BREAKING NEWS: In 5-4 ruling, Supreme Court rejects federal preemption argument in “light cigarette” litigation, suggesting that preemption may not fly in pending Wyeth matter

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Seal-USSC100 In a 5-4 decision, the United States Supreme Court held that neither the Federal Cigarette Labeling and Advertising Act's pre-emption provision nor the Federal Trade Commission's actions in this field pre-empt plaintiffs’ state-law fraud claim related to “light cigarette” advertisements. The plurality, comparing and contrasting with Cipollone v. Liggett Group, Inc., 505 U. S. 504 (1992), determined that the alleged duty not to deceive was unrelated to the Labeling Act’s regulation of “smoking and health” information. (Slip op., at pp. 5-20.)

The mass media has extensive coverage of this decision. For general media coverage of this ruling, see, for example, The New York Times, FoxNews and Forbes.

One interesting theme, missed by much of the general media coverage, is whether this opinion offers any guidance as to how the Supreme Court will determine the preemption issue in Wyeth. If nothing else, this decision suggests that the current Supreme Court does not have a specific preemption agenda that has yet revealed itself. The law and fact-specific analysis of the Labeling Act makes any comparison with Wyeth somewhat challenging.

Stevens, J., delivered the opinion of the Court, in which Kennedy, Souter, Ginsburg, and Breyer, JJ., joined. Thomas, J., filed a dissenting opinion, in which Roberts, C. J., and Scalia and Alito, JJ., joined.

You can review the opinion here:

For those using browsers without flash, the direct link to the file is here.

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Changes [deleted] coming to The Complex Litigator

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First, I wish to assure regular visitors that the type of content that brought you here and kept you returning will still be a part of this blog.  That said, I am pleased that a goal of mine when I created this blog appears that it will be realized sooner than I expected.  It was my hope to expand the output of this blog with additional contributing authors, and that looks like it is going to happen.

I have associated with Initiative Legal Group LLP, a civil litigation firm emphasizing class action litigation as one of its practice areas.  Initiative Legal Group LLP has agreed to help support, co-sponsor and co-produce this blog.  I will continue as a Supervising Editor and a principal contributing author, but this blog will soon benefit from the addition of more content authors and from the substantial expertise possessed by all of Initiative Legal Group LLP's attorneys in the area of class action jurisprudence.

At the outset, I had hoped to one day create a destination site, a community of sorts, providing information about class actions and other complex litigation issues.  The movie studio sales pitch for this concept would be "the Politico of class action and complex litigation." These improvements won't happen overnight, but they are coming.  Post frequency may actually decline for a few weeks as a result of several factors, including my need to get situated at Initiative Legal Group LLP and the general slow-down during the holidays.  However, we hope to build some momentum in 2009.  Until then, I will attempt to keep up with any new developments so I can keep you up to date.

On a related note, with my move to Initiative Legal Group LLP comes an improved ability to support practitioners interested in co-counseling arrangements or class action case referrals.  If  you need assistance, particularly in the Southern California area, don't hesitate to contact me.

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Poor Apple, sued yet again over iPhone 3G speeds

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This blog reported in September, and again in November, that Apple and AT&T were facing a flurry of proposed class action lawsuits regarding the performance of the iPhone 3G on AT&T's higher speed network.  On November 26, 2008, plaintiff James Pittman sued Apple for varrious product defects.  (Jim Dalrymple, Apple Faces Another 3G Speed Lawsuit (December 4, 2008) www.pcworld.com.)

My iPhone seems to do as well as any other cell phone at holding calls, which is to say that it is passable at that task.  The 3G speed is substantially better than Edge, and I get 3G in a significant portion of the Los Angeles area.  Just my experience.

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For the moment, California law is clear: no punitive damages for violations of labor code provisions regulating breaks

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Greatsealcal100Whether punitive damages are available for violations of various labor code provisions has been something of an open question in California. You may recall, for instance, that a jury found against Wal-Mart in the matter of Savaglio v. Wal-Mart, awarding $172 million to the class members, including $115 million in punitive damages.  In that particular case, after Wal-Mart argued that punitive damages amounted to a penalty on a penalty, Judge Ronald Sabraw rejected the argument that meal and rest break premiums were penalties.  That particular finding was later confirmed as the correct interpretation in Murphy v. Kenneth Cole (2007) 40 Cal.4th 1094.  In any case, without clear guidance on the question, it has seemed prudent to at least request punitive damages for such violations and let a Court say that they weren't recoverable.

Yesterday, however, a Court of Appeal approached this issue from a different perspective.  In Brewer v. Premier Golf Properties (December 3, 2008) the Court of Appeal (Fourth Appellate Distirct, Division One) reviewed, among other things, whether a punitive damage award for violation of various Labor Code sections was valid.  The Brewer Court concluded that punitive damages are not available for several violations of the Labor Code: 

“We are convinced, both by application of the "new right-exclusive remedy" doctrine and under more general principles that bar punitive damages awards absent breach of an obligation not arising from contract, punitive damages are not recoverable when liability is premised solely on the employer's violation of the Labor Code statutes that regulate meal and rest breaks, pay stubs, and minimum wage laws.

(Slip op., at pp. 10-11.)  The Brewer case was an individual action, but it is covered here because of the significant impact on many wage & hour class actions.  If you are curious about the "new right-exclusive remedy" doctrine, take a look at Rojo v. Kliger (1990) 52 Cal.3d 65.

It is worth noting that Savaglio remains on appeal and may ultimately affect this area of law.  However, Savaglio has been stayed pending the outcome in Brinker, so it will be several years before that case moves forward.

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A special thank you to those who provided support and assistance during a surprisingly short job search

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I'd like to extend a special thank you to those members of the blawgosphere that provided support and assistance in my brief hiatus from gainful employment.  It is greatly appreciated.

The Complex Litigator will have an exciting announcement when the ink is dry on an employment arrangement, but I can say without getting ahead of myself that it looks like I will realize one of several long-term goals for this blog -- the expansion of the team of regularly contributing authors.  Fear not (assuming you like things how they are), as I will continue in my role as the primary editor and author.

Best regards,

H. Scott Leviant

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If a Protective Order governing trade secrets is issued in your case, don't do this (or get out your checkbook)

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Greatsealcal100This blog is intended to cover topics related to complex litigation.  But, based solely on the appellate decisions covered here, one might think that this site is restricted to class action topics.  While it is true that the bulk of appellate decisions mentioned on this blog relate to class actions, that has more to do with the fact that class actions are an easily "ascertained" subset of complex litigation than any decision to limit coverage of other "complex litigation" decisions.  Today, in Wallis v. PHL Associates (November 25, 2008), the Court of Appeal (Third Appellate District) considered some of the thorny issues related to trade secrets and protective orders in the context of reviewing a sanction award in the eyebrow-raising amount of $43,678.42.

The Court explained the conduct resulting in that unusually high sanction: 

“ In the course of this long-running litigation, the parties agreed to a protective order, which the court issued, allowing the parties to file under seal certain confidential documents containing alleged trade secrets. Cross-complainant PHL Associates, Inc. (PHL) filed the declaration of its attorney Tory E. Griffin, with attachments containing what PHL alleged were trade secrets. Although the declaration designated that it was filed under seal pursuant to the protective order and was sent to the trial court in a sealed envelope and labeled appropriately, the document later appeared in the court file available to the public.

Upon learning of the public availability of the declaration, attorney Mendoza notified her clients of the public availability. In an attempt to defeat PHL’s claim that the information attached to the declaration contained trade secrets, the Wallises and Mendoza had third-parties view and copy the declaration.

PHL, along with fellow cross-complainants Jeffrey T. Wichmann and Mary B. Holmes, filed a motion for sanctions pursuant to Code of Civil Procedure section 128.5 (section 128.5) against the Wallises and Mendoza for their conduct relating to the declaration. The trial court granted the motion, finding that the actions of the Wallises and Mendoza were frivolous and taken in bad faith.

(Slip op., at pp. 2-3.)  The Court of Appeal wasn't any more impressed with the conduct or the arguments than the trial court:  "The position of the Wallises and Mendoza, that the appearance of the declaration in the court’s public file allowed them to disclose the information attached to the Griffin declaration, was frivolous. And they acted in bad faith when they disclosed the information."  (Slip op., at pp. 3-4.)

File this under too cute by half.  Protective Orders are fairly common in class actions and other types of complex litigation.  But, in my experience, Protective Orders are not taken as seriously as they should be.  This decision is a painful reminder that a court may not look favorably on cynical attempts to end-run a protective order.  And this (disregarding protective orders) may be more common that you might think.  I was commended by a trial court recently for not using information subject to a "use" protective order, despite an urgent need to do so.  Following the trial court's order shouldn't have been so unusual as to receive praise, but it was.  Just remember that they call them protective Orders for a reason.

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Are you in Los Angeles? And are you hiring?

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Having accomplished what I set out to do in my last endeavor somewhat faster than anticipated, I now find myself looking for my next challenge.  Anyone interested in working with a somewhat opinionated attorney (who is willing to dial down those opinions during work hours) with quite a bit of class action experience is welcome to contact me by e-mail: 

thecomplexlitigator [at] leviant.net.

It only hurts a little to ask, right?

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GUEST BLOGGER: Sergei Lemberg from lemonjustice.com on the "Loser Pays" system and why it hurts consumers

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THE COMPLEX LITIGATOR:  As a new feature of this blog, I am hoping to provide regular visitors with some added variety through guest authors that cover topics related to, but outside the scope of, this blog. 

Sergei Lemberg, an attorney who practices lemon law and blogs at www.lemonjustice.com is sitting in the guest blogger’s chair today.

“Loser Pays” and Its Impact on Consumers

Every state has a Lemon Law, which requires a manufacturer to give you a refund or a replacement vehicle if they can’t fix a new car’s defect within a certain number of attempts. As we all know, car manufacturers will try to do whatever they can to get out of compensating a consumer who has a lemon. So, when a manufacturer refuses, it’s up to the consumer to file a Lemon Law claim.

A number of states require that the consumer enter an arbitration program run by either the manufacturer or the state. The rationale is that, if the two parties’ differences can be smoothed out, it won’t burden the court system. In practice, however, car manufacturers have legal teams that fight Lemon Law claims – whether in arbitration or in the court system. It’s much more likely that consumers will have positive outcomes and get the compensation they deserve when they hire a Lemon Law attorney. This is because most state laws say that, if the consumer wins the case, the manufacturer has to pay the consumer’s attorney’s fees. Therefore, manufacturers need to weigh the cost of fighting the claim (that is, the cost of their legal team plus the consumer’s lawyer) against agreeing to a buyback or replacement vehicle. If the consumer has a lawyer and a good case, chances are that the manufacturer will back down and pay up.

England and many other European countries have what’s termed a “loser pays” policy, whereby whomever is on the losing side of a legal action has to pay the legal fees of the prevailing party. While this might seem fair on the face of it, loser pays undermines the foundation of Lemon Laws and other laws that include what’s termed “fee-shifting.” Think about it. The average consumer simply doesn’t have the resources to risk filing a Lemon Law claim and having to pay GM’s or Chrysler’s legal bills. No one in their right mind would take a car manufacturer to court – even if they had a solid case.

Lemon Laws certainly don’t provide consumers with an unfair advantage; if anything, they make it difficult to get relief by imposing stringent requirements on consumers. Awarding attorneys’ fees in a successful Lemon Law claim puts the onus where it belongs: squarely on the shoulders of the car manufacturer who made and sold a defective product.

It goes without saying, however, that there are two sides to every story. There are some who think that attorney’s fees are causing the legal system to run amok, and who propose reforms that would make it harder for wronged consumers to fight back.

The problem with this position is twofold. First, consumers are regularly abused by big car companies, who have bottomless pockets with which to fight claims against them. Second, because Lemon Law claims result in relatively low dollar amount settlements (thousands of dollars instead of hundreds of thousands or millions of dollars) it’s impossible for attorneys to bring cases without also being awarded fees.

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In Vasquez v. State of California Supreme Court declines to impose a pre-filing resolution requirement to all 1021.5 fee requests, but...

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Greatsealcal100This morning the California Supreme Court issued an opinion that examined the limits on its attorney fee opinion in Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 560 (Graham). "  In Vasquez v. State of California (November 20, 2008), the Supreme Court was asked to extend Graham, a catalyst theory case, to all Code of Civil Procedure section 1021.5 requests for fees resulting from a public benefit.  The summary of the holding neatly encapsulates the Supreme Court's "no, and yes" answer to that invitation: 

“Today we revisit one of the “limitations on the catalyst theory” adopted in Graham, supra, 34 Cal.4th 553, 575 — specifically, the rule that the plaintiff in a “catalyst case,” to recover attorney fees under section 1021.5, “must have engaged in a reasonable attempt to settle its dispute with the defendant prior to litigation” (Graham, at p. 561). While this is not a catalyst case (see post, at p. 19), defendant argues the rule just mentioned should apply whenever fees are sought under section 1021.5. We hold that no such categorical rule applies in noncatalyst cases. In all cases, however, section 1021.5 requires the court to determine that “the necessity and financial burden of private enforcement . . . are such as to make the award appropriate . . . .” (Ibid., italics added.) In making this determination, one that implicates the court’s equitable discretion concerning attorney fees, the court properly considers all circumstances bearing on the question whether private enforcement was necessary, including whether the party seeking fees attempted to resolve the matter before resorting to litigation.

(Slip op., at pp. 2-3.)  So you don't have to attempt to resolve a matter before litigation to claim sectin 1021.5 fees, but the Court can consider whether you did as a factor when deciding if it will award fees under section 1021.5.  I suppose this means that the reasonability of the defendant and its counsel and the inclinations of the particular judge hearing the case will now have a lot more to do with whether a plaintiff is successful in recovering fees under 1021.5.  An intractable defendant with obstructive counsel will have a hard time convincing a court that it would have cooperated without the need for litigation had the plaintiff but asked.  On the other hand, a very cooperative defendant could save itself fees under this section by demonstrating its willingness to change practices and correct problems.

I wonder if this mixed set of incentives will change any behaviors on either side of the bar.

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A consumer must tender the purchase price for goods or services in order to have standing to sue for discriminatory practices (Surrey v. Truebeginnings)

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Greatsealcal100California has tended to be on the flexible side when it comes to the issue of standing.  While arguing before one trial court judge in a complex litigation department, I mentioned the lenient standing requirements in California, and the judge interrupted and said, roughly, "I'd go further.  I'd say that California essentially has no concept of standing in most instances."  Thus, when a Court of Appeal defines standing parameters for a consumer-oriented statute, it is noteworthy.

In addition, there are decision that, though not directly conerning class actions, resolve issues that affect the potential for future class actions.  Decisions that define standing are one such category of cases.  In Surrey v. Truebeginnings, et al. (November 18, 2008), the Court of Appeal (Fourth Appellate District, Division One) defined standing to sue for violations of the Unruh Civil Rights Act (Civ. Code, § 51, et seq.) and the Gender Tax Repeal Act of 1995 (Civ. Code, § 51.6):

“The critical issue in this appeal is whether someone who presents him or herself to a business with the intent of purchasing its services or products, but becomes aware of that business's practice of charging different amounts for such services or products based on gender and thereafter does not purchase those services or products, is aggrieved by that practice so as to have standing to sue for violations of the Unruh Civil Rights Act (Civ. Code, § 51 et seq. (the Unruh Act)) and the Gender Tax Repeal Act of 1995 (Civ. Code, § 51.6 (the Gender Tax Repeal Act)). (All further statutory references are to the Civil Code.) In a case of first impression in California, we answer this question in the negative and adopt a bright-line rule that a person must tender the purchase price for a business's services or products in order to have standing to sue it for alleged discriminatory practices relating thereto.

(Slip op., at p. 2.)  The core facts were easily summarized by the Court of Appeal:

“In November 2003, TrueBeginnings, LLC, began operating an online matchmaking service, True.com (referred to collectively with TrueBeginnings, LLC and its parent company, HDVE, LLC, herein as TrueBeginnings). The service was very successful, but it had a disproportionately high percentage of male patrons; in November 2004, TrueBeginnings sought to rectify this imbalance by offering certain free services to women who joined. In early May 2005, Surrey visited TrueBeginnings' website with the intent of utilizing its services; after discovering the discrepancy in its charges, he did not, however, subscribe to or pay for its services.

(Slip op., at p. 2.)

While I am inclined to agree with the Court's overall reasoning, it pains me to do so in this case.  I happen to believe that online dating services deserve tremendous scrutiny as an industry that has the ability (whether exercised or not) to get away with deceptive activities not tolerated in any other business.  The unwillingness of people to bring their customary skepticism into the world of online dating services leaves them open to all manner of deception schemes, including the potential for padded profile roles, computer-generated contacts, imposter members and other frauds difficult to detect or prove without unfettered access to the inner workings of the service's computer system.  If there is an industry where caveat emptor applies, online dating is it.

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