"Google Sued for Selling Ads on Parked Domains"

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According to InformationWeek, and verified by Kimberly Kralowec, a class-action lawsuit was filed against Google in a U.S. District Court (N.D.Cal., San Jose, California), for the alleged sale of "low quality" ads on parked domains and error pages.  (Thomas Claburn, Google Sued For Selling Ads On Parked Pages (July 15, 2008) www.informationweek.com.)  The plaintiff is represented by attorneys from the San Francisco-based law firm of Schubert Jonckheer Kolbe & Kralowec.  One of the plaintiff's attorneys, Kimberly Kralowec, is the author of the established and widely-read blog, The UCL Practitioner.  Ms. Kralowec was quoted throughout the InformationWeek article:

“In seeking class certification for the lawsuit, Levitte's attorneys hope to represent other aggrieved Google advertisers. "We believe it's a problem that affects all [Google's] advertisers equally," said Kimberly Kralowec, partner at the law firm representing Levitte.

The matter is assigned to Judge Ware, who has some experience with the seedy underbelly of Internet-related litigation.  Specifically, I refer to the sprawling sex.com domain ownership litigation that Judge Ware still has the pleasure of handling to this day.  I actually had some limited part in that case, successfully dismissing an ancillary complaint associated with that litigation, as the case stretched out like an octopus in an effort to find sources for damages; the central defendant absented himself from the jurisdiction of the court to a safe, foreign residence.

Electonista, a blog predominantly about gadgets, has incorrectly identified the firm of Kabateck Brown Kellner as the filing firm in the Levitte v. Google case.  In fact, Kabateck Brown Kellner filed a similar class action suit six days later, also in the Northern District of California, on behalf of plaintiff RK West, Inc.  I would assume that the later-filed matter will be related to the case before Judge Ware.

Google, of course, has no comment.  In light of the recent Viacom v. YouTube discovery ruling, one wonders what electronic databases related to the AdSense program will be fair game in this class action suit.

You can view the Levitte Complaint (filed by Ms. Kralowec, et al.) here.

You can view the RK West, Inc. Complaint (filed by Kabateck Brown Kellner) here.

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Shortly after Sprint beat a class action challening early cancellation fees, Verizon settles similar class action for $21 million

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On June 12, 2008, The Complex Litigator reported that Sprint avoided liability after a California jury ruled in its favor in a trial involving the contentious issue of early termination fees (ETFs) in wireless service contracts.  At that time, other carriers set for trial on the same issue were believed to be watching the Sprint trial as an indicator of how their trials might resolve.  But, in a surprising twist, Verizon has apparently settled the class action suit it was facing after the start of its trial last week.  The settlement is described as having a value of $21 million dollars, although there is no immediate information about the terms of that settlement (i.e., whether it contains a "claims-made" component, or other provision that would impact Verizon's realized cost from the settlement).  Verizon spokesman Jim Gerace is reported to have said, "This suit was a distraction. This was a quick way to resolve it."

[Via Wireless and Mobile News.]

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Class action counsel must be as diligent reviewing potential conflicts as their defense counterparts

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Defense counsel are well acquainted with the concept of conflicts checks at the outset of a matter.  Most defense firms with more than a handful of attorneys have electronic systems in place that track all past representations for the purposes of assessing potential conflicts when a matter is first offered to a firm.  Plaintiff-side practitioners, at least in my observations, are less rigorous about conflict checks, due, in part, to the infrequency with which conflicts arise in a predominantly plaintiff-side practice.  While the infrequency of conflicts allows for laxity without consequence in most cases, when conflicts do surface, the results can be painful.

For example, in Baas, et al. v. Dollar Tree Stores, Inc., (N.D. Cal. Case No. 07-03108 JSW), plaintiffs' counsel undertook to represent two hourly employees in a putative class actions against Dollar Tree Stores, Inc. (“Dollar Tree”), contending that Dollar Tree altered the time records of its employees and, thus, failed to compensate employees for all of the time that they actually worked.  Plaintiffs moved for class certification.  The Court denied the motion on the sole ground that a conflict of interest by counsel prevented them from adequately representing the class.

Rule 23(a)(4) requires that "the representative parties will fairly and adequately protect the interests of the class."  (Fed. R. Civ. P. 23(a)(4).)  Adequacy of representation is a two-part analysis, which asks "(1) Do the representative plaintiffs and their counsel have any conflicts of interest with other class members, and (2) will the representative plaintiffs and their counsel prosecute the action vigorously on behalf of the class?"  (Staton v. Boeing Co. (9th Cir. 2003) 327 F.3d 938, 957.)  In Baas v. Dollar Tree, the first question was answered "yes," leading the Court to conclude in its April 1, 2008 Order that counsel could not adequately represent their clients.  The Court explained the source of the conflict:

“Dollar Tree argues that Plaintiffs’ counsel’s representation of John Hansen (“Hansen”), the manager of the store in which named Plaintiffs Baas and Lofquist used to work, in another lawsuit against Dollar Tree creates a conflict of interest. “The responsibility of class counsel to absent class members whose control over their attorneys is limited does not permit even the appearance of divided loyalties of counsel.” Kayes v. Pacific Lumber Co., 51 F.3d 1449, 1465 (9th Cir. 1995) (quoting Sullivan v. Chase Inv. Serv. of Boston, Inc., 79 F.R.D. 246, 258 (N.D. Cal. 1978)). As the court explained in Kayes, “[t]he ‘appearance’ of divided loyalties refers to differing and potentially conflicting interests and is not limited to instances manifesting such conflict.” Id.

(Opinion, at p. 3.)  After setting forth various rules of professional conduct, the Court explained where the conflicts could materialize in the dual representations:

“Here, Plaintiffs’ counsel’s client Hansen is a witness in this matter. Lofquist testified in her deposition that Hansen was aware that she worked off the clock in his presence and that Hansen encouraged her to do so. (Declaration of Beth Hirsch (“Hirsch Decl.”), Ex. F at 247:4-248:17. Hansen testified that Lofquist was paid for the time she worked and that he never asked anyone to come in and work off the clock. (Hirsch Decl., Ex. D at 547:23-548:16). He further testified that he knew it was against Dollar Tree’s policy to misrepresent the time employees worked or took breaks. (Id. at 648:13-17). To reconcile the testimony of Hansen and Lofquist, Plaintiffs’ counsel will either need to portray Hansen as a liar or as a manager who knowingly violated his company’s policies. Plaintiffs counter that Plaintiffs’ and Hansen’s claims and class actions are distinct and do not conflict with one another. Plaintiffs further argue that because Hansen is merely involved as a witness in this matter, he is not placed in any jeopardy of being liable. Plaintiffs thus focus on the existence or absence of any conflicts between the two cases and fail to address the duty of loyalty Plaintiffs’ counsel owe to all their clients.

From the testimony in the record, it appears as Plaintiffs’ counsel will either have to cross-examine Hansen and impeach his credibility, or “soft-pedal” their examination of Hansen to the detriment of their representation of the class members in this action. Even if this conflict of interest could be waived, Plaintiffs’ counsel would need to obtain waivers from every class member, which, as a practical matter, they cannot do from the absent class members. Therefore, the Court concludes that Plaintiffs have not demonstrated their counsel would adequately represent the class as required by Rule 23(a)(4). Failure to satisfy any one of Rule 23’s requirement precludes class certification. Rutledge v. Electric Hose & Rubber, Co., 511 F.2d 668, 673 (9th Cir. 1975); see also Sipper v. Capital One Bank, 2002 WL 398769, *4 (C.D.Cal. Feb. 28, 2002) (denying motion for class certification based on plaintiffs’ counsel’s conflict of interest). Accordingly, the Court denies Plaintiffs’ motion for class certification.

(Opinion, at p. 5.)  In a nutshell, plaintiffs' counsel reached one rung too far and were cut off at the knees for it.  Had they fully explored the potential for conflict at the outset of the second case, they may have concluded that a referral of the case to another firm was the better course of action.

The full opinion is included below:

Read this document on Scribd: 2008-04-01 Order Dollar Tree

Here is a link to the Order for visitors without flash:  April 1, 2008 Order Denying Certification.

UPDATE:  A reader informs me that the Acrobat.com widget is not functioning correctly.  I've had some problems with it myself in getting this post up.  It is possible that the pdf file contains some sort of error.  If I can't get it fixed, I may have to see if iPaper works any better with this file.

UPDATE 2:  It appears that Acrobat.com is experiencing some problem today.  I am presenting the Order through Scribd.

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Court of Appeal affirms order striking class allegations after defendant moved to bar certification

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Greatsealcal100I clearly recall reading a Daily Journal news article about Judge Sundvold's decision to "strike" class allegations on the defendant's motion, before plaintiffs in the case had filed their motion for class certification.  In fact, in preparing this post, I found a copy of that March 12, 2007 article in a clippings file.  (Don J. DeBenedictis, Precertification, Stores' Lawyers Crush Class, Daily Journal (March 12, 2007).)  The article mentioned that the defendant had been contacting its store managers and obtained "several hundred" declarations from them.  However, the article noted that the plaintiffs were not permitted by the court to contact those managers.  I found the reported discussion very peculiar; it seemed that something had to be missing.  I found it implausible that the Court would "not allow plaintiff to contact those current and former store employees or to see more than 5 percent of the declarations. . . ."  It turns out that the reports were fairly accurate.

In re BCBG OVERTIME CASES (June 13, 2008) ___ Cal.Rptr.3d ___ is the published opinion of the Court of Appeal (Fourth Appellate District, Division Three) that followed from the Judge Sundvold's Order finding that the matter was unsuitable for class treatment.  The Court of Appeal affirmed the Trial Court's decision.

First, some nomenclature in the underlying case was discussed by the Court of Appeal.  In the Trial Court, the defendant apparently referred to its motion as a "Motion to Strike Class Allegations."  The Court of Appeal discussed the misleading nature of this document title:

“BCBG’s “motion to strike” was not a motion to strike as used during the pleading stage of a lawsuit in both California and federal procedure. (Code Civ. Proc., § 435; Federal Rules Civ. Proc., rule 12(f).) It was a motion seeking to have the class allegations stricken from the complaint by asking the trial court to hold an evidentiary hearing and determine whether Plaintiffs’ proposed class should be certified.  “A motion to strike class allegations is governed by Rule 23, not Rule 12(f). Rule 23 requires that the Court decide the certification issue at the earliest time possible.” (Bennett v. Nucor Corp. (E.D. Ark., July 6, 2005, No. 3:04CV002915WW) [2005 WL 1773948] slip opn., p. 2, fn. 1.)

(Slip op., at p. 6.)

Next, the Court of Appeal examined the procedure utilized by the defendant.  Although defense-initiated motions to deny certification are uncommon, the Court of Appeal concluded that they are permitted:

“Under both California and federal law, either party may initiate the class certification process. In Carabini v. Superior Court (1994) 26 Cal.App.4th 239, a state appellate panel explained the California class certification process: “‘As soon as practical after commencement of a lawsuit that purports to be a class action, a hearing must be held on whether it will be allowed to proceed as such. The hearing may be held either on the motion of the representative to certify the case as a class action; or, on motion by the party opposing the class to dismiss the class action allegations; or, by the court on its own motion . . . .’ [Citations.]” (Carabini v. Superior Court, supra, 26 Cal.App.4th at p. 242.)

(Slip op., at p. 6.)  In upholding the procedure permitted by the Trial Court, the Court of Appeal also cited California Rules of Court, rule 3.767 (formerly Rule 1857, before the excellent idea of rules with decimal points).

In reading the opinion, the Court of Appeal suggests, but does not say, that the plaintiffs may have made a tactical error in the issues raised on appeal.  In particular, the plaintiffs did not appeal the trial court's rulings that prohibited the plaintiffs from discovering the contact information of store managers.  In the text of the opinion, the Court said:

“BCBG’s motion to strike the class allegations was not made before the Plaintiffs had a chance to conduct discovery on class certification issues. Such discovery had been going on for some time, although some of the plaintiffs’ efforts had apparently been thwarted by adverse rulings from the court. The propriety of these rulings is not before us.

(Slip op., at p. 9.)  Then, in a footnote immediately following the text, the Court said:

“We do not know why Plaintiffs have been unable to obtain the contact information for BCBG’s former and current managers. “Contact information regarding the identity of potential class members is generally discoverable, so that the lead plaintiff may learn the names of other persons who might assist in prosecuting the case. (E.g., Bartold v. Glendale Federal Bank (2000) 81 Cal.App.4th 816, 820-821, 836, Budget Finance Plan v. Superior Court (1973) 34 Cal.App.3d 794, 799-800; see Code Civ. Proc., § 2017.010.)” (Pioneer Electronics (USA) Inc. v. Superior Court (2007) 40 Cal.4th 360, 373.) BCBG’s opposition to the request for a precertification notice seems to be based on its assertion that there is nothing improper about its precertification contact with the putative class members.

(Slip op., at p. 9, fn. 4.)  Reading these passages, it sounds very much like the Court of Appeal would have welcomed the opportunity to reverse for further discovery that would include depositions of any declarant offered by defendant.  Looking at the Court of Appeal docket, it doesn't appear that any attempt was made to address the Pioneer decision during the appeal, although, given that discovery rulings were apparently not raised in the appeal as discretionarily included issues, any attempt to do so may have been rejected.

While the procedure used here is uncommon, it isn't novel.  The real lesson from this case is to be sure you make your record in the trial court in the unfortunate event that you have to appeal a trial court order - and then be sure you raise the issues on appeal.  I'm not sure that the Court of Appeal would, in good conscience, tolerate a trial court ruling that allowed a defendant to put forth declarations of its own managers to defeat certification while refusing to submit those declarants to cross-examination at deposition.

Class Action Defense Blog has its customary thorough coverage of the decision, as does California Labor and Employment Law Blog.

For flash-enabled visitors, here is the opinion in a form viewable in your browser on this page:

 

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After Sprint's home run, Verizon is at bat in cell phone cancellation fee class action

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On June 12, 2008, Sprint avoided liability when a California jury ruled in its favor in a trial involving the contentious issue of early termination fees (ETFs) in wireless service contracts.  Now, in an Alameda County Superior Court, attorney will present opening arguments as Verizon goes on trial in the second of four coordinated class actions against cell phone companies.  (Evan Hill, Cell Phone Fee Case Set for Trial (June 23, 2008) www.law.com.)

In light of the verdict in the Sprint class action, attorneys for the class will shift their trial strategy:

“At the heart of the class actions is California Civil Code §1671(d), which lays out how to collect liquidated damages when someone breaks a contract. For the early termination fees to be legal under the statute, the cell phone companies need to prove that the fee reasonably reflects the money they lost when the customers left.

[Jeffrey] Lawrence [of Coughlin Stoia Gellar Rudman & Robbins] said the burden was on Sprint to prove it had made a reasonable estimate in establishing the fees. In their closing trial brief, the plaintiffs argued that Sprint never presented any evidence that it based its fees on how much it would lose from customers breaching their contracts. They pointed to testimony by Sprint's vice president of marketing, who said the company set its early termination fees after seeing how competitors used theirs to keep more customers from leaving.

(Ibid.) However, all of this maneuvering may be moot, if the FCC takes action.  The week after the Sprint verdict was issued, FCC Chairman Kevin Martin stated that he was "skeptical" that class actions can solve customer concerns about ETFs.  Martin wants the FCC to make an "initial decision" in July or August about how to regulate ETFs.

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ClassActionBlawg continues to provide weekly review posts full of resources

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Paul KarlsgodtI've previously mentioned the excellent weekly class action blogosphere surveys at ClassActionBlawg.  This week is no exception at ClassActionBlawg, and the roundups keep growing.  However, if you aren't regularly reading posts on this blog, it's easy for such mentions to get lost in the archives, so I direct your attention to roundups for the last few weeks at ClassActionBlawg.

  • On June 17, 2008, ClassActionBlawg mentions posts on topics that include class action settlements, "scandal" coverage of the Kentucky Fen-Phen attorneys and Milberg Weiss, Civil Procedure, class action decisions, and debate over various aspects of class action and tort reform, to name some of the topics addressed.
  • On June 10, 2008, ClassActionBlawg mentions posts on class action trends, technology news, and arbitration clauses and waivers, among other topics.

You'll find other entertaining collections of posts almost every week at ClassActionBlawg.  One of the best aspects about Paul's roundups is the relatively even-handed coverage of news from all parts of the legal agenda spectrum.  In many cases, it provides an opportunity to see issues debated from polar extremes, which is helpful if you find yourself undecided on a particular issue.

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BREAKING NEWS: In class action, jury finds Sprint's early cancellation fees were properly charged

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Sprint Nextel Corp. announced today that a California jury ruled in its favor in a trial involving the contentious issue of early termination fees (ETFs) in wireless service contracts.  (Roger Cheng, Jury Sides With Sprint on Early Exit Charges (June 12, 2008) www.smartmoney.com.)  A number of similar class actions have been in various stages of progress, but the Sprint class action was the first to return a verdict.

Meanwhile, The Federal Communications Commission (FCC) held a lengthy hearing today on whether wireless carriers' ETFs are justified and if jurisdiction over those fees should switch from the states to the federal government.  (Chloe Albensius, FCC Debates Need for Cell-Phone Termination Fees (June 12, 2008) www.pcmag.com.)  Since this issue gained traction in 2006, with the filing of class action suits, all major carriers have adjusted their practices to allow for pro-rated ETFs.  Until the FCC determines whether these ETFs constitute federally regulated "rates," consumers and carriers will remain uncertain as to whether states have any jursidiction over carriers' ETFs.  At least in the Sprint case, it is undoubtedly pleased that California currently has jursidiction over this issue.

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An estimated 500+ class actions rendered moot after FACTA amended

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According to Rep. Michele Bachmann (R-Minnesota), H.R. 4008 was signed into law on June 3, 2008.  H.R. 4008 amends the Fair And Accurate Credit Transaction Act (FACTA) by clarifying that, up to June 3, 2008, a company is not in willful violation of the Act if it shortens a consumer’s credit card number printed on a receipt to four digits but does not remove the expiration date.  According to ChamberPost, over 500 class actions currently pending asserted claims based upon the failure of various businesses to remove the credit card expiration date from a consumer's printed receipt.  (Pete Lawson, Fair and Accurate Credit Transaction Act (FACTA) (June 4, 2008) www.chamberpost.com.)  Going forward, businesses must correct their receipt printing practices, since H.R. 4008 applies only to receipts printed between December 4, 2004 and June 3, 2008.

This legislation is an interesting compromise approach.  While it will apparently shut down over 500 class actions, much to the relief of those defendants, it doesn't change FACTA's requirements going forward.  Everyone gets one free pass to get compliant.  I wonder if we will see more "spot" reform legislation as the negotiated middle ground between general anti-class action legislation and the proponents of civil enforcement through class suits.

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You may now resume your drunken boating

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Greatsealcal100Yesterday, the Court of Appeal (Second Appellate District, Division Two) upheld Los Angeles Superior Court Judge Victoria G. Chaney’s order enjoining the state from suspending and revoking licenses to operate a motor vehicle based upon an individual’s "boating under the influence" conviction.  (Okamoto, Court: State May Not Suspend Driver’s License Over Drunken Boating (May 4, 2008) www.metnews.com.) 

Plaintiffs Cinquegrani and Royea brought a class action challenging the DMV’s practice of summarily suspending or revoking a driver's license following a "BUI" conviction.  The trial court concluded that they were likely to prevail on the merits.  Vehicle Code Sec. 13352(a) mandates that the DMV immediately suspend or revoke an individual’s driver’s license upon receiving a court record showing that an individual had been convicted of driving a vehicle under the influence of alcohol or drugs in violation of Sec. 23152.

The Court of Appeal, affirming the trial court, held that Sec. 23620 only applies to the sentencing of defendants for driving under the influence because boating offenses have their own punishment scheme set forth in the Harbors and Navigation Code.  Construing the statutes and observing that the Legislature has employed the term "separate violation" in all of the statutes increasing the penalties for repeat DUI offenders, the Court of Appeal concluded the Legislature included the reference to Harbors and Navigation Code Sec. 655 in the Vehicle Code for purposes of enhancing a DUI conviction, not as a separate punishment for a BUI.

Please feel free to return to your regularly scheduled drunken boating activities, secure in the knowledge that your driver's license is safe.

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TJX Companies, Inc. v. Superior Court sets "limits" on class actions under Song-Beverly Credit Card Act of 1971

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Greatsealcal100The Song-Beverly Credit Card Act of 1971 (Civ. Code, § 1747 et seq.), in simplistic terms, protects credit card holders in a variety of ways, including limiting liability for billing errors or unauthorized usage.  In addition, the Act regulates conduct of merchants accepting credit card payments for transactions.  The California Legislature has declared that the Act is intended to mirror provisions in the federal Truth in Lending Act.  (Civ. Code, § 1747.01.)

Some of the protections available under the Song-Beverly Credit Card Act have just been limited or clarified, depending upon your point of view.  In TJX Companies, Inc. v. Superior Court (May 22, 2008) ___ Cal.Rptr.3d ___, the Court of Appeal (Fourth Appellate District, Division Three) construed portions of Civil Code section 1747.08, which provides, in part:

Except as provided in subdivision (c), no person, firm, partnership, association, or corporation that accepts credit cards for the transaction of business shall do any of the following:

(1) Request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to write any personal identification information upon the credit card transaction form or otherwise.

(2) Request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to provide personal identification information, which the person, firm, partnership, association, or corporation accepting the credit card writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise.

(3) Utilize, in any credit card transaction, a credit card form which contains preprinted spaces specifically designated for filling in any personal identification information of the cardholder.

The Court of Appeal, hearing Petitions for Writs of Mandate, was asked to (1) determine whether a one-year statute of limitation applied to the penalty provisions in section 1747.08, and (2) determine whether section 1747.08 applied to return transactions.

First, the Court of Appeal held that the mandatory language in section 1747.08 rendered the penalties under that section mandatory.  As a consequence the one-year statute of limitation set forth in Code of Civil Procedure section 340 governed the matter, rather than the three-year statute of limitation set forth in Code of Civil Procedure section 338.

Second, the Court of Appeal, construing the language of section 1747.08, determined that the statute was clearly intended to govern initial credit card transactions, not returns that might follow after such transactions.  The Court specifically noted the merchant's need to protect against fraudulent returns as a policy basis supportive of its construction of the Legislative intent.

I routinely see decision like TJX described as "limiting" or "expanding" a particular statutory or regulatory system.  For example Privacy Law Blog said:

“On May 22, 2008, the California Court of Appeal narrowed the scope of claims available under California’s Song-Beverly Credit Card Act of 1971, California Civil Code § 1747.08, ruling that the statute is subject to the one-year statute of limitations of Code of Civil Procedure section 340 and does not apply to merchandise returns.

(Tanya Forsheit, No Shopping Spree for Plaintiffs Under California's Song-Beverly Credit Card Act (May 26, 2008) privacylaw.proskauer.com.)  But is this really accurate?  The TJX decision was a question of first impression.  Did the Court of Appeal "narrow" anything?  I don't think anybody had a definitive answer as to which was the applicable statute of limitation.  You wouldn't need a Writ to find out if it was so clear, would you?  Textual descriptions of this sort seem more useful as a barometer of the author's bias, rather than as an analysis of the outcome.  Editorial characterizations of this ilk are more likely to have some significance if, for example, a number of Courts of Appeal construe a law in one way over many years, after which the Supreme Court weighs in and reverses those decisions.  Then it seems fair to say the the Supreme Court "limited" or "expanded" a particular understanding of the law.

As for questions of first impression about the reach of a particular statute, use commentaries about the decision to guage whether the commenter is "reporting" or just writing an op-ed piece for their constituency.  It's not my intention to single out Proskauer on this issue.  Commentary like this is pandemic to the blawgosphere (there I go, using that horrific term).  I'm sure I'm guilty.  But it's no secret that the consuming audience for Proskauer's perspective isn't your average plaintiff's attorney.

So long as you know where an author is coming from, bias can be useful.  It is a good thing to have a variety of perspectives expanding the public dialog.  Just be careful that bias in analysis doesn't unintentionally create an impression of change where none actually occurred.

UPDATE:  Class Action Defense Blog has a very thorough post analyzing TJX.

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