Class Action Defense Strategy Blog : Class Action Lawyer & Attorney : Sheppard Mullin Law Firm : Antitrust, Securities, Wage & Hour, Consumer Fraud

By Jacqueline Binger

In case of first impression for it, the Ninth Circuit clarified the validity of tip pools under the Fair Labor Standards Act ("FLSA") where the tip pool includes employees who are not customarily and regularly tipped. In Cumbie v. Woody Woo, Inc., the Court of Appeals held that where workers make more than the minimum wage and the employer takes no tip credit, tip pools including non-tipped employees do not violate the FLSA. 
 

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By Shannon Petersen

On December 31, 2009, the Third Circuit held that a borrower must prove detrimental reliance to obtain actual damages for a violation of the federal Truth in Lending Act ("TILA"). See Vallies v. Sky Bank, ---F.3d---, 2009 WL 5154473 (3^rd Cir. 2009).
 

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By Christopher Loveland

The United States Court of Appeals for the Fourth Circuit in Ferrell v. Express Check Advance of South Carolina, LLC (No. 09-2401) examined the citizenship of limited liability companies for purposes of diversity jurisdiction in a class action. The Plaintiff in Ferrell, a citizen of South Carolina, commenced a class action lawsuit on behalf of “other South Carolina citizens” against four “payday loan” businesses in South Carolina state court. The lawsuit alleged that defendants’ payday loans violated various South Carolina laws. One of the defendants, Express Check Advance of South Carolina, LLC (“Express Check”), removed the case to the United States District Court for the District of South Carolina on diversity grounds, contending that it was a citizen of Missouri and Kansas, and not a citizen of South Carolina.
 

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By Sascha Henry and Paul Seeley

In Clark v. State Farm Mutual Automobile Insurance Co., Nos. 07-1454, 07-1466, the Tenth Circuit affirmed a district court's order denying class certification because it lost jurisdiction when the representative plaintiff's claims became moot. Clark shows how a defendant's request for a merits determination before class certification was rewarded when the resulting decision mooted the named plaintiff's claim and defeated class certification.
 

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By Ruben Escalante

Two recent Fourth District Court of Appeal cases affirmed the denial of class certification. Kaldenbach v. Mutual of Omaha Life Insurance Co., 178 Cal.App.4^th 830 (2009), was one of the first cases to address the California Supreme Court's decision in the In re Tobacco II Cases, 46 Cal. 4^th 298 (2009). Evans v. Lasco Bathware, Inc., 178 Cal.App.4^th 1417 (2009), held that differences in damages could be a reason for denying class certification.

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By John Stigi and Martin White

In Mims v. Stewart Title Guaranty Co., 2009 WL 4642631 (5th Cir. Dec. 9, 2009), the United States Court of Appeals for the Fifth Circuit considered whether plaintiffs can bring class claims under Section 8(b) of the Real Estate Settlement Procedures Act of 1974 (“RESPA”), codified in relevant part at 12 U.S.C. § 2607(c), where a service provider’s fee “bears no relationship” to the service provided. After careful consideration, the Fifth Circuit concluded that “class issues do not predominate” in such situations, because determining whether the fee charged was reasonable or unreasonable necessarily required a “transaction-by-transaction” analysis, and that a class action is not a “superior method” to trying such individualized claims.
 

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By Sascha Henry and Paul Seeley

In In re Vioxx Class Cases, (2009) __ Cal. App. 4th __, the trial court denied class certification after the defendant, Merck & Co., Inc. effectively showed that the plaintiff's theory of the case was grossly simplified. By introducing copious evidence showing the numerous factors that may relate to each class member's reliance and damages, Merck avoided class certification even in the face of its allegedly pervasive and misleading advertising campaign. The plaintiffs appealed, arguing that the California Supreme Court's decision in In re Tobacco II Cases, (2009) 46 Cal. 4th 298, undermined the trial court's rationale. The Court of Appeal, Second District, affirmed the trial court's denial of class certification.
 

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By Christina Costley and Aimee Kahn

In In re Constar Int’l, Inc. Securities Litigation, No. 08-2461, 2009 WL 3462032 (3d Cir. Oct. 29, 2009), the United States Court of Appeals for the Third Circuit affirmed an order by the United States District Court for the Eastern District of Pennsylvania certifying a class of plaintiffs who brought suit under Section 11 of the Securities Act of 1933. The Court held that the district court did not abuse its discretion by certifying the class, notwithstanding defendants’ argument that the district court erred in concluding that the “predominance” element of Rule 23(b)(3) had been met before deciding whether the stock traded in an efficient market. The district court held that a claim for fraudulent statements in a registration statement under Section 11 (as distinct from a claim for securities fraud brought under Section 10(b) of the Securities Exchange Act of 1934) does not require plaintiffs to establish reliance or loss causation.
 

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By John Stigi and Christina Costley

In In re Cohen, No. 09-70378, 2009 WL 3681701 (9th Cir. Nov. 5, 2009), the United States Court of Appeals for the Ninth Circuit reversed an order by the United States District Court for the Northern District of California that rejected co-lead plaintiff’s selection of counsel and instead appointed a firm selected by the district court.  Calling the district court’s selection of counsel “clearly erroneous,” the Ninth Circuit took the unusual step of issuing a writ of mandamus vacating the district court’s appointment of counsel and holding that, under the plain language of the Private Securities Litigation Reform Act of 1995 (“Reform Act”), the district court has the power to reject, but not to select, lead counsel in a securities fraud class action.
 

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