Blog Rss Feed

Class Action News of the Day

Tue, 21 May 2013 15:21:16 GMT

Sprint seeks Supreme Court review of California appeal court decision refusing to compel arbitration of class action alleging improper early termination fees.

Supreme Court rejects Nucor Corp. appeal of certification of class of black workers alleging racial discrimination.

Florida District Judge Dimitrouleas refuses to certify class of consumers suing Aquinity Interactive days after case was filed.

Note: Full access to news items requires Law360 subscription.

First Circuit Vacates Denial Of Class Certification In Opinion Concerning Pfizer’s Off-Label Marketing Of Neurontin

Mon, 06 May 2013 21:30:40 GMT

In Harden Manufacturing Co. v. Pfizer, Inc., 712 F.3d 60 (1st Cir. 2013), one of three cases addressing Pfizer’s off-label marketing of the anticonvulsant drug, Neurontin, the First Circuit vacated the district court’s denial of certification as to a putative class of third-party payors and remanded for further proceedings. The court relied on its holdings pertaining to RICO causation in the lead case, Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc., 712 F.3d 21 (1st Cir. 2013), to conclude the district court’s decision about the Harden plaintiffs’ second motion for class certification required further analysis, specifically as it related to proof of causation and damages.

This trio of cases concerned Pfizer’s off-label marketing of Neurontin and plaintiffs’ efforts to recover for the Neurontin prescriptions they had thereby been fraudulently induced to pay. In Kaiser, Plaintiffs’ primary evidence of causation and injury was provided by the expert testimony of Dr. Meredith Rosenthal, a Ph.D. in health economics from Harvard and Professor at the Harvard School of Public Health. Dr. Rosenthal compared Pfizer’s promotional spending to patterns in prescriptions using aggregate data and statistical approaches. Based on regression analysis, Dr. Rosenthal found a causal connection between Pfizer’s fraudulent marketing and the number of Neurontin prescriptions written for off-label indications. Rejecting Pfizer’s arguments to the contrary, the court concluded that Dr. Rosenthal’s use of aggregate evidence was sufficient to show causation for RICO claims based on fraudulent marketing.

Relying on that holding, the court concluded in Harden that the district court’s denial of class certification should be vacated. The court noted that the district court based its denial on the determination that Dr. Rosenthal’s report could not provide proof of causation or damages and on the conclusion that “a class action would be ‘unmanageable’ due to the requirement of a ‘granular doctor-by-doctor analysis’” to establish whether Pfizer’s fraudulent marketing caused an increase in off-label Neurontin prescriptions. Harden, 712 F.3d at 70. Because it had concluded in Kaiser, generally, that the use of aggregate evidence and statistical regression analysis was acceptable in fraudulent-marketing RICO claims and, specifically, that Dr. Rosenthal’s testimony could provide such evidence in this matter, the First Circuit vacated the district court’s denial of class certification and remanded for further proceedings.

Best Practices in Reducing Cost and Managing Risk in Class Action Litigation

Fri, 03 May 2013 19:04:22 GMT

Across industries, corporate counsel reported they spent $2.1 billion annually on class action lawsuits in 2012. This reflects a modest decline from $2.2 billion in 2011. On average, companies managed 5.1 class actions in 2012, representing a 16 percent increase from 2011, when that number was 4.4. In both years, 1.6 of the matters managed were new, indicating that ongoing matters are taking longer to resolve.

The nature and type of class actions is evolving. Since 2011, there has been an increase of more than 50 percent in spending on high risk/bet-the-company class actions relative to other types. In 2012, these matters represented 10 percent of annual class action spending, up from 6 percent in 2011. During the same time period, spending on the middle rung of risk classifications (“complex class actions”) also increased, from 51 percent to 55 percent. Correspondingly, annual spending on routine class actions dropped from 43 percent in 2011 to 35 percent in 2012.

Consumer fraud and labor and employment matters account for more than 50 percent of all class actions, making them the most prevalent. Securities matters dropped from 13 percent of all class actions in 2011, to 10 percent in 2012.

In 2013, corporate counsel expect an onslaught of new consumer fraud class actions related to data security, wireless and other untested technologies, and food safety and labeling. Additionally, 9 percent of companies are newly on the watch for health care class actions, and 6 percent are concerned with class actions related to environmental issues.

On average, companies dedicate three in-house attorneys and three non-attorneys to class actions. In 2012, in-house legal departments added, on average, one full time employee to their class action management teams. This is consistent with the trend toward building more sophisticated, targeted internal legal resources.

Still, outside law firm spending makes up 90 percent of class action costs. Corporate counsel are consolidating the firms they use to defend class actions. On average, they decreased the number of law firms used for these matters from 4.6 in 2011, to 3 in 2012. Consolidation in the class action realm is driven by the opportunity to realize added value, the prevalence of related lawsuits, and the benefits of concentrated knowledge and insights.

The use of alternative fee arrangements continues to rise. Nearly one-third of companies rely on these arrangements, a 35 percent increase from 2011. Another 17 percent plan to adopt them in 2013, representing a more than 50 percent increase from 2012. Fixed fees are the predominant type of AFA used, as they were in 2011, and are chosen by nearly two-thirds, or 63 percent, of companies that use AFAs.

Early case assessment, new settlement strategies, and in-sourcing are driving per class action savings. Companies spent $671,100 annually per class action during 2012, a 14 percent decline from 2011, when they spent $776,500. Substantial cost savings are generated by using rigorous case assessment and modeling to calculate financial exposure. Companies that employ this strategy spend 38 percent less per class action and 42 percent less on outside counsel than companies that do not rigorously assess financial exposure.

DOWNLOAD THE FULL 2013 CLASS ACTION SURVEY REPORT AT WWW.CLASSACTIONSURVEY.COM.

Coming Soon: 2013 Carlton Fields Class Action Survey

Tue, 30 Apr 2013 20:09:32 GMT

Carlton Fields is pleased to announce the forthcoming release of its 2013 Carlton Fields Class Action Survey on Best Practices in Reducing Cost and Managing Risk in Class Action Litigation. This second edition of our multi-industry annual survey provides meaningful insights into corporate counsel’s perspectives on and attitudes toward, class action litigation and trends in 2013 and beyond. The specific topics covered in this latest survey include best practices and trends in class action spending, risk management, cost control, litigation philosophies, and reserve setting, as well as the impact of recent class action rulings.

Florida Supreme Court Makes Clear That Concepcion Is Valid And Binding In Florida

Sun, 28 Apr 2013 20:53:22 GMT

In light of the Florida Supreme Court’s recent ruling in McKenzie Check Advance of Florida, LLC v. Betts, 38 Fla. L. Weekly S223, 2013 WL 1457843 (Fla. April 11, 2013), it is now clear that Concepcion applies to class action waivers in arbitration agreements. In April 2011, the United States Supreme Court in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) held that state law decisions that find class action waivers in arbitration clauses to be unconscionable or void as against public policy were preempted by the Federal Arbitration Act (“FAA”).

In McKenzie, the plaintiffs brought suit asserting statutory claims based on the Florida lending practices statute, Florida Consumer Finance Act, Florida Deceptive and Unfair Trade Practices Act, and the Florida Civil Remedies for Criminal Practices Act. Plaintiffs asserted that McKenzie Check Advance (MCA), under the deceptive guise of a check cashing service, was actually loaning money at exorbitant rates. One of the named plaintiffs, Kelly, had signed a version of MCA’s arbitration agreement that contained a class action waiver. The circuit court found that the class action waiver was unenforceable because it was void as against public policy. The Fourth District Court of Appeal certified to the Florida Supreme Court the question of whether a class action waiver in an arbitration agreement violates public policy when the trial court is persuaded that the waiver prevents consumers from obtaining competent counsel.

Applying the rationale of Concepcion to the facts set forth by the Fourth District in McKenzie, the Florida Supreme Court concluded that the FAA preempts invalidating the class action waiver in McKenzie on the basis of it being void as against public policy. The record evidence presented in McKenzie substantiated the public policy arguments rejected by the United States Supreme Court in Concepcion. Thus, the Florida Supreme Court “conclude[d] that the basis for invalidating the class action waiver propounded by [the named plaintiff] Kelly based on the facts of this case [was] foreclosed by Concepcion.”

Genesis Healthcare Corp. v. Symczyk - Class Actions Are Fundamentally Different From Collective Actions

Wed, 17 Apr 2013 12:15:41 GMT

The FLSA establishes federal minimum-wage, maximum hour, and overtime guarantees that cannot be modified by contract. Section 16(b) of the FLSA gives employees the right to bring a private cause of action on their own behalf and on behalf of “other employees similarly situated” for specified violations of the FLSA. A suit brought on behalf of other employees is known as a “collective action.”

In Symczyk, plaintiff filed a collective action under FLSA on behalf of herself and “other employees similarly situated.” Defendants served an offer of judgment and Ms. Symczyk’s individual claim was later extinguished. Finding that no other individuals had joined plaintiff’s suit, the District Court held that once plaintiff’s individual claim became moot, the entire lawsuit became moot. The Third Circuit agreed Ms. Symczyk’s claim was moot but allowed the collective action to move forward, reasoning that a dismissal would allow defendants to “pick off” named plaintiffs before certification and frustrate the goals of collective actions. The Supreme Court reversed.

In reversing, the Supreme Court pointed out the fundamental difference between collective actions and class actions:

· A putative class acquires an independent legal status once it is certified under Rule 23.

· By contrast, under the FLSA, conditional certification does not produce a class with an independent legal status, or join additional parties to the action.

As such, once a collective action plaintiff’s individual claim becomes moot, the entire suit becomes moot. Because of the fundamental differences between class actions and collective actions, plaintiffs in collective actions cannot rely on established class action law to prevent dismissal.

Comcast v. Behrend: Supreme Court Cuts Power To Cable-Television Customers' Class Action

Wed, 27 Mar 2013 21:10:05 GMT

After months of anticipation, the Supreme Court finally released its decision in Comcast Corp. v. Behrend, No. 11–864. In a 5-4 decision authored by Justice Scalia, the Court reversed the certification of a 23(b)(3) class of Comcast cable-television customers located in the metropolitan Philadelphia market. The purported class was attempting to bring an antitrust case against Comcast for allegedly overcharging its cable subscribers. Why did the Court deny class certification and what does this mean for class-action defendants going forward?

As you will recall from oral argument, this case concerned what kind of evidence must be presented during the certification stages of class litigation, before a judge can allow a class action to proceed. The specific issue in Comcast dealt with whether a class could be certified without the district court considering whether plaintiffs’ damage models were actually tied to their class-based liability theory. Was the fact that damages could be calculated on a class-wide basis enough without determining the merits-related issue of whether the damages model had a sufficient “fit” with the specific, alleged basis for antitrust liability?

In its decision, the majority reiterated its Wal-Mart Stores, Inc. v. Dukes ruling from nearly two years ago. In addressing a putative Rule 23(b)(2) class, Wal-Mart held that prior to certifying a class, district courts must conduct a “rigorous analysis” under Rule 23 to determine the Rule’s prerequisites have been satisfied. Such “rigorous analysis” must take place during the early certification stages of litigation, even in circumstances that would require inquiry into the merits of the claim. Applying this concept to Comcast, a Rule 23(b)(3) case, the Court ruled that it is not enough for plaintiffs to merely offer damage models that may be subject to common proof. Rather, to satisfy the requirements of commonality under Rule 23(a) and predominance under Rule 23(b)(3) at the class certification stage, such damage models must actually match up or “fit” with the theory of impact or harm that allegedly resulted from the antitrust violation. Such a decision furthers the Court’s apparent willingness to tighten the requirements for establishing class actions. The Supreme Court is inviting litigants to delve even deeper into the merits of the case at the class certification stage and engendering further litigation over where the line falls between class certification and the substantive merits. Class-action defendants will be happy to accept such an invitation.

After Comcast, it appears that the Supreme Court has ratcheted-up the predominance inquire under Rule 23(b)(3) so as to reject damages models that are speculative or not specific enough – even if they might be common across the entire putative class. As Justice Scalia reasoned for the majority:

[A] model purporting to serve as evidence of damages in [a Rule 23(b)(3)] class action must measure only those damages attributable to [the class’s liability] theory. If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3). Calculations need not be exact, but at the class-certification stage (as at trial), any model supporting a plaintiff’s damages case must be consistent with its liability case, particularly with respect to the alleged anticompetitive effect of the violation.

Class Certification Affirmed In Homeowners’ Action Against Law Firm Alleging Violations Of FCCPA And FDUTPA

Fri, 22 Mar 2013 15:37:31 GMT

In Law Offices of David J. Stern, P.A. v. Hewitt, 106 So. 3d 489 (Fla. 4th DCA 2013), the District Court of Appeal of the Fourth District of Florida reviewed a trial court order certifying a class of homeowners in an action against the Law Offices of David J. Stern, and its managing partner.

The Plaintiffs sought class certification claiming that the foreclosure law firm violated state law by charging the group of homeowners for summonses served on unknown parties who may have claims on the property. The homeowners alleged that the firm’s attempt to collect payments for unknown defendants was in violation of the Florida Consumer Collection Practices Act (“FCCPA”) and the Florida Deceptive and Unfair Trade Practice Act (“FDUTPA”). The law firm appealed the trial court’s class certification order contending that the class representative’s claim was atypical.

The Court affirmed the class certification order relying on Law Offices of David J. Stern, P.A. v. Banner, 50 So. 2d 1221 (Fla. 4th DCA 2010). The Court found the two cases indistinguishable in all relevant respects, and rejected the argument that the class representative’s claim was atypical. The Court noted in its opinion that its jurisdiction was limited to review of the proprietary of the class certification. Thus, the Court could not review the trial court’s denial of appellants’ motion for partial summary judgment on appellee’s claim for a violation of FDUTPA. The Court, however, stated that “any future determination on whether the FDUTPA claim is viable would not affect the trial court’s determination as to class certification of the FCCPA claim.”

Supreme Court Holds Named Plaintiff Cannot Bind Class To Amount In Controversy Below CAFA Threshold To Avoid Federal Court Jurisdiction

Tue, 19 Mar 2013 19:01:35 GMT

The Supreme Court issued the second decision this term that will impact class action law. The issue in Standard Fire Ins. Co. v. Knowles, No. 11-1450 (March 19, 2013) concerned the common practice of a plaintiff who files a class action in state court (typically in a “hell hole” jurisdiction for defendants), and in the complaint stipulates, prior to certification of the class, that he and the class he seeks to represent will not seek damages that exceed $5 million in total. The goal, of course, is to thwart the defendant’s ability to remove the case to federal court. The Court unanimously held that such a stipulation does not have its intended effect and neither binds the class nor removes the case from CAFA’s scope.

The Supreme Court considered its reasoning to be “simple.” Stipulations must be binding to have effect. But the plaintiff’s pre-certification stipulation is not binding because a named plaintiff who files a proposed class action cannot legally bind the class before certification. Accordingly, because the plaintiff’s stipulation bound no one but himself, he had not reduced the value of the putative class members’ claims.

Beyond this simple reasoning, the Court envisioned a number of events that could cause the stipulation to be void. The state court could condition class certification on excising the stipulation. Or the court might find the named plaintiff inadequate because of the stipulation when the real value of the case well exceeds $5 million. Or another class member could intervene with an amended complaint without the stipulation and the court could substitute that party as the class representative. The bottom line is that the stipulation was not binding and the district court “should have ignored that stipulation.” This is a welcome development in removing yet another obstacle to federal court jurisdiction of CAFA cases.

Amgen Inc. v. Connecticut Retirement Plans and Trust Funds: Does Supreme Court Put “Cart Before The Horse” To Satisfy Predominance Requirement?

Thu, 28 Feb 2013 16:13:56 GMT

To best understand this decision, we need to look at the rules concerning both class actions and securities:

According to Rule 23(b)(3), a class action may be maintained if the court finds that questions of law or fact common to class members “predominate” over questions affecting individual members. This is known as the “predominance requirement.”
§10(b) of the Securities Exchange Act and Securities and Exchange Commission Rule 10b-5 require plaintiffs in securities-fraud actions to prove reliance on a material misrepresentation or omission made by a defendant.

Amgen argued that in order to satisfy the predominance requirement, plaintiffs are required to prove (1) defendant made misrepresentations or omissions; and (2) plaintiffs actually relied on the alleged material misrepresentations, before class certification. Connecticut Retirement argued that during the class certification stage, plaintiffs are only required to demonstrate that investors share a common question of reliance as a class. In a 6-3 decision authored by Justice Ginsberg, the Supreme Court sided with plaintiffs, holding that plaintiffs in securities fraud cases need not prove materiality at the class certification stage.

The majority reasoned that under a fraud-on-the-market theory, reliance can be proven on a class-wide basis. Because material reliance can be resolved simultaneously for the entire class, it need not be proven at the class certification stage. Requiring plaintiffs to establish material misrepresentation at this early stage would be akin to requiring plaintiffs to establish that they will win on the merits. Such a requirement at a certification ruling would be to “put the cart before the horse.” Materiality will be resolved later on the merits.

In his dissent, Justice Thomas identifies the flaw in the majority’s ruling: “The Court’s opinion depends on the following assumption: Plaintiffs will either (1) establish materiality at the merits stage, in which case class certification was proper because reliance turned out to be a common question, or (2) fail to establish materiality, in which case the claim would fail on the merits”. This second scenario would mean reliance was never a common question and the class should not have been certified in the first place. Plaintiffs should not be excused of their Rule 23 burden to show at certification that questions of reliance are common merely because they might lose later on the merits element of materiality. Justice Thomas claims that the Court “put the cart before the horse” by deferring class certification issues until trial on the merits.

While it is clear that Amgen is an important decision for securities fraud cases, we expect it to impact future class actions in general. This decision is sure to be cited by plaintiffs arguing for the reduction of elements required to be resolved at the class certification phase. As Amgen appears to blur the line between class certification and merits elements, could other class certification issues be pushed off until trial?

Arbitration Clause of a Loan Agreement Containing a Class Action Waiver Was Not Void as Being In Violation of Public Policy

Fri, 08 Feb 2013 16:10:03 GMT

In Baldwin v. Regions Financial Corp., 98 So. 3d 1201 (Fla. 3d DCA 2012), the District Court of Appeal of the Third District of Florida held that an arbitration clause of a loan agreement, containing a class action waiver, was not void as being against public policy by being contrary to the remedies provided by the Florida Consumer Collection Practices Act (FCCPA).

This case arose from Baldwin’s appeal of a non-final order granting Regions’ amended motion to compel arbitration. Baldwin had obtained a vehicle loan from Regions that contained an arbitration clause. This clause provided that either party could choose to arbitrate any dispute between them, and if a dispute is arbitrated, then Baldwin waived his class action rights. Regions then sent Baldwin and other debtors envelopes with the words “Consumer Collections” printed on the outside. Pursuant to Florida Statutes section 559.72(16), a person attempting to collect a debt may not mail communications to a debtor in an envelope with any words on the outside that are calculated to embarrass the debtor. Baldwin filed a putative class action complaint against Regions alleging that the envelopes were meant to embarrass the debtors in violation of this section of the FCCPA. In accordance with the loan agreement, Regions moved to compel arbitration.

Baldwin claimed that the arbitration clause waiving the right to a class action was in violation of the remedies provided by Florida Statute section 559.77(2) of the FCCPA. He argued this section allowed for $2,000 of statutory damages if the claim was brought as a class action, but only $1,000 as an individual action. Baldwin also argued that for a class action claim, the allowance for punitive damages and other equitable relief under the FCCPA was greater than that for an individual claim.

The Court disagreed with both arguments and affirmed the order under review. The Court first cited section 559.77(2) to demonstrate that both the prevailing plaintiff in an individual action and the named plaintiff in a class action may recover additional statutory damages not exceeding $1,000. The Court further stated that the clause providing for the award of punitive damages and equitable relief applied equally to a class action or individual claims.

A “Sea Change” In Florida Law?

Thu, 24 Jan 2013 20:13:29 GMT

The Florida Supreme Court issued in intriguing opinion in Soper v. Tire Kingdom, Inc., No. SC11-1462, which provokes questions about the trajectory of Florida class action law. In Tire Kingdom, the court reversed and remanded the Third District’s decision in Tire Kingdom, Inc. v. Dishkin, 81 So. 3d 437 (Fla. 3d DCA 2011), apparently without allowing briefing by the parties on the merits.

The three sentence per curiam order (joined by Justices Pariente, Lewis, Quince, Labarga, and Perry) merely stated that the Third District’s decision in Dishkin was in “express and direct conflict” with its decision last year in Sosa v. Safeway Premium Finance Co., 73 So. 3d 91 (Fla. 2011). It unfortunately does not articulate how that conflict arises.

The vigorous dissent by Justice Canady (joined by Chief Justice Polston) provides a clue. Justice Canady argues that Sosa represented a “sea change in Florida’s law governing class actions” and suggested that it should be repudiated. How did it represent a “sea change”? The only thing we know at this point is that the court in Sosa ignored the U.S. Supreme Court’s analysis in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) related to the (a)(2) commonality element of the class action rule. The court in Sosa held that, at least on commonality, “the possibility of mere factual differences in the individual circumstances surrounding each of the putative class members’ claims and the variances in defenses to them” was improper. Given that the language of Rule 23(a)(2) is similar to Rule 1.220(a)(2) and Florida courts have heretofore deferred to federal case law interpreting Rule 23 in construing the Florida class action rule, Justice Canady argued that this was error.

If Sosa’s “sea change” and Tire Kingdom’s emphasis on it is cabined to commonality, it is not really much of a sea change from federal class action law pre-Wal-Mart. Most litigants long have considered commonality a throw-away element easy for a plaintiff to satisfy, with defendants preferring to save up their ammunition for a predominance and superiority challenge. In the federal system, Wal-Mart breathed life back into the argument that there is a defense to the commonality element, but in this sense, Wal-Mart was a sea-change. What else might Sosa mean? The court seemed to quote the legal standard for determining class certification from virtually every district court of appeal decision construing Rule 1.220 in the last ten years, so there is something there perhaps for everyone. Its predominance analysis was fairly unremarkable and fact-driven. Thus, maybe the “sea-chance” relates only to commonality. We don’t know. What is certain is that Sosa and now Tire Kingdom give lawyers on both sides of the “v.” plenty of things to say in arguing for and against class certification going forward. What also is certain is that defendants facing class actions in Florida courts need to take a hard look at removal to federal court, where they can be sure they have additional commonality arguments that appear foreclosed for the time being in Florida courts.

Comcast Corp. v. Behrend - Supreme Court Hears Oral Arguments

Mon, 26 Nov 2012 13:22:21 GMT

The Supreme Court heard oral argument this month in Comcast Corp. et al. v. Behrend et al., No. 11-864, where the parties fought over whether the lower courts took a close enough look at plaintiffs’ model for damages. The issues underlying oral arguments concerned the amount that class action plaintiffs are required to prove during the early stages of litigation. Obviously, the greater the amount, the greater the burden for would be class action plaintiffs. Specifically, this case turns on whether a class can be certified without a district court considering whether plaintiffs have provided admissible evidence showing damages could be awarded on a class-wide basis. From the Justices’ comments, it appears that the Court will use this case to formulate a rule governing the amount of inquiry a judge will need to do on expert damages testimony before certifying a class. We will keep you posted as this case progresses.