District Court Magistrate Judge grants motion to compel deposition of withdrawing named plaintiff who was not a putative class member

United States Magistrate Judge Suzanne H. Segal (Central District of California) granted defedants' motion to compel the deposition of a named plaintiff that had filed a motion for voluntary dismissal and was not a putative class member.  Dysthe, et al. v. Basic Research, L.L.C., et al., ___ F.R.D. ___, 2011 WL 1350409 (C.D. Cal. Apr. 8, 2011).  The named plaintiffs Shalena Dysthe, Eric Hall and Chaunte Weiss filed a class action complaint alleging that various defendants made purportedly false claims concerning the efficacy of Relacore weight-loss products.  [I am shocked, shocked to hear of false claims related to the efficacy of a weight-loss product.]  When the defendants sought to schedule depositions, they were notified that Hall intended to dismiss his claims with prejudice.  The defendants responded that they would stipulate to the dismissal after the deposition.  Motions ensued.  Defendants argued that Hall's testimony was still relevant to certification.  Plaintiffs argued that Hall wouldn't even be a class member when his claims were dismissed with prejudice.

The Court explained, "Generally, to depose putative or absent class members, a party must show that 'discovery is both necessary and for a purpose other than taking undue advantage of class members.'"  Slip op., at 3.  Then the Court observed that, because Hall had not been dismissed, the showing required for discovery from putative class members was not applicable; Hall was still a party.  Even when dismissed, the Court found that Hall's testimony regarding his experience with Relacore would be highly relevant.

District Court holds defendant to four corners of complaint when granting motion to remand

United States District Court Judge William Alsup (Northern District of California) granted a motion by plaintiff Pineda to remand a class action back to the California Superior Court from whence it came.  Pineda v. Bank of America, N.A., 2011 WL 1134467 (N.D. Cal. Mar. 28, 2011).  "Wait, isn't that case name very similar to a recent decision from the California Supreme Court regarding statutes of limitation in Labor Code section 203 cases?"  So right you are.  That's why this isn't a garden-variety remand order.  In this case, the defendant argued that it analyzed the complaint back in 2007 and concluded that the amount in controversy should have been calculated on the basis of a one-year statute of limitation.  But when the California Supreme Court held otherwise, Bank of America claimed that it learned for the first time that the case was removable.  Judge Alsup rejected that argument, observing that the parties agreed that the complaint alleged a four-year statute of limitation, and under that four-year statute, the amount in controversy exceeded $5 million.  The time to remove expired back in 2007, when the defendant was in possession of a complaint that, within its four corners, alleged an amount in controvery high enough to invoke CAFA jursidiction.

And, as I noted when reporting on Pineda previously, this matter is handled by Gregory Karasik at Spiro Moss.

Reasonable lodestar hourly rates in the Northern District of California

For those keeping track of such things, United States District Court Judge Marilyn Hall Patel (Northern District of California) found "reasonable attorneys fees based on rates of $650 for partner services, $500 for associate attorney services and $150 for paralegal services. See Suzuki v. Hitachi, 2010 WL 956896 *3 (N.D.Cal. March 12, 2010)."  Faigman v. AT&T Mobility LLC, 2011 WL 672648 (N.D.Cal. Feb 16, 2011).  The opinion also noted that counsel requesting a higher rate should provide information supporting the departure from those presumptively reasonable hourly rates.

Ninth Circuit holds that district courts are limited to the complaint in deciding certain local controversy criteria for CAFA remand

On November 30, 2010, the Ninth Circuit agreed to hear a discretionary appeal in Coleman v. Estes Express Lines, Inc.  See prior post.  The Ninth Circuit accepted the appeal and provided some guidance in the Ninth Circuit as to whether such appeals should be taken.  Today, the Ninth Circuit issued its Opinion on the underlying issue.  Coleman v. Estes Express Lines, Inc. (9th Cir. Jan. 25, 2011).  Asked to decide whether a federal district court is limited to the complaint in deciding whether two of the criteria for the local controversy exception are satisfied, the Court held that the district court is so limited.

Coleman moved for remand under the local controversy exception. Estes opposed, arguing that two of the criteria for the local controversy exception were not satisfied. "First, Estes argued that Estes West had insufficient funds to satisfy a judgment, and that 'significant relief' therefore had not been 'sought' from it. See 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa). Second, Estes argued that Estes Express had almost complete control over the operations of Estes West, and that Estes West’s 'alleged conduct' therefore did not 'form a significant basis for the claims asserted by the proposed plaintiff class.' Id. § 1332(d)(4)(A)(i)(II)(bb)."  Slip op., at 5.  Estes then supplied a declaration to support its contentions.  The District Court refused to consider the declaration, finding that the complaint satisfied the criteria for remand.

Looking at the plain language of the statute, the Court found support for the concept that the pleadings govern the analysis:

The first criterion is whether “significant relief is sought” from a defendant who is a citizen of the state in which the suit is filed. 28 U.S.C. § 1332(d)(4)(A)(i)(II)(aa) (emphasis added). The word “sought” focuses attention on the plaintiff’s claim for relief — that is, on what is “sought” in the complaint — rather than on what may or may not be proved by evidence. The second criterion is whether the defendant’s “alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class.” Id. § 1332(d)(4)(A)(i)(II)(bb) (emphasis added). Like the word “sought,” the word “alleged” makes clear that the second criterion is based on what is alleged in the complaint rather than on what may or may not be proved by evidence.

Slip op., at 8.

The Court then reviewed the legislative history and concluded that it supported the construction applied by the Court.  The Court commentd in passing that the declaration supplied by Estes was probably insufficient even if the District Court could have considered it.

The Court ended with a note about variations in pleading standards between state and federal courts:

We are aware of the difficulties that can be created by different pleading requirements in state and federal courts. A plaintiff filing a putative class action in state court need satisfy only the pleading standards of that court. It is therefore possible that if a putative class action is removed from state to federal court under CAFA the complaint, as originally drafted, will not answer the questions that need to be answered before the federal court can determine whether the suit comes within the local controversy exception to CAFA jurisdiction. In that circumstance, the district court may, in its discretion, require or permit the plaintiff to file an amended complaint that addresses any relevant CAFA criteria.

Slip op., at 21-22. The Court then affirmed the remand.

District Court (E.D. Cal.) certifies a collective action of grape farm workers

United States District Court Judge Lawrence J. O'Neill (Eastern District of California) granted a motion to certify a collective action of grape farm workers pursuant to he Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 210 et seq.  Gomez v. H & R Gunlund Ranches, Inc., 2010 WL 5232973 (E.D.Cal. Dec 16, 2010).  The Court applied the more common two-stage certification approach used in FLSA actions.  The Court rejected the defendant's argument that the plaintiffs were obligated to provide evidence that other would opt-in if given the opportunity to do so.  The Court then issued instructions on required revisions to the proposed notice, including removal of all references to state law claims.  The Court refused to grant the defendant's request to limit the plaintiffs' ability to communicate with opt-in Plaintiffs.  The Court also refused to preclude additional notice through Spanish language media, noting that maximizing notice was beneficial and rejecting the argument that such media, often used in class actions, would somehow constitute a violation of professional responsibility rules.

Alvarez v. T-Mobile USA, Inc. stayed pending Concepcion

United States District Court Judge William B. Shubb (Eastern District of California) stayed a consumer class action pending against T-Mobile USA, Inc. until a decision is rendered in AT&T Mobility LLC v. Concepcion, --- U.S. ----, 130 S.Ct. 3322 (2010).  Alvarez v. T-Mobile USA, Inc. (E.D. Cal. December 7, 2010).  As with all cell phone companies bent on world domination and ultimate evil, T-Mobile's consumer contract includes an arbitration provision with a class action waiver.

Ninth Circuit defers the submission of Mazza v. American Honda Motor Company, Inc. pending outcome in Wal-Mart Stores, Inc. v. Dukes

In a somewhat dodgy maneuver, the Ninth Circuit, on December 7, 2010, issued an Order deferring submission of Mazza v. American Honda Motor Company, Inc. pending a decision in Wal-Mart Stores, Inc. v. Dukes, 603 F.3d 571 (9th Cir. 2010) (en banc), cert. granted, --- S.Ct. ----, 79 U.S.L.W. 3128 (U.S. Dec. 6, 2010) (No. 10-277).  Huh?  That seems like a stretch, unless you think that Wal-Mart will issue some sort of proclamation about all nationwide class actions, which seems to be far down on the list of likely outcomes.  More about Mazza here and here.

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.