Articles Posted in Class Action Court Decisions

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Judicial Panel Grants Plaintiffs Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by Class Action Defendants, and Transfers Class Actions to Northern District of Illinois

Nine class actions – two each in the Central and Northern Districts of California, and one each in the Eastern and Southern Districts of California, the Northern District of Illinois, the District of Minnesota, and the Northern District of Texas – were filed against various Chase defendants arising out of home equity lines of credit. In re JP Morgan Chase Bank Home Equity Line of Credit Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 7, 2010) [Slip Opn., at 1]. According to the allegations under the class actions, “Chase improperly suspended or reduced plaintiffs’ respective home equity line of credit accounts and, relatedly, used inappropriate automated valuation models in assessing the value of the underlying properties.” Id. Attorneys for plaintiffs in seven of the class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Northern District of Illinois or, alternatively, in the Northern District of California. Id. Plaintiff and defendants in the Minnesota class action supported the motion; plaintiff in the Northern District of California class action supported centralization in that district instead of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that it “will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.” Id. The Judicial Panel also agreed that the Northern District of Illinois was the appropriate transferee court because “Defendants and almost all plaintiffs support centralization in this district” and because it “provides a convenient forum.” Id., at 2. Accordingly, the Panel transferred all class actions pending outside of Illinois to that district. Id.

Download PDF file of In re JP Morgan Chase Bank Home Equity Line of Credit Litigation Transfer Order

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Bankruptcy Court had Jurisdiction to Certify Debtor-Class Action Against Wells Fargo but Prerequisites for Class Action Certification under Rule 23(b) were not Satisfied, Particularly with Respect to Damages Fifth Circuit Holds

The three named plaintiffs in this action (Judy Wilborn, Karlton and Monica Flournoy, and Judy Martin) filed Chapter 13 bankruptcy petitions in Texas. In re Wilborn, ___ F.3d ___ (5th Cir. June 18, 2010) [Slip Opn., at 1-2]. According to the allegations underlying the class action complaint, plaintiffs have home loans that are held or serviced by Wells Fargo Bank, and they allege that the Bank “charged, or charged and collected, unreasonable and unapproved post-petition professional fees and costs during the pendency of their bankruptcies.” Id., at 2. The fees and costs challenged by the class action – which “include such things as bankruptcy attorneys’ fees, recording fees, notification fees, title search fees, document fees, and property inspection fees” – are permitted under each plaintiff’s loan documents. Id. Nonetheless, plaintiffs’ class action complaint accused the Bank of engaging in a pattern and practice of charging such fees in violation of bankruptcy laws on the theory that “Wells Fargo’s failure to disclose these fees to the bankruptcy court interferes with their ability to complete their Chapter 13 reorganization plans and emerge from bankruptcy having cured all arrearages.” Id. Plaintiffs also object to the fact that these fees and costs continued to accumulate during the pendency of the bankruptcy even though Wells Fargo received distributions from the Chapter 13 Trustee in accord with the individual bankruptcy plans. Id. The class action complaint acknowledged that the Bank charged plaintiffs fees that it had incurred both prior to and after confirmation of the bankruptcy plans, that the fees ranged from $1200 to $4000, and that in some instances at least a portion of the fees were approved by the bankruptcy court. Id., at 3. Plaintiffs moved the bankruptcy court to certify their complaint as a class action; the bankruptcy court granted the motion, certifying a class that consisted of more than 1200 members. Id., at 3-4. The bankruptcy court certified its class action certification order for direct appeal to the Fifth Circuit, and Wells Fargo also petitioned the Circuit Court for permission to appeal the certification order. Id., at 4. The Fifth Circuit granted the Bank’s petition for an interlocutory appeal and reversed the class action certification order. The Court concluded that “a bankruptcy judge may certify a class of debtors under appropriate circumstances but that the proposed class in this case does not satisfy the requirements of Federal Rule of Civil Procedure 23 and Federal Bankruptcy Rule of Procedure 7023.” Id., at 2.

The Fifth Circuit explained that the appeal presented two issues: “The questions at issue are whether a bankruptcy judge may certify a class action comprised of debtor-plaintiffs, and if so, whether the class certification in this case was proper.” In re Wilborn, at 1-2. Wells Fargo first challenged whether the bankruptcy court had jurisdiction to enter the class certification order, id., at 4. While the Circuit Court recognized that “there has been disagreement among courts as to whether a bankruptcy judge may certify a class action of debtors,” id., at 8, it had no difficulty in holding that the bankruptcy court had jurisdiction over the putative class action, see id., at 4-9. The central issue on appeal, then, was whether the prerequisites for class certification under Rule 23 had been met. Id., at 9.

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Unconscionability Challenge to Class Action Waiver in Cardmember Agreement Governing Credit Card was Properly Determined by District Court, not Arbitrator, so District Court did not Err in Granting Bank’s Motion in Putative Class Action to Compel Plaintiffs to Arbitrate Individual Claims Third Circuit Holds

Plaintiffs filed a putative class action against Chase Bank alleging that the Bank improperly increased the interest rates on their credit card account balances, and that it did so retroactively. Puleo v. Chase Bank USA, N.A., ___ F.3d ___ (3d Cir. May 10, 2010) [Slip Opn., at 1, 4]. The class action was filed in Pennsylvania state court, but removed to federal court on grounds on diversity. Id., at 6-7. According to the allegations underlying the class action complaint, the Bank retroactively increased the interest rate on one plaintiff’s account from 4.99% to 29.99%, and on another plaintiff’s account from 14.74% to 25.99%. Id., at 4. Defense attorneys argued that the terms of the Cardmember Agreements permitted the challenged interest rate increases, and that the interest rate increases did not violate state or federal laws. Id. However, the propriety of the increases is not relevant to the appeal. Rather, the appeal focused on the arbitration clause in the Cardmember Agreement, which prohibits class actions. Id., at 3. Plaintiffs filed the putative class action in state court, and Chase removed the action to federal court and moved the district court to compel plaintiffs to arbitrate their claims on an individual basis because of the class action waiver in the Cardmember Agreement, id. Plaintiffs countered that the class action waiver was unconscionable, and that the question of its enforceability should be decided by the arbitrator instead of the court. Id. The district court disagreed, “concluding, first, that [plaintiffs’] challenge to the enforceability of the class action waiver was a question of arbitrability for the court to decide, and, second, that the entirety of the Arbitration Agreement was enforceable.” Id. On appeal, plaintiffs argued only that the district court erred in ruling on the issue of the unconscionability of the class action waiver, id. In a 6-4 decision, the Third Circuit concluded that the district court properly determined the enforceability of the class action arbitration wavier and affirmed. Id.

The Cardmember Agreement required credit card account customers to arbitrate any disputes with Chase on an individual basis. Puleo, at 5-6 (see NOTE, below). “Despite the express ban on class actions, [plaintiffs] initially brought this case as a putative class action in Pennsylvania state court on behalf of themselves and other similarly situated Chase credit card holders in Pennsylvania.” Id., at 6 (footnote omitted). As noted above, defense attorneys removed the putative class action to federal court, and the district court granted a defense motion to compel plaintiffs to arbitrate their claims on an individual basis, upholding the enforceability of the class action waiver. Id., at 7-8. The Third Circuit began its analysis by noting that “Congress enacted the Federal Arbitration Act (‘FAA’) ‘to reverse the longstanding judicial hostility to arbitration agreements . . . and to place arbitration agreements upon the same footing as other contracts.’” Id., at 9 (citations omitted). And with respect to the specific issue presented by the appeal, the Circuit Court noted that Supreme Court authority holds that “[t]he question whether the parties have submitted a particular dispute to arbitration, i.e., the question of arbitrability, is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.” Id., at 9-10 (citation omitted).

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District Court Properly Dismissed Securities Class Action but Existing Circuit Court Authority Overruled because Neither § 10(b) of the Securities Exchange Act of 1934 nor Rule 10b-5 is Extraterritorial Supreme Court Holds

Plaintiffs filed a putative class action against National Australia Bank, and its wholly-owned subsidiary HomeSide Lending (a mortgage servicing company) and three of its executives, alleging violations of the Securities Exchange Act of 1934 after National announced that it was writing down the value of HomeSide causing its stock price to drop. Morrison v. National Australia Bank Ltd., ___ U.S. ___, 130 S.Ct. 2869, 2010 WL 2518523, *3-*4 (2010). According to the allegations underlying the class action, from 1998 to 2001 both National’s annual reports and other public documents, and HomeSide’s executives, “touted the success of HomeSide’s business.” Id., at *3. But in July 2001, National wrote down the value of HomeSide by $450 million, and in September it wrote down the value of HomeSide by another $1.75 billion. Id. The class action alleged that National downplayed the write-downs, and that HomeSide and its executives “had manipulated HomeSide’s financial models…in order to cause the mortgage-servicing rights to appear more valuable than they really were.” Id. The class action complaint was filed in the district court for the Southern District of New York and “alleged violations of §§ 10(b) and 20(a) of the Securities and Exchange Act of 1934…, and SEC Rule 10b-5,” id., at *4. Defense attorneys moved to dismiss the class action for lack of subject-matter jurisdiction under Rule 12(b)(1) and for failure to state a claim under Rule 12(b)(6). Id. The federal court dismissed the class action for lack of subject matter jurisdiction “because the acts in this country were, ‘at most, a link in the chain of an alleged overall securities fraud scheme that culminated abroad.’” Id. (citation omitted). The Second Circuit affirmed on the same grounds, id. (citation omitted). The Supreme Court granted certiorari, and affirmed.

The Supreme Court explained that this case presented the question of “whether § 10(b) of the Securities Exchange Act of 1934 provides a cause of action to foreign plaintiffs suing foreign and American defendants for misconduct in connection with securities traded on foreign exchanges.” Morrison, at *3. As a preliminary matter, the High Court addressed Second Circuit’s analysis of the extraterritorial reach of § 10(b) and circuit court precedent on the issue. Id. (citing Schoenbaum v. Firstbrook, 405 F.2d 200, 208, modified on other grounds en banc, 405 F.2d 215 (2d Cir. 1968); In re CP Ships Ltd. Sec. Litig., 578 F.3d 1306, 1313 (11th Cir. 2009); Continental Grain (Australia) Pty. Ltd. v. Pacific Oilseeds, Inc., 592 F.2d 409, 421 (8th Cir. 1979)). The Court explained at page *4, “But to ask what conduct § 10(b) reaches is to ask what conduct § 10(b) prohibits, which is a merits question. Subject-matter jurisdiction, by contrast, ‘refers to a tribunal’s “‘power to hear a case.’”’ [Citations.] It presents an issue quite separate from the question whether the allegations the plaintiff makes entitle him to relief. [Citation.]” But while this was error, the Supreme Court declined to remand the matter finding “that unnecessary” because “nothing in the analysis of the courts below turned on the mistake, [so] a remand would only require a new Rule 12(b)(6) label for the same Rule 12(b)(1) conclusion.” Id., at *4-*5.

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“Mass Action” Provision in Class Action Fairness Act (CAFA), Extending Federal Court Jurisdiction to Lawsuits Involving at Least 100 Plaintiffs, did not Permit Federal Courts to Treat Multiple, “Virtually Identical Complaints” by Same Plaintiffs’ Counsel as a Single Lawsuit for Purposes of Determining Number of Plaintiffs Seventh Circuit Holds

Five separate but “mostly identical complaints” (not class actions) were filed against various Bayer entities in Illinois state court seeking damages for personal injuries allegedly caused by Bayer’s prescription drug Trasylol. Anderson v. Bayer Corp., ___ F.3d ___ (7th Cir. June 22, 2010) [Slip Opn., at 1, 3]. According to the “virtually identical” lawsuits, “plaintiffs (or their decedents) suffered injuries as a result of being administered Trasylol during heart surgery.” Id., at 3-4. Defense attorneys removed the lawsuits to federal court under the Class Action Fairness Act (CAFA), asserting that the lawsuits fell within CAFA’s “mass action” provision “which allows the removal of cases joining the claims of at least 100 plaintiffs that otherwise meet CAFA’s jurisdictional requirements.” Id., at 3. The district court remanded four of the five lawsuits on the ground that they involved less than 100 – it was, apparently, only by accident that the fifth lawsuit named precisely 100 plaintiffs. Id. Bayer asked the Seventh Circuit for permission to appeal the remand order; defense attorneys argued that the Circuit Court should “hold that (1) plaintiffs cannot avoid federal diversity jurisdiction by carving their filings into five separate pleadings, and (2) there is diversity jurisdiction over most plaintiff’s claims because the claims of the small number of non-diverse plaintiffs were fraudulently misjoined and should be severed.” Id. The Circuit Court rejected the appeal because it agreed with the district court that the lawsuits fell outside the scope of CAFA’s “mass action” provision because they involved fewer than 100 plaintiffs; accordingly, the Court held that it was without jurisdiction to reach the second issue advanced by Bayer. Id.

Plaintiffs’ counsel originally filed “four virtually identical complaints, using verbatim language,” in Illinois state court “on behalf of 57 unrelated plaintiffs.” Anderson, at 3-4. Defense attorneys removed the lawsuits to federal court on grounds of diversity, arguing that the non-diverse plaintiffs had been joined fraudulently to defeat diversity jurisdiction. Id., at 4. The federal court remanded the complaint to state court sua sponte. Id. On remand, plaintiffs’ counsel amended the lawsuits to add another 111 plaintiffs, distributed across the four complaints and bringing the total number of plaintiffs in one of those lawsuits to 100; plaintiffs’ counsel also filed a fifth lawsuit. Id. Bayer again removed the lawsuits to federal court on the ground that the five separate complaints “should be treated as a single mass action,” id. The lawsuits were again remanded to state court and Bayer filed a petition seeking permission to appeal under the CAFA provision that “creates an exception for class actions to the general rule that remand orders are not reviewable.” Id. (citing 28 U.S.C. § 1447(d)).

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Nationwide Class Action (excluding California and New York) Alleging Domino’s Systematically Underpaid Delivery Drivers in Violation of Fair Labor Standards Act (FLSA) Entitled to Conditional Class Action Certification because Evidence Submitted by Plaintiffs Met Minimal Burden Required at First Stage of FLSA Proceedings Minnesota Federal Court Holds

Plaintiffs filed a putative class action against their employer, Domino’s Pizza, alleging violations of the federal Fair Labor Standards Act (FLSA); specifically, the class action complaint alleged that Domino’s failed to pay its pizza delivery drivers minimum wage. Luiken v. Domino’s Pizza, LLC, ___ F.Supp.2d ___ (D. Minn. June 21, 2010) [Slip Opn., at 1-3]. According to the allegations underlying the class action, Domino’s failed to reimburse its delivery drivers for all automobile expenses incurred in the course of their employment, id., at 4. The class action sought to represent a nationwide class, except for delivery drivers in California and New York. Id., at 2. Plaintiffs moved the district court to certify the litigation as a class action, id., at 1. Defense attorneys opposed class action treatment, arguing that class members were not “similarly situated” because of “highly individualized fact-specific determinations taking into account driver-specific factors such as type of car, routes, and total mileage” and because “reimbursements vary by geographic region.” Id., at 2. Noting the difference between class action certification motions under Rule 23 and conditional class certification under the FLSA (technically, certification of a “collective action”), the district court granted plaintiffs’ motion.

The federal court explained that class action certification under the FLSA is a two-part process, and that in determining whether to conditionally certify a class (the first step in the process), the court determines whether plaintiffs have established “a colorable basis that the putative class members are the victims of a single decision, policy, or plan.” Luiken, at 4 (citation omitted). Here, plaintiffs argued that Domino’s employed “a single policy which systematically under-reimbursed them for automobile expenses incurred in the course of their employment” and, accordingly, they were “paid below the federal minimum wage.” Id. In brief, plaintiffs argued that Domino’s used a uniform set of assumptions in determining reimbursement rates, and that those assumptions were uniformly unfair. Id. Defense attorneys countered that individual issues, including the base wages paid each driver, defeat class certification. Id., at 5. Domino’s additionally argued that at least some drivers were paid more than the federal minimum wage, and plaintiffs conceded that subclasses may be necessary due to differences in base pay. Id., at 5 n.5.

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District Court Properly Remanded Class Action to State Court on Ground that Variable Life Insurance Policy Constituted a “Security” Within the Meaning of Exception to Federal Court Jurisdiction under CAFA (Class Action Fairness Act) Seventh Circuit Holds

Plaintiff filed a putative class action against the issuer of his life insurance policy, Lincoln National Life Insurance, alleging that it breached the terms of certain of its variable life insurance policies. Lincoln Nat’l Life Ins. Co. v. Bezich, ___ F.3d ___ (7th Cir. June 25, 2010) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, “Each month, Lincoln deducts cost-of-insurance charges from the accounts of its policyholders…[that] are not determined based on expected mortality, as promised by the policy.” Id., at 1-2. Defense attorneys removed the class action to federal court, asserting jurisdiction under the Class Action Fairness Act (CAFA), id., at 2. However, the district court remanded the class action to state court on the ground that CAFA provides an exception for class actions “that solely involves a claim . . . that relates to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to any security (as defined under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C. 77b(a)(1)) and the regulations issued thereunder).” Id. (citing § 1332(d)(9)(C)). Defendant filed a petition with the Seventh Circuit seeking permission to appeal the district court’s remand order. Id., at 1-2. Lincoln National Life argued “that its petition raises a ‘novel and important issue’ under CAFA: ‘whether contract claims grounded in the traditional insurance features of variable life insurance policies, as opposed to those related to their security features, qualify under the securities exception to CAFA.’” Id., at 2. Because the Seventh Circuit agreed with the district court’s conclusion that § 1332(d)(9)(C) required remand, it dismissed the appeal for lack of jurisdiction. Id.

The Circuit Court explained that Lincoln allowed the holders of single variable life insurance policies to “allocate money between a General Account, which accumulates value from premium payments, and a Separate Account, an investment account whose value varies depending on the performance of the investments selected.” Bezich, at 2-3. The policyholder may place 100% of his or her funds in either the General or Separate Account, or may split the funds between the accounts in any percentage they desire. Id., at 3. “The Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940,” id. (citation omitted). The class action challenges the insurance charges deducted from both the General and Separate Account based on the percentage of funds in each account. Id. Defense attorneys argued that the appeal should be accepted because “no court of appeals has ever considered the application of CAFA to this type of variable life insurance policy.” Id.

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Class Action Against Tobacco Company Alleging Unfair Trade Practices and Breach of Implied Warranty and Seeking Medical Monitoring for Lung Cancer on Behalf of Class of Smokers who have not been Diagnosed with Lung Cancer and who are Asymptomatic Warranted Class Action Certification under both Rule 23(b)(2) and (b)(3) Massachusetts Federal Court Holds

Plaintiffs filed a putative class action against Philip Morris alleging “unfair or deceptive” trade practices in violation of Massachusetts state law, breach of implied warranty, and negligence; specifically, the class action complaint “allege[d] that Philip Morris designed, marketed, and sold Marlboro cigarettes that delivered an excessive and dangerous level of carcinogens.” Donovan v. Philip Morris USA, Inc., ___ F.Supp.2d ___ (D.Mass. June 24, 2010) [Slip Opn., at 1]. According to the allegations underlying the class action complaint, “plaintiffs have no apparent symptoms of lung cancer, and as such, are not seeking damages.” Id. Thus, this class action “diverges from a typical tobacco suit,” id. Instead of seeking damages, the class action sought to compel Philip Morris to pay for medical monitoring – “that is, regular screenings to determine whether they have early signs of the disease” based on the argument that “if [class members] do eventually develop lung cancer, these screenings will increase their likelihood of survival almost six-fold.” Id., at 1-2. Plaintiffs sought certification of a class action “on behalf of Massachusetts residents, age fifty and older, who have smoked Marlboro cigarettes for at least twenty pack-years.” Id., at 1. Further, “No class member may be diagnosed with lung cancer or be under a physician’s care for suspected lung cancer, and all must have smoked Marlboro cigarettes within the Commonwealth of Massachusetts.” Id., at 2. Defense attorneys opposed class action treatment. In a 56-page order, the district court granted plaintiffs’ motion for class action certification.

In analyzing whether to grant class action treatment, the district court noted that “the motion was not easily resolved because it raised threshold issues of Massachusetts products liability law.” Donovan, at 2. First, the class action certification motion presented a set of issues tied to “the unusual remedy plaintiffs seek, a supervised medical monitoring program using Low-Dose Computed Tomography (‘LDCT’) scans.” Id. Plaintiffs argued that unlike x-rays, which could only detect lung cancer “when it had reached an advanced stage,” the new LDCT-scanning technology allowed for much earlier detection “significantly increasing survival rates from about fifteen percent to eighty-five percent.” Id. (Plaintiffs argued that monetary damages would not adequately compensate class members for the cost of medical monitoring, id., at 3.) Second, the class action certification motion presented the question of whether the named plaintiffs had standing to prosecute the class action because “[b]y definition, plaintiffs who seek medical monitoring to determine whether they have cancer are asymptomatic.” Id. And third, the class action presents a “novel issue [that] pertains to the timing of plaintiffs’ claims and the related issue of claim preclusion.” Id. “Typically, toxic tort exposure cases put the plaintiffs on the horns of a dilemma. If they bring a claim when they are aware of their exposure – assuming the standing issues are resolved – they take the risk that they cannot recover if they develop cancer in the future under the ‘single controversy rule.’ If they wait until they develop cancer to bring a claim, the statute of limitations will have expired because they knew of the risks at an earlier time.” Id. Here, plaintiffs argued that this dilemma was avoided because “The statute of limitations should run from the date that plaintiffs develop subcellular changes that substantially increase their risk of cancer and where that increase triggers a medically-accepted form of screening.” Id., at 4.

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Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. — 1407, Over Objection of Common Class Action Defendants, but Transfers Class Actions to Northern District of Georgia

Two class actions – one in the Georgia and one in Virginia – were filed against Capital One Financial and its wholly-owned subsidiary, Capital One Bank (USA) based on the claim that Capital One “unilaterally increased interest rates on customers’ credit card accounts without notice.” In re Capital One Bank Credit Card Interest Rate Hike Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 11, 2010) [Slip Opn., at 1]. Two additional class actions – one in California and another one in Georgia – were treated as potential tag-along cases, id., at 1 n.1. Attorneys for the Virginia class action plaintiffs filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Eastern District of Virginia, where their class action was pending. Id., at 1. Plaintiffs in the Northern District of Georgia class action supported the motion, id. Capital One opposed centralization of the class actions, or requested that the Judicial Panel delay ruling on the motion until the Georgia district court had ruled on the dispositive motions pending before it, Id. Specifically, defense attorneys had filed motions for summary judgment in each of the Georgia class actions, id., at 1-2. Alternatively, Capital One requested centralization in the Northern District of Georgia, id., at 1. The Judicial Panel granted the motion to centralize the class action lawsuits, rejecting defendants’ request to await decisions on the Georgia summary judgment motions because one had been filed only recently and because the California class action suggested that multidistrict litigation would still remain irrespective of the Georgia federal court’s rulings. Id., at 2. The Judicial Panel agreed, however, that the Northern District of Georgia was the appropriate transferee court because “[t]he first-filed actions are pending [there]” and because in one of those cases “discovery has begun and a motion for summary judgment is pending.” Id. Accordingly, the Panel transferred all class actions pending outside of Georgia to that district. Id.

Download PDF file of In re Capital One Bank Credit Card Interest Rate Hike Litigation Transfer Order

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Verizon’s Decision to Enter into Proposed Class Action Settlement of Class Action Alleging Violation of FACTA (Fair and Accurate Credit Transactions Act) while Clarification Act was Pending before Congress did not Allow Verizon to Back Out of Settlement After Passage of Clarification Act Third Circuit Holds

Plaintiffs filed two putative class actions against Verizon Wireless, one in Pennsylvania and one in Tennessee, alleging that it violated the Fair and Accurate Credit Transactions Act (FACTA), which prohibits merchants in credit or debit card transactions from providing consumers at point of sale with a printed receipt that displays more than the last five digits of the card or its expiration date; specifically, the class action complaint alleged that plaintiffs received a receipt that contained the expiration date of their credit or debit card. Ehrheart v. Verizon Wireless, ___ F.3d ___ (3d Cir. June 15, 2010) [Slip Opn., at 3; Dissenting Opn., at 7-8]. The parties entered into a proposed class action settlement; at the time, the Credit and Debit Card Receipt Clarification Act of 2007 (the Clarification Act) was pending before Congress, and if it passed then plaintiffs’ claims would fail as a matter of law because the Clarification Act insulated merchants from liability for claims based solely on the failure to redact expiration dates during the time period that subsumed plaintiffs’ claims. Slip Opn., at 3-4. The parties moved the district court for preliminary approval of the proposed class action settlement, which the district court granted on April 22, 2008. Id., at 4. The Clarification Act was signed into law on June 22, 2008, and six days later Verizon filed a motion to vacate the approval of the class action settlement. Id. The district court granted Verizon’s motion, and subsequently granted Verizon’s motion for judgment on the pleadings. Id. In vacating its approval of the class action settlement, the district court explained that the Clarification Act applied to any lawsuit that was not yet final and so it applied to the instant class action lawsuit because the proposed class action settlement had not yet received final approval. Dissenting Opn., at 12. “Because Congress eliminated the plaintiffs’ cause of action, the District Court reasoned, it had to vacate its preliminary approval of the Settlement Agreement.” Id. In the district court’s view, “no class action settlement can be fair, adequate or reasonable when Congress has determined that such relief is unfair and unreasonable.” Id., at 13. Plaintiffs appealed, and the Third Circuit reversed.

The Third Circuit explained that “the District Court lost sight of three important points” in granting Verizon’s motion to vacate preliminary approval of the class action settlement: “First, there is a restricted, tightly focused role that Rule 23 prescribes for district courts, requiring them to act as fiduciaries for the absent class members, but that does not vest them with broad powers to intrude upon the parties’ bargain. Second, a strong public policy exists, which is particularly muscular in class action suits, favoring settlement of disputes, finality of judgments and the termination of litigation. Third, our jurisprudence holds that changes in the law after a settlement is reached do not provide ground for rescission of the settlement.” Ehrheart, at 5 (footnote omitted).

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