Class Action Round-Up | Winter 2015
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Class Action Round-Up Winter 2015 • WHERE THE (CLASS) ACTION IS • CONSUMER PROTECTION • BANKING • EMPLOYMENT • ENVIRONMENTAL • PRIVACY • SECURITIES • PRODUCT LIABILITY • RICO • SETTLEMENTS ATTORNEY ADVERTISING ©2015 Alston & Bird LLP
Transcript of Class Action Round-Up | Winter 2015
Class Action Round-UpWinter 2015
• WHERE THE (CLASS) ACTION IS
• CONSUMER PROTECTION
• BANKING
• EMPLOYMENT
• ENVIRONMENTAL
• PRIVACY
• SECURITIES
• PRODUCT LIABILITY
• RICO
• SETTLEMENTS
ATTORNEY ADVERTISING
©2015 Alston & Bird LLP
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• WHERE THE (CLASS) ACTION IS
• CONSUMER PROTECTION
• BANKING
• EMPLOYMENT
• ENVIRONMENTAL
• PRIVACY
• SECURITIES
• PRODUCT LIABILITY
• RICO
• SETTLEMENTS
Where the (Class) Action Is
We learned from a recent survey of senior in-house counsel that class actions are on the rise and their stakes are getting higher. The survey reported that more than 15 percent of the class actions are “high-risk,” an increase of more than 300 percent since 2011. With the recent Supreme Court class decisions making it marginally harder to proceed on a class basis, the plaintiffs’ bar appears to be betting heavier on higher-stakes cases.
That was certainly the case in the final quarter of 2014, which saw the approval of several multimillion dollar settlements. But in the Seventh Circuit, Chief Judge Richard Posner continued his assault on seemingly collusive class action settlements that provide big fees to attorneys and “meager” benefits to class members.
The Sixth Circuit plowed new ground for pleading scienter in securities class actions, setting up a three-way circuit split that the Supreme Court will almost certainly have to settle. Other circuits got into the mix, interpreting lesser known CAFA provisions, including the “state action” and “local” defendant exceptions, and the “other paper” provision that provides additional opportunities for removal to federal court.
As always, we welcome your feedback about the Round-Up. Please let us know how we can make it better. We hope you enjoy the report.
This advisory is published by Alston & Bird LLP to provide a summary of significant developments to our clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under court rules of certain jurisdictions.
Authors & EditorsCari K. Dawson [email protected] 404.881.7766
Kyle G.A. Wallace [email protected] 404.881.7808
David R. Venderbush [email protected] 212.210.9532
Andy Tuck [email protected] 404-881-7134
Brian D. Boone [email protected] 704.444.1106
Amanda M. Waide [email protected] 404.881.4409
David B. Carpenter [email protected] 404.881.7881
Jonathan D. Parente [email protected] 404.881.7184
Jason Rottner [email protected] 404.881.4527
Bowen Shoemaker [email protected] 404.881.4979
Allison S. Thompson [email protected] 404.881.4536
Amanda Kelley [email protected] 214.922.3420
Lindsay G. Carlson [email protected] 213.576.1038
Geoff C. Rathgeber [email protected] 404.881.4974
Ryan P. Ethridge [email protected] 919.862.2283
Meredith Jones Kingsley [email protected] 404.881.4793
Alex Akerman [email protected] 213.576.1149
Andrew Hatchett [email protected] 404.881.4826
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• PRIVACY
• SECURITIES
• PRODUCT LIABILITY
• RICO
• SETTLEMENTS
Banking
� California Panel Bolsters FAA’s Preemption of Arbitration Bans
McGill v. Citibank N.A., No. G049838 (Cal. Ct. App.) (Dec. 18, 2014). Judge Aronson. Reversing denial of motion to compel arbitration.
The California 4th District Court of Appeal clarified two key arbitration issues by relying on Concepcion and the California Supreme Court’s Iskanian ruling. The law in California is now simple: the Federal Arbitration Act (FAA) preempts all state laws that amount to total bans on arbitration. According to the decision, the FAA even preempts California’s longstanding Broughton-Cruz rule—a rule that arbitration agreements were unenforceable against certain private claims brought for the public’s benefit.
� Time’s Up on RESPA Pay-to-Play Class Action
Thomas J. Riddle, et al. v. Bank of America Corp., et al., No. 13-4543 (3d Cir.) (Oct. 15, 2014). Affirming dismissal for failure to state a claim.
The Third Circuit affirmed the dismissal of a consumer class action against Bank of America N.A. on statute of limitations grounds because plaintiffs could not discover sufficient evidence of fraudulent concealment. Plaintiffs had alleged that the company made millions on kickbacks and referrals to private insurers. Bank of America sought
dismissal, based on the Real Estate Settlement Procedures Act’s (RESPA) one-year limitations period. The judge ordered discovery to determine whether Bank of America fraudulently concealed their alleged wrongdoing, but that discovery yielded no triable fact to justify equitable tolling of the RESPA claims. The appellate court held, “Taking [Bank of America’s] representations at face value without asking a single question for seven years is insufficient diligence to toll the statute of limitations in these circumstances.” n
Debbie Jones will co-chair the American Conference
Institute’s 22nd National Forum on Consumer Finance Class
Actions & Litigation April 13-14 in Los Angeles and speak on
the California Homeowner Bill of Rights.
CLASS-IFIED INFORMATION
Debbie Jones
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• SETTLEMENTS
Consumer Protection
� Where’s the Analysis? Eighth Circuit Blasts District Court’s Class Cert Grant in FDCPA Action
Powers v. Credit Management Services Inc., No. 13-2831 (8th Cir.) (Jan. 13, 2015). Reversing grant of class certification motion.
Defendant CMS is a Nebraska debt collection firm that collects consumer debts assigned to it by the original creditor. The firm commences consumer debt collection actions in Nebraska state courts by filing standard-form complaints. Powers alleged that CMS’s standard-form pleadings and discovery requests violate various provisions of the Fair Debt Collection Practices Act (FDCPA). In certifying four classes, the district court agreed with Powers that the predominant common question is whether CMS sent each class member standard collection complaints and discovery requests, which violate the FDCPA.
The Eighth Circuit reversed, “concluding that the district court abused its discretion by failing to conduct the ‘rigorous analysis . . . of what the parties must prove’ that Rule 23 requires.” The court of appeals chastised the district court for glossing over Rule 23(a)’s commonality requirement, holding that the court would have to review every state court collection suit to determine whether CMS’s claims were “unfair or unconscionable” as the statute requires. And the court of appeals went further on the district court’s analysis of the discovery request claims, finding no analysis of how those claims could be properly analyzed on a class-wide basis.
� Graco Fails to Boost Mootness and Standing Arguments Based on Car Seat Recalls
Long v. Graco Children’s Products Inc., No. 3:13-cv-01257 (N.D. Cal.) (Dec. 17, 2014). Judge Donato. Denying Graco’s motion to dismiss and strike class allegations.
After a national recall, Long alleged that Graco violated California consumer protection laws by selling car seats that it knew had defective belt buckles. Graco moved to dismiss, arguing that offers of full monetary compensation to Long in the recall barred his lawsuit based on mootness and Article III standing. The district court questioned whether applicable law permitted such arguments, but ultimately rejected the arguments because Graco failed to present sufficient evidence that it actually offered Long a full refund at any time.
Cari Dawson will co-chair the American Conference
Institute’s 8th Annual Summit on Defending & Managing
Automotive Product Liability Litigation, the premier
automotive product liability event, June 3-4 in Chicago.
CLASS-IFIED INFORMATION
Cari Dawson
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• SETTLEMENTS
� Oh, Baby! Fourth Circuit Finds Preemption in Infant Formula Lawsuit
Nemphos v. Nestlé Waters N. Am. Inc., No. 13-2146 (4th Cir.) (Jan. 8, 2015). Affirming dismissal for failure to state a claim.
Michelle Nemphos sued Nestlé, alleging that bottled water, infant formula, and baby food caused her daughter to develop dental fluorosis, a dental enamel condition caused by excessive exposure to high concentrations of fluoride. The district court granted Nestlé’s motion to dismiss, concluding that federal law preempted Nemphos’s state law claims: Nestlé’s products were already subject either to a federal “standard of identity” or to other federal labeling regulations.
The Fourth Circuit agreed with the district court, concluding that federal law “already covers the ground that Nemphos aims to unsettle through her claims.” Though the court noted that the “presence of an express preemption clause does not immediately end the inquiry,” it rejected Nemphos’s claim because she sought a required warning that was additional to rather than identical to the federal standard. The court also affirmed dismissal based on Nemphos’s failure to meet the pleading requirements of Rule 8, reasoning that the complaint was filled with general and conclusory statements that could be adapted to many different products at many different times while saying little about the contents of the specific products that harmed Nemphos’s daughter.
� Sirius XM Can’t Enforce Arbitration Clause in Radio Contract Bundled with Vehicle Purchase
Knutson v. Sirius XM Radio Inc., No. 3:12-cv-00418 (9th Cir.) (Nov. 10, 2014). Reversing dismissal of class action claims.
Knutson purchased a new Toyota truck with a 90-day trial subscription to Sirius XM. He sued Sirius XM, alleging that three marketing calls to his cellphone violated the Telephone Consumer Protection Act (TCPA). The
district court dismissed the putative class action because the Sirius XM service agreement required arbitration of individual claims.
The Ninth Circuit reversed because Knutson was never aware he was entering into a contract with Sirius XM. “A reasonable person in Knutson’s position could not be expected to understand that purchasing a vehicle from Toyota would simultaneously bind him or her to any contract with Sirius XM, let alone one that contained an arbitration provision without any notice of such terms.” The court rejected the argument that Knutson was bound by the contract even if he hadn’t read it. The court also cited evidence that Sirius did not send Knudsen the agreement until more than a month after the three-day period during which he could reject its terms.
David Carpenter and Amanda Waide examine a Fair Debt Collection Practices Act class action in their Law360 article “8th Circ.
Continues Trend of Rigorous Rule 23 Analysis.”
CLASS-IFIED INFORMATION
David Carpenter Amanda Waide
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• PRODUCT LIABILITY
• RICO
• SETTLEMENTS
� Sweet Victory for Mott’s in “No Sugar Added” Mislabeling Class Action
Rahman v. Mott’s LLP, et al., No. 3:13-cv-03482 (N.D. Cal.) (Dec. 3, 2014). Judge Illston. Denying motion for class certification.
Mohammed Rahman brought a class action against Mott’s alleging that the use of the statement “No Sugar Added” on Mott’s 100% Apple Juice does not comply with applicable Food and Drug Administration regulations and violates California’s Sherman Law, California Health and Safety Code provisions, and various California consumer remedies statutes. In October, the district court pruned many of the claims from the class action but allowed the Unfair Competition Law claim to proceed. Rahman moved for class certification for a liability-only class under Rule 23(c)(4), acknowledging his weak position on predominance of common issues regarding damages.
The district court denied the motion on the grounds that Rahman failed to articulate why certifying a liability class would be more efficient than individually adjudicating the claims, noting that the court “is not bound to certify a liability class merely because it is permissible.” The court also found that Rahman was vague about whether he intended to certify a class for damages, intended to let class members pursue damage claims individually, or had some other plan, adding the qualifier, “In any event, none of these options is particularly desirable.”
� Brazil Fails to Score in Fruit Cup; Dole Leads 1-0
Brazil v. Dole Packaged Foods LLC, No. 12-cv-01831 (N.D. Cal.) (Dec. 8, 2014). Judge Koh. Granting in part and denying in part Dole’s motion to decertify.
Chad Brazil brought a class action against Dole claiming the company violated federal and California law when its labels claimed certain food products were “all natural” when they contained artificial ingredients. The court certified a damages class and an injunctive relief class even though Brazil’s expert had yet to run his regression analysis to prove damages. After the expert supplied his damages model, Dole moved to decertify both classes, arguing the model was fundamentally flawed and that neither class was ascertainable.
The district court agreed in part and decertified the damages class after concluding the model suffered from a laundry list of errors, including not controlling for Dole’s advertising, not confirming whether comparable goods offered by Dole’s peers had used “All Natural” labels, and not accounting for label and packaging differences. The court also expressed “unease” with plainly contradictory approaches used by the expert in another case. It was not all bad news for Brazil, as the court left intact the injunctive relief class. n
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• SECURITIES
• PRODUCT LIABILITY
• RICO
• SETTLEMENTS
Employment
� Tenth Circuit Addresses CAFA’s “Local Controversy” and “State Action” Exceptions
Woods v. Standard Ins. Co., No. 13-2160 (10th Cir.) (Nov. 10, 2014). Reversing remand order and upholding CAFA jurisdiction.
Government employees in New Mexico sued a state agency, Standard Insurance Company, and Standard’s local insurance agent, claiming that they did not receive the amount of coverage they paid for. After accepting a discretionary appeal from a remand order, the Tenth Circuit addressed the Class Action Fairness Act’s (CAFA) “state action” and “local controversy” exceptions, concluding that neither precluded removal under CAFA.
First, the court held that the “state action” exception applies only when all of the primary defendants are states, state officials, or state entities. The exception did not apply because Standard was a primary defendant. Second, CAFA’s “local controversy” exception did not apply because a state agency is not a “local” defendant and Standard’s agent was not a defendant from whom significant relief was sought. The court pointed to CAFA’s legislative history, which says that naming the local insurance agent as a defendant in an insurance-related class action would not generally defeat CAFA jurisdiction under the “local controversy” exception.
� First Circuit Sets Bright Line Rule for Removal Time Periods
Romulus v. CVS Pharmacy, No. 14-1937 (1st Cir.) (Oct. 24, 2014). Reversing remand order and upholding CAFA jurisdiction.
After the district court initially remanded the case because the CAFA amount in controversy was not satisfied, plaintiffs’ counsel sent CVS’s counsel an email that CVS believed was new information constituting “other paper” under 28 U.S.C. § 1446 that established the amount in controversy and provided grounds for removal. The district court rejected CVS’s argument and remanded the case again, holding that CVS could have discovered the information within 30 days of service of the complaint.
At our next Labor & Employment Executive Breakfast, Steve Ensor and
David Keating will serve a “Forum on Data Breaches and Employment Information”
and some practical advice for employers.
CLASS-IFIED INFORMATION
Steve Ensor David Keating
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• SECURITIES
• PRODUCT LIABILITY
• RICO
• SETTLEMENTS
The First Circuit reversed and held that the 30-day removal clock is triggered “only when the plaintiffs’ complaint or plaintiffs’ subsequent paper provides the defendant with sufficient information to easily determine that the matter is removable.” The court rejected the argument that the defendant could have investigated removability and established amount in controversy earlier and should not be able to wait and rely on the later-received correspondence from plaintiffs. Finally, the term “other paper” encompasses any correspondence from a plaintiff to a defendant concerning the potential amount in controversy.
� Right Formula, Wrong Application: Pennsylvania Supreme Court Denies Claim of “Trial by Formula”
Braun v. Wal-Mart Stores Inc., No. J-43A&B-2013 (Pa.) (Dec. 15, 2014). Affirming judgment for plaintiffs.
Wal-Mart employees brought a class action claiming denial of promised rest breaks and meal breaks. Post-certification, a jury exonerated Wal-Mart on meal breaks, but awarded the class $187,648,589 on the rest breaks and for off-the-clock work. Wal-Mart appealed, arguing a “trial by formula” using sham statistics and baseless extrapolations that ignored outcome-determinative individual issues among the class members’ claims, including voluntary missed breaks and the occasions during which cashiers would operate a cash register under another employee’s name.
Those arguments failed. The Pennsylvania Supreme Court differentiated the case from Wal-Mart Stores, Inc. v. Dukes, where the U.S. Supreme Court had disapproved of “trial by formula.” Braun did not involve an “adjudication of Wal-Mart’s liability to a subset of employees that would then be extrapolated” to the remainder of the class. Furthermore, the class commonality was not an issue because the Braun plaintiff sufficiently proved that all class members met the criterion.
� Louisiana High Court Tosses Post-Katrina Teacher Class Action
Oliver v. Orleans Parish School Board, No. 2014-C-0329 (La.) (Oct. 31, 2014). Dismissing class action.
The Louisiana Supreme Court threw out a class action brought by 7,500 public school employees claiming that they were wrongly fired in the wake of Hurricane Katrina. The 5-2 decision unraveled a billion-dollar win for the teachers—obtained in the trial court, affirmed in the court of appeals—and kicked the case based on res judicata.
Beyond the two dissenters, a third justice wrote separately in concurrence to express sympathy for the laid-off employees.
� California Courts Split on Arbitrability Question
Langston v. 20/20 Companies Inc., No. 5:14-cv-1360 (C.D. Cal.) (Oct. 17, 2014). Judge Bernal. Granting motion to compel arbitration.
Judge Bernal upheld the enforceability of an employment agreement requiring individual arbitration of California’s Private Attorney General Act (PAGA) claims. In doing so, he became at least the third federal district judge to disagree with the California Supreme Court’s recent decision in Iskanian v. CLS Transportation L.A., LLC, 59 Cal. 4th 348 (Cal. 2014). According to Judge Bernal, the Federal Arbitration Act preempts the California rule against agreements that waive the right to bring representative PAGA claims because that rule impermissibly disfavors arbitration.
The upshot? The enforceability of these PAGA waivers may depend on whether the issue is litigated in state court or federal court. n
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• SETTLEMENTS
Environmental
� Numerosity Thwarts Certification of Contamination Class
Day v. Whirlpool Corp., No. 2:13-CV-02164 (W.D. Ark.) (Dec. 3, 2014). Judge Holmes. Denying a joint motion to certify.
Numerosity bared its teeth in a recent environmental class action. Landowners in Fort Smith, Arkansas, sued Whirlpool for property impacts allegedly from a chemical plume. In a joint filing, the parties urged the court to certify two putative subclasses that encompassed 104 properties. But the court refused. Not only did the briefing improperly focus on the number of properties in the subclasses rather than the number of persons in the subclasses, but the discrete source of contamination, discernible footprint of contamination, and availability of public records to identify claimants also did not make joinder impractical. Future defendants may use Day to cast numerosity as a formidable hurdle for any plaintiff seeking certification in a contamination case. n
Clean up at the 44th Spring Conference: The ABA Super
Conference on Environmental Law, where Paul Beard will
deliver a “Supreme Court Roundup: Land, Air, Water, and
Jurisdiction,” March 26-28 in San Francisco.
CLASS-IFIED INFORMATION
Paul Beard
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• SETTLEMENTS
Privacy
� Spam Fax Liability Not Covered by Dish Network Ruling, Says Eleventh Circuit and FCC
Palm Beach Golf Center-Boca Inc. v. John G. Sarris, D.D.S., P.A., No. 13-14013 (11th Cir.) (Oct. 30, 2014). Reversing grant of summary judgment.
The Eleventh Circuit revived a spam fax class action, holding that entities using third parties to send unsolicited fax advertisements on their behalf are liable under the TCPA. The district court had invoked the FCC’s 2013 Dish Network declaratory ruling, which shields businesses that engage telemarketers to advertise for them from TCPA liability in certain circumstances. The Eleventh Circuit solicited the FCC’s input on the ruling, and the FCC clarified in a letter to the court that the Dish Network ruling does not extend to unwanted faxes. The Eleventh Circuit agreed.
� Gym Crunches TCPA Liability by Avoiding Autodialers
Marks v. Crunch San Diego LLC, No. 3:14-cv-00348 (S.D. Cal.) (Oct. 23, 2014). Judge Bashant. Granting motion for summary judgment.
A California district court judge ended a putative TCPA class action on a finding that the defendant gym did not use an “automated telephone dialing system” to spam members with advertising text messages, as a gym member alleged. Crunch’s telemarketing system could not produce, generate, or store telephone numbers, and phone numbers could be added to Crunch’s system only manually by the member or by Crunch staff, or by a member responding to an advertisement by text message. Judge Bashant held that Crunch’s system did not violate the TCPA’s prohibition on the use of autodialing systems.
� Disclosure of Android ID by Cartoon Network App Does Not Violate VPPA
Ellis v. The Cartoon Network Inc., No. 1:14-cv-00484 (N.D. Ga.) (Oct. 8, 2014). Judge Thrash. Dismissing with prejudice.
A Georgia district court judge dismissed a Video Privacy Protection Act (VPPA) suit alleging that Cartoon Network disclosed personally identifiable consumer information to third parties without user consent. The plaintiff attacked Cartoon Network’s Bango Android application, which collected Android ID numbers and viewing history. Judge Thrash held that disclosure of the Android ID alone did not constitute disclosure of personally identifiable information in violation of the VPPA because a third party would need to take further steps to match the Android ID to a specific person.
Follow the yellow brick road to the 3rd Annual Cybersecurity Law Institute at Georgetown University Law Center, where
Dominique Shelton will co-present “The Emerging Law
on Corporate Cyber Liability: Privacy, Data Breaches & System
Failures—Oh My!”
CLASS-IFIED INFORMATION
Dominique Shelton
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• SETTLEMENTS
� The FCC’s Nicer Side? Junk Fax Ruling Grants Retroactive Immunity
In re: Federal Communications Commission, Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Order, FCC 14-164 (released Oct. 30, 2014).
The FCC released an October 30, 2014, order clarifying advertisers’ TCPA obligations to clearly and conspicuously include opt-out information in both solicited and unsolicited faxes. The 2014 order resolves confusion stemming from a vague footnote in a 2006 FCC order by stating that the opt-out requirement applies to both solicited and unsolicited faxes. The FCC granted retroactive immunity to over two dozen companies for not including opt-out notices in solicited faxes and invited more companies to apply for this exemption, signaling that the FCC may be more receptive to business concerns about TCPA enforcement.
� Target’s Motion to Dismiss Misses the Bull’s-eye
In re: Target Corp. Customer Data Security Breach Litig., No. 14-md-02522 (D. Minn.) (Dec. 18, 2014). Judge Magnuson. Granting in part and denying in part motion to dismiss.
In the Target 2013 data breach litigation, Judge Magnuson rejected as premature Target’s argument that consumers lacked standing. The complaint sufficiently alleged injuries “fairly traceable” to Target’s breach, including paid extra charges, restricted access to bank accounts, and limitation in paying other bills. The court also reviewed several arguments specific to state law in the data breach context. n
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• SETTLEMENTS
Product Liability
� I Can’t Believe It’s Not a Class Action: Liquid Butter Spray Class Certification Bid Denied
Allen v. ConAgra Foods Inc., No. 3:13-cv-01279 (N.D. Cal) (Jan. 9, 2015). Judge Chhabria. Denying class certification.
A California federal judge rejected a consumer class’s certification bid in a suit about the labeling of ConAgra’s Parkay Spray liquid butter. The court relied on the Third Circuit’s Carrera v. Bayer Corp. decision requiring plaintiffs to present a plan to identify class members to meet the ascertainability requirement. In the absence of an ascertainability plan, the plaintiffs were out of luck.
� Class Certification Denied in Asbestos Malpractice Suit
Southern v. Asbestos Processing LLC, No. 0:11-cv-01800 (D.S.C.) (Jan. 8, 2015). Judge Anderson. Denying class certification.
A putative class of nearly 16,000 South Carolina residents filed malpractice suits against the attorneys who handled their asbestos claims. Certification was denied. The court denied Rule 23(c)(4) issue certification. The court held that the proposed issue class satisfied most of Rule 23(a) and (b), but it was not superior because whether a plaintiff could recover depended entirely on whether that plaintiff had a viable workers’ compensation claim against his or her former employer. Answering that question would require a fact-intensive individual inquiry. The judge did suggest another procedural device—request for admission under Rule 36—to expedite individual trials. n
Jenny Mendelsohn, Scott Elder and Cathy Burgess explore new dimensions of “3D Printed Medical Devices: More Lawsuits and More Questions” in Law360 Medical Devices Law & Industry Report.
CLASS-IFIED INFORMATION
Scott Elder Cathy BurgessJenny Mendelsohn
Todd Benoff
Todd Benoff warns of “Emerging Threats in Recall-Based Auto
Class Actions” in Law360.
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• PRODUCT LIABILITY
• RICO
• SETTLEMENTS
RICO
� Presumption of Reliance Does Not Extend to RICO Claims
CGC Holding Co. v. Broad & Cassel, No. 13-1255 (10th Cir.) (Dec. 8, 2014). Affirming class certification in part and reversing class certification in part.
Real estate borrowers alleged that their lenders conspired to obtain up-front fees for loan commitments that they never intended to fulfill. The Tenth Circuit held that the “fraud on the market” presumption of reliance—common in securities cases—does not apply to class RICO claims. The lenders won that battle, but lost the war. In the end, the very act of paying the up-front fee constituted class-wide evidence of reliance and certified the class.
� The Donald Gets Trumped
Cohen v. Trump, 2014 BL 302279, No. 13-cv-2519 (S.D. Cal.) (Oct. 24, 2014). Judge Curiel. Class Certified.
Judge Curiel rejected Donald Trump’s attempt to avoid class certification in a suit alleging mail and wire fraud in advertising for “Trump University”—a real estate seminar—because common questions existed as to whether Trump misrepresented his involvement with the seminar and whether it was even a university at all. The plaintiffs were permitted to prove reliance on a class-wide basis because “common sense” dictated that customers relied on representations that they were getting Trump and a university (it was called “Trump University,” after all), when they were allegedly getting neither. n
Frank Hirsch and Richard McAvoy suggest a map for the rugged terrain of “Life After
Jesinoski: The New Wild West of TILA Rescission” in Consumer Financial Services Law Report.
A federal judge gave defendants another tool to use when “Pumping the Brakes on Unintended
Acceleration Allegations,” as noted by Josh Becker and Sarah O’Donohue in their article for Law360.
CLASS-IFIED INFORMATION
Frank Hirsch
Josh Becker
Richard McAvoy
Sarah O’Donohue
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• PRODUCT LIABILITY
• RICO
• SETTLEMENTS
Securities
� Sixth Circuit Plows “Middle Ground” on Securities Fraud Corporate State of Mind.
Paul Ansfield, et al. v. Omnicare Inc., et al., No. 13-5597 (6th Cir.) (Oct. 10, 2014). Affirming motion to dismiss.
The Sixth Circuit undertook a useful framework analysis for pleading corporate scienter in a Section 10(b) securities class action. The court canvassed the existing two approaches from other circuits and found that both potentially ran counter to the purposes of the 1934 Act and the Private Securities Litigation Reform Act of 1935. The court landed in a “middle ground,” setting forth three ways in which a plaintiff may allege the requisite scienter for a corporate misrepresentation. The court then affirmed dismissal because plaintiffs’ complaint failed to meet that standard. The Sixth Circuit’s new approach creates a three-way circuit split that could tee up the issue of collective corporate scienter for Supreme Court review. n
Doug Hinson is a co-chair of the American Conference
Institute’s 9th National Forum on ERISA Litigation and will
speak on employee stock ownership plans.
CLASS-IFIED INFORMATION
Doug Hinson
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Settlements
� Antitrust
In re Electronic Books Antitrust Litig., No. 1:11-md-02293 (S.D.N.Y.) (Nov. 21, 2014). Judge Cote. Approving $450 million settlement.
Apple has settled consumer claims, pursued by the U.S. Department of Justice and 33 states, alleging that it conspired with five publishers to raise the prices for electronic books. Under the settlement, Apple will pay $400 million to as many as 23 million consumers, $30 million to class counsel, and $20 million to state authorities that assisted with the litigation.
Judge Cote approved the settlement agreement even though it permits Apple to continue pursuing its appeal of Judge Cote’s July 2013 decision finding that Apple violated antitrust laws—a contingency she described as “highly unusual.” Thus, Apple will pay nothing if it wins its appeal outright. If the Second Circuit reverses or vacates the 2013 decision, Apple will pay $50 million to the consumer class and $10 million each to class counsel and the assisting states.
� Banking
Fladell, et al. v. Wells Fargo Bank N.A., No. 0:13-cv-60721 (S.D. Fla.) (Oct. 29, 2014). Judge Moreno. Approving $300 million settlement.
The parties settled claims alleging that Wells Fargo and Assurant charged unlawfully inflated premiums on forced-placed insurance policies issued in connection with class members’ mortgage loans. The settlement will provide $281 million to homeowner-class members and $19 million in attorneys’ fees. Judge Moreno overruled objections
that the settlement did not set out a concrete structure to ensure settlement funds would reach injured class members. The court noted that out of 1.3 million class members, only 12 objections were filed by 21 objectors, six of which were subsequently withdrawn.
Lopez v. HSBC Bank USA N.A., No. 1:13-cv-21104 (S.D. Fla.) (Oct. 29, 2014). Judge Moreno. Approving $32 million settlement.
Judge Moreno granted final approval to HSBC Bank and three insurers’ settlement of a class action accusing them of overcharging more than 250,000 homeowners for force-placed insurance. The order came less than one month after Judge Moreno sent notice to the parties suggesting that the settlement could be improved by reducing the $10 million attorneys’ fee award and/or redistributing unclaimed funds to a cy pres recipient, which would “enhance the court’s confidence.”
No ordinary venue: Kyle Wallace and Kristen Bromberek discuss “MDL Strategies:
Choosing a Transferee Court” in Law360.
CLASS-IFIED INFORMATION
Kyle Wallace Kristen Bromberek
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• WHERE THE (CLASS) ACTION IS
• CONSUMER PROTECTION
• BANKING
• EMPLOYMENT
• ENVIRONMENTAL
• PRIVACY
• SECURITIES
• PRODUCT LIABILITY
• RICO
• SETTLEMENTS
Class counsel and the defendants stood by the deal, however, and the court approved the settlement as fair, reasonable, and adequate without explaining its reasoning. The approved settlement provides $32 million to homeowners, as well as injunctive relief barring force-placed insurance practices and other nonmonetary benefits class counsel valued at $126 million.
� Consumer Protection
Pearson v. NBTY Inc., No. 14-1198 (7th Cir.) (Nov. 19, 2014). Reversing and remanding final approval of $6.5 million settlement.
The Seventh Circuit, through Judge Posner, continues to take aim at collusive class action settlements. This time, it shot down a “selfish” $6.5 million settlement in a glucosamine supplement false labeling class action, saying the settlement was apparently contrived to ensure “meager” benefits to class members and maximum fees to attorneys. Of the $6.5 million the defendants set aside to settle, $4.5 million was earmarked for class counsel’s attorneys’ fees. Even after the district court cut the attorneys’ fee award to $1.93 million, the panel found that amount was out of proportion with the $900,000 in payouts to claimants.
Judge Posner also took issue with a so-called “kicker” clause, by which any fees deemed excessive would revert back to the defendants. The court called this clause “a gimmick for defeating objectors” and found that it barred judges from correcting excessive fees by increasing the share of the class. The panel also stated that it was “hard to resist” the inference that the defendants were trying to minimize the number of claims filed to reduce their bottom line, given the onerous claims process, compared to the modest potential award.
In re Neurontin Marketing, Sales Practices, and Products Liability Litig., No. 1:04-cv-10981, MDL No. 1629 (D. Mass.) (Nov. 7, 2014). Judge Saris. Order on motion for attorneys’ fees.
The court awarded $91 million to the plaintiffs’ attorneys in multidistrict litigation accusing Pfizer of illegally marketing Neurontin for off-label use. The court found that the $108 million requested, representing about a third of the $325 million settlement pot, was too high. This conclusion was based on a study of “megafund” cases in the First Circuit that settled for $250 million to $500 million that found the average fee award was 17.8 percent. In fashioning the fee award, Judge Saris considered the fact that class counsel had already been compensated in the case for its work in another trial against Pfizer, and she found that the attorneys did not provide sufficiently detailed information to support their lodestar claim for $27.4 million, not including time spent on the separate trial.
Fitzgerald v. Gann Law Books Inc., No. 2:11-cv-04287 (D.N.J.) (Dec. 17, 2014). Judge McNulty. Approving $1.2 million settlement with reduced attorneys’ fees.
Judge McNulty approved the settlement over junk faxes sent by Gann Law Books, finding it to be fair and reasonable, and awarded $421,000 in attorneys’ fees—a reduction of $580,000 from the $1 million request. The proposed settlement provided for two forms of relief to consumers: (1) cash, payable from a $1,145,000 fund; and (2) free continuing legal education (CLE) webinars. The parties valued the CLE webinars at more than $1.8 million, but Judge McNulty called this figure a “phantom” benefit and found they were worth $50,000 because only 216 of the 8,000 class members had submitted claims for the webinar benefits. As a result, the total settlement amount on which the requested fees were
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Class Action Round-Up | Winter 2015
• WHERE THE (CLASS) ACTION IS
• CONSUMER PROTECTION
• BANKING
• EMPLOYMENT
• ENVIRONMENTAL
• PRIVACY
• SECURITIES
• PRODUCT LIABILITY
• RICO
• SETTLEMENTS
based—over $3 million—was overstated by $1.75 million, and the actual value of the proposed attorneys’ fees was closer to 84 percent. In addition, Judge McNulty noted that class counsel calculated its fees by taking one-third of the total settlement, which was higher than the 20-30 percent typical in TCPA cases. By setting the attorneys’ fees at $421,000—a figure achieved by multiplying class counsel’s time spent by two—the settlement left a “residue” of about $650,000 for class members who could be found but had not filed a claim, up from the $78,000 “residue” proposed by the parties.
� Securities
In re Bank of America Corp. Securities, Derivative, and Employee Retirement Income Security Act (ERISA) Litig., No. 13-1573 (2d Cir.) (Nov. 5, 2014). Affirming approval of $2.4 billion settlement.
The Second Circuit approved Bank of America’s record $2.4 billion securities class action settlement over claims that the bank misled shareholders regarding material information related to its merger with Merrill Lynch in January 2009. The investors claimed that (1) they were not informed of Merrill Lynch’s projected losses of over $20 billion in the fourth quarter of 2008 and agreements to pay Merrill Lynch executives $3.6 billion in bonuses, and (2) Bank of America’s stock price dropped precipitously once this information was made public.
In approving the settlement, the Second Circuit dismissed challenges by a handful of investors contending that attorneys’ fees should have been limited to 3 percent of the total settlement. The objectors failed to identify any abuse of discretion and failed to explain why a 3 percent cap would be more reasonable. The court also repeated the arguments that representative plaintiffs should not have been reimbursed for about $450,000 in legal fees and that the notice should have disclosed the average amount of damages per share plaintiffs could potentially recover.
Wong v. Accretive Health Inc., No. 14-2191 (7th Cir.) (Dec. 9, 2014). Affirming approval of $14 million settlement and plan of distribution.
The Seventh Circuit affirmed a settlement agreement in a securities action between a police pension and Accretive, rejecting two arguments of a lone objector. First, the lawsuit was not “frivolous” under the Private Securities Litigation Reform Act simply because it recovered “a low percentage of potential damages.” Instead, a lawsuit is frivolous if it “lacks an arguable basis either in law or in fact.” Second, the plan of distribution did not provide for those who could not show loss causation. Class members who sold before the alleged disclosure date would always recover zero. n
