In Erica P. John Fund, Inc. v. Halliburton Co., No. 12-10544, 2013 WL 1809760 (5th Cir. Apr. 30, 2013), the United States Court of Appeals for the Fifth Circuit held that a defendant in a securities fraud class action is not entitled to rebut the fraud-on-the-market presumption of reliance at the class certification stage by showing the alleged misstatement caused no market price impact. The Fifth Circuit adopted the same analysis the United States Supreme Court used in Amgen Inc. v. Connecticut Ret. Plans and Trust Funds, 133 S. Ct. 1184 (2013) [blog article here]. There, the Court held that class certification procedures afford securities fraud defendants no right to rebut the presumption through evidence showing the alleged misstatements were not material. The Fifth Circuit’s opinion now extends Amgen by further narrowing the range of rebuttal evidence a district court may consider at the class certification stage.
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Recent Cases
California Supreme Court Clarifies Class Action Standards in Brinker
On Thursday, April 12, 2012, the California Supreme Court issued its much anticipated decision in Brinker Restaurant Corp. v. Superior Court. In addition to providing needed clarity regarding the law of meal and rest periods (which we separately analyze here), the decision also contains several defense-friendly statements regarding class action law more generally.
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The Ninth Circuit Again Follows Concepcion And Enforces Consumer Arbitrations
On March 16, 2012, the Ninth Circuit followed the recent U.S. Supreme Court decision in AT&T Mobility, Inc. v. Concepcion, 131 S. Ct. 1740 (2011), and held that the Federal Arbitration Act (the FAA) preempts state law refusing to enforce arbitration provisions with class action waivers. See Marygrace Coneff v. AT&T Corp., — F.3d —-, 2012 U.S. App. LEXIS 5520 (9th Cir. Wash. Mar. 16, 2012). Coneff follows closely on the heels of the Ninth Circuit’s recent opinion in Kilgore v. KeyBank, Nat’l Ass’n, — F.3d —-, 2012 WL 718344, *10 (9th Cir. March 7, 2012), in which it followed Concepcion in holding the FAA preempts California law excluding claims for “public injunctions” from arbitration.
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Federal Law Preempts State Law Barring Arbitration Of Claims For Public Injunction
On March 7, 2012, the Ninth Circuit held that the Federal Arbitration Act preempts California’s rule prohibiting the arbitration of claims for public injunctions. Kilgore v. KeyBank, Nat’l Ass’n, — F.3d —-, 2012 WL 718344, *10 (9th Cir. March 7, 2012). Referring to this as the “Broughton-Cruz rule,” after the California Supreme Court’s decisions in Broughton v. Cigna Healthplans of California, 21 Cal. 4th 1066 (1999), and Cruz v. Pacificare Health Systems, Inc., 30 Cal. 4th 303 (2003), the Ninth Circuit unanimously held that “the Broughton-Cruz rule does not survive” the United States Supreme Court decision in AT&T Mobility, Inc. v. Concepcion, 131 S. Ct. 1740 (2011) (FAA preempts California law refusing to enforce class action waivers in arbitration provisions).
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California Court of Appeal Clarifies Breach of Warranty Law in Class Actions and Vacates Order Certifying Class of Consumers in American Honda Motor Company, Inc. v. Superior Court
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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ZIPped Back Up: Williams-Sonoma Gains Federal Dismissal Of New Jersey Consumer Privacy Claim in Feder
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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UnZIPped in New Jersey?
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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California Appellate Court Analyzes Employment Arbitration Agreement after Supreme Court’s AT&T Decision
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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Discover Bank Is Dead: The U.S. Supreme Court Rules That Federal Law Preempts State Laws That Obstruct The Enforcement Of Class Action Waivers In Arbitration Agreements
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.
Continue Reading Discover Bank Is Dead: The U.S. Supreme Court Rules That Federal Law Preempts State Laws That Obstruct The Enforcement Of Class Action Waivers In Arbitration Agreements
Kwikset: California Supreme Court Expands Plaintiffs’ Standing To Sue Under The Unfair Competition Law
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.4th 210, 245; Citizens of Humanity, LLC v. Costco Wholesale Corp. (2009) 171 Cal.App.4th 1, 22; and Buckland v. Threshold Enterprises, Ltd., (2007) 155 Cal.App.4th 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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California Court of Appeal Continues the Trend of Limiting Tobacco II
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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