In Lewis v. Verizon Communications, Inc., Ninth Circuit offers guidance on burden of proof showing required in CAFA-based removals

In Abrego Abrego v. Dow Chemical Co., 443 F.3d 676, 685 (9th Cir. 2006), the Ninth Circuit held that, under the Class Action Fairness Act (“CAFA”), Pub. L. No. 109-2, 119 Stat. 4 (2005) (codified in scattered sections of 28 U.S.C.), the burden of establishing removal jurisdiction is, as it was before CAFA, on the party asserting jurisdiction in federal court.  CAFA authorizes removal to federal court of class actions where the amount in controversy exceeds $5 million (excluding interest and costs).  In the Ninth Circuit, when the complaint does not allege a specific amount of damages, the party attempting removal under diversity bears the burden of showing, by a preponderance of the evidence, that the amount in controversy exceeds the statutory amount. Guglielmino v. McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007); see also Lowdermilk v. U.S. Bank Nat’l Ass’n., 479 F.3d 994 (9th Cir. 2007).  In Lewis v. Verizon Communications, Inc. (November 18, 2010), the Ninth Circuit considered whether the defendant's unrebutted affidavit showing a potential amount in controversy was sufficient to meet the burden of showing the amount in controversy.

The Ninth Circuit held that, on the uncontested showing by Verizon, the amount in controversy was sufficiently demonstrated:

The amount in controversy is simply an estimate of the total amount in dispute, not a prospective assessment of defendant’s liability. See McPhail v. Deere & Co., 529 F.3d 947, 956 (10th Cir. 2008) (“The amount in controversy is not proof of the amount the plaintiff will recover. Rather, it is an estimate of the amount that will be put at issue in the course of the litigation.”). To establish the jurisdictional amount, Verizon need not concede liability for the entire amount, which is what the district court was in essence demanding by effectively asking Verizon to admit that at least $5 million of the billings were “unauthorized” within the meaning of the complaint.

Slip op., at 11.  The Ninth Circuit noted that its standard of proof is higher than some Circuits:

The law in our circuit is articulated a little differently from that of others, in that we expressly contemplate the district court’s consideration of some evidentiary record. See generally Diane B. Bratvold & Daniel J. Supalla, Standard of Proof to Establish Amount in Controversy When Defending Removal Under the Class Action Fairness Act, 36 WM. MITCHELL L. REV. 1397 (2010). We employ a preponderance of the evidence standard when the complaint does not allege a specific amount in controversy. Guglielmino, 506 F.3d at 699. The Seventh Circuit, along with the First and Second Circuits, apply what may be a lower standard of proof: a “reasonable probability” standard. See, e.g., Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 449 (7th Cir. 2005) (when the complaint is “silent or ambiguous on one or more of the ingredients needed to calculate the amount in controversy . . . the removing litigant must show a reasonable probability that the stakes exceed the minimum.”); see also Amoche v. Guarantee Trust Life Ins. Co., 556 F.3d 41, 48 (1st Cir. 2009); DiTolla v. Doral Dental IPA of New York, 469 F.3d 271, 277 (2nd Cir. 2006). The Fourth Circuit has not adopted a specific standard of proof, although “several district courts within the Fourth Circuit have concluded that the appropriate standard of proof is preponderance of the evidence.” Laws v. Priority Trustee Services of N.C., L.L.C., 2008 WL 3539512 at * 2 (W.D.N.C. Aug. 11, 2008). Both the Seventh Circuit in Spivey and the Fourth Circuit in Strawn have looked to evidence outside the complaint when the complaint is silent as to the amount. Regardless of the label applied to the standard of proof, the result in this case should be the same as that in the Seventh and Fourth Circuits’ decisions in Spivey and Strawn.

Slip op., at 12.  The Ninth Circuit then observed that Spivey was closest to the case before it and approvingly followed the same analysis.

Ninth Circuit issues its first opinion on criteria that appellate courts should consider when deciding whether to accept an appeal of a remand order under CAFA

Under the Class Action Fairness Act of 2005 (“CAFA”), a party may seek leave to appeal a remand order to the court of appeals, which has discretion whether to accept the appeal. 28 U.S.C. § 1453(c)(1).  While other Circuits have discussed the criteria that an appellate court should consider when deciding whether it is appropriate to hear such a discretionary appeal, the Ninth Circuit, until today, had not set forth its own set of such criteria.  In Coleman v. Estes Express Lines (9th Cir. Nov. 30, 2010), the Ninth Circuit set forth criteria to guide a reviewing court.

Coleman sued both Estes West and Estes Express Lines for wage and hour violations.  After its acquisition, Estes West was an internal regional division of Estes Express Lines.  After removal, Coleman moved to remand under the local controversy exception to CAFA jurisdiction.  Estes Express Lines argued that, as a Virginia-based company from which any relief would be obtained, the local controversy exception did not apply.  The district court granted the motion to remand, noting that courts are divided as to whether to look beyond the complaint to determine whether the local controversy exception applies.

The Ninth Circuit used this petition as an opportunity to adopt the First Circuit's list of criteria to use in evaluating applications for leave to appeal under section 1453(c)(1):

In Dental Surgeons, the First Circuit held that a key factor in determining whether to accept an appeal is “the presence of an important CAFA-related question” in the case. Coll. of Dental Surgeons, 585 F.3d at 38. Because discretion to hear appeals exists in part to develop a body of appellate law interpreting CAFA, “[t]he presence of a non-CAFA issue (even an important one) is generally not thought to be entitled to the same weight.” Id. If the CAFA-related question is unsettled, immediate appeal is more likely to be appropriate, particularly when the question “appears to be either incorrectly decided [by the court below] or at least fairly debatable.” Id.

The First Circuit also enumerated several case-specific factors, including the importance of the CAFA-related question to the case at hand and the likelihood that the question will “evade effective review if left for consideration only after final judgment.” Id. The appellate court should also consider whether the record is sufficiently developed and the order sufficiently final to permit “intelligent review.” Id. Finally, the First Circuit observed that the court should conduct the familiar inquiry into the balance of the harms. Id. at 39.

Slip op., at 19025-26.  Applied to the case before it, the Court concluded that leave to appeal was appropriate because it would advance CAFA jursiprudence:

Applying these criteria, we grant Estes Express’ application for leave to appeal. Although the local controversy exception to CAFA jurisdiction is “narrow,” it is nonetheless an enumerated exception to a federal court’s CAFA removal jurisdiction. It is intended to “identify . . . a controversy that uniquely affects a particular locality” and to ensure that it is decided by a state rather than a federal court. See Evans v. Walter Indus., Inc., 449 F.3d 1159, 1163-64 (11th Cir. 2006) (internal quotation marks and citation omitted). The question whether the district court must rely only on the pleadings or should look to extrinsic evidence will often determine whether a case will be remanded under the local controversy exception. This case thus raises an important issue of CAFA law. As the district court recognized, this is an unsettled question in this Circuit. We do not say that district court’s decision “appears to be incorrectly decided,” but the array of courts on both sides of the question indicates that it is at least “fairly debatable” and that appellate review would be useful.

Slip op., at 19026.  The Court concluded that the issue would escape appellate review if not taken now and that no harm other than delay would be suffered by the plaintiff.  It follows that we can expect guidance from the Ninth Circuit in the next year or so on this issue.

Nationwide breach of contract class certified; laws of 48 states at issue

United States District Court Judge Susan Illston (Northern District of California) certified a nationwide class action alleging declaratory relief and breach of contract claims.  In re Conseco Life Ins. Co. LifeTrend Ins. Sales and Marketing Litigation, 2010 WL 3931096 (N.D.Cal. Oct 06, 2010).  Plaintiffs sought certification of a nationwide class, challenging certain life insurance policy changes for policies administered by defendant Conseco Life Insurance Company (“Conseco”).  The Court granted the motion to certify the nationwide class, but denied the motion to certify a California sub-class.

The interesting portion of the discussion focuses on the laws at issue:

Conseco relies heavily on Zinser and In re Paxil in contending that the variations in state law defeat certification. Both of those cases, however, concerned nationwide product liability actions involving significant variations in the state tort laws governing the multiple claims asserted by the plaintiffs. See Zinser, 253 F.3d at 541-42; In re Paxil, 212 F.R.D. at 542-44. Here, by contrast, plaintiffs assert only two claims-breach of contract and declaratory judgment-on behalf of the national class. Conseco has not identified any state-to-state variations in the law governing declaratory judgment, and Conseco overstates the extent of any variations in state contract law, including as to the definition of breach, the existence of causation and damages requirements, and the admissibility of extrinsic evidence.  First, contrary to Conseco's representations, several courts have recognized that the law relating to the element of breach does not vary greatly from state to state. See, e.g., Klay v. Humana, Inc., 382 F.3d 1241, 1262-63 (11th Cir.2004); Leszczynski v. Allianz Ins., 176 F.R.D. 659, 672 (S.D.Fla.1997). Second, plaintiffs have persuasively rebutted Conseco's assertions concerning variations in the causation and damages elements of the contract claim. Finally, the Court agrees with plaintiffs that, as neither party has asserted that the form policy contract contains ambiguous terms (rather, they offer competing interpretations based on the face of the documents), admission of extrinsic evidence should not be necessary to interpret the contractual provisions at issue. Plaintiffs' contractual interpretations may ultimately be rejected at the summary judgment stage or disproved at trial, but they are not patently untenable from the face of the documents, and do not demonstrate a lack of common issues of law.

Slip op., at 6.

The Court rejected the California sub-class, concededly asserted as an alternative pleading, because the fraud theory of liability was inconsistent with the theory underlying the nationwide class claims.

Chinese Wang decision is big news

Wrong, but necessary somehow.  A little later than promised, but Wang v. Chinese Daily News, Inc. (9th Cir. Sept. 27, 2010) has too much going on not to receive some additional attention.  At the outset, Wang was a basic wage & hour case.  The plaintiffs alleged that employees were made to work in excess of eight hours per day and/or forty hours per week. They alleged that they were wrongfully denied overtime compensation, meal and rest breaks, accurate and itemized wage statements, and penalties for wages due but not promptly paid at termination.  The subsequent procedural twists and turns were anything but standard.  But despite the many moving parts in the decision, the Ninth Circuit summarized the case in a few sentences:

The district court certified the FLSA claim as a collective action. It certified the state-law claims as a class action under Rule 23(b)(2) and, alternatively, under Rule 23(b)(3). In the state-law class action, it provided for notice and opt out, but subsequently invalidated the opt outs. It granted partial summary judgment to plaintiffs; held jury and bench trials; entered judgment for plaintiffs; awarded attorney’s fees to plaintiffs; and conducted a new opt-out process. CDN appeals, challenging aspects of each of these rulings, as well as the jury’s verdict.

Slip op., at 16393.  After the trial court certified a narrowed class under Rule 23(b)(2) (finding that injunctive relief was on "equal footing" with monetary relief), the trial court approved a notice that authorized class members to opt into the FLSA action and out of the state law-based class action.  The notice precipitated the first major upheaval in the case:

Forms were mailed to 187 individuals, and notice was posted and forms made available at CDN’s Monterey Park facility. Plaintiffs received back about 155 opt-out forms, including 18 from individuals not on the original list of class members.  Plaintiffs filed a motion to invalidate the opt outs, for curative notice, and to restrict CDN’s communication with class members. On June 7, 2006, the court granted the motion, finding that “the opt out period was rife with instances of coercive conduct, including threats to employees’ jobs, termination of an employee supporting the litigation, the posting of signs urging individuals not to tear the company apart, and the abnormally high rate of opt outs.” Wang v. Chinese Daily News, Inc., 236 F.R.D. 485, 491 (C.D. Cal. 2006). The district court deferred any future opt-out procedure until after the trial on the merits.

Slip op., at 16395.  Facing cross-motions for summary judgment, the trial court then ruled that news reporters were not exempt professionals.  Next, the matter proceeded to a trial.  The defendant contended that only the FLSA claims should be tried and that UCL claims were pre-empted by the FLSA, but the trial court elected to retain supplemental jurisdiction, rejected the pre-emption argument and tried the state law claims as well.

The Court of Appeal first tacked the exemption analysis.  After examining decisions from other Circuits, the Court concluded that the reporters did not satisfy the creative professionals exemption.

Although the evidence submitted revealed disputes over how to characterize CDN’s journalists, we agree with the district court that, even when viewing the facts in the light most favorable to CDN, the reporters do not satisfy the criteria for the creative professional exemption.

Slip op., at 16400.  Next, the Court examined whether the trial court had applied the correct criteria for determining whether certification under Rule 23(b)(2) was appropriate.  The Court concluded that, although the matter was decided prior to Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010) (en banc), the trial court applied essentially identical standards and correctly decided the issue.

The Court then turned to the invalidation of opt-outs.  The Court first held that a trial court's authority to regulate class communications and the notice process implicitly confers that power to take corrective action when that process has been tainted.  The Court then considered whether the evidence submitted was sufficient to support the trial court's decision.  The Court noted in particular the evidence submitted by a class action notice company regarding normal opt-out rates:

Finally, plaintiffs submitted a declaration from the president of a class action notice company explaining that ordinarily opt-out rates do not exceed one percent. In this case, the district court found that current employees opted out at a 90 percent rate, whereas former employees opted out at a 25 percent rate.

Slip op., at 16407.  After concluding that the decision to invalidate the opt-outs was supported, the Court examined whether deferring a new opt-out period until after the trial was appropriate.  Again the Court noted the trial court's broad discretion to regulate the notice process: "The ordinary procedure is to give notice at the time of class certification. But the rule does not mandate notice at any particular time. See Fed. R. Civ. P. 23(c)(2)."  Slip op., at 16408.  The Court then affirmed the trial court's conclusion that it was necessary to delay a new notice and opt-out process in order to avoid the taint imposed during the initial process.

Finally, after observing that the evidence supported the jury verdict regarding meal periods under either the "provide" or "ensure" standards currently up for review by the California Supreme Court, the Court ended its Opinion by explicitly holding what most courts in the Ninth Circuit had already concluded: the FLSA does not preempt state law claims like the UCL.

Breaking News: Ninth Circuit issue two class action opinions addressing novel issues in the Ninth Circuit

After a bit of a lull on the class action front, the Ninth Circuit had a busy morning.  Two major opinions on class action issues were just issued by Ninth Circuit panels, and both opinions are sure to generate a good deal of discussion.  Both address areas of unsettled law among various federal courts.  The first is of interest to wage & hour practitioners and the second addresses the argument that large statutory damage awards defeat "superiority" of the class action procedure:

• Wang v. Chinese Daily News, Inc. (9th Cir. Sept. 27, 2010) is something of a kitchen sink of class action issues.  Among other things, the Ninth Circuit affirmed (1) the concurrent prosecution of a FLSA opt-in collective action and a Rule 23 opt-out class action, (2) the invalidation of Rule 23 opt-outs due to coercion, (3) the decision to conduct a corrective opt-out process after the trial, and (4) certification under Rule 23(b)(2).  The Court also held that the UCL was not preempted by the FLSA.
• Bateman v. American Multi-Cinema, Inc. (9th Cir. Sept. 27, 2010) concerned the singular issue of a class certification denial on superiority grounds.  The Ninth Circuit concluded that none of the three grounds relied upon by the district court — the disproportionality between the potential statutory liability and the actual harm suffered, the enormity of the potential damages, or AMC’s good faith compliance — justified the denial of class certification on superiority grounds.

Both opinions are substantial, and I will try to give both an extended treatment this evening.  Full disclosure: Greg Karasik of Spiro Moss represents Plaintiff Bateman.

Ninth Circuit considers "crux of the complaint" rule to determine when arbitrator decides arbitrability

It's not to early to nominate the year 2010 as the year of the arbitration wars.  In our latest installment, Obi Wan is asked to assemble forces...sorry, Clone Wars.  Today the Ninth Circuit examined the question of "whether the 'crux of the complaint' rule requires the question of arbitrability to be determined by the arbitrator when a plaintiff’s challenge to the arbitration clause does not appear in his complaint." Bridge Fund Capital Corporation v. Fastbucks Franchise Corporation, Slip op., at 14205 (9th Cir. Sept. 16, 2010).

In the span of a few paragraphs, the Court set out the essentials of the "crux of the complaint" test:

“The arbitrability of a particular dispute is a threshold issue to be decided by the courts,” Nagrampa, 469 F.3d at 1268, unless that issue is explicitly assigned to the arbitrator, see Rent-A-Ctr., W., Inc. v. Jackson, ___ U.S. ___, 130 S. Ct. 2772, 2775 (2010) (holding that arbitrability is a question for the arbitrator “where the agreement explicitly assigns that decision to the arbitrator”). While the validity of an arbitration clause can be a question for the arbitrator where the “crux of the complaint is that the contract as a whole (including its arbitration provision)” is invalid, the court determines the validity of the clause where the challenge is “specifically [to] the validity of the agreement to arbitrate.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444 (2006).

In other words, when a plaintiff’s legal challenge is that a contract as a whole is unenforceable, the arbitrator decides the validity of the contract, including derivatively the validity of its constituent provisions (such as the arbitration clause). See Buckeye, 546 U.S. at 445-46 (explaining that “as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. [U]nless the challenge is to the arbitration clause itself, the issue of the contract’s validity is considered by the arbitrator in the first instance.”). However, when a plaintiff argues that an arbitration clause, standing alone, is unenforceable—for reasons independent of any reasons the remainder of the contract might be invalid—that is a question to be decided by the court. See Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1120 (9th Cir. 2008) (“[O]ur case law makes clear that courts properly exercise jurisdiction over claims raising (1) defenses existing at law or in equity for the revocation of (2) the arbitration clause itself.”).

After Buckeye, we have applied the “crux of the complaint” rule as a method for differentiating between challenges to the arbitration provision alone and challenges to the entire contract. Nagrampa, 469 F.3d at 1268. In Buckeye, the Court held that “because [the plaintiffs] challenge[d] the Agreement, but not specifically its arbitration provisions, those provisions are enforceable apart from the remainder of the contract. The challenge should therefore be considered by an arbitrator, not a court.” 546 U.S. at 446. In Nagrampa, we distinguished Buckeye because “the complaint in Buckeye, unlike Nagrampa’s complaint, did not contain claims that the arbitration provision alone was void and unenforceable, but rather alleged that the arbitration provision was unenforceable because it was contained in an illegal usurious contract which was void ab initio.” Nagrampa, 469 F.3d at 1268. Fastbucks contends that Buckeye, and not Nagrampa, applies here because Plaintiffs’ complaint does not contain a specific challenge to the arbitration clause.

We disagree. This case presents a third scenario not described in either Buckeye or Nagrampa; namely, a specific challenge to the arbitration clause that is not raised as a separate claim in the complaint. See Winter v. Window Fashions Prof’ls, Inc., 83 Cal. Rptr. 3d 89, 93 (Ct. App. 2008) (distinguishing Buckeye and Nagrampa and holding that arbitrability was for the court to decide where the plaintiff’s specific “challenge to the arbitration clause was [raised] in response to [a] petition to compel arbitration” rather than in the complaint). Because the material question is whether the challenge to the arbitration provision is severable from the challenge to the contract as a whole, Buckeye, 546 U.S. 444-45; Rent-A-Ctr., 130 S. Ct. at 2778, the inclusion of, or failure to include, a specific challenge in the complaint is not determinative. See Winter, 83 Cal. Rptr. 3d at 93. What matters is the substantive basis of the challenge.

Slip op., at 14209-11.

I report on this decision primarily because the sudden explosion of arbitration issues in different contexts is interesting, at least to me.  Tomorrow I will find out whether I successfully beat back a claim that Stolt-Nielsen preempts Gentry.  It looks like I will be paying attention to arbitration decisions for some time to come.

Article III standing not shown and claims lacking necessary facts leads to dismissal of consumer class action alleging carcinogens in baby bath products

United States District Court Judge Claudia Wilken (Northern District of California) granted a motion to dismiss plaintiffs' Second Amended Complaint in a consumer class action alleging various defendants knowingly manufactured and sold bath products for children that contain probable carcinogens and other unsafe substances.  Herrington v. Johnson & Johnson Consumer Companies, Inc., 2010 WL 3448531 (Sept. 1, 2010).  The Court found the allegations related to the risk of harm too remote to satisfy the plaintiffs' Article III burden:

Plaintiffs do not cite controlling authority that the “risk of harm” injury employed to establish standing in environmental cases applies equally to product liability actions. At least two out-of-circuit cases are instructive on the nature of the increased risk of harm necessary to create an injury-in-fact. In Sutton v. St. Jude Medical S.C., Inc., a product liability case, the Sixth Circuit concluded that a plaintiff had standing when he alleged that the implantation of a medical device exposed him to “a substantially greater risk” of harm. 419 F.3d 568, 570-75 (6th Cir.2005). In Public Citizen, Inc. v. National Highway Traffic Safety Administration, the D.C. Circuit, addressing a petitioner's standing to challenge agency action, expressed doubts about finding that any increased risk of harm inflicted an injury-in-fact. 489 F.3d 1279, 1293-96 (D.C.Cir.2007). The court recognized that, under its precedent, standing was appropriate in such cases “when there was at least both (i) a substantially increased risk of harm and (ii) a substantial probability of harm with that increase taken into account.” Id. at 1295. These cases and Central Delta suggest that, to the extent that an increased risk of harm could constitute an injury-in-fact in a product liability case such as this one, Plaintiffs must plead a credible or substantial threat to their health or that of their children to establish their standing to bring suit.

Plaintiffs have not alleged such a threat. In essence, they complain that (1) 1,4-dioxane and formaldehyde are probable human carcinogens; (2) “scientists believe there is no safe level of exposure to a carcinogen,” 2AC ¶ 68; (3) children are generally more vulnerable to toxic exposure than adults; and (4) 1,4-dioxane and formaldehyde have been detected in Defendants' products. However, Plaintiffs do not allege that 1,4-dioxane and formaldehyde are in fact carcinogenic for humans. Nor do they plead that the amounts of the substances in Defendants' products have caused harm or create a credible or substantial risk of harm.  This contrasts with the showing in Central Delta, in which the landowners cited the defendant agency's own reports, which predicted that “the majority of the months during which the standard would be exceeded are projected to be peak-irrigation months during plaintiffs' growing seasons.” Central Delta, 306 F.3d at 948. The plaintiffs also cited reports showing “the negative effects of increased salinity on the various crops that they grow” and themselves reported that “their harvests were damaged in the past due to high salinity in the water.” Id. Here, Plaintiffs do not plead facts to suggest that a palpable risk exists. They only allege that 1,4-dioxane and formaldehyde may be carcinogenic for humans, that there could be no safe levels for exposure to carcinogens and that Defendants' products contain some amount of these substances. Indeed, as Plaintiffs plead, the Consumer Product Safety Commission (CPSC) has stated that, although the presence of 1,4-dioxane “is cause for concern,” the CPSC is merely continuing “to monitor its use in consumer products.” 2AC ¶ 64. The risk Plaintiffs plead is too attenuated and not sufficiently imminent to confer Article III standing.

Opinion, at 3.  The Court granted leave to amend, so it is unclear whether the plaintiffs can meet the challenging task of alleging facts that will satisfy their Article III standing.

The Court also offered some interesting remarks about Rule 9(b) as it pertains to the plaintiffs' fraud and UCL claims:

Herrington and Haley cite In re Tobacco II Cases, 46 Cal.4th 298, 93 Cal.Rptr.3d 559, 207 P.3d 20 (2009), to argue that they are not required to allege which representations they specifically saw. There, addressing the allegations necessary to plead reliance to establish standing to bring a UCL claim, the California Supreme Court stated that “where ... a plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements.” Id. at 328, 93 Cal.Rptr.3d 559, 207 P.3d 20; see also Morgan, 177 Cal.App.4th at 1257-58, 99 Cal.Rptr.3d 768. However, Plaintiffs have not plead that they viewed any of Defendants' advertising, let alone a “long-term advertising campaign” by Defendants. Even if they did, In re Tobacco II merely provides that to establish UCL standing, reliance need not be proved through exposure to particular advertisements; the case does not stand for, nor could it, a general relaxation of the pleading requirements under Rule 9(b). See, e.g ., In re Actimmune Mktg. Litig., 2009 WL 3740648, at *13 (N.D.Cal.).

As for alleged non-disclosures, a modified pleading standard applies “on account of the reduced ability in an omission suit ‘to specify the time, place, and specific content’ relative to a claim involving affirmative misrepresentations.” In re Apple & AT & TM Antitrust Litig., 596 F.Supp.2d 1288, 1310 (N.D.Cal.2008) (quoting Falk v. Gen. Motors Corp., 496 F.Supp.2d 1088, 1099 (N.D.Cal.2007)). Herrington and Haley's primary complaint is that Defendants did not disclose information concerning the presence of 1,4-dioxane and formaldehyde. See, e.g., 1AC ¶¶ 32, 198. Their failure to plead the time and place of these omissions will not defeat their claims. And reliance on these nondisclosures could be presumed if their allegations suggested that the omitted facts were material. See, e.g., Blackie v. Barrack, 524 F.2d 891, 906 (9th Cir.1975). However, Herrington and Haley have not made such allegations. Although they plead that they would not have purchased Defendants' products had they known of the presence of 1,4-dioxane and formaldehyde, a fact is material if a reasonable person “would attach importance to its existence or nonexistence in determining” whether to purchase the product. Morgan, 177 Cal.App.4th at 1258, 99 Cal.Rptr.3d 768 (citation and internal quotation marks omitted). Because Herrington and Haley have not averred facts that show that the levels of these substances caused them or their children harm, under the objective test for materiality, the alleged non-disclosures are not actionable.

Opinion, at 8.  Hmmm.  It's just a tiny bit of formaldehyde in your baby's bubble bath.  It's not a material fact.

District Court finds "first-to-file rule" inapplicable where first-filed case is no longer a class action

United States District Court Judge William Alsup (Northern District of California) denied a motion by defendant P.F.Chang's China Bistro, Inc. to transfer a putative wage & hour class action to the Central District of California.  Dubee v. P.F. Chang's China Bistro, Inc., 2010 WL 3323808 (N.D. Cal. Aug. 23, 2010).  Defendant asserted the "first-to-file rule" and an earlier case pending in the Central District as grounds for the transfer.  After explaining that the "first-to-file rule is an underdeveloped but generally recognized legal doctrine regarding duplicative lawsuits," the Court denied the motion:

When deciding whether to apply the first-to-file rule, the court looks to three threshold factors: (1) the chronology of the two actions; (2) the similarity of the parties; and (3) the similarity of issues. Ibid. The two actions need not be identical; it is enough that they are “substantially similar.” Nakash v. Marciano, 882 F.2d 1411, 1416 (9th Cir.1989).

In the instant action, the first factor of chronology is met. The Vasquez action was filed over a year before the instant action. The second factor, however, is not met. While P.F. Chang's China Bistro is the defendant in both actions, the plaintiffs are neither the same nor “substantially similar.” As stated, while the Vasquez action was originally filed as a putative class action, it is now proceeding solely as an individual action. In the instant case, plaintiff Dubee is proceeding as a representative plaintiff on behalf of himself and all other California P.F. Chang's employees that are similarly situated. While this class-if certified-could encompass the plaintiff in Vasquez, the claims asserted by the plaintiff in Vasquez do not (and will not) encompass plaintiff and the putative class in the instant action. For this reason, the two actions are not substantially similar with respect to the parties involved.

Slip op., at 2.  The Court noted as significant the fact that certification was never briefed in Vasquez.

District Court declines to decertify class because of alleged conflict-based inadequacy of counsel

United States District Court Judge Lawrence J. O'Neill (Eastern District of California) denied a renewed motion to decertify a class of former members of Calcot that marketed their cotton in a Seasonal Pool.  Andrews Farms v. Calcot, LTD., 2010 WL 3341963 (E.D.Cal. Aug. 23, 2010).  Defendants argued that counsel was inadequate because of an irreconcilable conflict between the interests of a former named plaintiff represented by counsel and the interests of the certified class.  The Court found class counsel to be adequate and declined to apply a mechanical disqualification rule:

Because class actions are unique, “the traditional rules that have developed in the course of attorneys' representation of the interests of clients outside of the class action context should not be mechanically applied to the problems that arise in the settlement of class action litigation.” In re Agent Orange Prod. Liab. Liti., 800 F.2d 14, 19 (2nd Cir.1986). Class actions provide a particular problem with respect to the rules on conflict because “the potential for conflicts in the course of representing numerous class members is greatly enhanced.” In re Joint Eastern and Southern Dist. Asbestos Litig., 133 F.R.D. 425, 431 (S.D.N.Y.1990). Thus, “although automatic disqualification might promote the salutary ends of confidentiality and loyalty,” the courts do not apply such rules automatically in a class action context, because automatic disqualification “would have a serious adverse effect on class actions.” In re Agent Orange, 800 F.2d at 18. Accordingly, to determine whether class counsel will represent the interests of the class vigorously, the Court must employ “a balancing of the interests of the various groups of class members and of the interest of the public and the court in achieving a just and expeditious resolution of the dispute.” In re Joint Eastern and Southern Dist. Absestos Litig., 133 F.R.D. at 431 (quoting In re Agent Orange, 800 F.2d at 19).

Slip op., at 8.

Widespread manifestation of a defect is not essential to class certification

The Ninth Circuit giveth and it taketh away.  On the one hand, the Fourth Amendment is better described as the Fourth Suggestion around these parts.  But consumer class actions received a booster shot last week.  In Wolin v. Jaguar Land Rover (9th Cir. Aug. 17, 2010), the Ninth Circuit reversed a denial of class certification in a consumer class action alleging a defective design in an automobile.  Plaintiffs Gable and Wolin each brought a class action lawsuit against Jaguar Land Rover North America, LLC (“Land Rover”) alleging that Land Rover’s LR3 vehicles suffer from an alignment geometry defect that causes tires to wear prematurely. The district court declined to certify a class because Gable and Wolin were unable to prove that a majority of potential class members suffered from the consequences of the alleged alignment defect.  The Ninth Circuit reversed.

The Court first examined commonality:

Federal Rule of Civil Procedure 23(a)(2) provides that “questions of law or fact common to the class” are a prerequisite to class certification. Commonality exists where class members’ “situations share a common issue of law or fact, and are sufficiently parallel to insure a vigorous and full presentation of all claims for relief.” Cal. Rural Legal Assistance, Inc. v. Legal Servs. Corp., 917 F.2d 1171, 1175 (9th Cir. 1990) (internal quotation marks and citation omitted). “The existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). [2]

Appellants easily satisfy the commonality requirement. The claims of all prospective class members involve the same alleged defect, covered by the same warranty, and found in vehicles of the same make and model. Appellants’ complaints set forth more than one issue that is common to the class, including: 1) whether the LR3’s alignment geometry was defective; 2) whether Land Rover was aware of this defect; 3) whether Land Rover concealed the nature of the defect; 4) whether Land Rover’s conduct violated the Michigan Consumer Protection Act or the Florida Deceptive and Unfair Trade Practices Act; and 5) whether Land Rover was obligated to pay for or repair the alleged defect pursuant to the express or implied terms of its warranties. These common core questions are sufficient to satisfy the commonality test. See Hanlon, 150 F.3d at 1019-20.

Slip op., at 11991.  The Court then rejected the argument that individualized factors would affect tire wear:  "What Land Rover argues is whether class members can win on the merits. For appellants’ claims regarding the existence of the defect and the defendant’s alleged violation of consumer protection laws, this inquiry does not overlap with the predominance test."  Slip op., at 11993.

Then, discussing typicality, the Court made what is probably the most striking pronouncement of the opinion:

Whether they experienced premature tire wear at six months, nine months, or later goes to the extent of their damages and not whether named appellants “possess the same interest and suffer[ed] the same injury as the class members.” E. Tex. Motor Freight Sys. Inc. v. Rodriguez, 431 U.S. 395, 403 (1977) (internal quotation marks omitted). Typicality can be satisfied despite different factual circumstances surrounding the manifestation of the defect. See Daffin, 458 F.3d at 553. Gable and Wolin, like the rest of the class, may have a viable claim regardless of the manifestation of the defect. The fact that Gable and Wolin already received discounts and some free services also does not defeat typicality. See Lymburner v. U.S. Fin. Funds, Inc., 263 F.R.D. 534, 540 (N.D. Cal. 2010) (finding named plaintiff typical of class despite availability of plaintiff-specific remedy and finding “no authority for the argument that typicality is defeated because the remedies may be different for class members or that the availability of rescission as a remedy will monopolize this case”). Gable’s and Wolin’s claims are typical of the class.

Slip op., at 11996.  Finally, the Court concluded that superiority is closely connected to commonality:

Appellants aver that no other prospective class members have filed other related actions, and Land Rover does not dispute this point. The amount of damages suffered by each class member is not large. Forcing individual vehicle owners to litigate their cases, particularly where common issues predominate for the proposed class, is an inferior method of adjudication.

Slip op., at 11997.

Fun fact:  This same panel also heard the Mazza, et al. v. American Honda Motor Company case.