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Archive for the ‘Class Action Fairness Act’ Category

One of the more significant issues relating to the Class Action Fairness Act of 2005 (CAFA) that has percolating through the federal courts over the past few years is whether parens patriae actions brought by state attorneys’ general seeking to recover damages for their citizens are “class actions” that can be removed to federal court.  On Friday, a panel of the Fourth Circuit Court of Appeals issued a 2-1 decision holding that parens patriae actions are not class actions subject to removal under CAFA.  West Virginia v. CVS Pharmacy, Inc., No. 11-1251 (4th Cir. May 20, 2011) (to be published).

CAFA Law Blog has been covering this issue extensively in recent months, and I expect they will have an entertaining post about the case in the coming days.  For CAFA Law Blog posts on the topic, see this link.

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United States District Court Judge Janet C. Hall issued an order today rejecting the proposed settlement in Wilson v. DirectBuy, Inc., No. 3:09-CV-590 (JCH) (D. Conn. May 16, 2011) (Here is a link to the slip opinion).  The controversial settlement had been opposed by 39 attorneys general, a nonprofit consumer rights organization, and had been singled out by commentators for criticism as a model for class action abuse. 

Judge Hall’s order found fault with many aspects of the settlement, including both the proposed settlement’s procedural and substantive fairness.  Procedurally, Judge Hall was concerned with the nascent stage of the record at the time of the settlement and the lack of discovery performed before the settlement.  Among the court’s substantive concerns were that the in-kind benefits provided under the agreement were similar to a coupon settlement, that the parties had overstated the risks to class members of litigating the case to trial, and that the maximum value of the settlement was too low in comparison to the best possible recovery in order for the settlement to be within the range of reasonableness. 

The court’s opinion expressly does not rule on, although it does discuss, several of the other issues raised by objectors, including the sufficiency of the email notice given to class members and an order by the magistrate judge enjoining a similar lawsuit filed by the State of West Virginia.

It is important to note that the court’s opinion does not at all portend a win for the class at trial.  In fact, pointing to the potential for statewide class actions under individual state consumer protection laws and enforcement actions by individual state attorneys’ general:

[t]he court notes that these state consumer protection statutes may not be suitable for litigation on a nationwide class action basis. . . . However, it appears to the court that they may be well suited for statewide class actions, especially within the states with broadly written consumer protection statutes.  This attempt is already being made in California and Missouri. . . . Further, investigations by state attorneys general are under way in at least a couple states, and, in some states, consumer protection actions can be brought on behalf of consumers. . . .

Therefore, in light of these statutes and the evidence that public and private attorneys are prepared to enforce them, class members appear to have substantially stronger claims than the RICO claims alleged in this case. Because the parties seek to release these state claims via the Settlement Agreement, the strength of these claims must be accounted for in this court’s analysis of the fairness, adequacy, and reasonableness of the Agreement. . . .

Slip op. at 26 (internal citations omitted).

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As 2010 winds down, it’s time to review the key developments in class action law.  It was an especially busy year for the federal courts, and in particular the U.S. Supreme Court, on issues impacting class action practice.  Here, in chronological order, are 10 key developments from the year that was:

  1. January 5 – In In re Baycol Products Litigation, the Eighth Circuit follows the Seventh Circuit’s lead in upholding the right of a federal court to enjoin a putative statewide class action from proceeding where a federal court had already denied class certification in a case involving substantially similar claims.  (See CAB entries dated January 7 and January 12).
  2. February 23 – In a decision that will impact many class actions removed under the Class Action Fairness Act, the Supreme Court adopts the “nerve center test” as the standard for determining corporate citizenship, in Hertz Corp. v. Friend.  (See CAB entry dated March 2)
  3. March 31 – The Supreme Court holds that states may not regulate the types of claims that may be filed as class actions in the federal courts, in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co.  (See CAB entry dated April 8)
  4. April 7 – In American Honda Motor Co. v. Allen, the Seventh Circuit holds that a trial court must rule on challenges to the admissibility of expert testimony relevant to class certification before deciding whether a class may be certified.  (See CAB entry dated May 4)
  5. April 26 – The Ninth Circuit issues its decision in Dukes v. Wal-mart Stores, Inc., adopting rigorous class certification standards similar to those previously adopted by the Second Circuit in In re IPO Securities Litigation, 471 F.3d 24 (2d Cir. 2006), but nonetheless certifying under FRCP 23(b)(2), what has been called the largest employment discrimination class action in history.
  6. April 27 – The Supreme Court seemingly puts an end, for all practical purposes, to the concept of class arbitration by holding that a defendant could not be compelled to defend an arbitration on a class basis where the arbitration clause did not expressly provide for class arbitration, in Stolt-Nielsen S.A. v. Animalfeeds Int’l Corp.  (See CAB entry dated May 11).
  7. June 24 – In Morrison v. National Australia Bank, the Supreme Court deals a fatal blow to “foreign-cubed” class actions, holding that § 10(b) of the Securities and Exchange Act of 1934 does not allow for fraud claims involving transactions on foreign exchanges that occurred outside the United States. (See case summary at SCOTUS blog).
  8. July 19, October 20 – An Eleventh Circuit panel issues a controversial decision in Cappuccitti v. DirecTV, Inc., severely restricting CAFA removal jurisdiction to cases where the amount in controversy exceeds $75,000 with respect to at least one class member, but later reverses itself in an October 15 opinion.  (See Guest Post from Eric Jon Taylor and Jon Chally at CAFA Law Blog for more on the first decision and this October 20 CAB entry on the second decision).
  9. November 9 – Supreme Court hears oral argument in AT&T Mobility v. Concepcion, in which the Court considers whether the Federal Arbitration Act preempts state law holding a class arbitration waiver unconscionable.  (See CAB fsummary of oral argument dated November 17).
  10. December 6 – Supreme Court grants certiorari in Wal-Mart Stores, Inc. v. Dukes, to decide the issue of whether a claim for monetary relief can be certified under FRCP 23(b)(2).  (See CAB entry dated December 7).

Just considering the cases still awaiting ruling before the Supreme Court, 2011 promises to be another exciting year in the world of class actions.  Happy New Year to all!

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The Eleventh Circuit Court of Appeals reversed itself just months after its widely reviled opinion in Cappuccitti v. DirecTV.  In a per curiam opinion issued October 15, 2010, a three judge panel concluded, on rehearing, that the earlier Cappuccitti decision was simply “incorrect.”  The key holding means that a plaintiffs’ class under CAFA does not have to meet a threshold requirement of having at least one plaintiff with a claim of $75,000 or more. 

“Subsequent reflection has led us to conclude that our interpretation was incorrect. Specifically, CAFA’s text does not require at least one plaintiff in a class action to meet the amount in controversy requirement of 28 U.S.C. § 1332(a). Accordingly, we construe both parties’ petitions for rehearing en banc to include petitions for panel rehearing, vacate our earlier opinion, and replace it with this one.” Cappuccitti v. DirecTV, — F.3d —, 2010 WL 4027719 (11th Cir. Oct. 15, 2010) (cites omitted).

 This decision should quiet the near universal criticism that has been clanging through the echo chamber of the class action bar since the appellate court’s July 19 ruling. The July opinion focused on the jurisdictional thresholds of the Class Action Fairness Act (CAFA).  The summer Cappuccitti decision was controversial because it seemingly invented a new requirement for federal courts to exercise original jurisdiction over class actions filed under CAFA.  The opinion set an unprecedented threshold that at least one plaintiff in a CAFA class action must allege an amount in controversy of at least $75,000.  Critics of the ruling observed that such a requirement would effectively end the filing of CAFA class actions in the Eleventh Circuit.  The CAFA law blog has extensively covered the potential impacts.  But never mind, that’s all in the past.  After the most recent ruling, the CAFA doors are now back open.

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On February 23, the Supreme Court issued its decision in Hertz Corp. v. Friend, No. 08-1107, in which it adopted the “nerve center” test as the proper approach for determining a corporation’s principal place of business for diversity jurisdiction.  The Court stated that it was adopting a single test among the numerous approaches previously employed by the lower federal courts “[i]n an effort to find a single, more uniform interpretation of the statutory phrase [“principal place of business.”]  The decision promises to bring more predictability to the resolution of an often-litigated issue in the context of removal of class actions under the Class Action Fairness Act of 2005.

For a good synopsis of the decision and its potential impact in the class action removal context, read Karen P. Palmersheim’s article at www.lexology.com entitled Supreme Court’s decision opens doors to lawsuits under the federal Class Action Fairness Act.

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CABWR is finally back after a three week holiday hiatus!  Here are some blog posts from the week that was that might be of interest to class action practitioners:

Class Action Decisions

CAFA Law Blog discusses a Fifth Circuit Court of Appeals decision addressing jurisdiction under the Class Action Fairness Act (CAFA) before reversing class certification in a case alleging violations of the federal Telephone Consumer Protection Act (TCPA):

Class Action Defense Blog summarizes a California appellate court decision reversing a trial court’s decision to deny certification after concluding that it would be necessary to make a determination on the merits to ascertain class members and evaluate numerosity:

http://classactiondefense.jmbm.com/2009/01/class_action_defense_cases_gha.html

Classified comments on a Florida decision upholding a class certification order where the lack of a hearing transcript left the appellate court with no way to analyze the evidence considered by the trial court in reaching its decision:

http://www.carltonfields.com/classactionblog/blog.aspx?entry=246

Folo comments on an opinion by Seventh Circuit Court of Appeals Judge Richard Posner, who has some harsh words for attorneys for objectors to a class action settlement who sought an attorney fee award for what the Judge did not consider a significant contribution to the outcome of the case:

http://www.folo.us/2008/12/30/this-case-is-finito/

The UCL Practitioner summarizes a Seventh Circuit Court of Appeals decision discussing the removability under CAFA of securities class actions filed under section 22(a) of the Securities Act of 1933:

http://www.uclpractitioner.com/2009/01/7th-circuit-makes-it-harder-for-plaintiffs-to-keep-securities-class-actions-in-state-court.html

Class Action Trends

Drug and Device Law Blog discusses the phenomena of “global coordinating counsel” and its rise from marketing ploy to reality as class action and related procedures become more developed around the world:

http://druganddevicelaw.blogspot.com/2009/01/new-meaning-of-global-coordinating.html

Mass Tort Litigation Blog discusses the “multi-faceted” nature of mass tort litigation in an article that includes a discussion of federal judge Jack Weinstein treating MDL litigation and settlement of pharmaceutical products liability claims as a “quasi-class action”:

http://lawprofessors.typepad.com/mass_tort_litigation/2009/01/todays-14-billi.html

Securities Docket summarizes a Manhattan Institute report on a trend in Louisiana public pension funds serving as lead plaintiffs in securities class actions:

http://www.securitiesdocket.com/2008/12/28/manhattan-institute-finds-la-pension-funds-most-active-lead-plaintiffs-in-securities-cases/

The D&O Diary summarizes the year in securities litigation from 2008…

http://www.dandodiary.com/2009/01/articles/securities-litigation/a-closer-look-at-the-2008-securities-lawsuits/

… and The Race to the Bottom offers observations about the modest nature of the increase in securities class actions in light of the financial crisis:

http://www.theracetothebottom.org/home/the-trend-in-securities-class-action-lawsuits.html

The Daily Insurer discusses a recent report by Seyfert Shaw LLP summarizing trends in employment class action litigation:

http://dailyinsurer.blogspot.com/2009/01/class-action-litigation-analyzed-in-new.html

Class Action Commentary

Point of Law provides an abstract of a student note by James McDonald in Duke Law Journal entitled “Milberg’s Monopoly: Restoring Honesty and Competition to the Plaintiffs’ Bar”:

http://www.pointoflaw.com/archives/2009/01/milbergs-monopo.php

Wage Law discusses claims-made settlements and reversions in wage and hour class actions and whether unclaimed funds escheat to the state:

http://www.californiawagelaw.com/wage_law/2009/01/more-on-reversions-and-claims-made-settlements.html

Pro Football Talk comments on the facts of a class action filed on behalf of retired players against the NFL Players’ Association for for breach of fiduciary duty, which was recently tried to a jury verdict in the retirees’ favor:

http://www.profootballtalk.com/2009/01/13/ruling-in-nflpa-class-action-sheds-light-on-what-the-union-did-allegedly-to-retired-players/

Class Action News

The Complex Litigator reports on the California Supreme Court’s decision to grant review in the wage and hour class action Brinkley v. Public Storage, Inc., Sup. Ct. Case No. S168806:

http://www.thecomplexlitigator.com/2009/01/breaking-news-review-granted-in-brinkley-v-public-storage-inc.html

Class Action Previews. Predictions, and Hopes for 2009

North Carolina Business Litigation Report previews the year ahead for the North Carolina Business Court, including a discussion of class actions:

http://www.ncbusinesslitigationreport.com/2009/01/articles/watching-the-court/the-year-ahead-in-the-north-carolina-business-court/

New look Overlawyered has a post proposing a good idea for a consumer class action that it’s author predicts will be filed by some plaintiffs’ firm in 2009:

http://overlawyered.com/2008/12/a-prediction-for-2009/

Law and More has hopes for “juicy corporate class action litigation” in 2009:

http://lawandmore.typepad.com/law_and_more/2009/01/needed-juicy-corporate-classaction-litigation.html

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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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