Class Action Defense Blog

As a resource for California class action defense attorneys, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers October 3 - 9, 2008, during which time only 27 new class action lawsuits were filed. Class action complaints alleging employment-related claims generally head the list of the new class action filings by a wide margin. This again proved to be true. During the past week, 21 of the new labor law class actions, representing an incredible 78% of the total number of new class actions filed. The only other category that satisfied the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with 5 new filings (19%).

Posted In: Class Actions In The News

Class Action Alleging Employer Coerced Restaurant Employees to Share Tips in Violation of Federal Fair Labor Standards Act (FLSA) Decertified as Class Action because “Critical Questions of Fact” in Proposed Class Action “Vary from Plaintiff to Plaintiff and Restaurant to Restaurant” Texas Federal Court Holds

Plaintiff filed a class action against her employer, Brinker International, alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, plaintiff alleged that at its Chili’s restaurants, defendant required that servers share their tips with “Quality Assurance employees (QAs). Roussell v. Brinker International, Inc. ___ F.R.D. ___ (S.D. Tex. September 30, 2008) [Slip Opn., at 1]. The district court certified the lawsuit as a class action on behalf of approximately 3500 servers, id. The 3500 servers who opted into the FLSA class action worked at 775 Chili’s restaurants in 45 states, id., at 3. In July 2008, the federal court reaffirmed that “the question of whether QAs were eligible to participate in a mandatory tip pool could be tried collectively,” but it expressed concern that “the question of manager coercion could not be fairly tried using representative testimony based on Plaintiffs’ original trial plan.” Id. The district court requested that plaintiff submit a revised trial plan, id. Plaintiff proposed a three-phase trial plan, id., at 2; defense attorney objected to the proposal and requested that the district court decertify the class action, id., at 3. The federal court granted defendant’s motion and decertified the lawsuit as a class action.

Plaintiff argued that class action treatment was warranted and proposed the following trial plan. The federal court summarized the proposed class action trial plan at page 2 of its opinion. In Phase 1, the court would decide whether QAs are entitled to share in server tips. It they are found to be ineligible, then in Phase 2 the court “a second jury [would] consider whether a test flight of 20 to 50 of the opt-ins deposed in this case were coerced or required to share tips with QAs”; plaintiff argued that Phase 2 would “clarify the legal and evidentiary issues necessary to fully adjudicate such claims.” Roussell, at 2. In Phase 3, the federal court would hold a case management conference to determine how to resolve the claims of the remaining opt-in class members, id. Defense attorneys argued that the revised trial plan did not solve the deficiencies in the original plan, id., at 3. The district court agreed, explaining at pages 3 and 4: “One of the questions central to liability in this case is whether Plaintiffs were coerced by different managers at the 775 stores to share tips with QAs. Plaintiffs’ Revised Trial Plan does not demonstrate that this question can be fairly tried collectively ….” The federal court explained that class action treatment “is only justified in cases in which plaintiffs are similarly situated and where proceeding collectively will not render trial unfair to defendants.” Id., at 4. Class action treatment was inappropriate in this case because “this lawsuit involves critical questions of fact that vary from plaintiff to plaintiff and restaurant to restaurant, and does not allow resolution of the case in a single collective proceeding.” Id., at 5. Accordingly, it granted the defense motion to decertify the class action, id., at 5-6.

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Securities Class Action Properly Dismissed for Failure of Allegations in Class Action Complaint to Meet PSLRA’s Heightened Pleading Standards because Defendants were Under no Legal Duty to “Search out and Disclose” Raw Data of FDA Clinical Trials Prior to FDA Issuing Results of Drug Trial Eighth Circuit Holds

Plaintiff filed a class action against Orphan Medical and two of its officers for violations of federal securities laws; specifically, the class action complaint alleged that defendants “negligently failed to disclose material information to Orphan's stockholders before asking the stockholders to approve Orphan's merger with [Jazz Pharmaceuticals], in violation of §§ 14(a) and 20(a) of the Securities Exchange Act of 1934…, and Securities and Exchange Commission (SEC) Rule 14a-9.” Little Gem Life Sciences LLC v. Orphan Medical, Inc., 537 F.3d 913, 914 (8th Cir. 2008). Defense attorneys moved to dismiss the class action complaint on the grounds that the class action’s allegations “failed to meet the heightened pleading standards required by the Private Securities Litigation Reform Act (PSLRA)”; the district court agreed and dismissed the class action. Id. On appeal, plaintiff argued that the district court should have converted the motion to dismiss into a motion for summary judgment, and that the allegations in the class action complaint satisfied the PSLRA. Id., at 914-15. The Eighth Circuit affirmed.

According to the class action complaint, Orphan, a pharmaceutical company, sought a merger because it was experiencing financial difficulties. At the time, the company’s future profitability was uncertain, largely because it was unclear whether its drug Xyrem, upon which it heavily relied, had broader medical uses. In particular, Orphan was testing whether Xyrem could be used to treat fibromyalgia, and it initiated Phase I of its FDA clinical trials in June 2004, which it passed. Xyrem still had to pass Phase II and Phase III trials before it could obtain FDA approval to treat fibromyalgia. Little Gem, at 915. The gravamen of the class action was that shareholders voted on the merger in June 2005, and in July 2005 it was announced that Xyrem successfully passed Phase II: plaintiff alleges that defendants should have disclosed the successful completion of Phase II before the shareholders voted on the merger with Jazz. Id., at 915-16. In support of its motion to dismiss the class action, defendants “asserted factual allegations that went beyond the face of [the class action] complaint.” Id., at 916. The district court did not consider those factual allegations in holding that the class action “failed to meet the heightened pleading standards mandated by the PSLRA.” Id.

Continue reading "PSRLA Class Action Defense Cases–Little Gem v. Orphan Medical: Eighth Circuit Affirms Dismissal Of Securities Class Action Holding Class Action Complaint Failed To Meet Heightened Pleading Requirements Under PSLRA" »

Posted In: Class Action Court Decisions, PSLRA/SLUSA Class Actions

Congressional Amendments in Foreign Trade Antitrust Improvement Act (FTAIA) to Sherman Act’s Jurisdiction Barred Foreign Plaintiff Corporation’s Antitrust Class Action Claims Ninth Circuit Holds

Plaintiff, a British computer manufacturer, filed a class action complaint against “U.S. and foreign manufacturers and sellers of DRAM, a type of high-density memory used in personal computers and other electronic devices” for violations of federal antitrust laws and Section 1 of the Sherman Act; the class action complaint alleged violations of Sections 4(a), 12 and 16 of the Clayton Act, and sought injunctive relief and damages In re Dynamic Random Access Memory (DRAM) Antitrust Litig., 538 F.3d 1107, 1109 (9th Cir. 2008). Plaintiff alleged a “global conspiracy to fix DRAM prices, raising the price of DRAM to customers in both the United States and foreign countries.” Id., at 1109-10. Defense attorneys moved to dismiss the class action for lack of subject matter jurisdiction under the Foreign Trade Antitrust Improvement Act of 1982 (FTAIA), which amended the Sherman Act; plaintiff’s theory was that “defendants could not have raised prices worldwide and maintained their global price-fixing arrangement without fixing the DRAM prices in the United States.” Id., at 1110. The district court granted the motion and denied plaintiff leave to file an amended class action complaint, finding that plaintiff did not meet the jurisdictional prerequisites under the FTAIA “because it had not sufficiently alleged that its foreign injury was directly linked to the domestic effect of higher U.S. prices for DRAM.” Id. The Ninth Circuit affirmed.

The Ninth Circuit explained that Congress amended the jurisdictional language of the Sherman Act in 1982 by enacting the FTAIA: the FTAIA amended the Sherman Act so as to exclude “anti-competitive conduct that causes only foreign injury.” In re DRAM, at 1110 (citation omitted). The FTAIA accomplished this purpose by declaring that the Sherman Act “shall not apply to conduct involving trade or commerce ... with foreign nations.” Id. (citing § 6a). It carves out an exception, known as the “domestic injury exception,” for foreign conduct that “(1) has a ‘direct, substantial, and reasonably foreseeable effect’ on domestic commerce,” id. (citation omitted). Quoting the U.S. Supreme Court, the Ninth Circuit explained at page 1111 that the FTAIA's language as:

Continue reading "Class Action Defense Cases–In re Dynamic Random Access Memory: Ninth Circuit Affirms Dismissal Of Antitrust Class Action For Lack Of Subject Matter Jurisdiction Under Foreign Trade Antitrust Improvement Act (FTAIA)" »

Posted In: Class Action Court Decisions

Defense Motion to Dismiss Securities Class Action Claims Granted in Part, but Class Action Plaintiffs Adequately Alleged Existence of Certain Omissions or Misrepresentations as to Most Defendants as well as Control Person Liability as to All Individual Defendants Illinois Federal Court Holds

Plaintiffs filed a class action against Motorola and some of its officers and directors alleging violations of federal securities law; the class action complaint alleged that defendants artificially inflated the company’s stock price by issuing statements that omitted important facts or contained material misrepresentations in violation of Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5. Silverman v. Motorola, Inc., ___ F.Supp.2d ___ (N.D.Ill. September 23, 2008) [Slip Opn., at 1-2]. Count I of the class action complaint was premised on the Section 10(b) and Rule 10b-5 violations (material misrepresentations and omissions); Count II of the class action complaint was premised on the Section 20(a) violation (asserting control person liability). Id., 1-2. The allegations in the class action centered on Motorola’s development of its third generation cell phones, or “3G” cell phones. Id., at 3. Defense attorneys moved to dismiss the class action complaint for failure to satisfy the heightened pleading requirements under the PSLRA (Private Securities Litigation Reform Act), id., at 2. The federal court granted defendants’ motion in part, but refused to dismiss the class action in its entirety.

After detailing the statements underlying the class action complaint, see Silverman, at 3-12, the district court noted that plaintiffs’ misrepresentation claims fall into two categories: (1) the drop in price of the company’s RAZR cell phones, and (2) the delayed rollout of the company’s new 3G cell phones, id., at 15. The federal court readily rejected the RAZR category, noting that the company had expressly discussed the price drop in the RAZR line and the reasons for the price reductions. See id. “Therefore, any allegations of fraud based on statements regarding the RAZR price decrease are dismissed.” Id. With respect to the 3G cell phone claims in the class action complaint, the district court agreed that some of the alleged misrepresentations were “mere puffery,” see id., at 15-16, and that company representations concerning projected sales and revenue were protected as “forward-looking statements,” see id., at 18-19. However, the federal court rejected the puffery defense as to other company statements, finding that representations such as whether new products will be “competitive” and “on track” would be material if defendants knew these statements to be untrue, id., at 16-17, and found that the “forward-looking” safe harbor did not apply to statements of present or future facts that could have materially affected an investor’s decisions, id., at 18-19. Similarly, omissions concerning potential delays in the 3G rollout could be actionable, id., at 17-18, particularly as the delay severely impacted sales during the Christmas holiday season, see id., at 27.

Continue reading "PSLRA Class Action Defense Cases–Silverman v. Motorola: Illinois Federal Court Grants Defense Motion To Dismiss Certain Claims In Securities Class Action Finding Some Class Action Allegations Inadequate Under PSRLA" »

Posted In: Class Action Court Decisions, PSLRA/SLUSA Class Actions

Class Action Seeking Medical Monitoring due to Exposure to Contaminated Drinking Water Denied Class Action Treatment because Plaintiffs Failed to Demonstrate Existence of Common Proof as to Each Class Member’s Injuries West Virginia Federal Court Holds

Plaintiffs filed a putative class action in West Virginia state court against E.I. du Pont de Nemours and Company seeking damages for harm allegedly caused by drinking water contaminated with perfluoroctanoic acid, also known as “C-8,” which is a chemical that does not degrade and is “used in the manufacture of many industrial and consumer products including non-stick cookware coatings and architectural coatings.” Rhodes v. E.I. Du Pont De Nemours & Co., ___ F.Supp.2d ___ (S.D.W.V. September 30, 2008) [Slip Opn., at 1-2]. Specifically, the class action complaint alleged that DuPont’s Washington Works plant in West Virginia released C-8 into the drinking supply of the Parkersburg Water District, and that because C-8 “is not a naturally occurring substance[,] … all C-8 found in human blood is attributable to human activity.” Id., at 2. Defense attorneys removed the class action to federal court, id., at 5. Plaintiffs moved the court to certify the litigation as a class action; defense attorneys opposed class action treatment. Id., at 1. The district court denied plaintiffs’ motion explaining that while plaintiffs “presented compelling evidence that exposure to C-8 may be harmful to human health,” the class action is premised on “some potential harm to the general public” rather than on “specific injuries to each member of the proposed class.” Id. The federal court explained at page 1, “The fact that a public health risk may exist is more than enough to raise concern in the community and call government agencies to action, but it does not show the common individual injuries needed to certify a class action.” Accordingly, the district court denied plaintiffs’ class action certification motion.

We summarize the facts only briefly. DuPont has used C-8 at its plant for more than 50 years, and has released C-8 into the air and into the Ohio River. Rhodes, at 2-3. The class action alleges that C-8 emissions from the DuPont plant contaminated the public water supply and that in 1984 “detectable levels of C-8 were discovered in the tap water of [certain] communities.” Id., at 3. While the precise effect of C-8 exposure “remains uncertain,” several studies have associated such exposure to various health problems, including several types of cancer. Id. There have been calls for “precautionary measures such as removing C-8 from drinking water supplies and using alternative drinking water sources, especially for children and the elderly,” id., and various state and federal agencies have directed attention to the regulation of C-8 emissions and exposure, see id., at 3-4. A prior class action involving C-8 emissions from the Washington Works plant was filed in West Virginia state court against DuPont in 2002 entitled Leach v. E.I. Du Pont Nemours & Co.; the state court certified that lawsuit as a class action and the class action settlement ultimately approved in Leach defined the class as “all individuals who, for a period for at least one year, consumed drinking water containing .05 ppb (parts per billion) or greater of C-8 attributable to releases from the Washington Works plant from any of six specified Public Water Districts or any eligible private sources and who did not opt out of the class or waive their class member rights.” Id., at 4. Parkersburg Water District was not part of that class action because at the time its water contained less than .05 ppb of C-8; at the time the new class action was filed, the C-8 levels exceed that amount. Id., at 5.

Continue reading "Class Action Defense Cases–Rhodes v. DuPont: West Virginia Federal Court Denies Class Action Certification In Putative Medical Monitoring Class Action Holding Individualized Inquiries Would Predominate" »

Posted In: Certification of Class Actions, Class Action Court Decisions

To assist class action defense attorneys anticipate the kinds of class actions against which they will have to defend in California, we provide weekly, unofficial summaries of the legal categories for new class action lawsuits filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas. We include only those categories that include 10% or more of the class action filings during the preceding week. This report covers September 26 - October 2, 2008, during which time 34 new class action lawsuits were filed. It is rare that labor law class action complaints do not top the list of the new class action filings, and this past week was no exception. During the past week, 21 of the new labor law class actions, representing 62% of the total number of new class actions filed. The only other category that satisfied the 10% threshold involved class action lawsuits alleging unfair business practice claims, which include false advertising claims, with 8 new filings (24%).

Posted In: Class Actions In The News

Production of Documents to Regulators Pursuant to Confidentiality Agreement Constituted a Waiver of Attorney-Client/Work Product Doctrines Entitling Class Action Plaintiffs to Documents in ERISA Class Action Maryland Federal Court Holds

Plaintiffs, former employees of Scudder/Deutsche Former who had participated in defined contribution retirement plans, filed a class action against various defendants for violations of ERISA (Employee Retirement Income Security Act); specifically, the class action complaint alleged that defendants breached fiduciary duties owed under ERISA by engaging in market timing and late trading in connection with the plans’ investment in mutual funds. In re Mutual Funds Investment Litig., 251 F.R.D. 185, 186 (D.Md. 2008). The Judicial Panel on Multidistrict Litigation coordinated the class action litigation for pretrial purposes in the District of Maryland. Id. During the course of the MDL litigation, class action plaintiffs sought from defendants the production of certain documents “previously disclosed by the Scudder/Deutsche defendants to regulatory officials, specifically the SEC and the New York Attorney General's Office, in connection with those agencies' investigation of similar allegations against the defendants.” Id. Defendants refused on the grounds that the documents were protected from disclosure by the attorney-client privilege and/or attorney work-product protection, and that the documents had been disclosed to regulators “subject to a confidentiality agreement.” Id. In essence, defense attorneys relied on the doctrine of “selective waiver” in opposing plaintiffs’ document request, id.; the district court rejected the defense arguments and ordered defendants to produce the documents requested.

The documents had been produced to regulators “subject to ‘non-waiver’ and ‘confidentiality’ agreements” that expressly stated that “Deutsche Bank does not intend to waive the protection of the attorney work product doctrine, attorney-client privilege, or any other privilege applicable as to third parties” and required regulators to “maintain the confidentiality of the Confidential Materials pursuant to this agreement and…not disclose them to any third party”; ultimately, defendants settled with the regulatory agencies and paid more than $100 million in civil penalties. In re Mutual Funds, at 186. The class action plaintiffs sought production of all documents given to the SEC or other regulatory agencies with regard to market timing or late trading; defendants withheld 36,000 pages, asserting the attorney-client privilege and/or work product doctrine. Id., at 186-87. In their motion to compel, plaintiffs did not dispute whether the documents generally would fall within the scope of those doctrines; rather, they argued that the privileges had been waived. Id., at 187. The district agreed: “There is no question that the defendants have disclosed otherwise protected material, voluntarily, to an adversary, for their own benefit in negotiating a settlement with the regulators.” Id. After discussing Fourth Circuit and Tenth Circuit authority concerning disclosures that constitute a subject-matter waiver of attorney-client and work product documents and of the validity of “selective waiver” as a defense to such waiver, the district court granted plaintiffs’ motion. The district court concluded at pages 187 and 188, “The defendants' voluntary disclosure of otherwise protected material to the [regulatory agencies], despite the entry of a confidentiality agreement, results in waiver.” However, the district court held that the waiver applied only to those documents “actually disclosed” to regulatory agencies; specifically, the court rejected class action plaintiffs’ claim that defendants’ production constituted a “subject matter waiver as to any attorney-client and non-opinion work product, not simply waiver as to the actual documents disclosed.” Id., at 188.

Continue reading "ERISA Class Action Defense Cases–In re Mutual Funds: Maryland Federal Court Grants Motion To Compel In ERISA Class Action Holding Fiduciaries Waived Attorney-Client/Work Product Doctrines By Producing Documents To Regulators" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

Labor Law Class Action Erroneously Decertified because Evidence Submitted by Class Action Plaintiffs Concerning Nationwide Practices was Relevant to Predominance of Class Action Claims of Massachusetts Employees Supreme Judicial Court Holds

Plaintiffs filed a putative class action against their former employer, Wal-Mart, alleging labor law violations; the class action complaint alleged that Wal-Mart “wrongfully withheld compensation for time worked and denied of cut short rest and meal breaks to which they were entitled.” Salvas v. Wal-Mart Stores, Inc., 452 Mass. 337, 338-39 (Mass. September 23, 2008). The trial court certified the litigation as a class action on behalf of roughly 67,500 current and former employees who worked for Wal-Mart in Massachusetts during a ten-year period, id. Wal-Mart subsequently moved for summary judgment on the class action claims; Wal-Mart also moved to exclude as unreliable the testimony of plaintiffs’ main expert witness, and to decertify the class action. Id. The trial court granted summary judgment with respect to the class action’s meal breaks claims, and with respect to some of the wage claims; the trial court also granted Wal-Mart’s motions to exclude the expert testimony and to decertify the class action. Id. The Massachusetts Supreme Judicial Court reversed. We address here only that portion of the Supreme Judicial Court’s opinion concerning class action certification.

The Supreme Judicial Court found that Wal-Mart’s home office established and directed corporate-wide policies, including payroll controls. Salvas, at 339. Under these procedures, each hourly employee “adhere[d] to stringent timekeeping procedures, including clocking in and out at the beginning and end of each shift and at other prescribed times.” Id., at 340. According to Wal-Mart policy, “hourly employees should never be required to work ‘off-the-clock’” and hourly employees were generally prohibited from working overtime. Id., at 340-41. Employees were repeatedly warned that they could be terminated for working off-the-clock or for failing to take breaks, and store managers were required to investigate “every instance” of off-the-clock work. Id., at 341. Individual store managers also worked under a competing pressure: “the responsibility for payroll came with considerable pressure from the home office to boost profits by, among other things, minimizing labor costs, one of the corporation’s largest controllable expenses.” Id., at 342. Further, “Store managers were rewarded for keeping payroll costs low. Conversely, if they exceeded Wal-Mart’s stringent labor cost guidelines, they might lose their bonuses or lost their jobs.” Id. And at least as early as 1989, Wal-Mart knew that “despite the written policy directives to the contrary, store managers were sometimes ‘[a]ltering time cards to decrease reported payroll expenses’ and ‘[i]nstructing associates to work off the clock.’” Id. Wal-Mart knew also that some hourly employees were missing meal and rest breaks, id., at 342-43.

Continue reading "Wal-Mart Class Action Defense Cases–Salvas v. Wal-Mart: Massachusetts Reverses Decertification Of Labor Law Class Action (And Grant Of Summary Judgment On Class Action Claims) Holding Predominance Test Had Been Satisfied" »

Posted In: Certification of Class Actions, Employment Law Class Actions, Class Action Court Decisions

Class Action Complaint Failed to Adequately Allege Violations of Fair Debt Collection Practices Act (FDCPA) because Mere Attachment of Entire Contract with Unenforceable Attorney Fee Clause to Debt Collection Complaint Underlying Class Action was not an Attempt to Collect Attorney Fees where Debt Collection Complaint did not Pray for Such Fees Sixth Circuit Holds

Plaintiff filed a class action complaint in Ohio federal court against