Supreme Court declines to consider whether state laws limiting class actions ban clauses are preempted by federal law

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According to the Associated Press, the United States Supreme Court rejected T-Mobile's appeal in three related cases.  The issue in the three cases is identical: whether state laws limiting class action ban clauses in consumer contracts are preempted by federal law.  As of this posting, the Supreme Court docket does not yet reflect the denial of the Petition in case 07-976.

T-Mobile sought review of a Ninth Circuit decision that precluded enforcement of a class action ban on the ground that a recent "Third Circuit decision (Gay v. Creditinform) created a conflict among the lower courts."  (Gupta, Supreme Court Refuses to Hear Class-Action Ban Issue (May 27, 2008) pubcit.typepad.com.)  [Note: Public Citizen participated in the opposition to T-Mobile's petition.]

State and federal courts have been holding of late that class-action bans in arbitration clauses are unconscionable under state contract law, a result seen in the Discover Bank decision (Discover Bank v. Superior Court (2005) 36 Cal.3d. 148) in California.  Defendants routinely argue that the Federal Arbitration Act preempts state law on this issue.  However, that argument has not met with success; the Federal Arbitration Act expressly saves generally-applicable state contract law of unconscionability from preemption.

UPDATE:  The May 28, 2008 Order List from the Supreme Court includes the Laster v. T-Mobile determination.

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ClassActionBlawg.com provides yet another quality roundup of class-related blog posts

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Paul KarlsgodtOn most weeks, ClassActionBlawg.com surveys the blogosphere for posts topical to class actions.  Paul's latest roundup is probably the most extensive (and most useful) yet.  (Karlsgodt, Class Action Blogosphere Weekly Review (May 20, 2008) ClassActionBlawg.com.)  You'll find links to such blogs as Carlton Fields’ class action blog Classified, Drug and Device Law Blog, and Federal Civil Practice Bulletin.

Of particular note, ClassActionBlawg.com mentioned a guest blogging submission by Elizabeth Cabraser on ACSBlog.  As someone worthy of a WHO'S WHO post in her own right, any comments by Ms. Cabraser are worth a read.

Finally, thanks to ClassActionBlawg.com for including in the weekly roundup an earlier post by The Complex Litigator on developments affecting punitive damage claims in class actions.

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ClassActionBlawg.com provides a weekly collection of class action blog posts

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Paul KarlsgodtClassActionBlawg.com has just posted a round-up of class action blawg articles from the last week or so.  This week's round-up includes one article by The Complex Litigator, so a special thanks for that.  ClassActionBlawg.com includes these useful round-ups once a week, but the most recent collection of posts is particularly thorough; it makes for a great launching point to look around the blawgosphere for topical posts on class actions.

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Law review article contends that puntive damage claims have been precluded in class actions

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Inferential preclusion of punitive damage claims in many class actions is the premise of a forthcoming Law Review article by Professor Sheila Scheuerman of the Charleston College of Law. (Scheuerman, Sheila B., Two Worlds Collide: How the Supreme Court's Recent Punitive Damages Decisions Affect Class Actions (2008, forthcoming) Baylor Law Review, available at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1127691.) Although self-described as an alternative assessment of the impact of recent Supreme Court punitive damage decisions, the article ultimately echoes the refrain advanced by, among others, members of the defense bar immediately following the United States Supreme Court’s decision in Philip Morris USA v. Williams, 127 S.Ct. 1057 (2007).

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Showing laudable common sense in Bufil v. Dollar Financial Group, Inc., a California Court of Appeal limits Alvarez v. May Dept. Stores Co.

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Greatsealcal100I must confess that, of all decisions for which I may take blame or credit, Alvarez v. May Dept. Stores Co. (2006) 143 Cal.App.4th 1223 sticks in my craw as the most abhorrent and most memorable (by a slight margin).  Not that I didn't give Alvarez my all; I have no shame there.  But I lost the appeal.  Then my Petition for Review was denied by the California Supreme Court (though Justice Kennard was of the opinion that it should have been granted), and I even went so far as to file a Petition for Writ of Certiorari with the United States Supreme Court.  It was, of course, denied.  The oral argument in the Court of Appeal lasted something like 45 minutes (it went way over the allowed time), and about 40 minutes of it were non-stop questions from all three justices.  It was brutal, educational, and intensely disappointing.  Mostly disappointing.

Enter Bufil v. Dollar Financial Group, Inc. (April 17, 2008, ord. pub. May 13, 2008), issued by the First Appellate District, Division Four.  The introduction to the opinion summarizes the legal terrain:

“On the heels of the denial of class certification against employer and respondent Dollar Financial Group, Inc. (Dollar), in a suit alleging violation of meal and rest break labor laws, appellant Caren Bufil pursued class certification in a new suit which significantly narrowed the class definition. Relying on the doctrine of collateral estoppel, the trial court granted judgment on the pleadings in favor of Dollar. Also relying on this doctrine as well as traditional concerns relevant to the issue of certification, the court denied Bufil’s motion for class certification. We reverse.

(Slip op., at p. 1.) 

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When legislators decide to "fix" things, the remedy is often worse than the ailment

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Paul KarlsgodtClassActionBlawg.com has a short post, entitled "Congressmen seek investigation on practices of class action lawyers: A good use of taxpayer dollars," that says a lot.  Referring to a CFO.com news story, ClassActionBlawg.com offers a modest proposal to the legislators that want to put the entire class action system under the microscope, all on account of recent media coverage of a few bad apples (Lerach, et al.).  (See, Plourd, On the Hill, Trying to Put Plaintiffs' Bar on the Defensive (May 6, 2008) www.cfo.com.)

The post on ClassActionBlawg.com is short, so I repeat the core of it here:

Certainly, there have been some high-profile abuses among members of the plaintiffs’ class action bar recently. But these are examples of individual arrogance and greed, not evidence of an epidemic in need of a Congressional investigation–especially in light of the myriad other things Congress could be doing these days. The acts of a few bad apples shouldn’t ruin the bunch.

Among other things, Boehner and Smith seek “[r]eforms that Congress can make to rid the judicial system of [class action] abuses.” If you really want to spend government money to prevent class action abuse, here’ s a modest proposal from a class action defense lawyer’s perspective: try better funding for the courts. If there were more, better-paid judges available to give the time and thoughtful analysis needed in carrying out their function as gatekeepers rather than simply doing whatever they can to manage their overflowing dockets, maybe there wouldn’t be any incentive to pursue frivolous class actions and abusive tactics. Just an idea.

It is worth emphasizing that Paul Karlsgodt practices primarily on the defense side of class actions.  The class action device isn't "broken" because of few bad actors.  Every profession has them.  Let's entrust our court system to talented jurists that are appropriately compensated.  Let's give them the resources they need to do their job in an orderly manner, and let's give them facilities that aren't crumbling and overcrowded.  The Complex Litigator seconds ClassActionBlawg.com's proposal.

[Via ClassActionBlawg.com]

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In light of the Federal Reserve's proposed new credit card regulations, are we looking at the next frontier in unfair practice class actions?

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On May 2, 2008, the Federal Reserve Board proposed rules "to prohibit unfair practices regarding credit cards and overdraft services that would, among other provisions, protect consumers from unexpected increases in the rate charged on pre-existing credit card balances."  (See, May 2, 2008 Press Release.)The proposed revisions to the FTC Act include five key protections for consumers that use credit cards:

  • Banks would be prohibited from increasing the rate on a pre-existing credit card balance (except under limited circumstances) and must allow the consumer to pay off that balance over a reasonable period of time.
  • Banks would be prohibited from applying payments in excess of the minimum in a manner that maximizes interest charges.
  • Banks would be required to give consumers the full benefit of discounted promotional rates on credit cards by applying payments in excess of the minimum to any higher-rate balances first, and by providing a grace period for purchases where the consumer is otherwise eligible.
  • Banks would be prohibited from imposing interest charges using the "two-cycle" method, which computes interest on balances on days in billing cycles preceding the most recent billing cycle.
  • Banks would be required to provide consumers a reasonable amount of time to make payments.

The proposed rule revisions would also address subprime credit cards by limiting the fees that reduce the available credit to the consumer. In addition, banks that offer credit by advertising multiple rates or credit limits would be required to disclose in their solicitation the factors that determine whether a consumer will qualify for the lowest rate and highest credit limit.

Looking at the detailed regulations governing mortgage lending (TILA and Regulation Z), and the decisional law that followed, it appears that even sophisticated banks routinely fail to implement practices and procedures that are fully compliant with regulatory requirements.  Assuming similar difficulty by lenders in adjusting their practices to comply with new credit card-related regulations, we may be looking at the "next thing" in consumer class action litigation.  After all, we're still waiting to see what the Seventh Circuit will do with the trial court decision in Andrews v. Chevy Chase Bank FSB (E.D.Wis. 2007) 474 F.Supp.2d 1006, a case holding that a declaration of the right to rescind under TILA was available on a class-wide basis.  If that question still isn't settled under TILA to this day, you can safely wager your home that new credit card practices regulations will leave much for Courts to decide.

[Via Consumer Law & Policy Blog]

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An interesting defense of the class action device

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In earlier posts on this blog, I challenged some specific criticisms levied at the class action procedural device.  (See, "'Class' missing in Daily Journal column on class actions" and "Daily Journal Forum column challenges recent anti-class action campaign".)  The blog Disgusted Beyond Belief offers its own critique of several of the most common complaints about the class action device:

[O]ne has to wonder about those who call class actions with settlements frivolous. It is true that sometimes it is cheaper and easier to settle to make a complainant go away than it is to go to trial and win, but the aggregate costs of most class actions are so high that one would think it would always be much cheaper to go to trial if the suit is so weak as to be frivolous. In other words, it is not very likely that a class action suit where there has been a settlement was frivolous - just the opposite, in fact.

("Class Action Lawsuits" (April 21, 2008) disgustedbeyondbelief.blogspot.com.)

It is true that lawyers typically get anywhere between 30 and 40% of a suit that is done on contingency. But keep in mind that there is also the chance that they will lose and then get nothing. What it means is that the lawyer or law firm assumes the risk of the lawsuit.

(Ibid.)  The rest of the post is a good read, as Disgusted Beyond Belief is not ashamed to express outrage (in an entertaining manner).  I must admit that I did chuckle at the notion of a "right-wing stranglehold on the [mainstream medias]."  I guess many things in life are subjective.

[Via The UCL Practitioner]

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Whiplash warning: Bell v. Superior Court (H.F. Cox, Inc.) is depublished

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We live in amazing times.  Not three minutes after I published my last post about Bell v. Superior Court (H.F. Cox, Inc.), 158 Cal.App.4th 147 (2007), Ms. Kralowec (The UCL Practitioner) was kind enough to alert me via e-mail to the fact that the Supreme Court has reversed itself on the depublication request in Bell:

The order filed on April 23, 2008 is hereby amended to read in its entirety: The petition for review is denied. The requests for an order directing depublication of the opinion are granted. The Reporter of Decisions is directed not to publish in the Official Appellate Reports the opinion in the above-entitled appeal filed November 21, 2007, which appears at 158 Cal.App.4th 147. (Cal. Const., art. VI, section 14; rule 8.1125(c)(1), Cal. Rules of Court.) George, C.J., was absent and did not participate. Kennard J., is of the opinion the petition should be granted.

(Kralowec, "Supreme Court depublishes class certification opinion: Bell v. Superior Court (H.F. Cox, Inc.)" The UCL Practioner, www.theuclpractitioner.com.)  The customary blog nomenclature is "Hat Tip to...." or "Nod to ...." as a thank you for being the source of useful information.  That just doesn't seem good enough in this case, so...Thanks!

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The value of precedent depends on perspective: Bell v. Superior Court (H.F. Cox, Inc.)

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Greatsealcal100 In a post from earlier today, The UCL Practitioner reported that "[o]n Wednesday, the Supreme Court denied review and depublication in Bell v. Superior Court (H.F. Cox, Inc.), no. S160423."  (Kralowec, "Supreme Court denies review and depublication in class certification case: Bell v. Superior Court (H.F. Cox, Inc.)," The UCL Practioner, www.theuclpractitioner.com.)   In an earlier post on that same blog, The UCL Practitioner, noting that the Bell decision contained "some interesting language on the 'superiority' element of class certification," quoted from the opinion:

The opinion contains some interesting language on the "superiority" element of class certification: The party seeking class certification has the burden to establish that class action will be a superior means of resolving the dispute. (Aguiar v. Cintas Corp. No. 2, supra, 144 Cal.App.4th at pp. 132-133.) Our Supreme Court recently addressed the issue of the superiority of a class action in a wage and hour case. In Gentry v. Superior Court (2007) 42 Cal.4th 443, the Supreme Court concluded that both factors on which the trial court relied in this case – the size of some claims suggesting individual enforcement and the possibility of administrative proceedings before the Labor Commissioner – were insufficient to deny class certification. The court noted that there are many other factors in favor of class resolution in such cases, including that current employees might not bring individual claims out of a fear of retaliation, that current employees might not know of their rights (especially where, as here, the employer has affirmatively told them they are not eligible for overtime), and the necessity of class actions to give teeth to wage and hour laws even when some employees may have claims large enough for individual enforcement. (Id. at p. 459-462.) The court specifically held that an administrative action before the Labor Commissioner was an inadequate substitute for a class action. (Id. at p. 465.) As such, the trial court’s conclusion that a class action is not superior cannot stand.

(Kralowec, "New class certification decision: Bell v. Superior Court (H.F. Cox, Inc.)," The UCL Practioner, www.theuclpractitioner.com, quoting Bell.) My reaction to Bell at the time was that it seemed substantially more useful to plaintiffs than defendants.  As an aside, this is almost always true when a Court of Appeal reversed any part of a denial of certification.  Reversing a certification denial order, in any part, is a big deal.  Certification decisions are reviewed for abuse of discretion, and trial courts get the benefit of the doubt on appeal.

Today, I argued (successfully) against a defendant that sought to decertify a class.  Relying heavily on Bell, the defendant attacked a garden-variety class definition used in overtime/off the clock cases as lacking ascertainability.  Bell included some language that made defendant's argument more than trivial to overcome.

The defendant's use of Bell, an apparently plaintiff-friendly case, was sobering.  I was reminded of the danger inherrent in evaluating new precedent through the bias of one's primary practice area, in my case, predominantly plaintiff-side class actions.  While it is usually the case that a defendant, seeking decertification, would shy away from any certification opinion where any portion of a denial of certification was reversed, there are no guarantees that you won't have to deal with "surprise" citations.  In Bell, as in most cases, there are bits and pieces that are as useful to defendants as to plaintiffs, depending upon what issues are in play.

My unsolicited advice to erstwhile class action practitioners is to set aside some time to read each and every new class action decision, front to back, at least once while it is still hot off the presses.  Your early read of new authority may be enough to help you avoid surprises down the line.

UPDATE:  Aside from also reporting on the depublication of Bell earlier today, Wage Law notes that while Bell "had seemed to favor the plaintiff (who was the petitioner seeking Supreme Court review) the Court of Appeal's endorsement of the denial of certification in the off-the-clock and meal period causes of action had been embraced by the employers' bar, who will lament the depublication of the case."  ("Supreme Court Depublishes Bell v Superior Court (HF Cox, Inc.)," Wage Law, www.wagelaw.typepad.com.)

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