Class-Action

3rd Circuit and 7th Circuit Federal Courts of Appeal Differ on the Standards For Class Certifification

October 3, 2013 | Peter S. Lubin and James V. DiTommaso

Ever since the Supreme Court’s rulings in Walmart and Comcast, denying class certification in those cases, courts have had to increasingly deny plaintiffs class certification. Recently, a rift has appeared between federal courts with different interpretations of what should be acceptable for a class action to proceed. Traditionally, all that plaintiffs have needed to secure class certification is a class with well-defined limits, proof that the members of the proposed class have a common complaint against the defendant, evidence that the named plaintiffs are sufficient representatives of the entire class, and proof that the plaintiffs’ counsel can adequately represent the class in a court of law. Only after the class has achieved certification do the plaintiffs worry about trying to include all potential class members.

On one side of the argument is the 7th Circuit Court of Appeals, which has consistently made rulings on the belief that class actions are an efficient mode of determining the liability of a defendant, particularly when individual claims are small. This court has ruled in favor of class actions in such cases as the one against Sears and Whirlpool for moldy washing machines, as well as a case addressing lack of properly displaying warnings for ATM fees. Both of these cases have been discussed on this blog.

On the other side of the debate is the 3rd Circuit Court of Appeals which has recently ruled that class actions may not be certified until individual class members can be ascertained. This decision comes in the case of Carrera v. Bayer in which consumers allege that they were deceived by Bayer’s claim that green tea extract in its One-A-Day WeightSmart supplements would boost consumers’ metabolism. The district judge, Jose Linares of Newark, New Jersey, denied class certification on a nationwide basis, but granted the plaintiff’s subsequent motion for certification of a class of Florida purchasers under that state’s trade practices suit.
On appeal at the 3rd Circuit Court, Bayer’s attorneys argued that the class should not have been certified because it is impossible to discern everyone who bought the product. Consumers purchasing a widely-distributed over-the-counter product are unlikely to have kept packages or receipts or any kind of record that they purchased the product. Bayer’s representatives therefore argued that membership of the class cannot be ascertained and, on these grounds, the class should not be certified.

The legal counsel for the plaintiffs argued that there are three methods by which they can determine class membership: pharmacy membership programs that track members’ purchases; and screening of affidavits from consumers who claim to have bought One-A-Day WeightSmart to eliminate fraudulent or duplicate claims. They also pointed out that Florida’s consumer law does not require proof of individual reliance. Therefore Bayer’s potential $14 million exposure should not be affected by how big the class is or how the class is defined.
In its decision, the three-judge panel of the 3rd Circuit Court ruled that, unless the plaintiffs could determine a real plan for determining buyers, certifying the class and allowing the case to proceed would be to violate Bayer’s rights of due process. This, according to the 3rd Circuit Court, gives the defendant the right “to raise individual challenges and defenses to claims”. They therefore remanded the case until the plaintiffs could provide sufficient evidence that the class is “ascertainable” despite the fact that the plaintiffs had already laid out a very clear plan for identifying and finding class members.

In the brief filed for the plaintiffs’ motion to reconsider, the controversial status of the 3rd Circuit Court’s decision is laid out. The brief points out that Rule 23 (for determining class certification) “does not require a roll call (nor, for that matter, does due process). The brief also states that, “In the half-century since the creation of the modern class action, the panel’s decision is the first by any federal circuit court to hold that class certification may be defeated on the basis of ‘ascertainability’ even when the existence of a well-defined class is not in doubt and the full extent of potential liability is known. … If allowed to stand, the panel’s decision will effectively wipe out most class actions involving small-dollar consumer products – cases for which class treatment has always been recognized as most essential.”

You can view the very well done motion for en banc rehearing before the 3rd Circuit here.

Mars Petcare Faces Class Action Lawsuit Filed by Its Factory Workers

September 28, 2013 | Peter S. Lubin and James V. DiTommaso

KOAM TV 7

Mars Petcare defends itself after some former workers in Southeast Kansas file a class action lawsuit. Mars Petcare makes Pedigree and other pet foods sold at many major retailers.

A former employee at one of Mars Petcare’s manufacturing facilities in Galena, Kansas doesn’t want his identity released.

“Retaliation from the company,” says the former worker. “It’s huge. It’s going to be the biggest thing to hit this area. It’s going to be a corporate killer.”

Court documents filed in Jasper County, Missouri claim the pet food company should have known about the danger condition of phosphine gas levels, but failed to warn of that condition or remove it.

“It causes respiratory and intestinal damage,” says the former worker. “We don’t know how much. We know there was stuff coming in that was fumigated and was not listed as being fumigated that went straight into making pet food.”

Estee Lauder Sued in Class Action For Alleged False Claims That Skin Cream Repairs DNA Damage

September 4, 2013 | Peter S. Lubin and James V. DiTommaso

The Class Action Lawsuit claims that Estee Lauder’s skin cream claims about repairing DNA are fraudulent. But as unbelievable as it sounds, dermatologist Dr. Jeanette Graf said creams can repair DNA.

“Whether it’s in the form of peptides, whether it’s in the form of retinols, whether it’s in the form of enzyme inhibitors — all of which play a role together in diminishing the amount of DNA damage,”

Graf told CBS News.

Milwaukee Time Warner Customers File Class Action For Losing Channel 4

August 19, 2013 | Peter S. Lubin and James V. DiTommaso

Video: Odometer Roll-Back Fraud — Our Chicago Class Action Lawyers and Consumer Protection Attorneys Fight for Consumer Rights

August 11, 2013 | Peter S. Lubin and James V. DiTommaso

Odometer rolled back on car for sale

AOL reports:

Buying a used car is already risky business, and this story of fraud in New York will have you double checking your paperwork.

Matin Jarmuz used Craigslist.com to sell his 1992 Toyota Camry. According to Jarmuz’s Craigslist post, at 21-years-old and 200,000 miles the Camry still had a smooth, quite ride. He sold the car quickly to Chris Sciolino for $900 cash. Jarmuz thought he had made a good deal, until other Craigslist users alerted him that his old Camry was up for sale again by the same man he just sold it to, only this time listed at $1,800 and with 79,000 miles.

Odometer fraud is a serious problem in the U.S. In a 2002 study the National Highway Traffic Safety Administration determined that close to half a million cars are sold each year with false odometer readings, at a cost of more than of $1 billion dollars annually. Since the study was done, the Office of Odometer Fraud Investigations has seen an escalation in cases. Fixing an odometer is a federal crime, one made much easier on newer cars where, instead of cracking open a dashboard, sellers just need to hack the onboard computer.

Our Chicago auto fraud lawyers have spoken with many consumers who have been cheated through an odometer roll-back. A car with a odometer roll-back is generally considered unmerchantable as the real mileage can not be verified.

Seventh Circuit Affirms Class Certification in Wage Claim – Ross v. RBS Citizens, NA

August 10, 2013 | Peter S. Lubin and James V. DiTommaso

Employees of a bank with multiple branch locations throughout Illinois sued to recover unpaid overtime wages under both the federal Fair Labor Standard Act (FLSA) and the Illinois Minimum Wage Law (IMWL). After the district court certified two classes of plaintiffs, the defendant bank appealed the certification to the Seventh Circuit Court of Appeals. Based in part on a U.S. Supreme Court decision clarifying the requirements for class certification, the Seventh Circuit affirmed the district court’s order. Ross, et al v. RBS Citizens, N.A., 667 F.3d 900 (7th Cir. 2012).

The plaintiffs alleged in their lawsuit that the bank had several “unofficial” policies that allowed it to deny overtime pay to employees, id. at 903, such as using “comp time” instead of overtime wages or altering employee timesheets. They also alleged that some assistant bank managers (ABMs), while officially exempt from eligibility for overtime pay, spent most of their time on non-exempt work. The plaintiffs therefore sought to certify two classes: non-exempt employees who were entitled to overtime compensation, and ABM employees who performed non-exempt work and were entitled to overtime pay. A class action requires four basic elements: “numerosity, commonality, typicality, and adequacy of representation.” Id.; Fed. R. Civ. P. 23(a). The district court certified both classes under Rule 23(b)(3) of the Federal Rules of Civil Procedure (FRCP), which applies to cases where the issues affecting all class members supersede those affecting individual members, and where a class action is the best way to resolve the conflict.

Court Dismisses ATM Fee Lawsuit Due to Prior Class Action Settlement Agreement

August 1, 2013 | Peter S. Lubin and James V. DiTommaso

An Illinois court dismissed a lawsuit against a bank alleging deceptive fees for debit card transactions, ruling that a prior settlement in a class action lawsuit, of which the plaintiff was a class member, barred the suit. Schulte v. Fifth Third Bank (“Schulte 2”), No. 09 C 6655, statement (N.D. Ill., Jun. 15, 2012). The plaintiff acknowledged being part of the class, and by accepting the terms of the settlement agreement, the court held, the plaintiff had released the bank from any further claims related to ATM fees.

The original lawsuit alleged that the defendant “resequenced” debit card transactions during a posting period in an order from highest to lowest, rather than in chronological order. Schulte v. Fifth Third Bank (“Schulte 1”), 805 F.Supp.2d 560, 565 (N.D. Ill. 2011). This meant that the balance of the customer’s account drew down faster, leading to more overdrafts and associated fees. A class action lawsuit commenced in November 2009, and the U.S. District Court for the Northern District of Illinois approved a class settlement agreement in July 2011.

The Schulte 1 settlement applied to customers of the defendant from October 21, 2004 to July 1, 2010. The court applied a five-part test established by the Seventh Circuit Court of Appeals for determining if a class action settlement is fair:

Class Certification Granted in Lawsuit Brought by Identity Theft Victim Against Credit Reporting Agency – Osada v. Experian

July 28, 2013 | Peter S. Lubin and James V. DiTommaso

A consumer sought to certify two classes in a lawsuit against a credit reporting agency, after the agency allegedly refused to remove negative information from his credit report that was the result of identity theft. The lawsuit asserted various claims under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. The court certified one of the two classes in Osada v. Experian Information Solutions, Inc., No. 11 C 2856, slip op. (N.D. Ill., Mar. 28, 2012), finding that it met the requirements contained in Rule 23 of the Federal Rules of Civil Procedure.

According to the court’s opinion, the plaintiff learned in late 2008 that unknown parties had taken out two mortgage loans in his name in a total amount greater than $600,000. He contacted the defendant, Experian, regarding how the fraudulent loans would affect his credit report. He also filed a police report, but did not send a copy to Experian. When each mortgage eventually went into foreclosure, the courts handling those matters reportedly realized that identity theft was a factor. The plaintiff submitted an identity theft affidavit to the Federal Trade Commission (FTC) in late 2009 and wrote to Experian in early 2010 requesting removal of the mortgages from his credit report. He attached the FTC affidavit, the police report, and proof of residence to his request.

Federal Court Dismisses Certain State Law Claims in Multidistrict Litigation Case Alleging ATM Overdraft Fee Fraud

July 26, 2013 | Peter S. Lubin and James V. DiTommaso

A federal judge denied most of a motion to dismiss brought by multiple banks in a consolidated case alleging overdraft fee fraud. In re Checking Account Overdraft Litigation, 694 F.Supp.2d 1302 (S.D. Fla. 2010). The Judicial Panel on Multidistrict Litigation (JPML) consolidated multiple claims into a single matter in the Southern District of Florida in order to deal efficiently with common pretrial matters. The plaintiffs asserted causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing (“GFFD covenant”), and many individual causes asserted common law breach of contract claims and state law consumer protection claims. The defendants filed an omnibus motion to dismiss, which the trial court granted in part and denied in larger part. The court dismissed claims under certain state consumer statutes, as well as claims based on the laws of states in which no plaintiffs lived.

The central issue of the litigation was the ordering of ATM transactions from highest to lowest, regardless of the order in which the account holder performed the transaction. This allegedly reduced the account holder’s total account balance more quickly, garnering more overdraft fees for the defendants. At the time the court rendered its order on the omnibus motion to dismiss, the litigation consisted of fifteen separate complaints, each brought against an individual bank. All of the fifteen complaints pending at the time of the court’s order involved breach of GFFD covenant claims. Five complaints were filed in California as putative class actions on behalf of California customers. Eight complaints were filed outside California, putatively on behalf of nationwide classes excluding California. One complaint was filed by a California resident and sought to represent a nationwide class. The final complaint was filed by a Washington resident on behalf of a class of Washington customers. According to the JPML, the consolidated litigation has involved one hundred separate complaints since 2009, with forty-four still involved as of March 5, 2013.

U.S. Supreme Court Rules that Arbitration Agreement Bars Class Action and Class Arbitration Claims – AmEx v. Italian Colors Restaurant

July 25, 2013 | Peter S. Lubin and James V. DiTommaso

The United States Supreme Court recently ruled that federal law does not permit a court, based on a finding that individual arbitration is cost-prohibitive for a plaintiff, to strike a class arbitration waiver clause in a contract. American Express Co., et al. v. Italians Colors Restaurant, et al (“AmEx”), 570 U.S. ___, No. 12-133, slip op. (Jun. 20, 2013). The decision builds on prior decisions that have generally affirmed the enforceability of mandatory arbitration clauses, class arbitration waivers, and class action waivers, even in contracts where the bargaining power between the parties is far from equal.

The plaintiffs in AmEx are businesses that accept payments using American Express credit cards. The contract between the plaintiffs and American Express includes clauses requiring submission of all disputes to arbitration and waiving class arbitration procedures. The plaintiffs brought a federal antitrust class action lawsuit against American Express, claiming that the company engages in various monopolistic practices. The defendant brought a motion to compel arbitration under the contract and the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. In response, the plaintiffs offered an economist’s declaration stating that the cost of arbitration for an individual merchant asserting a federal antitrust claim would exceed any possible recovery.