a limited fund class, pursuant to Rule 23(b)(1)(B), which aggregates claims against a fund that is insufficient to satisfy all claims and would prevent absent class members receiving notice and opting out. Klein v. O'Neal, Inc., 2006 U.S. Dist. LEXIS 5436 (N.D. Tex. Feb. 13, 2006). Judge Sidney A. Fitzwater determined that for a class to be a limited fund class, the case must have the characteristics that the Supreme Court defined in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999). Because there was no showing that the case had the most distinctive characteristic - that the aggregated claims exceed the funds available to pay them - the court refused to convert the class into a limited fund class. - A.L.
Fourth Circuit Affirms Rejection of Class Certification in Section 1981 Discrimination Case
02/27/2006On February 15, 2006, In Thorn v. Jefferson Pilot Life Insurance, the Fourth Circuit affirmed the district court's rejection of class action certification to a group of African American plaintiffs in this Section 1981 and 1982 case against a life insurance company for charging race-based dual rates. Judge Karen Williams found that because the defendant presented statute of limitations issues that had to be addressed on an individual basis, the class claims did not predominate over the individual claims as required for certification under 23(b)(3). The court noted that the Fifth Circuit had held otherwise in a similar case last year, In re Monumental Life Ins. Co., 365 F.3d 408 (5th Cir. 2004), but distinguished those facts from the case at bar. The court also affirmed the district court's ruling that plaintiff's claim for equitable restitution was not susceptible to class-wide determination and rejected plaintiff's argument that certification was appropriate under 23(b)(2) because equitable relief predominated, holding that certification under that provision was improper where the predominant relief sought was not declaratory or injunctive in nature, even if equitable. Judge Michael wrote a strong dissent, arguing that without class certification the defendant would never be held accountable if it discriminated against 1.4 million African Americans. -L.C.
Class Action Law Writing Competition
02/28/2006Class Action Reports, Inc., a publisher of print and electronic class action news and analyses, has announced its annual Beverly C. Moore, Jr. Memorial Student Writing Competition. The announcement states that "The writing contest is open to all law students enrolled in a J.D. or LL.M program. Submissions should focus on a current issue relevant to class action law and should be received by Class Action Reports, Inc. by Wednesday, June 7, 2006. The winning entries will be published in a future issue of Class Action Reports." More information can be found in these guidelines.
Eastern District of NY Approves $18.25 million Securities Settlement
03/01/2006On February 17, 2006, in In re Luxottica Group, S.p.A. Securities Litigation, 2006 U.S. Dist. LEXIS 6133 (E.D.N.Y. 2006), Judge Jack B. Weinstein approved the settlement reached in this securities class action after five years of litigation. The court found that the factors laid out by the Second Circuit in Detroit v. Grinnell, 495 F.2d 448 (1974), weighed in favor of approving the agreement, in particular noting that: no class member had opted out of the settlement, the litigation was extremely complex, continued litigation would have been time consuming and expensive, the class would have had difficulty proving damages, and the settlement was reasonable given the possible recovery and risk of the litigation. Additionally, the court approved attorney's fees and expenses of of $2.5 million. -L.C.
New York Court Holds Donnelly Act Does Not Authorize Class Actions
03/02/2006On Feb. 28, in Paltre v. General Motors Corp., the Supreme Court of New York, Appellate Division affirmed the dismissal of class claims for antitrust violations and deceptive business practices, holding that the Donnelly Act, which prohibits monopolies that interfere with trade or the furnishing of services in New York and mandates treble damages for its violation, did not specifically authorize recovery in a class action. Plaintiffs also failed to set forth a viable cause of action to recover damages for deceptive business practices.- A.S.
PA Federal Court Denies Motion to Remand Comcast Class Suit to State Court
03/03/2006On February 28, 2006, Adam Schwartz v. Comcast Corp., 2006 U.S. Dist. Lexis 7499, Judge Thomas N. O'Neill denied plaintiffs' motion to remand the putative class action against Comcast back to PA state court. In providing a thorough review of CAFA’s three removal exceptions, O'Neill held that the plaintiffs could not, at a minimum, establish that at least 1/3 of the proposed class members were citizens of the original filing state. (1332(d)(3); 1332(d)(4)(A); 1332(d)(4)(B)). In doing so, O'Neill denied plaintiffs’ argument that establishing residential internet service evinces an intent to remain in a state permanently. Therefore, removal to federal court under CAFA was appropriate, and the motion to remand was denied. - J.J.
This decision seems crazy on the facts -- this is a class action by residential service customers of a Pennsylvania corporation (Comcast), 98% of whom reside in Pennsylvania. CAFA carves out federal jurisdiction over local controversies, denying jurisdiction where 2/3 of the class and the primary defendant are from the same state. The court here escapes the obvious conclusion by holding that citizenship for purposes of subject matter jurisdiction is residence with an intent to stay and that although nearly 100% of the plaintiffs were resident, it could not be assumed that all had the intent to stay - this despite the fact that plaintiff's counsel demonstated that 86.5% of the class maintained Comcast service over a 5-month period. While the plaintiff argued that "residence is an effective proxy for domicile," the Court "declined[d] to draw such a parallel." Of course, by declining to draw that parallel, the Court is essentially concluding that residence is not a good proxy for domicile, which seems the more ridiculous conclusion. This is especially so since the Court also held that it was the defendant's (removing party's) burden to demonstrate the presence of federal subject matter jurisdiciton. -W.B.R.
Second Circuit Rules Suit Relying on New York Law Precluded by California Class Action Settlement 03/06/2006
On February 24, 2006, the U.S. Court of Appeals for the Second Circuit affirmed the lower court’s ruling that a California class action settlement precluded the plaintiff’s claim that a mortgage with the defendant was unenforceable. Wolfert v. Transamerica Home First, Inc., 2006 U.S. App. LEXIS 4536. The court found that precluding the absent plaintiff’s claim did not violate due process. The court reasoned that New York’s mortgage laws did not provide the plaintiff with significantly more legal protection than did California’s, and therefore, the plaintiff was adequately represented in the class action. Additionally, the court rejected the plaintiff’s claim that the settlement notice violated due process. - A.L.
Plaintiff here attempted to escape a class action judgment on the grounds that she was not adequately represented, despite the fact that the class court had ruled that the class was adequately represented. The case thus confronts the issue not decided by the Supreme Court in Stephenson, 539 U.S. 111 (2003) - namely, how much preclusive effect a second court will give to a class action court's findings concerning adequacy of representation. The Second Circuit answers that question by reference to the degree of adversarial conflict in the initial proceeding stating that: "if the class action court ruled only in general terms that representation was adequate, without any adversarial consideration of the claim now advanced by Mrs. Wolfert . . . it would be manifestly unfair to preclude her collateral attack. On the other hand, if, in the class action, a defendant opposing class certification or an objector to the settlement had made a serious argument that a sub-class was required because of claims substantially similar to hers, and that argument had been considered and rejected by the class action court, it would not be unfair to preclude collateral review of that ruling and relegate Mrs. Wolfert to her direct review remedies." This appears a reasonable approach, emphasizing adversarial-ness as the touchstone for preclusion. Of course, since most issues in most class action settlements are not adversarially tested, it also leaves open a lot of room for collateral attack. -W.B.R.
Federal Court Certifies NY Prisoner Health Care Class Action
03/07/2006A class of NY prison inmates with Hepatitis C allege, among other things, that the State failed to provide medical treatment for their disease until they completed a substance abuse program in violation of the Eighth Amendment and disability discrimination statutes. Hilton v. Wright, 2006 WL 459202 (N.D.N.Y.). On February 27, 2006, Judge David N. Hurd found that the plaintiffs satisfied the certification requirements of Rule 23(a) and that the challenged prison policies generally affected all class members, satisfying the requirement of Rule 23(b)(2). The court alternatively found that certification was proper under Rule 23(b)(1)(A) or Rule 23(b)(1)(B). - A.L.
Hanger Orthopedic Group Securities Litigation Transferred to the District of Maryland
03/08/2006On Feb. 28, in In Re hanger Orthopedic Group, Inc. Securities Litigation, United States District Judge Block granted defendant's motion to transfer the litigation from the Eastern District of New York to the District of Maryland, applying nine factors collected in Dealtime.com v. McNulty, 123 F. Supp. 2d 750 (S.D.N.Y. 2000). Finding that "[t]here is no per se rule requiring or presumptively favoring the transfer of a securities- fraud action to the district where the issuer is headquartered," Judge Block nonetheless articulated how "several factors usually lean in favor of [such] transfer" and granted the motion.- A.S.
Lousiana Appellate Court Affirms Class Certification in Chemical Fume Suit
03/09/2006On March 1, 2006, Lousiana appellate court Judge John Saunders affirmed a lower court's class certification in a tort case where students, teachers, staff, and visitors at a high school claim injuries from exposure to the product Armor-Flex used during a roofing project. Rapp v. Iberia Parish Sch. Board, 2006 La. App. LEXIS 434 (La. App. Ct. 2006). The defense argued that the trial court erred in certifying the class. The court disagreed, holding that: the class consisted of numerous individuals with plausible claims, satisfying the numerosity requirement; liability was a central issue and common to all parties (even though the parties suffered differying levels of injuries), satisfying the commonality requirement; and the claims of the class representatives and the remainder of the proposed class all arose from the same chemical exposure, meeting the typicality requirement. - L.C.
This is a typical "mass tort" case, although the mass-ness of the tort was confined to a single building. Nonetheless, the key question at certification was commonality (and hence predominance). The Louisiana court here took a liberal approach, holding that questions concerning the defendant's liability were common and predominant. Such rulings are essential if mass tort cases are to be litigated collectively. - W.B.R.
Louisiana Magistrate Interprets CAFA's "Local Controversy" Exception in Favor of Federal Jurisdiction 03/10/2006
On February 27, 2006, Magistrate Judge Karen L. Hayes found that the defendants properly removed, pursuant to the Class Action Fairness Act (CAFA), a suit stemming from the alleged negligence of one defendant’s employee. Robinson v. Cheetah Transp., 2006 WL 468820 (W.D. La.). Plaintiffs contended that CAFA’s “Local Controversy” exception barred removal. The magistrate judge disagreed, ruling that alhough the allegedly-negligent employee was an in-state defendant, the plaintiffs did not seek “substantial relief” from him; the other defendants were national companies (not locally based) from which the plaintiffs hoped to capture the bulk of their damages. – A.L.
UMKC Class Action Symposium
03/11/2006University of Missouri-Kansas City Law School will host a Class Action Symposium on April 7, 2006. See here for details.
Southern District of New York Approves Settlement in Strip- Search Claims Class Action
03/13/2006On Feb. 7, in McBean v. City of New York, United States District Judge for the Southern District of New York Gerard E. Lynch granted a motion for final approval of a settlement above the objection of proposed intervenors in a class action alleging that pre-trial detainees were strip-searched in New York jails without individualized reaonable suspicion in violation of their federal civil rights. Exhaustively analyzing the procedural fairness, substantive fairness (using the nine Grinnell factors), awards to named plaintiffs, and attorneys' fees, the court found the settlement fair, reasonable, and adequate. It therefore approved the settlement, the payments to class representatives, and the attorneys' fees.- A.S.
Eastern District of California Certifies Class in Action Against Debt Collectors
03/14/2006On March 4, 2006, in Schwarm v. Craighead, 2006 U.S. Dist. LEXIS 8791 (E.D. Ca. 2006), Judge William B. Shubb certified the class in this action alleging that a debt collections company 1) violated the due process rights of those from which it attempted to recover fees, 2) fraudulently misrepresented itself, and 3) failed to comply with the Fair Debt Collections Practices Act. After initally finding that it had supplemental jurisdictions over the state law claims, the court held that the plaintiff met the numerosity, commonality, and typicality requirements of FRCP 23(a). The court found that since defendants intended to rely upon the a California law to defend itself across the claims, the commonality element was met. Moreover, it rejected defendant's claim that the typicality element was absent because the letters sent to plaintiff and absent class members were not identical, holding that precise symmetry is not required to establish typicality. The court further held that plaintiff's financial history did not bar her from serving as an adequate class representative, and that the class could be properly certified under either 23(b)(2) or (3). - L.C.
Northern District of Illinois Certifies Class in Independence One Mortgage Corp. Litigation
03/15/2006Finding the requirements of FRCP 23(a) and 23(b)(3) met, United States District Judge for the Northern District of Illinois James B. Zagel granted plaintiff's motion for class certification in a case regarding IOMC's handling of escrow accounts. Fournigault v. Independence One Mortgage Corp. (Feb. 21).- A.S.
California Appellate Court
03/15/2006In this coordinated class action, Natural Gas Anti-Trust Cases I, II, III & IV, 2006 Cal. App. LEXIS 296 (March 6, 2006), the court reversed the lower court's declaraction of attorney Earnest Thayer as a vexatious litigant based on his history of objecting to attorney's fees in class action settlements. Judge rejected Thayer's argument that the vexatious litigant statutes (Cal. Civ. Proc. sections 391-391.7) did not apply to him because he was not a class representatives in the actions to which he objected, but nonetheless held that the trial court erroneously declared Thayer a vexatious litigant because his behavior did not rise to the level required by the statute; in certain of the class actions in question Thayer was acting as an attorney for class members, and overall there was not sufficient evidence that he repeatedly engaged in conduct prohibited by the statute. - L.C.
Florida Appellate Court Rules Plaintiff Has Standing to Bring Class Action Seeking Uninsured Motorist Insurance Coverage
03/16/2006The plaintiff had obtained a declaratory judgment that the insurance company defendant must provide her with uninsured motorist coverage. Subsequently, and while her claims against the defendant for liability and damages were pending, the plaintiff sought class certification, seeking to obtain uninsured motorist coverage for a “class” of persons. The trial court found that she lacked standing to bring this class action, but Florida’s Third District Court of Appeal reversed. The court found that she had standing, regardless of her qualifications as class representative, because as there was no final judgment on her claims, she had a case or controversy with the defendant. Judge Frank A. Shepherd dissented, arguing that the plaintiff’s standing ceased when the declaratory judgment resolved her individual dispute pertaining to uninsured motorist coverage. Ferreiro v. Phila. Indem. Ins. Co., 2006 Fla. App. LEXIS 3286 (Fla. 3d DCA 2006). (March 8). - A.L.
Eastern District of Pennsylvania Certifies Class in Fair Debt Collections Practice Case
03/16/2006Primarily at issue in certifying the class in Seawell v. Universal FID, 2006 U.S. Dist. LEXIS 8922 (E.D. Pa. 2006), decided March 6, 2006, was the numerosity requirement. Plaintiff proposed a class of all people who received debt collections letters substantially similar to the one she received for a period of one year. Defense argued that numerosity was impossible to show since it kept no record of how many letters it sent out on a particular letterhead. Judge H. Louis Pollak agreed with the plaintiff. He found that there was sufficient evidence that defendant had sent at least 300 letters substantially similar to that sent to plaintiff. He found that the commonality, typicality, and adequacy requirements were also met, and that certification would be appropriate under either 23(b)(2) or 23(b)(3). - L.C.
Partial Summary Judgment Granted Against The Republic of Argentina in Class Suit
03/17/2006On March 9, 2006, Judge Thomas P. Griesa granted partial summary judgment for plaintiffs in a class action filed against The Republic of Argentina, alleging they defaulted on a bond indebtedness agreement. 2006 U.S. Dist. Lexis 9668. While the U.S. District Court for the Southern District of New York granted summary judgment as to the Republic's liability to all class members, they denied the named plaintiff's motion for judgment on the specific amount due to him individually. Judge Griesa reasoned that granting the named plaintiff full judgment would work against the obligation of the named representative to "continuously and vigorously" represent the class. Judge Griesa also denied plaintiff's motion to shift notice costs to the Republic, finding the situation did not constitute an "exceptional circumstance" justifying departure from the general requirement that plaintiff's pay notice costs as established in Eisen v. Carlisle & Jacquelein (417 U.S. 156). - J.J.
California District Court Grants Summary Judgment Despite Concurrent Class Action on Same Issues 03/20/2006
Plaintiffs filed these individual employment discrimination actions against Fedex when a class action on the same issues was pending (Satchell v. Fedex, 2005 U.S. Dist. LEXIS 37354 (N.D. Cal. Sept. 27, 2005)). Relying on 23(b)(1)(A), plaintiffs argued that summary judgment should be denied because to allow dismissal in this case would result in "inconsistent judgments" given that the class was recently certified in Satchell. Judge Susan Illston rejected this argument, holding that "a finding that any of the plaintiffs has not raised triable issues of fact . . . would not establish incompatible standards of conduct for Fedex." The court then engaged in a lengthly analysis of each plaintiff's claims against Fedex, granting summary judgment in some instances and denying it in others. (Alvarado v. Fedex, 2006 U.S. Dist. LEXIS 9973 (N.D. Cal. Mar. 10, 2006)) - L.C.
California Appellate Court Grants Precertification Discovery
03/21/2006An attorney brought this putative class action against Best Buy alleging charge of illegal restocking fees. After finding that the attorney could not serve both as class counsel and class representative, the trial court granted the attorney's motion for precertification discovery to find a substitute representative. The order required Best Buy to send written notice to all customers who were charged a restocking fee in the last six years. Best Buy appealed, arguing that the letters would constitute solicitation and violate the privacy rights of the recipients; that the attorney would control the litigation even if a new representative were found; and that the judge violated canons of judicial ethics in issuing the order. Judge Rylaarsdam quickly rejected Best Buy's arguments, finding that the defense failed to prove illegal solicitation; that it was mere speculation to presume that a new class representative would be a plaintiff in name only; and that "the charge of judicial impropriety [was] unsupported by any reasoned legal argument or citation to authority." The court did slightly alter the proposed letter to ensure that the privacy rights of recipients would be protected. Best Buy Stores, L.P. V. Superior Court of Orange County, 2006 Cal. App. LEXIS 337 (Cal. Ct. App., Mar. 13, 2006). - L.C.
Eastern District of New York Holds Action Commenced After CAFA Even Where Parallel State Claims Predate CAFA
03/22/2006On March 7, in Steinberg v. Nationwide Mutual Insurance Co., United States District Judge for the Eastern District of New York Arthur D. Spatt denied Nationwide's motion to dismiss for lack of subject matter jurisdiction a class action filed on behalf of all those insured by Nationwide who were involved in accidents and had a "betterment charge", not included in the insurance contract, deducted from their claim award.
A parallel claim was filed on November 24, 1999 and, after a series of procedural maneuvers, ended up in New York state court, where it was still pending at the time of this decision. On July 15, 2005, Plaintiff filed the instant action, which was "parallel to the pending state court action in form and in substance, in that it is based on the same transactions and occurences; alleges identical claims; and seeks identical relief." Finding that the issue of commencement and subject matter jurisdiction in the instance of such an existing parallel claim had "not yet been addressed at any level in any circuit," the court gave a detailed accounting of the legislative history of CAFA and analogous precedent. The court found "no compelling reason under CAFA, or any other federal law, to dismiss the Plaintiff's action solely based on the similar action pending in state court," and held that a new and independent action was commenced on July 15 and was thus eligible under CAFA.
The court also held that "claim splitting does not apply to parallel state and federal actions." Finally, the Court weighed the Colorado River factors, found that no "exceptional" circumstances warranted dismissal of the case, and denied Defendant's motion to abstain.- A.S.
Eastern District of California Denies Certification
03/23/2006Plaintiff allege that a former agent of the Farm Service Agency violated FSA regulations and brought an action for violation of due process. Additionally, plaintiffs claimed that defendant United States breached of the Privacy Act of 1974. The agent defaulted on her claims, so the only remaining claim was the privacy claim against the U.S., for which plaintiffs sought certification. Judge David F. Levi denied the motion, finding that the plaintiff's motion did not adequately address the Privacy Act claim, making it impossible for the court to properly certify the claim. The court also noted two additional problems with the plaintiff's motion: the evidence was not sufficient to prove the numerosity requirement because plaintiff's assertions were not supported by documentation, and counsel was not sufficiently skilled in class action litigation to meet the adequate representative requirement. Adams v. United States, 2006 U.S. Dist. LEXIS 10800 (E.D. Cal. Mar. 13, 2006). - L.C.
Motion Requesting The Court Set A Deadline For Class Member Questionnaire Denied
03/24/2006Judge E. Robert Goebel of the U.S. District Court for the Western District of Kentucky denied defendant's motion to set a deadline for potential class members to return a questionnaire. U.S. Dist. Lexis 11243. The questionnaire was intended to identify potential class members in a class action alleging that prisoners were subjected to illegal strip searches while in custody at Hopkins county jail. While 7,000 questionnaires were sent out to potential class members, only 564 had been returned and 2,400 returned undelivered, leaving more than 4,000 pending. Defendant filed a motion, arguing that in order to appropriately defend and evaluate the case they needed to know how many members were in the class. They thus requested that the court impose a 60 day deadline for all questionnaires to be returned. The court emphaticaly denied the motion, reasoning that doing so would be the "functional equivalent of a court ordered mandatory opt in requirement, that is speak now or forever be silenced." - J.J.
$32.3 Million Cash Settlement Approved in Class Suit Against Fruit of the Loom
03/27/2006Judge Joseph H. McKinley Jr., of the U.S. District Court for the Western District of Kentucky, approved a $32.3 million cash settlement in a securities class suit against Fruit of the Loom. 2006 U.S. Dist. Lexis 11241. Plaintiffs, in two consolidated class actions, alleged that Fruit of the Loom violated Section 10(b) of the securities exchange act by engaging in fraudulent conduct that artificially inflated the stock's market price. Of the $32.3 million settlement, the court awarded 25% in attorney's fees and over $2.5 million in expenses. The court used a seven factor test to affirm the "fairness, adequacy and reasonableness" of the settlement, and followed 6th circuit precedent favoring a percentage fund calculation over a lodestar/multiplier approach in calculating attorney's fees. -J.J.
Seventh Circuit Finds Class Members Need Not Exhaust Plan Remedies to Join ERISA Class Action 03/28/2006
An ERISA plan appealed the district court's decision to certify the class action against the plan, arguing that all class members must exhaust the plan remedies before joining the lawsuit. Judge Richard Posner affirmed the lower court's decision, holding that while named plaintiffs must exhaust all nonjudicial remedies before suing, the same is not true for unnamed members because "requiring exhaustion by individual class members would merely produce an avalanche of duplicative proceedings and accidental forfeitures." (In re Household Int'l Tax Reduction Plan, 2006 U.S. App. LEXIS 6821 (7th Cir. Mar. 20, 2006)). -L.C.
Fourth Circuit Overrules Class Certification Where Bankruptcy Adversary Proceeding Would Adequately Resolve Class Claims
03/29/2006In Gregory v. Finova Capital Corp., the United States Court of Appeals for the Fourth Circuit reversed class certification in a case alleging registration statement misrepresentations in violation of federal securities laws. TGI, a now-bankrupt company, sold notes to plaintiffs, using the proceeds to repay defendant, its principal investor. When TGI filed for bankruptcy, plaintiff note-holders filed the instant claims. After the class claims were filed, but before the class was certified, a committee of TGI's unsecured creditors commenced an adversary proceeding against defendant in the Delaware bankruptcy court where TGI's bankrupcty was pending, seeking to have defendant's secured claims either disallowed or equitably subordinated to the noteholders' unsecured claims. Writing for the majority, Judge Michael Luttig held that the Superiority requirement of Rule 23(b)(3) was not met because "[i]t would be inefficient and needlessly duplicative to allow the class action to go forward when the adversary proceeding will likely adjudicate this controversy in the normal course of TGI's bankruptcy." Even though the class claims differed in some respect from the bankruptcy proceedings, plaintiffs would be made "more or less whole" by those proceedings, and the trial court thus abused its discretion in certifying the class.- A.S.
Fifth Circuit Rules CAFA's Deadline for Appealing Remand Orders Triggered by Order Granting Leave to Appeal
03/30/2006Section 1453(c) of the Class Action Fairness Act provides that a party's appeal of a district court's decision to remand to state court is denied unless the appellate court grants an extension or decides the appeal within 60 days from when the appeal was "filed". The court found that this 60 day period begins when the appellate court grants leave to appeal - not when the appellant files a petition for leave to appeal. In dissent, Circuit Judge Emilio Garza argued that this ruling ignored the plain meaning of the statute and frustrated Congress' intent that there be an exceptionally tight schedule for such appeals. Patterson v. Dean Morris, L.L.P., 2006 U.S. App. LEXIS 7174 (5th Cir. Mar. 22, 2006). - A.L.
California Appellate Court Upholds Verizon Settlement
04/03/2006In an unpublished decision, the California Court of Appeal affirmed the lower court's approval of a revised settlement of claims stemming from Verizon's allegedly misleading marketing and billing practices. The court rejected all of the objectors' claims, which included that the settlement was not fair, adequate and reasonable and that the release was too broad. Campbell v. Cellular, 2006 Cal. App. Unpub. LEXIS 2459 (Mar. 24, 2006.) -A.L.
District Court Remands Action Despite Claims of Jurisdiction Under CAFA
04/03/2006Defendants argued key plaintiffs had not suffered damages and so could not have asserted a claim prior to the effective date of the Class Action Fairness Act (CAFA), such that federal jurisdition was proper. The court rejected this contention, noting that if the plaintiffs had failed to assert damages, the court would have dismissed their claim under Rule 12(b)(6). Defendants further argued that CAFA applied because plaintiffs had not served them until after CAFA's effective date. Despite state precedent directing that for the purposes of the statute of limitations the pertinent date is the date of service, the court found that for CAFA purposes, the case commences when a plaintiff files suit. Thus, CAFA did not confer jurisdiction. Hensley v. Comp. Sciences Corp., 2006 WL 662463 (W.D. Ark. Mar. 15, 2006). -A.L.
Ninth Circuit Affirms Holding that Class Members' Claims Were Released by Settlement
04/04/2006Plaintiffs argued that defendants violated antitrust law by engaging in price fixing. The District Court held that the plaintiffs were barred from litigating the claims because they were already settled in a separate case in which plaintiffs were class members. In re Visa Check/Mastermoney Antitrust Litig., 297 F. Supp. 2d 503 (E.D.N.Y. 2003). The Ninth Circuit affirmed, holding that issue preclusion applied because: 1) the issues plaintiffs raised all related to the earlier settlement, its scope, and its substantive and procedural fairness; 2) a settlement is a final judgment on the merits; and 3) plaintiffs did not opt out of the earlier class and their counsel appeared at the final settlement hearing, thus they were parties to the original judgment. Judge Carlos T. Bea also held that even if issue preclusion did not apply, plaintiffs' claims were extinguished by the settlement because the two actions shared an identical price-fixing predicate. Reyn's Pasta Bella, LLC v. Visa USA, Inc., 2006 U.S. App. LEXIS 7455 (Mar. 27, 2006). - L.C.
U.S. Supreme Court Holds SLUSA Applicable to Claims Not Based Directly on Purchase or Sale of Securities
04/05/2006In Merrill Lynch v. Dabit, plaintiff was a former Merrill Lynch broker who filed a class action on behalf of himself and other brokers. The complaint alleged that Merrill Lynch disseminated misleading research, thereby manipulating stock prices, causing its brokers to continue to hold their stocks long beyond the point when, had the truth been known, they would have sold, resulting in their losing money. Brokers also alleged that they lost commission fees when their clients, aware that they had been advised to make poor investments, took their business elsewhere. Defendants contended that the Securities Litigation Uniform Standards Act of 1998 (SLUSA), which provides that "no covered class action" based on state law and alleging "a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security" "may be maintained in any state or Federal court," preempted the suit. After the District Court agreed, the Second Circuit reversed, holding that SLUSA's "in connection with the purchase or sale" language did not reach the brokers' claim that the misrepresentation caused them to hold the stocks too long. The United States Supreme Court unanimously reversed, analyzing the legislative history and statutory construction, and holding that "in connection with the purchase or sale of any security" should be given a broad interpretation. Because, under a broad interpretation, the fraudulent manipulation of stock prices met this definition, the claims were precluded by SLUSA.- A.S.
Eleventh Circuit Overturns Certification of Class in ERISA Suit
04/06/2006Plaintiffs alleged that the description of their employee benefits plan that insurer defendant issued to them stated that there would not be a calendar year deductible, but that defendant assessed this deductible nonetheless. The court found that each class member had to show reliance on this description because other benefits documents that defendant issued stated that there would be a deductible. Turning to the lower court's Rule 23(b)(2) certification of the class, the court rejected the lower court's finding that declaratory or injunctive relief would be proper. Because of its requirement that each class member show reliance, the court found that the relief sought would not necessarily flow to every class member. Thus, the court ruled that it was an abuse of discretion to certify the plaintiffs' claims under Rule 23(b)(2). Heffner v. Blue Cross & Blue Shield of Ala., Inc., 2006 U.S. App. LEXIS 7659 (11th Cir. Mar. 29, 2006). - A.L.
Fourth Circuit Court of Appeals Denies Benefit of Default Judgment to Uncertified Class
04/07/2006In an earlier securities suit, alleging the mishandling of funds in trust, default judgment was entered into against Charterhouse on behalf of the appellant "and the class of similarly situated persons." Months later, in reconsidering individual defendants' summary judgment motions, the court retrospectively ruled against class certification. In a second action, appellant and the putative class sought recovery as judgment creditors against Charterhouse's insurers. The district court dismissed the claim because the appellant lacked subject matter jurisdiction and the claim was unenforceable because it awarded damages to an uncertified class.
This court held that the district court erred in finding the default judgment void, because the appellant had subject matter jurisdiction, and while the judgement was unenforceable with respect to the class members, the appelllant himself had an enforceable judgment. 2006 U.S. App. Lexis 7793. In regards to the rights of the putative class, this court held that the court may only adjudicate the rights of putative class members upon certification of the class under Rule 23. Therefore in the absence of formal class certification or in certain cases where the record shows that the "parties and the court acted at all times as though a class existed," the court cannot adjudicate the rights of an alleged class. Although the language of the judgment may have implicitly suggested that damages were awarded to the class as a whole, "the fourth circuit has never allowed the rigorous Rule 23 analysis to be accomplished implicitly." As such, this court affirmed that the default judgment was uneforceable with respect to the class. - J.J.
10 April 2006
Court Denies Class Certification Where Individualized Issues Would Remain to be ResolvedOn March 28, in Hyderi v. Washington Mutual Bank, United States District Judge for the Northern District of Illinois Mark Filip denied plaintiffs' motion for class certification. Certification was not appropriate under Rule 23(b)(2) because the injunctive relief requested was "essentially an order to pay damages." Certification was also denied under Rule 23(b)(3) because plaintiffs' suggested class resolution of the threshold liability question would subsequently require "numerous plaintiff-specific individualized hearings" on various issues. As such, class issues did not predominate. In addition, class adjudication was not superior, despite the potential that individual plaintiffs would only gain small awards, because the statute at issue provides statutory damages plus the ability to recover attorneys fees and costs and thus "provides substantial incentives to bring meritorious individual suits."- A.S.
11 April 2006
District of New York Approves Settlement in Inmate Case
In this fifth of a series of federal class actions against the City, plaintiffs alleged that the New York Department of Corrections engaged in excessive force against inmates in violation of the Eighth and Fourteenth amendments. Settlement negotiations began in October 2002, and in February 2006 the parties finally reached this settlement, which involves a number of measures covering NYC DOC's use of force policy, investigations, training, monitoring, and tracking. Judge Dennis Chin examined the relevant factors from City of Detroit v. Grinnell, 495 F.2d 448, 463 (2nd Cir. 1974)--1) length and complexity of litigation; 2) reaction of class; 3) stage of proceedings; 4) risks of establishing liability; 5) risks of obtaining relief; and 6) risk of decertification--and found that they all weighed in favor of approval. The court did express concern about one aspect of the proposed settlement that required that any claim of breach of agreement could only be addressed by bringing a new lawsuit for breach of contract. Nevertheless, given all of the other considerations, the court approved the settlement. Ingles v. Toro, 2006 U.S. Dist. LEXIS 15779 (S.D.N.Y. Apr. 3, 2006). - L.C.
12 April 2006
Ninth Circuit Holds that Burden of Proof Remains on Party Seeking Removal Under CAFA1160 Panamanian banana plantation workers sued defendant Dow Chemical Co., claiming that defendant's spraying of substances banned in the United States caused sterility and other health problems. Dow filed for removal under CAFA Section 1332(d)(11), claiming that the claims constituted a "mass action." The Disrict Court ordered Dow to show cause as to the minimum amount in controversy required ($5,000,000 in aggregate or $75,000 per plaintiff). When Dow failed to do so, the District Court remanded.
The Ninth Circuit, in analyzing Dow's claim that CAFA changed preexisting removal jurisdiction law to place the burden of refuting removal jurisdiction on the plaintiff, wrote that "[m]eshing the existing jurisdiction and removal statute sections with the CAFA 'mass action' amendments is far from straightforward." Nevertheless, the Court analyzed CAFA's plain language and legislative history and held that, under CAFA, "the burden of establishing removal jurisdiction remains, as before, on the proponent of federal jurisdiction." Furthermore, the District Court did not abuse its discretion in refusing to allow discovery to determine the amount in controversy or in holding that Dow had failed to meet its burden of proving that removal was warranted. Abrego v. Dow Chemical Co., 2006 U.S. App. LEXIS 8077 (9th Cir. Apr. 4, 2006).- A.S.
13 April 2006
Illinois District Court Denies Class Certification in ERISA Suit for Failure to Satisfy Typicality RequirementUnited States District Judge for the Northern District of Illinois Amy J. St. Eve refused to certifiy plaintiffs' proposed class, in a suit arising from defendant insurer's refusal to pay for a certain cancer treatment. The court found that plaintiffs' claims were not typical of the proposed sub-class of persons governed by ERISA, as Rule 23(a)(3) requires, because the insurer's coverage of the cancer treatment depended upon the date of treatment, the plan governing the claim, and whether treatment was provided as in-patient or out-patient care. The court further ruled that the plaintiffs were improper representatives of a proposed non-ERISA sub-class, comprised of persons with claims governed by state contract law, because the plaintiffs were not members of this sub-class. Finally the court rejected plaintiffs' effort to certify a defendant class, finding that the defendants were not "adequate" representatives due to antagonistic interests between them and the proposed defendant class. Moffat v. Unicare Midwest Plan Group 31451, 2006 U.S. Dist. LEXIS 16348 (N.D. Ill. Apr. 5, 2006). - A.L.
14 April 2006
5th Circuit Grants Removal Under CAFA For Suit Filed Prior To Requisite "Commencment" DateIn Braud v. Trans Serv. Co. the United States Court of Appeals for the fifth circuit held that removal to federal court under CAFA was appropriate for a suit originally filed before the requisite commencment date (2/18/05), when the effect of adding a defendant after that date made "it a substantially new suit so as to restart the removal window." 2006 U.S.App. Lexis 8496. Plaintiffs originally filed their class action suit in Louisiana state court on 8/30/04. After amending their complaint on 4/8/05 to add another defendant, that defendant filed for removal to federal court under CAFA, which gives the federal courts jurisdiction of qualifying class actions "commenced" after 2/18/05. This court overruled the district court's holding that removal was inappropriate, reasoning that the addition of the second defendant did not relate back to the original complaint, but effectively made it a substantially new suit. This court further held that the later dismissal of the second defendant from the complaint did not "oust" the federal court of subject matter jurisdiciton. - J.J.
17 April 2006
D.C. Circuit Denies 23(f) Interlocutory AppealPlaintiffs filed this Title VII case against Naval Sea Systems Command, alleging sex and race discrimination. They later moved to certify the matter as a class action, but the EEOC dismissed the complaint as lacking jurisdiction. The employer then processed the complaints individually, and dismissed each one. Plantiffs failed to sue within the required 90 days of the EEOC's dismissal, but did file with 90 days of the employer's individual dismissals. Shortly thereafter, they moved to certify the class under Rule 23. The district court dismissed the action because the plaintiffs had failed to file within the Title VII 90 day deadline. Plaintiffs then filed this 23(f) motion for an interlocutory appeal on the certification issue, arguing that the district court's denial of certification was clearly erroneous. The D.C. Circuit dismissed the petition, finding that plaintiff's arguments related entirely to Title VII timing requirements, and were thus beyond the scope of a 23(f) appeal, which is limited to arguments dealing with Rule 23 certification requirements. The court emphasized the narrowness of its holding, pointing out that plaintiffs' individual claims could go forward, and that they could appeal the Title VII issues after final judgment. In re James, 2006 U.S. App. LEXIS 8405 (D.C. Cir. Apr. 7, 2006). - L.C.
18 April 2006
DC District Court Certifies Class Action For Settlement PurposesPlaintiffs initiated this RICO action against directors and employees of Riggs Bank alleging money laundering, wire fraud, and mail fraud. Parties reached a settlement in June 2005 which plaintiff accepted on behalf of a putative class. After receiving preliminary certification and notifying class members, the plaintiff requested final approval of the settlement and class certification. The court certified the class, finding that the requirements of 23(a) and (b) were met and noting that "settlement-only" certifications were becoming a prominent feature of federal class action practice. The court also approved the settlement, finding it met the standard embodied in rule 23(e), and granted attorney's fees of 22%. Freeport v. Allbritton, 2006 U.S. Dist. LEXIS 9710 (D. D.C. Mar.13, 2006). - L.C.
19 April 2006
District Court Holds Parallel State Action No Bar to Its Proceedings; Refuses to Dismiss or StayPlaintiffs filed class actions, consolidated in the Eastern District of Pennsylvania, against manufacturers of hydrogen peroxide, alleging price fixing under five different states' laws. The Court divided them into two actions, one for direct purchasers, the other for indirect purchasers who allege that they have overpaid for a particular product as a result of a defendant's anticompetitive actions. Before the instant case was filed, parallel state claims were filed in California state court by plaintiffs also named in the federal action.
Defendants filed a motion to dismiss or stay the California claims in the instant case out of deference to the ongoing state action. United States District Court Judge for the Eastern District of Pennsylvania Stewart Dalzell analyzed the parallel claims under the six Colorado River factors. Finding that "none of these factors compels abstention, let alone favors it, dismissing or staying this case would amount to an abuse of discretion." In his analysis, Judge Dalzell stressed that plaintiffs had advised the state court that they would ask it to suspend its jurisdiction if the district court retained its jurisdiction. Furthermore, "CAFA itself weighs against" dismissal, since "Congress has put its thumb heavily on the federal side of the scales in class actions like these." The fact that California law would ultimately govern the substantive inquiry thus had "little, if any, bearing." In re: Hydrogen Peroxide Antitrust Litigation, 2006 U.S. Dist. LEXIS 18790 (E.D. Penn. Apr. 11, 2006).- A.S.
04 October 2006
Law Professor Experts in Class Action LawsuitsI am on a panel at the ALI/ABA Tenth Annual National Institute on Class Actions in San Diego, CA on Friday, October 6. I have been given the task of describing the growing trend of law professors appearing as expert witnesses in class action cases. Though I have been retained as an expert on a number of occasions, I have never seen anything written describing the practice, nor analyzing its legal, ethical, and strategic components. Click here for my thoughts.
20 October 2006
Another Circuit Fixes CAFAWith Morgan v. Gay, 2006 WL 2938309 (Oct. 16, 2006), the Third Circuit joins the Ninth, Tenth , and Eleventh Circuit in interpeting CAFA's remand appeal timing provision to mean precisely the opposite of what it says. CAFA permits appeal from an order granting or denying a motion to remand a removed case back to state court so long as the appeal is filed "not less than 7 days after entry of the [district court's] order." 28 U.S.C. §1453(c). As written, a litigant cannot appeal until day 7, but can then appeal years later. Of course, Congress meant to require appeal petitions to be filed expeditiously, so the provision should have read "not more than 7 days after entry of the order." It is fun to watch these courts reach this conclusion because to do so they have turn to the legislative history even though the statutory text itself is completely unambiguous (stupid, but not ambiguous), hence violating what some (though not all) see as a sacred principle of statutory construction.
24 October 2006
New Article Analyzes CAFA Commencement IssueLonny Hoffman (Univ. of Houston, visiting at Texas) has posted a new article analyzing the first year of caselaw concerning CAFA's commencement issue. Though the issue of when a class action "commenced" for purposes of whether or not CAFA applies is an issue that will fade with time. Professor Hoffman argues that there are important lessons for statutory commencement issues generally that can be drawn from the CAFA caselaw.
13 February 2007
Class Action Attorney's Fees Expert - February ColumnI am writing a monthly column entitled "Experts Corner" in a terrific new publication, Class Actions Attorney Fee Digest. My first column , co-authored with my friend Alan Hirsch, appeared in February. It discusses In re Stock Exchanges Options Trading Antitrust Litigation, 2006 U.S. Dist. LEXIS 87825 (S.D.N.Y. Dec. 4, 2006), a case in which the district judge chose to use a lodestar rather than percentage fee based on the fact that the plaintiffs' were only partially successful. Alan and I are critical of this choice, arguing that the percentage method would have been more efficient and would have been well-tailored to capture the partial success since it would have been only a percentage of the fund that the plaintiffs actually recovered.
14 March 2007
Class Action Attorney's Fees Expert - March ColumnI write a monthly column entitled "Expert's Corner" in Class Actions Attorney Fee Digest. My March column analyzes the issue of whether, in a common fund case, the fee should be set as a percentage of the monies made available or of those actually claimed by the plaintiffs (or distributed via cy pres). The column discusses, and agrees with the result reached by the Second Circuit in, Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423 (2d Cir. 2007).
19 March 2007
Class Action Law TeleconferenceI am participating in a class action continuing legal education teleconference on Tuesday, March 20, 2007. Here's an overview of the topics that I will be covering and an annotated outline of the CAFA issues that I will discuss.
11 April 2007
Class Action Attorney's Fees Expert - April ColumnI write a monthly column entitled "Expert's Corner" in Class Actions Attorney Fee Digest. My April column discusses incentive payments to plaintiffs, looking at why such payments are paid, to whom, in what circumstances, and how much they should be. The column's jumping off point is a $1.25 million incentive payment to plaintiffs in a recent nationwide anti-trust case. Spartanburg Regional Health Services Dist., Inc. v. Hillenbrand Indus., Inc., No. 03-2141 (D. S.C. 2006).
17 April 2007
California Supreme Court Rules Certification Should Precede MeritsIn Fireside Bank v. Superior Court of Santa Clara County, the California Supreme Court held that class certification decisions should precede merits rulings so as to guard against the problem of "one-way intervention." The Court nonetheless affirmed the trial court's decision to certify the class. Jan T. Chilton of Severson & Werson argued for the bank; Carol McLean Brewer of Kemnitzer, Anderson, Barron & Ogilvie for the plaintiffs.
25 April 2007
Morgan Stanley Settles Sex Discrimination Class ActionThe New York Times reported today that Morgan Stanley has agreed "to pay at least $46 million to settle a class-action suit filed by eight current and former female brokers who contended that they were discriminated against in how they were trained, promoted and paid." The parties have filed for preliminary approval of the settlement agreement in the US District Court for the District of Columbia. The plaintiffs are represented by Mehri & Skalet, Sprenger + Lang, PLLC, and a New Mexico employment firm Moody & Warner, PA; Morgan, Lewis & Bockius, LLP represents Morgan Stanley.
16 May 2007
Class Action Attorney's Fees Expert - May ColumnI write a monthly column entitled "Expert's Corner" in Class Actions Attorney Fee Digest. My May column analyzes the issue of aggregate fee awards that must be divided up among many class counsel -- I consider who does the dividing, according to what standard, and whether the outcome should be kept confidential. The column discusses a fee dispute presently preceding in the federal district court in New Orleans, where the court -- at lead counsel's request -- has sealed the amounts each class counsel is receiving from the aggregate fee award and where objectors seek to unseal those records. See In re High Sulfur Content Gasoline Products Liability Litigation, Civil Action No. MDL 1632 (E.D. La.).
21 June 2007
Class Action Attorney Fees Expert - June ColumnI write a monthly column entitled "Expert's Corner" in Class Actions Attorney Fee Digest. My June column looks at two cases in which class certification was denied and yet fees were sought. In one case, class counsel recovered fees while in the other they did not. The column discusses the differences between the two cases and explains their outcomes.
18 July 2007
Class Action Attorney's Fees Expert - July ColumnI write a monthly column entitled "Expert's Corner" in Class Actions Attorney Fee Digest. My July column provides a round-up of the 2007-2008 Supreme Court Term, analyzing cases concerning class action law generally, and class action attorney's fees in particular.