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Computer Software Fee Litigation Class Settlement Rejected

Mon, 07 May 2012 17:24:27 GMT

In Ferrington v. McAfee, Inc., No. 10-CV-01455-LHK, 2012 WL 1156399 (N.D. Cal. Apr. 6, 2012), the court emphatically denied the plaintiffs' motion for final approval of a class action settlement, and Plaintiffs' counsel's motion for attorneys' fees, though without prejudice. Ferrington is a class action against McAfee, Inc. and Arpu, Inc. arising out of a partnership between the two companies. McAfee, a provider of computer security software, partnered with Arpu, an online advertising company, to place ads that would appear after a customer completed a purchase on the McAfee website. These ads were targeted to entice a customer to purchase an Arpu product using the billing information that had been provided to McAfee for the purchase of the McAfee product.

After the named plaintiffs in this action purchased McAfee’s anti-virus program from the McAfee website, but before they downloaded the McAfee product, an Arpu pop-up ad with a button reading “Try It Now” appeared. The plaintiffs clicked on the button, believing that it would download the purchased software they had just purchased. The button actually authorized McAfee to transfer their billing information to Arpu, started a 30-day free trial of an Arpu product, and authorized Arpu to charge a monthly subscription fee after the free trial. The named plaintiffs never downloaded the Arpu product and later discovered the fee on their credit or debit card statements.

The class was defined as “All persons in the United States who purchased software, products or services from McAfee, Inc. and subsequently accepted an Arpu pop-up advertisement offer presented at the conclusion of the McAfee transaction and were charged by Arpu, Inc. for unused and unclaimed software, products and services after McAfee transferred their credit/debit card and other billing information to Arpu.” An objector to this suit brought another class action suit against McAfee and Arpu, with a class defined as “[a]ll persons residing in the United States who, during the four year period preceding the date of filing of this Class Action Complaint, did not provide their credit card, debit card, or billing information directly to Arpu but whose credit card, debit card, or billing information was obtained by Arpu.”

The court found that the claims of the subclasses were not common, because the two subclasses raised different claims. The court noted that the parties’ proposed settlement consisted of two distinct subclasses: those who downloaded the Arpu software (“the downloaders”), and those who did not (“the non-downloaders”). Because the situations of the two subclasses were “fundamentally” disctinct, the claims of the subclasses were found to be not common.

With regard to typicality, the court observed that the class representatives were all members of the subclass who did not download the Arpu software. The court found that because the class representatives were entitled to recover under the terms of the settlement, while the remaining class members were not, the claims of the named Plaintiffs were not typical of the claims of the entire class.

The court found that the interests of all class members were not adequately represented where no class representatives or counsel were assigned to represent the interests of the downloader subclass whose claims are released as a result of this settlement agreement. This situation was deemed to be a conflict of interest, as the subclasses have conflicting interests regarding how the allocation of the settlement fund.

The court similarly could not find that the settlement was fair, adequate, and reasonable, stating that “[i]t is troubling, at the very least, that the subclass of individuals who downloaded the Arpu software will necessarily be releasing all of their claims without any compensation despite the pending [objector] lawsuit, and despite the potential viability of some of their claims.” The parties to the objector’s lawsuit engaged in negotiations and reached material terms for a class-wide settlement. Where the plaintiffs in the objector’s lawsuit were likely to settle for some consideration, the court found that extinguishing the downloaders’ claims would be unfair and unreasonable. The Order concluded by noting that additional factors, including the agreement’s reversion provision and that counsel were to receive a disproportionate amount of the settlement, further indicated that the proposed settlement did not adequately protect the interests of all class members.

Certification Fails In Challenge To Insurer’s Use Of Coding Initiative For PIP Reimbursement

Thu, 12 Apr 2012 13:17:43 GMT

In DWFII Corp. v. State Farm Mutual Auto. Ins. Co., No. 11-10162 (11th Cir. Mar. 27, 2012) (unpublished), the Eleventh Circuit upheld the district court’s denial of certification to a purported class of medical providers challenging State Farm’s use of National Correct Coding Initiative edits to determine reimbursement for Personal Injury Protection claims under Florida’s no fault insurance statute.

At the outset, typicality was lacking because, for each claim—even if a medical provider could show that an edit was improper under the statute—the medical provider would have to satisfy several other elements to demonstrate it was entitled to reimbursement of the disputed charge. (For example, for each claim, the medical provider would have to show the bill was properly completed under the statute, the benefits of the insurance plan were not exhausted, the recipient of the services had valid coverage with State Farm, and the medical provider actually performed the services for which it billed.) For these same reasons, the plaintiff was unable to show that the predominance requirement was satisfied.

The declaratory and injunctive relief class failed for the additional reason that the monetary damages sought by the medical providers were not incidental to the requested equitable relief.

From Picking Citrus to Fighting for Proper Wages: Migrant Farm Workers Have Standing to Bring Class Action

Wed, 11 Apr 2012 21:30:05 GMT

In Garcia-Celestino v. Ruiz Harvesting, Inc., 2012 WL 602728, at * 1 (M.D. Fla. Feb. 24, 2012), the Middle District of Florida granted class certification to 38 migrant farm workers with respect to their claims that a central Florida citrus farmer, who employed approximately 286 Mexican migrant workers under a single contract, breached a contract with the workers and failed to pay minimum wage in violation of Florida’s Constitution. Prior to determining whether the elements of Fed.R.Civ.P. 23 were satisfied, the Court was required to accept Plaintiff’s substantive allegations as true when determining whether the migrant workers had Article III standing. Because plaintiffs alleged the citrus farmer employed the migrant workers pursuant to a federal foreign agricultural worker program and because plaintiffs alleged the citrus farmer damaged them by failing to pay the appropriate wage rate, unlawfully deducting travel time, and failing to properly reimburse the workers for their expenses, the Court found the migrant farm workers had standing to bring a class action claim. The Court went on to determine that Plaintiffs satisfied the requirements of Rule 23(a) and Rule 23(b)(3).

Court Rejects Argument That A Large Damages Award Could “Annihilate” Five Guys Famous Burgers & Fries And Certifies Putative Class

Wed, 11 Apr 2012 20:24:12 GMT

In Bush v. Calloway Consolidated Group River City, Inc. d/b/a Five Guys Famous Burger & Fries, Defendant argued that the putative class did not meet the superiority requirement of Rule 23(b)(3) because the defendant’s potential liability for violating the Fair and Accurate Credit Transactions Act (“FACTA”), $100 - $1000 per defendant, could be “enormous and completely out of proportion to any harm suffered by the plaintiff.” 2012 WL 1016871, (M.D. Fla. March 26, 2012). The Court followed the rulings of Fourth, Seventh, and Ninth Circuits and held that consideration of the potential enormity of a damages award would undermine the compensatory and deterrent purposes of FACTA. Moreover, the Court determined that at this early stage of the proceedings it would be impossible to know the number of individuals included in each class and “would be ‘unduly speculative’ to deny class certification based solely on the possibility of a large damages award.”

Class Certification Denied For A Class Of One

Wed, 11 Apr 2012 19:42:14 GMT

The plaintiff filed a class action complaint alleging the $24 annual administration fee per vehicle for property owners to use the electronically controlled toll booth violates a 1927 deed restriction which affords property owners the right to use the Venetian Causeway free from toll charges. The trial court denied the plaintiff’s motion to certify the class, and the Third District Court of Appeal affirmed.

In its opinion, the Court first found the numerosity requirement lacking because the proposed class was overbroad. The evidence as set forth demonstrated that plaintiff was the only one of the 1,400 participants in the Venetian Islands owners’ program to pay the administrative fee under protest. Id. at *3. Next, the Court found the typicality requirement unsatisfied as “…success in the eyes of [plaintiff] might well be seen as defeat of the interests of her island neighbors.” Id. at *4. Finally, the adequacy requirement was likewise lacking due to the potential conflict between plaintiff’s interests in the case and that of the purported class. Id. at *5.

In conclusion, the Court noted, “Aggregation of cases requires aggregation of interests. At the class action hearing, [plaintiff] was unable to offer the name and address of a single neighbor who shared her interest.” Id.

Sixth Circuit Vacates Class Certification Order Due To State Court Settlement

Wed, 11 Apr 2012 15:34:18 GMT

In Gooch v. Life Investors Insurance Company of America, Nos. 10–5003, 10–5723, 2012 WL 410926 (6th Cir. Feb. 10, 2012), the Sixth Circuit noted that the district court improperly applied the "clearly wrong" standard in deciding class certification by assuming the class representative's allegations to be true and resolving all doubts “in the plaintiff's favor” while conducting what it called “[a] limited factual inquiry into the class allegations, including the deposition of the named plaintiff.” The court noted this did not comply with the “rigorous analysis” standard, but concluded the error was harmless because the court based its decision on affidavits it deemed sufficient, probed behind the pleadings, and considered all relevant documents in evidence. The court ultimately vacated the class certification order because a state court settlement precluded the claims of most class members

Eighth Circuit Holds Amount-In-Controversy Stipulation In Complaint Avoids CAFA Jurisdiction

Wed, 11 Apr 2012 15:24:40 GMT

In the motion to remand, the class representative argued that the amount in controversy was not in excess of $5 million, as required by section 1332(d). The complaint alleged “judgment against defendant in an amount that is fair and reasonable in excess of $25,000, but not to exceed $4,999,999” and that “Plaintiff and the class do not seek—and will not accept—any recovery of damages (in the form of statutory interest) and any other relief, in total, in excess of $4,999,999.” Nestle responded that the theory of the case clearly comprehended the possibility of damages in excess of $5 million, since the interest due on the payment allegedly due would exceed $2 million each day. The Eighth Circuit noted that it had “previously stated that a binding stipulation limiting damages sought to an amount not exceeding $5 million can be used to defeat CAFA jurisdiction.” The court concluded that because the stipulations in the complaint were binding under Missouri law, it is “legally impossible for the amount in controversy in this case to meet CAFA's threshold, and remand based on CAFA's amount-in-controversy requirement was appropriate.”

Did Coneff Follow Kilgore and Concepcion? Or Did the Ninth Circuit Reject this Mouthful?

Tue, 10 Apr 2012 21:58:19 GMT

In Coneff v. AT&T Corp., --- F.3d ----, 2012 WL 887598 (9th Cir. Wash. Mar. 16, 2012), the Ninth Circuit again contemplated the impact of AT&T Mobility, Inc. v. Concepcion, 131 S. Ct. 1740 (2011), holding that the Federal Arbitration Act preempted state law, and refusing to enforce arbitration provisions with class action waivers, as we similarly recently discussed in Kilgore.

In Coneff, cell phone customers of AT&T entered into service agreements requiring arbitration and waiving the right to bring a class action. The district court denied AT&T's motion to compel arbitration, finding the waiver unconscionable and unenforceable.

The Ninth Circuit applied Concepcion, and reversed the district court, holding that states cannot require a procedure that is inconsistent with the Federal Arbitration Act, concluding that the California and Washington state laws were both preempted by the Federal Arbitration Act.

The Ninth Circuit also rejected the argument that there is an implied exception to Concepcion when arbitration provisions interfere with statutory rights under state law.

May Evidence of Satisfaction of Removal Requirements Be Considered After Notice of Removal?

Tue, 10 Apr 2012 21:43:09 GMT

In Janis v. Health Net, Inc., the Ninth Circuit Court of Appeals found error where the district court refused to consider evidence that jurisdictional requirements were met, solely on the basis that the evidence was not submitted at the time the notice of removal was filed.

The Court noted that nothing requires a removing defendant to attach evidence of jurisdiction to a notice of removal, as all that is required is a "short and plain statement of the grounds for removal."

The Ninth Circuit concluded that the district court's refusal to consider the evidence was an abuse of discretion, where the evidence appeared to establish that jurisdictional requirements were met, and prejudiced Health Net, and reversed the district court's order remanding to state court.

Seventh Circuit Adopts Third Circuit’s Requirement That Class Certification Order Specifically Define The Class And Describe Class Claims, Issues, And Defenses

Mon, 09 Apr 2012 14:09:55 GMT

In Ross v. RBS Citizens, N.A., 667 F.3d 900 (7th Cir. 2012), a Fair Labor Standards Act case, the Seventh Circuit adopted the Third Circuit’s analysis in Wachtel ex rel. Jesse v. Guardian Life Ins. Co. of A., 453 F.3d 179 (3d Cir. 2004), with regard to how Rule 23(c)(1)(B) should be construed. Rule 23(c)(1)(B) was added to Rule 23 in 2003. It proves that an order certifying a class action must define the class and the class claims, issues, or defenses, and must appoint class counsel under Rule 23(g). Only the Third Circuit in Wachtel had construed this rule to date. The Wachtel court had ruled that a trial court certifying a class must define the class with precision and must list all the class issues to be tried in the certification order.

In Ross, the Seventh Circuit agreed with this analysis. In Wachtel, the district court had violated this standard by providing a partial list of issues to be tried. In Ross, the district court did not violate this standard. The court identified the two class issues to be tried. Although the defendant suggested several other issues that should have been identified in the certification order, the appellate court ruled that these were “merely issues of trial strategy or proof, rather than overall claims or issues necessitating resolution.”

Seventh Circuit Opines On Dispute Between Class Action Lawyers On How To Divvy Up Settlement Proceeds

Fri, 06 Apr 2012 14:07:58 GMT

In the usual class action case, plaintiff’s lawyers work out among themselves how an attorney fee will be distributed amongst themselves should a settlement be reached. Sometimes, however, when that is not the case, the court must decide the issue. In In re Trans Union Corporation Privacy Litigation, 664 F.3d 1031 (7th Cir. 2011), the Seventh Circuit entered the fray. A law firm who represented individual claimants wanted to be added “to the docket in this appeal” but did not seek intervention as a party. The court noted that the law firm was trying to have it both ways because, on the one hand, it did not want to give up any of its attorney’s fees to class counsel, but on the other hand, it did not want the courts to question its fee arrangements with its clients. The court ruled that it couldn’t have its cake and eat it too, and that it was a party to the litigation for purposes of evaluating its fee arrangement. So there.

Open-Ended Class Based On Systemic Violations Of Wisconsin Special Education Law Ordered Decertified

Wed, 04 Apr 2012 14:04:04 GMT

In Jamie S. v. Milwaukee Public Schools, -- F.3d --, 2012 WL 336170 (7th Cir. 2012), the Seventh Circuit was asked to approve the certification of a class of all students eligible to receive special education from the Milwaukee Public School system who are, have been, or will be denied or delayed entry into an individualized education program. Seven students with disabilities accused the school system of refusing to comply with requirements of the federal Disabilities Education Act that required them to identify children with disabilities and develop individualized programs tailored to their specific needs. The district court refused to certify a broad class of all school age children with disabilities, and instead certified a narrower class of students eligible for inclusion in the program but who had not yet been identified.

This identification problem caused the Seventh Circuit to reverse certification even of this narrower class as fatally indefinite. A significant portion of the class was not identified. Moreover, the relevant criteria for inclusion in the class was unknown. Identifying disabled students who might be eligible for special education services was a complex, highly individualized task.

The plaintiffs argued that a prior circuit decision from 1977 approving certification of an open-ended class, Alliance to End Repression v. Rochford, supported the district court’s decision. The Seventh Circuit was not impressed: “Rochford’s tolerance of a wildly indefinite class definition under Rule 23 is no longer the norm. We have noted that ‘[Rochford] is a relic of a time when the federal judiciary thought that structural injunctions taking control of executive functions were sensible. That time is past.’”

The court also noted that the class failed the Supreme Court’s Wal-Mart standard for establishing commonality. Gone are the days when a plaintiff could argue that the ultimate liability question presented a common issue when that question itself devolved to a series of individual answers. The plaintiffs “must show that they share some question of law or fact that can be answered all at once and that the single answer to that question will resolve a central issue in all class members’ claims.

District Court Erroneously Refused To Apply Daubert Analysis To Exclude Defendant’s Expert Unreliable Testimony In Denying Certification Of Class Of Hospital Payers Challenging Merger On Antitrust Grounds

Mon, 02 Apr 2012 14:00:04 GMT

Messner v. Northshore University Healthsystem, -- F.3d --, 2012 WL 129991 (7th Cir. Jan. 13, 2012) involved a class challenge to a hospital merger. The Federal Trade Commission had already ruled that the merger of two Illinois hospitals violated the FTC Act. In a follow-on action, the plaintiffs sought to certify a class of payers, alleging that, as a result of the merger, all patients and their insurers paid higher prices for hospital services.

At the class certification stage, the central issue was whether the plaintiffs could show antitrust impact on a classwide basis. The plaintiffs moved to strike the hospital’s expert’s testimony on Daubert grounds. The district court agreed that the expert’s testimony contained some “misleading” information and analysis, but denied the motion on the ground that it would give the testimony “the weight it believes it is due.” The court went on to deny class certification, finding that the plaintiff’s expert had insufficiently shown that all class members received price increases.

The court of appeals reversed both rulings. It first held that the district court had erred in refusing to conduct a Daubert analysis with respect to the hospital’s expert testimony. When an expert’s report or testimony is “critical” to the certification question, the district court “must make a conclusive ruling on any challenge to that expert’s qualifications or submissions before it may rule on a motion for class certification.” Moreover, this rule applies irrespective of whether the expert being challenged is a plaintiff’s or defense expert. “The ruling is just as important to the plaintiffs as it is to the defendants.”

The court then held that the district court erred in denying class treatment. The plaintiff’s expert had demonstrated that all or substantially all class members had paid higher prices, even in the presence of market imperfections and fixed contracts that covered complex bundles of services. The expert was not required to show uniformity of price increases. Moreover, to the extent the class was overbroad because it included some members who had not suffered price increases, the solution would be to redefine the class, not deny certification.

A New Emphasis on Cost Certainty

Thu, 29 Mar 2012 21:39:24 GMT

Nearly half of corporate counsel surveyed plan to increase the use of alternative fee arrangements to improve cost certainty in 2012. Find out more in the upcoming class action survey by Carlton Fields to be released in April.

Who's On First?

Wed, 28 Mar 2012 19:37:00 GMT

The internal organization of corporate legal departments and accountability for managing class actions makes a tremendous difference in the relative costs of class action litigation. Learn more in the upcoming class action survey by Carlton Fields to be released in April.

A Business Within a Business: Class Action Management

Tue, 27 Mar 2012 18:12:11 GMT

Corporate legal departments report that their companies dedicate an average of 5 individuals (3 of these are, on average, attorneys) to the ongoing management of class action suits. Additionally, corporate counsel report spending an average of 313.9 hours annually on individual class action lawsuits. Learn more in the upcoming class action survey by Carlton Fields to be released next month.

Class Action Suits Expected to Rise in 2012

Mon, 26 Mar 2012 20:03:00 GMT

On the Rise: Corporate legal departments surveyed currently manage 4.4 class action suits, on average. That number is anticipated to increase incrementally to 5.4 in 2012. Learn more about the future of class action litigation from the perspective of corporate counsel in the new class action survey to be released in April by Carlton Fields.

Georgia Appellate Court Reverses Class Certification In Pharmacy Case

Mon, 26 Mar 2012 14:48:42 GMT

Upset that the local Rite Aid was closing and had transferred his prescriptions to a local Walgreens without his consent, a customer filed suit for breach of duty, breach of contract, and unjust enrichment, and sought class certification on behalf of the approximately 4,000 other pharmacy customers. However, the Court of Appeals reversed the certification of a class in Rite Aid of Georgia, Inc. v. Peacock, No. A11A2133, 2012 WL 954650, at *1 (March 22, 2012). In so ruling, the Court made clear that the plaintiff must suffer some injury or actual damages, not just an alleged violation of law, especially where that alleged violation is unclear. Id. at *3. Here, the plaintiff's failure to show any actual impact meant that he also could not show that his reaction was shared by the other class members, and was therefore typical, under the requirements of O.C.G.A. § 9-11-23. Id. at *5.

Tighter Purse Strings...

Thu, 22 Mar 2012 21:34:39 GMT

Corporate counsel project at least a 13.2% decline in legal spending vis-à-vis class actions principally through, among other things, stricter management of outside counsel, increased compliance efforts, and changes to class action strategies. Learn about this trend and more when the new class action survey by Carlton Fields is released in April.

What’s the #1 interest for corporate counsel managing class actions?

Wed, 21 Mar 2012 18:16:32 GMT

On Your Mind: According to a groundbreaking new class action survey by Carlton Fields, corporate counsel rank cost control as the second highest topic of interest in class action litigation. Find out which topic ranked #1 when the survey is released in April.

The New Normal for Class Action Litigation

Tue, 20 Mar 2012 18:22:00 GMT

Carlton Fields’ upcoming survey on class actions (to be released in April 2012) features best practices for corporate counsel in reducing cost and managing risk in modern class action litigation.

A New Approach to a Persistent Problem

Mon, 19 Mar 2012 18:18:00 GMT

Carlton Fields is pleased to announce the forthcoming April release of a new client-focused survey, "Successful Management of Class Actions: Empirical Findings from Corporate America." This ground-breaking new survey will provide meaningful insight into corporate counsel's perspectives on and attitudes toward class action litigation in 2012 and beyond.

Won't Get Fooled Again? Not Enough for Standing in the Third Circuit

Thu, 15 Mar 2012 15:35:51 GMT

The Third Circuit didn’t cite The Who in McNair v. Synapse Group, Inc., 2012 WL 695655 (3d Cir. March 6, 2012). But it would have been appropriate. The named plaintiffs argued that it was only a matter of time before they fell for the defendant's allegedly deceptive magazine subscription marketing tactics. But a skeptical Third Circuit seemed to think that the plaintiffs just won’t get fooled again—or at least that the possibility was too far-fetched to count as a reasonable likelihood of future injury for Article III standing purposes.

Plaintiffs were former subscribers to magazines marketed by defendant Synapse, the largest marketer of magazine subscriptions in the U.S. Plaintiffs claimed that Synapse sent subscribers deceptive postcards which appeared to be direct mail offers for new magazine subscriptions, when in fact they were automatic renewal notices for existing subscriptions. The alleged scheme was to trick subscribers into discarding the notice, without realizing they’d automatically be charged for renewing their subscription. Plaintiffs first attempted to certify a Rule 23(b)(3) class, but the district court denied certification on predominance grounds. It couldn't be presumed that all members of the class were deceived by Synapse’s postcards. Indeed, at least two named plaintiffs were not. Id. at *4.

Plaintiffs then amended their complaint to seek injunctive relief for a putative Rule 23(b)(2) class, and monetary relief only as to the named plaintiffs. The district court found that the named plaintiffs had Article III standing to assert these claims, because they were likely to suffer from the alleged deception again in the future. The district court nonetheless denied certification once more, because the putative class wasn’t cohesive enough under Rule 23(b)(2). Id. at *5.

The Third Circuit accepted interlocutory review of the standing question under Rule 23(f), acknowledging that the rule generally limits review to class certification issues, but holding that standing is a threshold issue necessarily bound up with the certification inquiry. Id. at *6, n.10. McNair found that the plaintiffs did not have Article III standing to lead a 23(b)(2) class because they, “unlike the class members they seek to represent, are not Synapse customers and are thus not currently subject to Synapse’s allegedly deceptive techniques for obtaining subscription renewals.” Id. at *7. Hence, there was no reasonable likelihood of future injury—a prerequisite to showing Article III standing for injunctive relief.

Plaintiffs effectively claimed that they might become Synapse customers again because “Synapse’s offers are compelling propositions . . ." Id. This stop-me-before-I-shop-again argument was too much for the Third Circuit. “Perhaps they may accept a Synapse offer in the future, but speaking generally, the law accords people the dignity of assuming that they act rationally, in light of the information they possess.” Id. Whether plaintiffs would willingly choose to re-subscribe was wholly speculative, and even if Plaintiffs might “be fooled again and again” into accepting Synapse offers, that mere possibility did not amount to a reasonable likelihood of future injury. Id., n. 15. For the same reason, Plaintiffs could not show standing under the “capable of repetition yet evading review” doctrine. Id. at *8.

McNair concluded that Plaintiffs were not being required to submit to continual injury merely to obtain standing. Rather, standing is determined at the outset of litigation. Id. Plaintiffs could have represented a 23(b)(2) class if they had just maintained their subscriptions until after moving for class certification, but they hadn't done so. Accordingly, they either never had standing, or lost standing because their claims had become moot. Id., n. 17.

Second Circuit Applies Concepcion to Arbitration Agreements

Tue, 13 Mar 2012 16:52:20 GMT

In In re American Express Merchants' Litigation, No. 06-1871-cv, (2d Cir. Feb. 1, 2012) ("AMEX III"), the Second Circuit Court of Appeals held, for the third time, that a class action waiver in an arbitration agreement between American Express and plaintiffs was unenforceable because it would effectively preclude plaintiffs from seeking to vindicate their statutory rights under the Sherman and Clayton Acts.

The named plaintiffs sought to represent a class made up of all merchants that have accepted American Express charge cards, and thus been forced to agree to accept American Express credit and debit cards. The plaintiffs alleged that American Express leveraged its market power in corporate and personal charge cards to compel merchants to accept its credit card products at an elevated rate. American Express moved to compel arbitration pursuant to the arbitration agreements with the plaintiffs.

Shortly after the Second Circuit Court issued its AMEX II opinion, the Supreme Court handed down its opinion in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). In Concepcion, the Supreme Court held that the Federal Arbitration Act preempted California common law deeming most class-action arbitration waivers in consumer contracts unconscionable. The Second Circuit found that Concepcion applied a fortiari here. Thus, the Second Circuit found that the class action waiver in this case precluded the plaintiffs from enforcing their statutory rights and deemed the arbitration provision unenforceable.

Does the FAA Preempt California Arbitration Law In Federal Class Actions?

Mon, 12 Mar 2012 16:54:42 GMT

In Kilgore v. Keybank, National Association, ---F.3d ----, 2012 WL 718344 (9th Cir. (CA) Mar. 7, 2012), the Ninth Circuit Court of Appeals considered whether the Supreme Court's decision in AT&T Mobility, Inc. v. Concepcion required the Federal Arbitration Act ("FAA") to preempt California's state law rule prohibiting the arbitration of claims for broad, public injunctive relief in a class action related to private student loans.

This Class Action was brought by former students of a private helicopter vocational school, claiming the school was a "sham aviation school that targeted limited-income students who could not afford to pay for their pilot training without taking out student loans." The students sued the preferred lender, and signed promissory notes including arbitration provisions.

Looking to the Supreme Court's Concepcion decision, the court noted that the savings clause of the FAA permits agreements to arbitrate to be invalidated by general contract defenses, but not by defenses "that apply only to arbitration." In contrast, the California Broughton-Cruz rule previously prohibited arbitration for claims for public injunctive relief.

The Court concluded that, as a result of the Concepcion decision, the Broughton-Cruz rule could no longer stand, because the rule "prohibits outright the arbitration of a particular type of claim," here, claims for broad public injunctive relief. The Court noted that, although the Broughton-Cruz rule "may be based upon the sound public policy judgment of the California legislature," Concepcion was clear in holding that state public policy cannot trump the FAA by prohibiting the arbitration of certain types of claims, thus the Broughton-Cruz rule must be displaced by the FAA.

As a result, the Court remanded to the district court to require arbitration of these claims.

Are Parens Patriae Actions Removable Under the Class Action Fairness Act?

Fri, 09 Mar 2012 22:51:18 GMT

In Nevada v. Bank of America Corp., --- F.3d ----, 2012 WL 688552 (9th Cir. (Nev.) Mar. 2, 2012), the Ninth Circuit was confronted with whether Nevada’s parens patriae lawsuit against Bank of America based on widespread complaints could be removed to Federal Court under the Class Action Fairness Act (“CAFA”) or as a mass action.

The court held that, because Washington v. Chimei Innolux Corp., 659 F. 3d 843 (9th Cir. 2011), held that attorney general enforcement actions are not “class actions” under CAFA, this suit was also barred, because parens patriae suits “lack the defining attributes of true class actions.”

The court further rejected Bank of America’s argument that it was removable as a “mass action” under the “event or occurrence” exclusion in CAFA, concluding that “the exception was intended to apply ‘only to a truly local single event with no substantial interstate effects’ in order to ‘allow cases involving environmental torts such as a chemical spill to remain in state court if both the event and the injuries were truly local.’” Here, where the complaint “alleges widespread fraud in thousands of borrower interactions,” the court concluded this was not within the “event or occurrence” exclusion.

Therefore, the court went on to analyze whether the case could be characterized as a mass action, concluding that the determination must turn on CAFA’s minimal diversity requirement and numerosity requirements. The court concluded that because the State of Nevada was the real party in interest, both of these requirements failed, and the court could not be removed as a mass action.

Class Certification Remanded in Light of Dukes Decision

Wed, 07 Mar 2012 21:14:27 GMT

In Nationwide Life Ins. Co. v. Haddock, No. 10-4237-CV, 2012 WL 360633 (2d Cir. Feb. 6, 2012), the Second Circuit vacated an order of class certification and remanded the case back to the U.S. District Court for the District of Connecticut.

Appellant Nationwide Life Insurance Company appealed the order certifying a plaintiff class of trustees of qualified employee benefit plans covered by the Employee Retirement Income Security Act (“ERISA”) and that had variable annuity contracts with Nationwide. Plaintiffs alleged that Nationwide breached its fiduciary duties by collecting revenue sharing payments from the mutual funds that it selected and tendered to the plans, seeking a declaratory judgment that Nationwide violated ERISA, an injunction prohibiting Nationwide from receiving such payments, and disgorgement of the payments already received by Nationwide.

During the appeal the Supreme Court issued its Wal-Mart Stores, Inc. v. Dukes opinion. The Second Circuit determined that if Plaintiffs were successful in establishing Nationwide's liability on the disgorgement issue, the district court would then need to determine the separate monetary recoveries to which individual plaintiffs are entitled from the funds disgorged. The Circuit determined that this process would require non-incidental, individualized proceedings for monetary awards, which Dukes rejected under Federal Rule of Civil Procedure 23(b)(2). Thus, the case was remanded for consideration in light of Dukes.

Consideration of Class Certification Argument Declared Moot

Fri, 02 Mar 2012 21:02:44 GMT

In an unpublished opinion, the Fifth Circuit declined to consider a plaintiff’s request for class certification pursuant to Federal Rule of Civil Procedure 23 finding that the complaint's allegations failed to merit such status and because “dismissal of Plaintiff’s complaint on its merits mooted any request for class certification.” Conditt v. Owens, No. 11-50426, slip. op. 2012 WL 29128, at *2 (5th Cir. Jan. 6, 2012). Therefore, the court denied Plaintiff’s motion on appeal for class certification. Id.

Allocation of Attorneys' Fees: Percentage Method Approved in Fifth Circuit

Wed, 29 Feb 2012 16:45:15 GMT

Two Settlement Class Member objectors appealed the approval of a proposed settlement agreement creating a $40 million settlement fund to be allocated among class members and their attorneys. Union Asset Mgmt Holding A.G. v. Dell, Inc., --- F.3d ----, 2012 WL 375249, *1 (5th Cir., Feb. 7, 2012). The class representatives allege that Defendant Dell and its officers, “violated the Securities Exchange Act . . . by fraudulently inflating reported revenues, engaging in erroneous accounting, and disseminating false information to the public.” Id. The two objectors assert, inter alia, that the “court erred in using the percentage method to calculate class counsel’s fees.” Id.

The Fifth Circuit affirmed an award of attorneys’ fees in a common fund class action settlement utilizing the percentage method approach, in which the court awards a fee based upon a reasonable percentage of the common fund, as opposed to the lodestar approach, in which fees are awarded based upon the number of hours worked multiplied by a reasonable hourly rate and adjusted by an upward or downward multiplier when appropriate. Two Settlement Class Member objectors argued that the lodestar method is the only way to calculate attorneys’ fees in the Fifth Circuit because the Fifth Circuit has “never explicitly endorsed the percentage method for common fund cases.” Id. at *7.

The Court disagreed finding that the percentage method approach was appropriate because the Private Securities Litigation Reform Act (“PSLRA”) contemplates such a calculation, it allows for easy computation, and the interests of class counsel are aligned with the class members. Id. at *8. Further, the district courts in the Fifth Circuit apply a blended lodestar and percentage method approach by utilizing the 12 factors of Johnson v. Ga. Highway Express, Inc., 488 F.2d 714, 717 (5th Cir. 1974), ensuring that the fee is reasonable. Thus, the Fifth Circuit joins the “majority of circuits in allowing [its] district courts the flexibility to choose between the percentage and lodestar methods in common fund cases, with their analyses under either approach informed by the Johnson considerations.” Id. at *9.

Class Action Waivers Found Outside The Context Of Arbitration Agreements In Employment Applications Are Binding In Georgia

Mon, 27 Feb 2012 16:55:46 GMT

In support of their Motion, Plaintiffs' argued that the Eleventh Circuit only recognizes class action waivers that appear in the context of an arbitration agreement, and that class action waivers can only be valid in the context of enforceable arbitration agreements under the Federal Arbitration Act. Id. at *2. This is because a party that agrees to a class action waiver gains a traded benefit- the advantage of the simplicity, informality, and speed of arbitration. Id.

The Middle District of Georgia, however, disagreed. Id. Here, the Court specifically stated that the validity of a class action waiver may be upheld because it is a provision that does not affect any substantive rights, and may be bargained for under the freedom to contract outside the context of arbitration. Id. at *2-*3.

The Court further struck down Plaintiffs' argument that the contract provision should be nullified as against public policy. Id. at *6. Where, as here, a party brings a case under a statute that permits or mandates fee shifting for successful claims, the possibility of recovering attorneys' fees and costs negates the concern that Plaintiffs will be unable to secure legal representation to check the "bad" behavior absent proceeding as a class action. Id. at *7. In this case, Plaintiffs brought suit under the Fair Labor Standards Act, which mandates fee shifting in successful cases. Id. Further, the damages sought by Plaintiffs are not small or insignificant amounts. Id. Therefore, the Court found that, in this case, the class action waiver did not violate public policy. Id.

What Are the Statistical Requirements for Class Certification Post-Wal-Mart?

Tue, 14 Feb 2012 14:51:01 GMT

In Sam Duran et al. vs. U.S. Bank National Assn., No. A125557 (Cal. Ct. App. Feb. 6, 2012), the California District Court of Appeals relied on the landmark Supreme Court decision in Wal-Mart to conclude that statistical evidence of 20 members out of 260 was insufficient to support class certification.

In Duran, the trial court granted class certification, and planned to use a random sample of 20 class members to testify as representatives for the class. The First District Court of Appeals of California concluded that the trial plan “was seriously flawed,” because there was “no statistical foundation for the trial court's initial assumption that 20 out of 260 is a sufficient size for a representative sample by which to extrapolate either liability or damages,” relying in part on the Wal-Mart holding that evidence representing one of every 12,500 class members was insufficient. As a result, the Court of Appeals reversed class certification, holding that “representative sampling studies did not justify certification.”
Further, the Court of Appeals found error where U.S. Bank was prevented from introducing evidence pertaining to nonclass members in its defense, preventing them from establishing that a large percentage of the absent class member plaintiffs were not owed overtime.

No "Condo Class" Where Individual Factual Issues Predominate

Mon, 13 Feb 2012 21:40:06 GMT

In a nutshell, Plaintiffs in Carol Brinker v. Chicago Title Ins. Co., Case No.: 8:10-cv-1199 (M.D. Fla. Feb. 9, 2012), sought certification of a class of condominium buyers who had been issued closing protection letters (“the contracts”) by the Defendant Title Insurance Companies in connection with closings on condominium units where an attorney and his law firms acted as the closing agent. The Defendants agreed in the contracts to reimburse the homebuyer for actual losses incurred by the buyers in connection with the closing when their losses arose out of fraud or dishonesty by the closing agent.

Although the report found that all the requirements of Rule 23(a) were satisfied, it recommended denial of the motion for class certification because individualized issues predominated over common questions of fact or law. To prove the loss causation element of their contract claims, the Court would have to “determine whether knowledge about [the closing agent’s] alleged fraud or dishonesty would have caused Plaintiffs or others to act differently (i.e. not execute the closing).” This loss causation analysis “inevitably [would] require an individualized inquiry of potentially each of the proposed class members.” In other words, even if Plaintiffs could establish fraud or dishonesty on a class wide basis, an individualized determination would be necessary to determine if each individual buyer would have proceeded with the transaction had the closing agent acted properly.

In addition, the contracts required the buyers to give the Defendants notice of their claims within 90 days of discovery of the loss. The affirmative defense of late notice would also require individualized proof of when each buyer learned of their loss, another individualized issue predominating over common issues of law or fact. Magistrate Judge Porcelli explained that while individualized issues on an affirmative defense might not, by themselves, preclude class certification, “in light of the collective issues relating to loss causation, reliance and … alleged defenses, the Court is satisfied that the individual issues in this case predominate over the common issues of fact or law.”

*In the interest of full disclosure, Carlton Fields represented the Defendants in this action.

Can A Member of a Prior Class Action Bring Suit Again?

Fri, 10 Feb 2012 15:08:51 GMT

In Skilstaf, Inc. v. CVS Caremark Corp., --- F.3d ----, 2012 WL 400369 (C.A.9 (Cal.)), the 9th Circuit considered an appeal from a dismissal of a putative class action filed in a California federal district court, based on a Massachusetts federal district court’s certification of a nationwide class and approval of a class settlement. A class member who objected in the Massachusetts case filed suit in California also seeking to represent a nationwide class, seeking damages based on the same facts as the Massachusetts case but against different defendants.

The California defendants moved to dismissed based on a covenant not to sue any other person seeking to establish liability based on the claims released in the Massachusetts case, arguing that this precluded the California action. Skilsstaf argued that the dismissal violated his due process rights. The California court concluded that Skilstaf’s “unique position” in the settlement process showed full knowledge of the “any other person” language in the covenant not to sue, and that Skilstaf did not opt out when given a chance to do so after objecting to the covenant not to sue. The California district court held that this agreement was enforceable, and dismissed.

On appeal, Skilstaf argued again that dismissal violates due process rights. Skilstaf attempted to rely on Churchill Village, LLC v. General Electric, 361 F.3d 566 (9th Cir. 2004), in arguing that due process is not satisfied when a class action defendant provides only objectors, rather than the entire class, with a second opt-out opportunity, even though Skilstaf did have the second opt-out opportunity. The 9th Circuit rejected this argument, concluding that the unnamed members of the putative California class are not bound by the decision to dismiss Skilstaf’s claims, any ability they have to challenge the covenant not to sue is unaffected.

Ninth Circuit Considers Wal-Mart Burden in Mazza

Fri, 10 Feb 2012 14:39:23 GMT

In Mazza v. American Honda, No. 09-55376 (Jan. 12, 2012), the Ninth Circuit vacated the district court’s order granting certification to a nationwide class of consumers suing Honda for false advertising, holding that California law could not be applied to the entire nationwide class. While the class was initially certified in 2008, this decision was deferred pending the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).

Pursuant to the Wal-Mart holding, the Ninth Circuit concluded that Plaintiffs did meet their burden to affirmatively demonstrate that there is a common question of fact or law that can resolve important issues “in one stroke,” despite the fact that different advertising took place across the country.

However, the Court further concluded that common issues of law do NOT predominate, because of material differences in substantive consumer protection statutes nationally. As a result, the Court concluded that the district court misapplied the three-step governmental interest test, erroneously concluded that California law could be applied to the whole class, and as a result abused its discretion in certifying the class.

The Court relied, in part, on the “importance of federalism,” noting that “many state courts … have undertaken to dictate the substantive laws of other states by applying their own laws to other states, resulting in a breach of federalism principles.” Further, the Court noted that if California law were applied to the entire class, “foreign states would be impaired in their ability to calibrate liability to foster commerce.”

The Second Circuit Vacates The Dismissal Of A Class Action Suit For A Lack Of CAFA Jurisdiction.

Thu, 02 Feb 2012 17:34:47 GMT

Bank v. Hydra Group LLC, 433 F. App'x 50 (2d Cir. 2011), involved a putative class action that claimed violations of the California Business & Professional Code related to the defendant’s unsolicited commercial e-mail advertisements. The defendant moved to dismiss the complaint for lack of personal jurisdiction and failure to state a claim. The district court did not rule on Defendant’s motion but did dismiss the action for a lack of subject matter jurisdiction, finding that the amount in controversy requirement was not satisfied. The plaintiff appealed the district court’s dismissal.

The Second Circuit reviewed de novo the district court's dismissal, noting that the Circuit will treat a class action suit as if the district court has not certified the class when determining whether they have subject matter jurisdiction. The Class Action Fairness Act requires that a party seeking entrance to federal court demonstrate that the aggregate amount in controversy exceeds $5,000,000. The Second Circuit noted that dismissal on this basis is warranted only if it “appear[s] to a legal certainty that the claim is really for less than the jurisdictional amount.”

The Second Circuit reviewed the complaint and California courts’ analysis of the relevant provisions of the California Business & Professional Code. Based on this review, the Second Circuit summarily found that they could not say with a legal certainty that the amount in controversy was less than $5,000,000. Therefore, the Second Circuit vacated the district court's judgment.

Eleventh Circuit Affirms That Inquiry Into Merits Is Appropriate To The Extent Necessary To Resolve Class Issues

Fri, 27 Jan 2012 13:38:23 GMT

In Coastal Neurology, Inc. v. State Farm Automobile Insurance Company, No. 10-15837 (11th Cir. Jan. 25, 2012) (unpublished), the Eleventh Circuit affirmed the district court’s order denying class certification. In doing so, the court made clear once again that, although a district court may not resolve the merits of a case in ruling on a Rule 23 motion, an inquiry into the merits may be necessary to determine whether Rule 23 has been met.

Note: Carlton Fields represented State Farm in this litigation.

Are Class Actions Constitutional? Are Class Action Lawyers Ignorant?

Thu, 12 Jan 2012 22:13:15 GMT

I bet the title got your attention. My friend, Mark Hermann, the Vice President and Chief Counsel – Litigation at Aon, and author of The Curmudgeon’s Guide to Practicing Law, has written an interesting article at abovethelaw.com. In reviewing Martin Redish’s book, Wholesale Justice: Constitutional Democracy and the Problem of the Class Action Lawsuit, Mark raises two topics sure to raise hackles at the class action bar.

The first is the subject of Redish’s book, which is whether class actions are constitutional. What? I know. That’s what I thought too, at first. Here is what Mark calls a “misleadingly over-simplified” summary of Redish’s book:

First, Redish argues that legislatures create substantive rights to be enforced by individuals. Federal Rule of Civil Procedure 23 improperly transforms those individual rights into collective rights that can be pursued in a class action. That transformation of an individual right into a collective one is a substantive change that oversteps the Supreme Court’s rulemaking power, in violation of both separation of powers and the Rules Enabling Act. (It’s true that Congress implicitly approves amendments to the Federal Rules by failing to act before the statutory deadline. Redish suggests that any such “legislation by inaction” violates the Presentment Clause.)

Second, Redish argues that opt-out class actions cause individuals to participate in classwide cases without having affirmatively consented to doing so, violating a litigant’s right to freedom from association. Finally, Redish blasts settlement class actions, for a host of reasons ...

Mark’s second point is that practicing lawyers are frequently not familiar with academic literature in their own field – to their detriment and the detriment of the clients they represent. He believes in-house counsel should demand that outside lawyers keep up at least to some degree with scholarship in the area in which they practice. He thinks that, in the right case before the right judge, Redish’s argument should at least be attempted.

I think there may well be some merit to the substantive point raised by Redish, although whether it will ever get traction 45 years after the enactment of the modern class action rule, who knows. On the question of why the argument has never been raised by defense counsel, I suspect some self-interest is at play, both in the part of the defense lawyers (who hate class actions at the intellectual level but love them at the level of the pocketbook) and companies (who hate litigating class actions but like or at least tolerate and use them to enact global settlements and resolve problems).

And then there is Mark’s point about outside counsel’s ignorance of their own field. I have 5 class action law review articles on my desk. I think I will go look at them now.

The Uncommon Impact Of Price-Fixing On Indirect Purchasers

Wed, 11 Jan 2012 16:38:00 GMT

In In re Florida Cement & Concrete Antitrust Litig., No. 09-23493-CIV, 2012 WL 12382 (S.D. Fla. Jan. 3, 2012), the plaintiffs sought certification of a class of indirect purchasers of ready-mix concrete who were injured by an alleged price-fixing conspiracy in the Florida concrete industry. The court found that the proposed class representatives had not purchased concrete from the defendants or had purchased concrete prior to the period in which the price-fixing is alleged to have occurred and therefore did not satisfy Rule 23’s typicality and adequacy prongs. Id. at *4-5. Notwithstanding, the court went on to evaluate the proposed class under Rule 23(b)(3)’s predominance and superiority requirements. Id. at *7.

To satisfy the predominance and superiority inquiries, the plaintiffs had to establish a common impact on class members and a methodology for calculating damages on a class-wide basis. Id. Because the plaintiffs were indirect purchases of concrete, they needed to prove both that the impact on direct purchasers and that the subsequent impact on indirect purchasers were susceptible to proof through common evidence. Id.

The plaintiffs were unable to show that the direct purchasers paid higher prices on average as a result of the price-fixing conspiracy. The plaintiffs’ expert’s only evidence of the common impact on direct purchasers was the existence of list prices used by defendants. However, the plaintiffs’ expert conceded in his initial report that he could not conclude that the impact on direct purchasers could be established based on this evidence alone, and the court refused to evaluate any new regression and correlation analysis in the expert’s rebuttal report, since that type of analysis for the first time in a reply constituted “sandbagging.” Id. at *8.

The plaintiffs were also unable to show that any increased cost to the direct purchasers was passed through to the indirect purchasers. Id. at *9. Because the indirect purchasers purchased the concrete from the direct purchasers pursuant to a cost plus contract, the plaintiff’s expert assumed a 100% pass through rate of any increased cost. Id. Notwithstanding, the plaintiffs’ expert acknowledged that cost plus contract are not always implemented according to their terms. Id.

The defendants’ relied on the declarations of certain contractor-direct purchasers to show that due to the decline in the construction industry, the direct purchasers often absorbed the alleged overcharge. Id. Consequently, the only way to determine the impact of the conspiracy on an indirect purchaser was to look at that purchaser’s individual contract, and based on the evidence presented, a common impact could not be presumed based only on the plaintiffs’ allegations of price-fixing. Id. at *10. There was therefore no evidence presented that the direct purchasers or indirect purchasers were actually injured by the conspiracy, and as a result, the plaintiffs could not, and did not, present a methodology for calculating damages on a class-wide basis. Id.

NLRB Rules Against Class Action Waivers

Tue, 10 Jan 2012 19:37:20 GMT

Friday, in D.R. Horton Inc. v. Michael Cuda, the NLRB issued a ruling that class action waivers of workplace claims can amount to an unfair labor practice under the National Labor Relations Act—that is, such waivers are unlawful. This ruling is highly controversial in light of recent charges of political maneuvering at the NLRB and because it may conflict with a ruling on arbitration waivers issued by the Supreme Court last year.

Businesses often require customers and employees to agree to arbitrate any disputes that may arise with the business, as a way to minimize expenses when resolving disputes. These arbitration agreements often include waivers of class action claims, meaning the customer or employee is agreeing to arbitrate her claim individually. Such waivers have been challenged as unconscionable and unconstitutional. Last year, however, in the context of a consumer class action, the Supreme Court held in AT&T Mobility v. Concepcion that rules banning class action waivers frustrate the purpose of the Federal Arbitration Act. So, at least in the context of consumer law, class action waivers are now permitted in arbitration agreements.

Friday, in D.R. Horton, the NLRB determined that the AT&T Mobility holding did not translate into the context of workplace disputes. In the context of an overtime claim, the NLRB determined that a class action waiver amounted to an unfair labor practice under the NLRA because it prevented employees from engaging in group ("associational") activity. The Board’s rationale is complex, but in essence, the Board concluded that whereas AT&T Mobility involved a conflict between the Federal Arbitration Act and state consumer law (and so raised Supremacy Clause issues), D.R. Horton involved a conflict between two federal statutes (the FAA and the NLRA).

This is far from over. The NLRB’s ruling can be (and likely will be) appealed to either the Eleventh Circuit Court of Appeals in Atlanta, or the Court of Appeals for the District of Columbia. A ruling by one of those Courts could go up to the U.S. Supreme Court.

Class Action Waivers Still Enforceable In Arbitration Agreements

Mon, 09 Jan 2012 16:35:00 GMT

In a recently released opinion, the Northern District of Georgia in Hopkins v. World Acceptance Corp., 798 F. Supp. 2d 1339 (N.D. Ga. 2011), noted that while enforcement of class waivers in arbitration agreements are not required under Concepcion, the waiver in this case is valid under preexisting Eleventh Circuit law. Id. at 1349. More specifically, the Eleventh Circuit has held class action waivers in arbitration agreements enforceable when at least some of the plaintiff's claims provide for the recovery of attorneys' fees and/or expert costs in the event plaintiff prevails. Id. The waiver in this case met such a requirement. Id. The possibility of a plaintiff to recover costs and fees establishes that plaintiffs would not be dissauded in bringing claims and in checking any alleged illegal conduct by defendants. Id.

The CAFA Year in Review: A Look Back at the Class Action Fairness Act in the Circuit Courts of Appeals in 2011

Fri, 06 Jan 2012 13:31:00 GMT

Eight circuit courts of appeals rendered 19 notable decisions addressing various issues under the Class Action Fairness Act (CAFA) in 2011, with the Seventh Circuit leading the way with five such decisions. Some show that forum shopping for class actions is alive and well. Others favor CAFA removal unless the plaintiff can show that it is “impossible” for the claim to exceed the jurisdictional amount-in-controversy threshold, while still others favored remands because removal statutes should be “strictly construed.” One decision relies upon Mark Twain for a grammar principle. There is only one dissenting opinion, but it is a very good one, citing the oft-used “duck test.”

To read the full article on this topic by Carlton Fields attorneys Sylvia H. Walbolt and Joseph H. Lang, Jr., please click here>.

Is A Parens Patriae Suit By A State A CAFA Class Action?

Thu, 05 Jan 2012 04:27:57 GMT

In LG Display Co., Ltd. v. Madigan, No. 11-8017, 2011 WL 5829918 (7th Cir. Nov. 18, 2011), the Illinois Attorney General brought a parens patriae action against manufacturers of LCD panels in Illinois state court, alleging violations of the Illinois Antitrust Act. The manufacturers removed the case, pursuant to the Class Action Fairness Act (CAFA). The Attorney General moved to remand and argued that the suit did not meet CAFA requirements and that therefore, the district court did not have jurisdiction. The federal district court agreed and granted the motion to remand.

On petition for permission to appeal the remand order, the Seventh Circuit held that the district court correctly determined the case was not a class action or mass action under CAFA. The Court declared that it therefore lacked jurisdiction over an appeal and denied the manufacturers’ petition.

In its decision, the Seventh Circuit reached the same result as recent decisions regarding this issue from the Ninth and Fourth Circuits, although using an “approach [that] is technically different from” those courts’ decisions. Id. at *1. First, the Court rejected the manufacturers’ suggestion that the case was “a disguised class action or mass action” and concluded that this parens patriae case and class actions “are entirely different beasts.” Id. at *3. The Court also rejected a claim-by claim analysis, saying that “just because CAFA was meant to expand federal courts’ jurisdiction over class actions, it does not follow that ‘federal courts are required to deviate from the “whole complaint” analysis when evaluating whether a state is the real party in interest in a parens patriae case.’” Id. at *4. Finally, the Court also concluded “[r]estraint is particularly appropriate in light of the Supreme Court’s directive that removal [statutes] should be ‘strictly construed,’ and the sovereignty concerns that arise when a case brought by a state in its own courts is removed to federal court.” Id. at *5 (internal citation omitted).

Concepcion Waiver

Thu, 29 Dec 2011 04:16:26 GMT

Judge James Lawrence King has issued another order of interest in re Checking Account Overdraft Litigation, No. 09-MD-02036-JLK (covered previously this blog) that addressed AT&T Mobility LLC v. Concepcion, 563 U.S. ___, 2011 WL 1561956, (2011).

In this recent order, Judge King denied motions by Wachovia and Wells Fargo seeking arbitration. Wachovia and Wells Fargo argued that prior to the Concepcion decision, arbitration motions would have been futile and also argued that they filed notice with the Court—well before Concepcion—reserving the right to seek arbitration.

Judge King rejected these arguments. He indicated that he entered detailed scheduling orders requiring the banks in this MDL to file any motions to arbitrate simultaneously with all motions to dismiss and said he would note that the defendants had not waived their right to compel arbitration.

As we previously indicated in this blog, Carlton Fields represents several banks in cases pending in MDL 2036, though none that are parties to the cases affected by the referenced order.

How Many Class Members Does It Take To Meet The Numerosity Requirement?

Thu, 15 Dec 2011 15:23:00 GMT

In American Debt Foundation, Inc. v. Hodzic, No. A11A1200, 2011 WL 5842726, at *1 (Ga. App. Nov. 22, 2011), a Georgia customer brought an action against a Florida debt-negotiation company for violation of Georgia's debt reduction statute. The trial court granted the request for class certification, but the Georgia Court of Appeals held that a class of nine citizens failed to satisfy the numerosity requirement. Id. at *2. The Court reasoned that the focus of the numerosity requirement generally entails consideration of whether joinder of the proposed class members is impractical, and here, the plaintiffs failed to present factors showing that joinder was impracticable. Id. Rather, the class representative could identify all putative class members, and there were no applicable geographic constraints. Id. at *3.

Class Certification Decision Will Not Return From The Dead

Thu, 15 Dec 2011 14:20:00 GMT

In Ardis v. Fairhaven Funeral Home & Creamatory, Inc., No. A11A0815, 2011 WL 5429445, at *3 (Ga. App. Nov. 10, 2011), the Court of Appeals upheld a trial court's decision that the plaintiffs' misrepresentation claim against the funeral home was not appropriate for class certification. The proposed class representatives filed suit against the funeral home alleging that it had failed to disclose that a portion of the fees paid by customers for obituary services covered the advertising cost of including the funeral home's business logo at the bottom of each obituary, thereby causing customers to unknowing pay for avoidable fees. Id. at *1. However, the trial court found that the plaintiffs' misrepresentation claim would necessarily entail "an individualized inquiry into whether each purported class member relied to their detriment on Fairhaven's failure to disclose the inclusion of its logo." Id. This difficulty in determining whether the plaintiffs were similarly situated demonstrated to the trial court that the commonality requirement was not met, a finding upheld by the Georgia Court of Appeals. Id. at *2.

The Continuing State Immigration Saga: Court Grants Injunction Against Enforcement Of House Bill 87

Thu, 15 Dec 2011 13:47:00 GMT

In Georgia Latino Alliance for Human Rights, et al, v. Deal, 793 F. Supp. 2d 1317 (N.D. Ga. 2011), nonprofit organizations, business associations, and individuals filed a class action challenging the constitutionality of Georgia's Illegal Immigration Reform Enforcement Act ("HB 87" or the "Act"). At the end of June of this year, the Court granted the class's request for a preliminary injunction over some of the most concerning portions of that Act, Sections 7 and 8, which were scheduled to take effect in July. Id. at 1322. Section 7 prohibits the transport, concealment, or harboring of illegal aliens, and Section 8 authorizes state law enforcement to investigate the immigration status of criminal suspects where the officer has probable cause to believe that the suspect committed another crime, including a minor traffic violation. Id. While the Court reasoned that the plaintiffs had demonstrated a likelihood of success on the merits of their preemption arguments, the Court denied the facial Fourth Amendment challenge, and the due process, equal protection, and right to travel challenges. Id. at 1337-1340.

Proposed Class Action For Hispanic Georgia Residents Denied

Wed, 14 Dec 2011 17:22:00 GMT

In Albarran v. Morton, No. 1:10-CV-3261-CAP, 2011 WL 5289421, at *1 (N.D. Ga. Oct. 19, 2011), Hispanic resident aliens sought "to obtain redress for what is alleged to be systematic violations of their constitutional rights through the application in Cobb County, Georgia of § 287(g) of the Immigration and Nationality Act ("INA")." This provision of the INA allows Immigration and Customs Enforcement ("ICE") to delegate certain functions to local authorities. Id. Here, the plaintiffs contend that the local authorities have been enforcing federal immigration laws without meaningful federal control. Id. at *6.

More specifically, the plaintiffs allege that the defendants repeatedly violated their constitutional due process rights by failing to read them the Miranda warning and denying them counsel during ICE interviews and custodial interrogation. Id. at *5. Though the plaintiffs argue that the defendants were using minor crimes, such as traffic violations, as a pretext to begin immigration proceedings, the Court held that the plaintiffs failed to allege an imminent threat of future harm, and therefore lacked standing to pursue the proposed class action. Id. at *8.