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Archive for December, 2008

Shannon P. Duffy of The Legal Intelligencer has authored an article summarizing the Third Circuit Court of Appeals’ decision in In re Hydrogen Peroxide Antitrust Litigation, No. 07-1689 (3d Cir., Dec. 30, 2008), which the article calls a “ruling that is sure to be required reading for antitrust lawyers.”  The decision also addresses more general class certification issues that are sure to be of interest to lawyers to practice in other areas. 

In particular, the Court has an interesting analysis of how a trial court must weigh conflicting expert testimony on class certification issues in carrying out the “rigorous analysis” required of a federal court in evaluating whether a class should be certified under FRCP 23.  The trial court had considered only whether the plaintiff had offered expert testimony that could be considered admissible under a Daubert analysis in finding that the plaintiff had established that the issue of antitrust injury was susceptible to common, class wide proof.  The trial court refused to weigh this evidence against the conflicting expert testimony offered by the Defendant that the antitrust injury could not be determined on a class wide basis.  The Third Circuit reversed, holding that the trial court was required to also consider conflicting expert testimony and then make a decision whether the issue was truly susceptible to class wide proof.   The court was clear that on remand, the trial court did not have to accept the defendant’s expert’s view, it merely had to demonstrate that the expert’s testimony had been considered in making an actual determination.

The decision reaffirms the idea that in carrying out the “rigorous analysis”, a district court must not shy away from making an actual determination of each of the issues necessary for class certification, even if that determination involves weighing conflicting testimony or involves deciding an issue that also happens to be a disputed issue on the merits of the plaintiff’s claims.  A court must not simply give the plaintiff the benefit of the doubt or view the evidence in the light most favorable to the plaintiff, as in ruling a motion to dismiss under FRCP 12(b)(6).

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As the new year approaches, everyone seems to be doing a “top ten” list for 2008, so of course, ClassActionBlawg has to have one too.  However, this “top ten” list has two improvements.  First, the rankings will be decided by reader vote.  Second, and even better, it goes to 11!

So, here are some key class action decisions and trends from the year that was, in no particular order.  See the poll below to vote for the one you like best.  Feel free to submit comments with other suggestions, and maybe together we can make a top ten list so good that it will go higher than 11.  Best wishes to all in 2009.

  • RICO fraud class actions show promise after Supreme Court’s decision in Bridge v. Phoenix Bond & Indemnity Co., 553 U.S.. —. , 128 S.Ct. 2131 (U.S. June 9, 2008) (holding that a plaintiff need not show first-party reliance in order to assert a claim under the federal RICO statute).
  • “Foreign Cubed” class actions show promise, then sputter a bit.  See Morrison v. National Australia Bank Ltd., 2008 WL 4660742 (2d Cir. Oct. 23, 2008) (discussing federal jurisdiction over “foreign cubed” securities class actions).
  • Fraud on the market theories are tested in consumer fraud cases.  See McLaughlin v. Philip Morris USA, Inc., 522 F.3d 215 (2d Cir. 2008) (rejecting class certification on various consumer fraud theories, including the “fraud on the market theory”).
  • Courts reject certification of FACTA Class Actions on superiority grounds based on reasoning that class exposure would be grossly disproportionate to the alleged harm to consumers.  See, e.g., this recent California federal court decision summarized at Class Action Defense Blog.
  • California courts address certification of wage and hour class actions involving unpaid wages for time worked during meal and rest breaksSee Brinker Restaurant Corp. v. Superior Court (2008), 165 Cal. App. 4th 25, review granted (Oct. 22, 2008).
  • Truth in Lending Act (TILA) actions seeking rescission of mortgages due to alleged predatory lending deemed unsuitable for class treatment.  See Andrews v. Chevy Chase Bank, No. 07-1327 (7th Cir., Sept. 24, 2008)
  • Class actions for damages caused by pollution where defendant has complied with applicable regulations see mixed results in the U.S. and Canada.
  • The Second Circuit Court of Appeals holds that a preponderance of the evidence standard of proof applies in determining whether the elements of class certification have been satisfied in Teamsters Local 445 Freight Division Pension Fund v. Bombardier, Inc., Case No. 06-3794-cv (2d Cir. Oct. 14, 2008).
  • Italy’s new class action law takes effect, while other European countries consider class action reforms.
  • Class action scandals involving illegal kickback and bribery schemes result in prison sentences for class action lawyers Melvin Weiss, William Lerach, Dickie Scruggs and others.
  • The Supreme Court rejects “scheme liability” in securities fraud cases in Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 128 S. Ct. 761 (2008)

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I’ve decided to take a week away from the blogosphere while I focus on family obligations during Christmas.  ClassActionBlawg will be back with more class action-related content next week.

In the meantime, my very best wishes to everyone during this holiday season.  May your 2009 be filled with joy, peace, and prosperity.

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The AAJ hasn’t published a “generous dispensers of recompense” list to compete with the ATRA’s list of “judicial hellholes,” as I very seriously suggested yesterday.  But the AAJ did send an email response to Robert J. Ambrogi of Legal Blog Watch in response to his well-publicized post yesterday discussing the ATRA report.   Ambrogi has summarized the AAJ response in this follow-up entry.  Not surprisingly, they don’t think too much of the report, although I’d be surprised if they didn’t at least take a few notes.

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Here are some blog posts from the week that was that might be of interest to class action practitioners:

Top Stories that Are Hopefully Not Indicative of Class Action Trends

Overlawyered reports on a courtroom fistfight between two lawyers pursuing rival class action suits against the same defendant:

http://overlawyered.com/2008/12/new-orleans-brawl-between-class-action-lawyers/

Class Action Decisions

How Appealing summarizes and links to an opinion by the Fourth Circuit Court of Appeals decision holding that a class action counterclaim defendant could not remove to federal court under the Class Action Fairness Act (CAFA) (as an aside, yours truly was on the losing end of the Ninth Circuit decision relied upon by the majority.  Sorry Mayer Brown et al. for helping to create bad precedent):

http://howappealing.law.com/121708.html#031686

Securities Docket offers a synopsis of a Fourth Circuit Court of Appeals decision upholding the dismissal of a securities fraud class action under the “strong inference” of wrongful intent standard required by the Supreme Court’s decision in Tellabs:

http://www.securitiesdocket.com/2008/12/15/fourth-circuit-affirms-dismissal-of-securities-class-action-against-inspire-pharmaceuticals/

Online Dating Newsletter reports on a federal court’s decision denying a motion for summary judgment filed by an online dating service defending claims that it continued to charge fees after members had canceled their service:

http://www.onlinedatingnewsletter.com/datingnews/truecomclassactionlawsuit/

Corporate Legal Times has a story about an an Iowa federal court’s class certification decision, with the self-explanatory headline “Class Action Status Doesn’t Stick to Teflon Lawsuits” …

http://www.cltmag.com/class-action-status-doesnt-stick-to-teflon-lawsuits.html

… and more on the same case from InjuryBoard.com and South Florida Lawyers:

http://www.injuryboard.com/national-news/teflon-lawsuits-won39t-become-class-action.aspx?googleid=253196

http://southfloridalawyers.blogspot.com/2008/12/teflon-class-action-up-in-flames.html

Wage Law reviews a recent California appellate decision addressing the standards for what evidence a trial court must consider in evaluating the fairness of a class action settlement: 

http://www.californiawagelaw.com/wage_law/2008/12/kullar-v-foot-locker—reversal-of-class-action-settlement-approval.html

The Race to the Bottom analyzes a New York court’s grant of summary judgment in a shareholder class action alleging that a forced bank merger constituted a breach of fiduciary duty:

http://www.theracetothebottom.org/home/bear-stearns-the-shotgun-merger-and-fiduciary-duties.html

Class Action Trends

As always, for the latest developments in subprime crisis litigation, see the D&O Diary

http://www.dandodiary.com/2008/12/articles/subprime-litigation/subprime-securities-suit-against-bank-dismissed-without-prejudice/

… and for more commentary and analysis on trends in subprime mortgage litigation, see this December 3 entry from Mortgage Meltdown:

http://mortgagemeltdown.typepad.com/my_weblog/2008/12/securities-fraud-lawsuit-against-countrywide.html

Class Action News

The Complex Litigatorreports on upcoming administrative changes in the Los Angeles County Complex Litigation Court (Btw, congrats to Scott Leviant on his new position with Initiative Legal Group LLP):

http://www.thecomplexlitigator.com/2008/12/management-changes-coming-to-complex-litigation-court-in-los-angeles-county.html

The Memphis Daily Newsreports on developments in a potential class action lawsuit being considered by the City of Memphis and Shelby County, Tennessee against lenders for alleged predatory lending practices leading to mass foreclosures in connection with subprime mortgages:

http://memphisdailynews.com/editorial/Article.aspx?id=39942

Spam Notes has an update on procedings on appeal to the Ninth Circuit Court of Appeals in a class action involving federal preemption of claims brought under the California anti-spam statute and other state laws:

http://spamnotes.com/2008/12/16/kleffman-v-vonage–no-oral-argument.aspx

Drug and Device Law provides an update on amendments to Financial Accounting Standards Advisory Counsel guidelines on what a company must disclose about securities class action and other litigation:

http://druganddevicelaw.blogspot.com/2008/12/amending-fas-5-update.html

Class Action Conferences

Class Action Defense Blog and CAFA Law Blog comment on an upcoming conference sponsored by the American Finance Institute on consumer finance class actions and litigation to be held in New York in late January:

http://classactiondefense.jmbm.com/2008/12/mark_your_calendars_class_acti_6.html

http://www.cafalawblog.com/-events-making-your-list-checking-it-twice-if-so-make-sure-this-outstanding-seminar-is-on-it.html

Class Action Commentary

www.InvestmentFraudPRO argues that FINRA securities fraud arbitration can often be a better approach for victims of investment fraud to recoup their losses than class action lawsuits:

http://investmentfraudpro.blogspot.com/2008/12/finra-securities-arbitration-or-class.html

FP Legal Post predicts that class actions against cell phone companies based on concealment of studies linking cell technology to brain cancer may be the next wave of litigation in Canada:

http://network.nationalpost.com/np/blogs/legalpost/archive/2008/12/15/cellphones-newest-bonanza-for-class-action-bar.aspx

Mass Tort Litigation Blog discusses a recent BNA Reports commentary on CAFA’s Local Class Action Exception:

http://lawprofessors.typepad.com/mass_tort_litigation/2008/12/cafas-local-cla.html

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Legal Blog Watch has a new post from Robert J. Ambrogi up today summarizing the latest edition of the American Tort Reform Association‘s annual “Judicial Hellholes” rankings for 2008-09 (see the link on the executive summary page for the full report).  Class action lawyers won’t be too surprised by the “honorees” on this year’s list.  One item of note was that Madison County, Illinois, once the standardbearer for “judicial hellholes” has stayed off the list for the second year in a row, although it’s still on the organization’s “watch list.”

I found the comments to Ambrogi’s post interesting.  One commenter questioned whether it was appropriate for Law.com to be endorsing the views of such a “radical corporate propaganda machine” as the ATRA (Legal Blog Watch is part of the Law.com Legal Blog Network).  This prompted a response from another reader that the article was appropriate in the spirit of fostering healthy debate and that the American Association for Justice (formerly ATLA) is viewed by some as being just as radical as the ATRA.  I’m not going to weigh in on that dispute, but I will be checking back to see whether Legal Blog Watch ever publishes an AAJ “generous dispensers of recompense” list.

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If you’re a Colorado attorney who didn’t make it to the quarterly CLE luncheon sponsored by the CBA class actions subsection, you missed out.  Dirk W. de Roos and O. Russel Murray gave excellent presentations on developments in class arbitration.  If you’d still like to hear the entire presentation, you’re in luck.  CLE Colorado recorded the audio of the presentation and will include it among its home-study materials.  We’ll have a link on the class action subsection website as soon as it is available.  In the meantime, here are some of the key points:

  • Class arbitration waivers, contracts requiring arbitration but specifying that arbitration proceed on an individual, not class, basis, have been used in a variety of contracts, including employment, executive compensation, consumer, franchise, and settlement agreements.
  • Outside the consumer context, class arbitration waivers have mostly been upheld.
  • Where class arbitration waivers are invalidated, courts most often do so based on traditional contract principles.
  • Class arbitration waivers are increasingly being struck down in consumer agreements, especially in “shrink-wrap” type agreements where the consumer is agreeing simply by using the product.
  • The key U.S. Supreme Court case recognizing the viability of class arbitration (not waivers) is Green Tree Financial Corp. v. Bazzle, 539 U.S., 444 (2003).
  • Class arbitration rules generally track FRCP 23, the main difference being that the decision maker is a private neutral instead of a judge.
  • Class arbitration rules differ from traditional arbitration because they lack the key element of privacy and confidentiality.

Each of the speakers had insights that I thought were interesting:

Dirk de Roos noted that a split among jurisdictions on the enforceability of class arbitration waivers may impact whether a nationwide class can be certified in court over a particular issue given the need to apply different standards to decide whether the action can proceed in court as a class action in the first place.

Russel Murray commented that class arbitration involves a convergence of two more general, controversial issues: 1) many people have an animosity toward class actions and favor ways to limit their application and effectiveness, but, on the other hand  2) many other people have deep concerns about the use of arbitration provisions in consumer agreements and are opposed to agreements that potentially limit the ability of consumers to enforce their rights.

Finally, here is one other item worthy of note.  Russel Murray noted that the National Arbitration Forum rules allow collective resolution of claims only on an opt-in basis, as opposed to the opt-out scheme contemplated by Rule 23 and most other class arbitration rules.  This means that only those plaintiffs who affirmatively opt in to the class after notice. 

The possibility of class arbitration agreements that involve restrictions on class actions less than a complete waiver of the right to bring the case on a collective basis is intriguing.  Imagine a cell phone company including a standard term in its agreements that every claim is subject to class arbitration but that the action would proceed under the National Arbitration Forum rules.  This provision would not be a class arbitration waiver in the strict sense, but it would involve a significant limitation on the ability of a plaintiff to seek collective redress as compared to a class action in court.   As far as I know, the enforceability of this type of class arbitration “reduction” provision has not been tested in court.

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If you’re looking for a refreshing story about a class action settlement that isn’t all about money, the LA Times has a story for you.  This article by Teresa Watanabe recounts the history of a series of class actions brought against the U.S. government to obtain amnesty for a classes of immigrants who came to the U.S. legally but later lost their legal immigrant status during the 1980s.  For one Turkish immigrant who stands to regain his legal status as a result of the latest settlement, the news was reason for elation over the possibility of fulfilling a dream of serving his adopted country.

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Thomas R. Bender, who blogs on Nuisance Law, recently posted an article entitled Pollution vs. Lawful Product: Nuisance vs. Non-Nuisance, which clarifies some nuances and distingushing characteristics between the Rhode Island Supreme Court’s decision in Rhode Island v. Lead Industries Association and the Supreme Court of Canada’s recent decision in St. Lawrence Cement Inc. v. Barrette.  A November 22 ClassActionBlawg entry shortly after the St. Lawrence Cement decision had been announced offered a somewhat superficial observation about the parallels between the two cases.  Anyone looking for a more in-depth analysis of the similarities and differences and a more thorough discussion of the claims and issues in the two cases should read Bender’s excellent article.

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Here are some blog posts from the week that was that might be of interest to class action practitioners:

Class Action-Related Post of the Week

Kudos to the folks at Drug and Device Law Blog on their excellent review, with the help of O’Melveny’s John Beisner, of the most recent draft of ALI’s Principles of Aggregate Litigation:

http://druganddevicelaw.blogspot.com/2008/12/umm-what-he-said.html

Class Action Decisions

Securities Docket summarizes and links to the latest decision from the U.S. District Court for the Southern District of New York discussing federal jurisdiction in a “foreign cubed” securities class action:

http://www.securitiesdocket.com/2008/12/01/sdny-dismisses-vodafone-securities-class-action-for-lack-of-subject-matter-jurisdiction/

Class Action Defense Blog discusses a pair of Federal district court decisions in class actions involving claims under the Fair Debt Collection Practices Act (FDCPA):

http://classactiondefense.jmbm.com/2008/12/class_action_defense_cases_ste.html

http://classactiondefense.jmbm.com/2008/12/fdcpa_class_action_defense_cas_11.html

North Carolina Business Litigation Report discusses a North Carolina federal court’s decision denying a motion for a preliminary injunction and discusses other developments in a class action seeking to enjoin a high profile bank merger:

http://www.ncbusinesslitigationreport.com/2008/12/articles/class-actions/nc-business-court-denies-motion-for-preliminary-injunction-in-wachoviawells-fargo-merger-case/

The Complex Litigator offers a synopsis of a California Supreme Court decision addressing the availability of punitive damages in wage and hour class actions:

http://www.thecomplexlitigator.com/2008/12/for-the-moment-california-law-is-clear-no-punitive-damages-for-violations-of-labor-code-provisions-r.html

The UCL Practitioner provides a link to the latest in California Court of Appeal decisions addressing the injury-in-fact requirement for standing under the Unfair Competition Law (UCL) after Proposition 64:

http://www.uclpractitioner.com/2008/12/new-ucl-standing-decision-troyk-v-farmers-group-inc.html

Wage Law offers a synopsis of a California decision discussing the impact of practical difficulties in ascertaining class membership on the viability of class certification in a wage and hour case:

http://www.californiawagelaw.com/wage_law/2008/12/harper-v-24-hour-fitness.html

Class Action News

Spam Notes discusses and provides a link to the complaint in a putative class action seeking liability against an Internet company for allegedly violating the Washington State gift card law by removing credits from customers’ “stored value accounts” due to inactivity:

http://spamnotes.com/2008/12/08/class-action-filed-against-skype-for-wa-gift-card-violations.aspx

WDSU.com reports on a class action against the City of New Orleans challenging the constitutionality of using automated cameras to catch drivers who run red lights:

http://www.wdsu.com/news/18215832/detail.html?rss=no&psp=news

Mercury News discusses an order by a California federal judge certifying a class in a case against a collection firm for alleged unlawful threats in bad check notices to debtors:

http://www.mercurynews.com/localnewsheadlines/ci_11139841?source=rss

The Wall Street Journal Law Blog provides details on an unsealed indictment of defendants accused of participating a conspiracy to collect class action settlement proceeds using forged documents and fake companies.  (See previous ClassActionBlawg commentary on the story here):

http://blogs.wsj.com/law/2008/12/03/class-action-fraud-alive-and-well-philly-prosecutors-say/

Class Action Scholarship

Mass Tort Litigation offers links variety of interesting scholarly articles on class action-related issues, including this abstract of an article by Tanya Monestier of Queen’s University entitled Personal Jurisdiction Over Non-Resident Plaintiffs in Multi-Jurisdictional Class Actions: Have We Gone Down the Wrong Road?

http://lawprofessors.typepad.com/mass_tort_litigation/

Class Action Trends

The D&O Diary discusses the “new wave” in subprime credit crisis litigation:

http://www.dandodiary.com/2008/12/articles/subprime-litigation/the-evolving-credit-crisis-litigation-wave/

Class Action Commentary

Point of Law responds to a commentary on the Cato Institute’s Cato-at-Liberty blog arguing that the Class Action Fairness Act (CAFA) is contrary to the originalist interpretation of the United States Constitution.  (See ClassActionBlawg reaction to the same commentary here):

http://www.pointoflaw.com/archives/2008/12/moller-constitu.php

Overlawyered discusses the reasons for the race to the courthouse shortly after a tragic event like the Black Friday shopper trampling:

http://overlawyered.com/2008/12/5-minute-after-suits-and-the-wal-mart-trampling/

A climate change skeptic responds to a researcher’s claims that he can calculate the difference between damage caused by a storm and the damage that would have been caused but for global warming, on The Air Vent:

http://noconsensus.wordpress.com/2008/12/10/class-action-suits-to-stop-global-warming/

International Class Action Law

Jurist reports on the rejection of a collective action brought in China by alleged victims of the recent tainted baby formula scandal.  (See previous ClassActionBlawg entry here):

http://jurist.law.pitt.edu/paperchase/2008/12/china-court-rejects-tainted-milk-class.php

Canadian Tax Resource discusses a bulletin issued by the Canadian Revenue Agency describing the department’s views on the tax implications of a Canadian securities class action settlement:

http://blog.taxresource.ca/cra-provides-direction-on-the-nortel-class-action-settlement/

Financial Post discusses the possibility of cross-border class action litigation by U.S. plaintiffs’ firms following the expected failure of a leveraged buyout of a Canadian company:

http://www.financialpost.com/story.html?id=1057781

The Court briefs a recent decision by the Supreme Court of Canada upholding the imposition of strict liability against a cement company in a public nuisance class action.  (See earlier ClassActionBlawg commentary on the case here):

http://www.thecourt.ca/2008/12/10/recognizing-no-fault-civil-liability-in-respect-of-neighbourhood-disturbances-in-quebec-civil-law/

Oh, and by the way, the title of this week’s CABWR is not a typo.  I just thought I’d make a belated pitch for that open Illinois Senate Seat.

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