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

By Judy Suwatanapongched

In American Honda Motor Company, Inc. v. Superior Court of Los Angeles County, 199 Cal. App. 4th 1367 (2011), the California Court of Appeal for the Second Appellate District clarified that, under California law, a party moving for class certification in a breach of warranty action must provide “substantial evidence of a defect that is substantially certain to result in malfunction during the useful life of the product.” American Honda Motor Co., Inc., 199 Cal. App. 4th at 1375.

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By Ted Max and Valentina Shenderovich

In Feder v. Williams-Sonoma Stores, Inc., the United States District Court for the District of New Jersey joined the New Jersey Superior Court in weighing in on the issue of whether a retailer violates consumer privacy state law by requesting a customer's zip code at the point of purchase.  Feder was brought by the same plaintiff’s lawyers and with claims similar to those in the state court case Imbert v. Harmon Stores, Inc.(Bed, Bath & Beyond). Imbert was decided last month, but without any written decision, and permitted that case to proceed past the pleading stage. The District Court in Feder, however, issued the first written opinion under the New Jersey statutes, finding that allegations that a zip code was verbally requested could not support a claim under New Jersey law.
 

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By Craig Cardon

A New Jersey state trial court has initially weighed in on the issue of whether a retailer violates state law by requesting a customer’s zip code at the point of purchase.  In a case fashioned after the California Supreme Court's decision in Pineda v. Williams-Sonoma, 51 Cal.4th 524 (Feb. 10, 2011), New Jersey Superior Court Judge Stephan Hansbury has denied a motion to dismiss brought by Harmon Stores, Inc. (Bed, Bath & Beyond), finding that the plaintiff Robert Imbert adequately pled a claim for violation of New Jersey's Truth in Consumer Contract, Warranty and Notice Act, N.J.S.A. 56:11-17 (“TCCWNA”).   The Court's ruling allows plaintiff to proceed beyond this initial stage, but no liability has been found.
 

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On July 12, 2011, California's Second Appellate District Court of Appeal issued a decision in Brown v. Ralphs Grocery Company regarding the enforceability of arbitration agreements in the employment context that limit employees' rights to assert class and representative actions. This was the first published state court decision in California regarding employment arbitration agreements since the United States Supreme Court's groundbreaking decision in AT&T Mobility, LLC v. Concepción ("AT&T Mobility"), where the Supreme Court held that California case law invalidating class action waivers in consumer arbitration agreements is preempted by the Federal Arbitration Act ("FAA").  (For a detailed analysis of the AT&T decision, please visit Sheppard Mullin's labor and employment blog dated April 27, 2011.)
 

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On April 27, 2011, the Supreme Court held that the Federal Arbitration Act "preempts California's rule classifying most collective arbitration waivers in consumer contracts as unconscionable." AT&T v. Concepcion, 563 U.S. ____, majority at 5, 18 (2011). The Court referred to this rule as the "Discover Bank rule," after the California Supreme Court's decision in Discover Bank v. Superior Court, 36 Cal.4th 148 (2005), though variations of this public policy-based rule have been articulated by many other court decisions in California and elsewhere. Writing for the majority in a 5 to 4 opinion, Justice Scalia concluded that state laws that undermine the enforceability of class action waivers in consumer arbitration agreements improperly obstruct the FAA.
 

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By James M. Burgess

In Kwikset v. Superior Court (Jan. 27, 2011) __ Cal.4th __, the California Supreme Court greatly expanded the standard for determining whether a plaintiff has standing to sue under the Unfair Competition Law (“UCL”), Business and Professions Code section 17200. In doing so, the Supreme Court disapproved several prior court of appeal decisions that had narrowed standing to only those plaintiffs who were entitled to restitution. (Silvaco Data Systems v. Intel Corp. (2010) 184 Cal.App.4^th 210, 245; Citizens of Humanity, LLC v. Costco Wholesale Corp. (2009) 171 Cal.App.4^th 1, 22; and Buckland v. Threshold Enterprises, Ltd., (2007) 155 Cal.App.4^th 798, 817.)  The Supreme Court’s opinion means that more lawsuits alleging UCL violations are likely to be filed and such lawsuits will be harder to dismiss at the pleading stage. 
 

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By Anna McLean and Rachel Tarko Hudson

The California Court of Appeal for the Fourth Appellate District recently added to the growing jurisprudence interpreting the scope and effect of In re Tobacco II Cases (2009) 46 Cal.4th 298 in its decision last month in Sevidal v. Target Corp. (Case No. D056206, Oct. 29, 2010) __ Cal.App.4th __.  Following a trend of other California appellate courts, including the Second Appellate District in Pfizer v. Superior Court (2010) 182 Cal.App.4th 622, Target stands for the proposition that Tobacco II applies only to standing, and does not change the requirements for class certification under California's Unfair Competition Law ("UCL"). The Target court upheld the lower court's decision denying class certification, holding that Tobacco II's limitation of traditional reliance and causation standing requirements to the named plaintiff in certain cases brought under the UCL does not eliminate the need for absent class members to establish that they were affected by the allegedly unfair practice in order to meet class certification requirements.
 

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By Jennifer Hoffman

In MacKay v. Superior Court (October 6, 2010) ___ Cal.App.4^th ___ the Second District Court of Appeal threw out a class action challenging an insurer's rating practices on the ground that California law prohibits insureds from challenging rates approved by the California Department of Insurance ("DOI") through a civil action. Writing for the court, Justice Croskey concluded that the "filed rate doctrine" applies to California insurance ratemaking, despite the voters' enactment of Proposition 103, and that the exclusive remedy for challenging an insurer's approved rating practices was through a statutory administrative review process.
 

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By Judy Suwatanapongched

In Walnut Producers of California v. Diamond Foods, Inc., Case No. C060346 (August 16, 2010), the California Court of Appeal for the Third Appellate District held that a class arbitration waiver in an agreement between walnut producers and a walnut processor is not unconscionable. Plaintiffs include Walnut Producers of California, a nonprofit cooperative marketing association whose members are walnut growers, and walnut producer George J. Miller Ranch, Inc. Defendant Diamond Foods is the successor by way of merger to Diamond Walnut Growers, Inc. (“Co-op”), an agricultural cooperative.
 

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By Paul Seeley

UPDATE:  On July 28, 2010, the Court of Appeal, First District, modified and published the opinion in Cellphone Fee Termination Cases .  The court retained its holdings regarding the adequacy of the class notice and the appropriate "incentive" payments to the class representatives.  However, the court did not publish the portion of its opinion that analyzed the "fairness" of the class settlement, including the court's recognition that the pending cross-complaint filed by Verizon against the class that could have reduced the class's overall damage award.  The rest of the opinion remains the same and can now be relied upon as authority supporting similar class-notice and incentive payment settlement plans.

On June 28, 2010, in the unpublished opinion Cellphone Fee Termination Cases, A124038 (June 28, 2010), the Court of Appeal, First District, affirmed the trial court’s approval of a nationwide class action settlement over the objections of several class members. Although it is not published, the Cellphone Fee case provides guidance for litigants seeking to secure approval of class-wide settlements. It also suggests effective litigation strategy that will help class action parties “win” the settlement against asserted objections.
 

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By Suzanna Winslow and Sascha Henry

The Second District of California Court of Appeal recently refused to extend the continuing violations doctrine to causes of action brought under the Unfair Competition Law ("UCL"). The Court of Appeal held that the trial court properly sustained the defendant's demurrer on the ground that the UCL cause of action was barred by the statute of limitations.   
 

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By Robert J. Stumpf, Jr. & Shannon Z. Petersen

On June 4, 2010, the California Court of Appeal issued its first important decision on the scope of California's Perata Mortgage Relief Act, passed into law in 2008 and codified at California Civil Code Sections 2923.5 and 2923.6. See Mabry v. Superior Court (Case No. G042911, June 4, 2010) ---Cal.App.4th---, 2010 WL 2180530. The plaintiffs alleged a class action.
 

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By Daniel L. Brown & Giselle Rivers

On May 27, 2010, the Court of Appeals for the Second Circuit affirmed in part and remanded in part a district court's decision certifying class actions against the Republic of Argentina and granting over $2 billion in damages to eight classes of plaintiffs.  Puricelli v. The Republic of Argentina, No. 09-0332, 2010 WL 2105132 (2nd Cir. May 27, 2010)("Puricelli"). While the Court of Appeals concluded that class certification was appropriate, it held that the district court erred in entering aggregate class-wide relief, as opposed to determining individual relief.
 

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By Shannon Petersen and Travis Anderson

On March 9, 2010, the Ninth Circuit held that the National Bank Act ("NBA") preempts claims of "unfair" and "fraudulent" conduct in violation of state law. See Martinez v. Wells Fargo Home Mortgage, Inc., No. 07-17277 (9th Cir. March 9, 2010).
 

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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 John Stigi and Martin White

In Alston v. Countrywide Financial Corp., 2009 WL 3448264 (3d Cir. October 28, 2009), the United States Court of Appeal for the Third Circuit confronted the issue of whether consumer plaintiffs alleging a violation of section 8 of the Real Estate Settlement Procedures Act of 1974 (“RESPA”), codified in relevant part at 12 U.S.C. § 2607(d)(2), need to show a monetary injury “in the form of an overcharge” to have standing to bring a private right of action against a mortgage lender. The Third Circuit concluded that plaintiffs need not suffer an overcharge because the “plain language of RESPA section 8 indicate[s] that Congress created a private right of action without requiring an overcharge allegation.” Rather, plaintiffs must only allege that a defendant received a “kickback” or offered a “sham service” under RESPA section 8(a) and 8(b) –– regardless of whether plaintiffs have suffered a monetary harm –– to have Article III standing to sue in the Third Circuit. This decision paves the way for class action litigation against other lenders asserting claims under Section 8 of RESPA.
 

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By Craig Cardon and Elizabeth Berman

The California Court of Appeal has recently published two new decisions involving data privacy class actions. Both involve claims under the Song-Beverly Credit Card Act. The most recent, Jessica Pineda v. Williams-Sonoma Stores, Inc., 2009 DJDAR 15191, affirmed the judgment against the plaintiff on the grounds that it is not a violation of Song-Beverly to request a zip code during a credit card transaction, even if the zip code is matched with a name to acquire that individual's address, and that the same conduct is not a serious invasion of privacy where the home address information is publicly available and plaintiff has taken no special steps to protect it. Approximately one month earlier, the same panel held in Susan Powers v. Pottery Barn Inc., (2009) 177 Cal.App.4^th 1039, that the federal CAN-SPAM Act does not preempt a Song-Beverly claim based on a request for an email address, and sent the case back to the trial court for further proceedings.
 

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