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Archive for the ‘Consumer Class Actions’ Category

Class Arbitration Waivers, the Sequel?

Posted in Class Action Trends, Consumer Class Actions, Supreme Court Decisions, tagged , , , , , , , , , , , on May 4, 2011| Leave a Comment »

Last week, following the Supreme Court’s decision in AT&T Mobility v. Concepcion, I commented that the decision does not answer the question whether a federal court has the power to declare a class arbitration waiver unconscionable.  Although not on this precise issue, the Court has granted cert on a related issue relating to the enforceability of arbitration agreements that preclude class actions.

The issue presented in CompuCredit Corp. v. Greenwood, No. 10-948 is “Whether claims arising under the Credit Repair Organizations Act, 15 U.S.C. § 1679 et seq., are subject to arbitration pursuant to a valid arbitration agreement.”  This would-be class action involves a potential conflict between two competing federal laws, the Federal Arbitration Act and the Credit Repair Organizations Act (CROA).  The Ninth Circuit Court of Appeals held that a class arbitration waiver was void “because the CROA specifically prohibits provisions disallowing any waiver of a consumer’s right to sue in court for CROA violations.”  In reaching that conclusion, it held that the statute’s reference to a “right to sue” was an express statement of Congressional intention to preclude waivers of consumer’s rights to bring a lawsuit in court, thus falling within an exception to the otherwise liberal policy favoring arbitration.

The case has been added to the Court’s docket for the October 2011 term.

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BH Executive Alert: Seventh Circuit Issues Significant Decision on Consumer Injunctive Relief Class

Posted in Class Action Decisions, Consumer Class Actions, Federal Civil Procedure, Federal Court Decisions, tagged , , , , , on February 24, 2011| Leave a Comment »

The Baker Hostetler website has a new Executive Alert discussing the Seventh Circuit Court of Appeals’ decision in Kartman v. State Farm Mut. Automobile Ins. Co., Case no. 09-1725, 2011 U.S. App. LEXIS 2830, and its potential implications.  Kartman addressed, among other things, the applicability of Rule 23(b)(2) to consumer class actions in which the ultimate goal is to recover money for class members.  According to the Executive Alert:

This decision is significant in its rejection of the creative attempt to certify a class of consumer claims for injunctive relief, the analysis of the “finality” and “appropriateness” elements of Rule 23(b)(2) for which little authority exists, and the willingness to delve into the merits of the underlying claims to determine that class certification was not appropriate.

Congratulations to my partner, Mark Johnson, and the rest of his team in Columbus on their victory in the case on behalf of State Farm.

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California Court of Appeal Decision Applying the Filed Rate Doctrine to Insurance Rates Stays Published

Posted in Class Action Decisions, Class Action News, Class Action Trends, Consumer Class Actions, tagged , , , , , , , on January 19, 2011| Leave a Comment »

The filed rate doctrine is an important concept that comes into play in many consumer class actions, including those against public utilities, telecommunications providers, and insurers, that challenge the amounts charged by a regulated provider for its services.  In its broadest sense, the doctrine holds that a regulated entity cannot be sued for charging allegedly excessive rates if those rates were filed with a federal or state regulator.

Last fall, in MacKay v. Superior Court, 188 Cal. App. 4th 1427 (2010), a panel of the the California Court of Appeal expressly applied the filed rate doctrine to bar a consumer protection claim based on an insurance companies act of charging allegedly excessive insurance premiums.  This past week, on January 12, 2011, the California Supreme Court denied a motion to depublish the decision, confirming its status as citable authority. 

Here is a key excerpt from the original decision, entered on October 6, 2010:

The filed rate doctrine provides that rates duly adopted by a regulatory agency are not subject to collateral attack in court. Numerous state courts have applied the filed rate doctrine to approved insurance rates. (E.g., Anzinger v. Illinois State Medical Inter-Ins. Exchange (1986) 144 Ill.App.3d 719, 721, 723 [98 Ill.Dec. 533, 494 N.E.2d 655]; Commonwealth v. Anthem Ins. Companies, Inc. (Ky.Ct.App. 1999) 8 S.W.3d 48, 51-52; City of New York v. Aetna Casualty & Surety Co. (N.Y.App.Div. 1999) 264 A.D.2d 304 [693 N.Y.S.2d 139, 140].) Indeed, one such case noted that while the filed rate doctrine originated in federal courts, “it `has been held to apply equally to rates filed with state agencies by every court to have considered the question.'” (Commonwealth v. Anthem Ins. Companies, Inc., supra, 8 S.W.3d at p. 52.) We thus must disagree with Fogel v. Farmers Group, Inc. (2008) 160 Cal.App.4th 1403, 1418 [74 Cal.Rptr.3d 61], to the extent that it rejected the application of the filed rate doctrine to California insurance rates. The Fogel court noted that the parties before it had identified no cases in which the filed rate doctrine had been applied in the context of a rate approved by a state regulatory agency.  Thus, the filed rate doctrine supports our conclusion that there is no tort liability for charging a rate that has been approved by the commissioner.
 
We note, however, the limited nature of our holding. Insurance Code section 1860.1 protects from prosecution under laws outside the Insurance Code only “act[s] done, action[s] taken [and] agreement[s] made pursuant to the authority conferred by” the ratemaking chapter. It does not extend to insurer conduct not taken pursuant to that authority. 
Id. at 1448-49 (internal footnotes omitted).

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A Breach of Contract Doesn’t Equal Fraud, and Other Observations

Posted in Class Action Decisions, Consumer Class Actions, Federal Court Decisions, tagged , , , , , , , , , , , , on January 11, 2011| 1 Comment »

Two colleagues separately sent me a copy of the Seventh Circuit Court of Appeals’ decision yesterday in Greenberger v. GEICO General Insurance Co., slip op., No. 09-1603 (7th Cir., Jan. 10, 2011) (Sykes, J.), so I thought it was worthy of a summary. 

Greenberger involved would-be class action claims against an insurer for the alleged practice of not paying to have vehicles restored to their pre-loss condition, as required under its policies.  The district court had granted the defendant’s motion for summary judgment before reaching a decision on class certification.  The Seventh Circuit affirmed.  The panel’s decision ostensibly rests on the holdings of earlier cases and doesn’t pretend to make new law.  However, the number of different issues addressed may make the case a common citation in future class certification response briefs, especially in insurance class actions in Illinois and the Seventh Circuit, but potentially elsewhere as well.  The holdings included:

  • Jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”) attaches to a class action complaint even if a class is never certified.  Slip op. at 5-6 (relying on Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806 (7th Cir. 2010)).
  • An insured cannot succeed on a breach of contract claim against his insurer for allegedly failing to bring a vehicle to a pre-loss condition if the vehicle is not available to be examined, because the insured cannot prove either a breach of the contract (by showing that the vehicle was not repaired to its pre-loss condition) or damages (by establishing the difference in value between the vehicle as repaired and the vehicle in its pre-loss condition).  Slip op. at 6-11 (relying on Avery v. State Farm Mutual Automobile Insurance Co., 835 N.E.2d 801 (Ill. 2005)).
  • A plaintiff cannot prevail on a consumer fraud or common law fraud claim if the fraud claim is based on the same predicate facts as a claim for breach of contract.  Slip op. at 11-16 (also relying on Avery).
  • In Illinois, no fiduciary duty exists between insurer and insured as a matter of law, unless the plaintiff can prove by clear and convincing evidence that special circumstances existed such that the insured placed trust or confidence in the insurer.  Slip op. at 16-17 (citing Fichtel v. Bd. of Dirs. of River Shore of Naperville Condo. Ass’n, 907 N.E.2d 903 (Ill. App. Ct. 2009); Martin v. State Farm Mut. Ins. Co., 808 N.E.2d 47 (Ill. App. Ct. 2004)).

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Class Action Blogosphere Periodic Review

Posted in Class Action Decisions, Class Action News, Class Action Trends, Consumer Class Actions, Employment Class Actions, Securities Class Actions, Supreme Court Decisions, tagged , , , , , , , , , , , , , , , on November 9, 2010| 4 Comments »

It’s back!  We can’t promise that it will appear weekly, so we changed the name to Class Action Blogosphere “Periodic” Review.  But, as always, we have combed through our favorite blogs and news feeds to bring our readers up to speed on a some of the notable developments in class action news.

The End of Consumer Class Actions as We Know Them?

One story is, by far, the biggest news in the class action world.  Today, the U.S. Supreme Court will hear argument in the case of AT&T Mobility Services v. Concepcion.  The key issue is whether class action exemptions in consumer contracts are enforceable even when state contract law bars such exemptions.  AT&T argues that the Federal Arbitration Act preempts state contract law.  Thus, if a class action exemption is tied to an arbitration clause it is enforceable despite contrary law at the state level.  For an accessible read, check out Brian T. Fitzpatrick’s story in the San Francisco Chronicle…

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/06/INA41G6I3I.DTL

… and see also

All Writs Act Better than Collateral Estoppel

Class action defense lawyers may have a new tool to use against copycat class actions; particularly those involving plaintiffs’ lawyers who attempt to extort settlements through threat of discovery.  It’s called the All Writs Act.  It was used by Judge Posner in the Seventh Circuit to grant an injunction blocking a copycat class action in another jurisdiction.  The case is called Thorogood v. Sears, Roebuck & Co.  For more information check out Andrew Trask’s November 10 post on Class Action Countermeasures.  Judge Posner even cites Trask’s new book, The Class Action Playbook.  (See CAB Review of the book here).

http://www.classactioncountermeasures.com/2010/11/articles/discovery/using-the-all-writs-act-to-block-copycat-class-actions/

For a slightly different take on Posner’s decision, read Russell Jackson’s post on Consumer Class Actions & Mass Torts.

http://www.consumerclassactionsmasstorts.com/2010/11/articles/predominance-1/7th-circuit-enjoins-relitigation-of-denial-of-class-certification/

Motion to Dismiss + Discovery = Motion Granted?

The Rule 12(b)(6) Motion to Dismiss can sometimes feel like a mini-motion for summary judgment.  Over the years, courts have been more willing to consider information beyond merely the pleadings including documents that are referenced by plaintiffs and central to their claims.  Anything more is supposed to convert the motion to dismiss into a motion for summary judgment, right?  Maybe not.  One court has apparently permitted discovery in the context of a Rule 12 Motion to dismiss.  Get the story in a post titled Preemption, Pleading & Rule 11 at Drug and Device Law.

http://druganddevicelaw.blogspot.com/2010/11/preemption-pleading-rule-11.html

Big Changes Coming for Rule 26 and Expert Witnesses

The communications between attorneys and their expert witnesses are currently discoverable in federal court. Not for long.  Federal Rule 26 is about to change in a way that will protect certain communications between counsel and expert.  The rule change will also extend work product protection to the draft reports of experts.  Check out the latest post in the North Carolina Business Litigation Report.

http://www.ncbusinesslitigationreport.com/2010/11/articles/discovery-1/work-product-protection-for-communications-between-lawyers-and-expert-witnesses-coming-next-month-under-revised-federal-rules-of-civil-procedure/

Hooters Waitresses Have no Class … Action?

Always read the fine print.  According to the Washington Post, whatever the Supreme Court decides in AT&T Mobility Services vs. Concepcion may have ramifications for a class of waitresses trying to sue Hooters.  You see, the job application has an arbitration clause that bars lawsuits.

http://www.washingtonpost.com/wp-dyn/content/article/2010/11/05/AR2010110507318.html?hpid=moreheadlines

Oppress Me, Please

Professor James C. Morton reports on a Canadian decision allowing class certification of a case seeking the remedy of “oppression” in his blog, Morton’s Musings.  Doesn’t sound like a very pleasant  remedy to us, but they march to the beat of their own drummer north of the border.

http://jmortonmusings.blogspot.com/2010/11/oppression-remedy-properly-sought-in.html

You Mean to Tell Me that Fast Food Makes you Fat!?

Sean P. Wajert of Mass Tort Defense reports on a recent decision denying class certification to a plaintiff seeking to hold a fast food chain responsible for allegedly misleading consumers into thinking that its fare poses no health risks.

http://www.masstortdefense.com/2010/11/articles/class-action-alleging-false-food-ads-rejected/

Securities Class Action Filings Down

As reported in the Conference Board’s Governance Center Blog by guest contributor Anthony Galban, Sr. V.P. of Chubb & Son, securities class action filings are down significantly in 2010.

http://tcbblogs.org/governance/2010/11/04/guest-contributor-securities-class-action-filings-are-down-but-will-the-trend-continue/

Hot Pockets are Fast and Tasty

Greg Mersol of Baker Hostetler’s new Employment Class Action Blog reports on the latest in a series of California decisions denying class certification in a wage and hour case seeking to hold an employer liable for not ensuring that its employees to take meal breaks.

http://www.employmentclassactionreport.com/class-action/another-court-denies-certification-of-a-california-meal-break-class/

Describe that Class for Me Again?

The Complex Litigator‘s H. Scott Leviant reviews a recent California Court of Appeal decision holding that class certification was not appropriate because the proposed class was not ascertainable.

http://www.thecomplexlitigator.com/post-data/2010/11/1/in-sevidal-v-target-corporation-an-unascertainable-class-doo.html

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Colorado Supreme Court Rejects “Fraud on the Market” Theory in Consumer Insurance Class Action

Posted in Class Action Decisions, Colorado Class Action News, Consumer Class Actions, tagged , , , , , , , on April 27, 2009| 4 Comments »

The Colorado Supreme Court issued one of its most significant class action decisions in recent years today in Farmers Ins. Exch. v. Benzing, No. 07SC483 (Colo., April 27, 2009), rejecting the so-called “fraud on the market” theory of reliance and loss causation in an insurance class action.  Justice Bender authored the decision on behalf of a unanimous court, with two justices not participating.  The key issues addressed in the opinion include:

1) the trial court had discretion to decertify a previously certified class, despite the court of appeals’ finding that the facts and arguments presented in connection with the  decertification motion could have been raised at the initial certification stage, as part of the court’s “continuing obligation to review whether proceeding as a class action is appropriate”, Benzing, slip op. at 19; and

2) the fraud-on-the-market theory of reliance and loss causation was not applicable in an insurance class action where there was no efficient market and where the information alleged to have been concealed was a matter of public record.  Benzing, slip op. at 23-31.

The Court declined to address an alternative theory, also borrowed from the securities context, that common reliance or injury could be established by presumption or inference in a case involving a material omission of fact, as articulated in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153-54 (1972).  The court acknowledged a split of authority on whether the Affiliated Ute doctrine could be applied in consumer class actions, but declined to rule one way or another, stating that the issue been “insufficiently raised” before the trial court and court of appeals.  Benzing, slip op. at 32-33 & n.9.

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Want to Cash in on the Next Class Action Settlement? Save Those Receipts

Posted in Class Action Settlements, Commentary, Consumer Class Actions, tagged , , , on March 3, 2009| 1 Comment »

This report from Jim Williams of Chicago’s CBS affiliate, CBS 2, illustrates a common quandry facing lawyers in consumer class actions.  The report discusses a class action settlement involving allegations that packaged chicken contained excessive amounts of water, resulting in consumers getting less chicken for their money than advertized.  The article criticizes the settlement because class members are required to provide receipts as proof that they purchased the chicken, in order to obtain a 3% refund as part of the settlement.

Williams takes issue with the practical difficulties with requiring consumers to provide receipts for low-value purchases made years in the past.  He credits a law school dean with the stating the obvious, that the receipt requirement is “unrealistic.”

What was the alternative?  Should the plaintiffs worked harder to force the defendant to pay for the alleged harm caused by its conduct, whether or not that payment would ever reach the hands of those who suffered the alleged harm?  Or should the case never have been filed in the first place?

For those who see the primary purpose of class actions as retribution or deterrance for corporate wrongdoers, the proof of purchase requirement may seem as an unnecessary barrier to justice.  But class actions are a procedural device in civil lawsuits.  In other words, they are disputes between private litigants for redress of private wrongs.  Punishment and deterrance can be accomplished through criminal and admininstrative enforcement schemes.  Moreover, in a settlement, the parties are reaching a comprimise of disputed claims.  Typically, the settlement occurs before there has been a determination of whether the defendant did anything wrong.

If compensation is the primary objective, then there are few better alternatives for meeting that objective in a case involving the manufacture of retail products.  Possible alternatives in civil settlements, such as a cy pres award to charity, may serve to punish, but they do nothing to compensate actual alleged victims.  The parties could have allowed claims through sworn statements rather than documentary proof in the form of a receipt, but the news report suggests a scenario where many purchasers would have no memory of whether they ever purchased the products at issue in the case.

This dilemma raises the question whether there is a social benefit to allowing private attorneys to pursue a class action on behalf of a class of alleged victims whose identies can never reasonably be ascertained (note that most jurisdictions have procedural requirements that should prevent certification of classes whose members are not ascertainable, but how effective those requirements are in practice is a matter of some debate).  Even assuming that the wrongdoing can be proved, does forcing a defendant to pay money to private lawyers, a charity, or a random group of self-reporting consumers serve a societal benefit that would not be achieved through other means?  The answer to that question may have a lot to do with how much one trusts government regulators, attorneys general, and prosecutors to protect consumer interests–and of course how much one trusts trial lawyers to do the same.

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