Wednesday, March 24, 2010

New Gift Card Regulations Restricting Fees and Expiration Dates Issued by Federal Reserve

On March 23, 2010, the Federal Reserve Board issued final rules to restrict the fees and expiration dates that may apply to gift cards. As explained in a press release on the Fed website, the rules are intended to “protect consumers from certain unexpected costs and require that gift card terms and conditions be clearly stated.” Specifically, “[t]he final rules prohibit dormancy, inactivity, and service fees on gift cards unless: (1) the consumer has not used the certificate or card for at least one year; (2) no more than one such fee is charged per month; and (3) the consumer is given clear and conspicuous disclosures about the fees.? Moreover, “[e]xpiration dates for funds underlying gift cards must be at least five years after the date of issuance, or five years after the date when funds were last loaded.”

The new regulations, which are set to take effect on August 22, 2010, presumably could serve as the predicate of a UCL unlawful prong claim. The regulations are contained in long form here, and summary form here.

Northern District Certifies “Early Payment” Class in Miletak v. Allstate Ins. Co.

On March 5, 2010, District Court Judge, James Ware, certified a California UCL and unjust enrichment class brought against defendants Allstate Insurance Company and Allstate Indemnity Company in Miletak v. Allstate Ins. Co., 2010 U.S. Dist. LEXIS 26913 (N.D. Cal. Mar. 5, 2010). Plaintiff’s proposed action alleges that defendants were unjustly enriched by defendants’ alleged use of “misleading bills to obtain payment of insurance premiums thirty or more days before the renewal date of insurance policies between the parties.” See id., at 1-2. Under the plaintiff's theory, class members would be entitled to the value of the interest earned over the thirty days defendants had use of premium payments before they were due – a remedy the Court found “restitutionary in nature, and therefore recoverable under the UCL.” See id., at 21. As reasoned by the Court, certification was appropriate insofar as plaintiffs’ claims were “based on identical statements received during a common time period and allege a uniform type of harm….” See id., at 34-35.

Tuesday, March 23, 2010

Two Responses Filed to Depublication Request in Jaimez v. DAIOHS

Two responses have been filed to the March 5, 2010 request to depublish the Second District’s opinion in Jaimez v. Daiohs USA, Inc., 181 Cal. App. 4th 1286 (2010). The Requests may be found here and here.

Pursuant to CRC 8.1125, the response deadline has expired. See CRC, Rule 8.1125(b)(1) (“Within 10 days after the Supreme Court receives a request under (a), the rendering court or any person may submit a response supporting or opposing the request.”)

Friday, March 19, 2010

Central District Denies Final Approval of Honda Hybrid Class Settlement: True v. Am. Honda Motor Co.

On February 26, 2010, Central District Judge, Virginia A. Phillips, entered a detailed order denying final settlement approval in True v. Am. Honda Motor Co., 2010 U.S. Dist. LEXIS 23545 (C.D. Cal. Feb. 26, 2010). Plaintiff’s case, brought on behalf of a putative class of Honda Civic Hybrid (“HCH”) purchasers and lessees, alleged defendant engaged in false and misleading advertising “regarding the fuel economy of HCHs” between 2003 and 2008. See id., at 1-4. The proposed settlement sought to resolve such claims by offering four potential benefits, including: (1) a fuel economy DVD, (2) rebates toward the purchase of a Honda vehicle, and (3) a $100 cash award, limited to those persons who made a documented complaint regarding fuel economy. See id., at 9-12.

The Court's finding that the proposed settlement was not fair, reasonable or adequate turned on two primary issues:

First, the Court concluded that the Settlement unduly favored persons who formally complained. As reasoned by the Court, the provision limiting monetary payment to this category of persons was not based on a viable difference in the alleged injury/damage sustained, and as a result, provided unduly preferential treatment this category of individuals. See True, 2010 U.S. Dist. LEXIS 23545, at 27-34 (“the settlement here draws an arbitrary distinction among class members with identical legal claims and injuries, and allows some to receive a cash award, and others only a DVD and limited rebate. This is patently unfair, and counsels against approval of the proposed settlement.”).

Second, the Court concluded that the primary relief offered (i.e. “the $500 or $1000 rebate given to class members who purchase another Honda or Acura”) rendered the settlement “a coupon settlement” [True, 2010 U.S. Dist. LEXIS 23545, 34-37], and that the value of the coupon benefit was insufficient in relation to the relative strength of the plaintiffs’ claims. See id., at 37-64 (“The Court has grave doubts as to the adequacy of the value of such a settlement of Plaintiffs' colorable claims, particularly in light of the three million dollar fee request. The Court thus finds the value of the settlement weighs against approval.”).

The Court’s order has some great discussion relating to the evaluation of coupon type settlements. The court was careful to note that such settlements are not improper, but face an uphill battle due to the inherent difficulty fulfilling the policy objectives underpinning use of the class action device. See id., at 36-37 (noting that “such settlements are generally disfavored.. due to three common problems…: ‘they often do not provide meaningful compensation to class members; they often fail to disgorge ill-gotten gains from the defendant; and they often require class members to do future business with the defendant in order to receive compensation.’”),

Wednesday, March 17, 2010

Central District Denies Certification of Printer Cartridge Defect Class in Kandel v. Brother Int'l Corp.

On February 1, 2010, Central District Judge Dale Fischer denied plaintiffs’ motion to certify a class arising out of an alleged Brother printer cartridge defect in Kandel v. Brother Int'l Corp., 2010 U.S. Dist. LEXIS 23493 (C.D. Cal. 2010). Plaintiffs sought to certify UCL and CLRA claims based on a theory alleging defendants (1) “designed Brother printers so as not to utilize all of the toner in the toner cartridges used in the printers”, and (2) “misled [the proposed class] … into believing that all of the toner in each cartridge would be used.” See id., at 1.  As noted by the Court, defendants did not deny that the printers do not utilize all of the toner in the cartridges, but claimed that this was an intended feature that was “included to prevent poor print quality and damage to the print drum caused by use of degraded, recycled toner.” See id., at 2. In denying certification, the Court concluded that the named plaintiff’s failed to establish the elements of typicality and adequacy.

With regard to typicality, the Court concluded that plaintiffs were subjected to unique defenses relating to standing that cut to the core of their case, including factual disputes as to (1) whether the subject printer cartridges were purchased by corporate entities associated with plaintiffs, depriving plaintiffs of “consumer” status under the CLRA and (2) whether the named plaintiffs could establish “materiality” with regard to the challenged representations due to deposition testimony conflicting with the plaintiffs’ central theory of the case. See id., at 5-9.

With regard to adequacy the Court took a seemingly extreme position, concluding that “[c]lass counsel is not adequate to prosecute the rights of an extensive class of absent class members as shown by the numerous errors and deficiencies in representation” which in the Court’s view, “cost the Court and Defendants unnecessary time and expense, and … either prejudiced or ran a high risk of prejudicing the absent class members.” See id., at 12-13. As explained by the Court, these errors turned largely on the plaintiffs' failure to serve the CLRA notice on one of the corporate defendants, as well as counsels' decision to use the term “consumer” in the proposed class definition rather than the term “person”:
The failure to give proper CLRA notice has prevented the class from seeking damages under the CLRA. This was obviously prejudicial to the class. The failure to serve BIL could have seriously prejudiced the ability of the class to acquire necessary documents and to hold Defendants liable. BIL was only reintroduced into the case due to the Court's highly charitable consolidation and amendment to the standing order. (See Docket No. 47.) Even now, proposed class counsel fails to consider the importance of whether the named Plaintiffs are "consumers." In the motion for class certification, counsel has carelessly redefined the class to be made up of "consumers" -- rather than "persons" or some other broader term -- without any apparent consideration that "consumer" is a term of art defined under the CLRA that would exclude businesses and business uses from the class. Due to this choice of words, the parties have had to litigate a distracting and unnecessary side issue of whether the class is really limited to "consumers," with Defendants obviously arguing that it is so limited and Plaintiffs backtracking from their own proposed class definition.
See Kandel v. Brother Int'l Corp., 2010 U.S. Dist. LEXIS 23493, at 14-15.

Tuesday, March 16, 2010

Petition for Review Filed in Jaimez v. Daiohs USA, Inc.

On March 15, 2010, defendant Daiohs USA, Inc. filed a petition for review in Jaimez v. Daiohs USA, Inc., 181 Cal. App. 4th 1286 (2010). The docket entry may be found here. Prior discussion of the opinion may be found here, here, and here.

Wednesday, March 10, 2010

Northern District Certifies Prisoner Transport Class in Schilling v. Transcor Am.

On February 16, 2010, Judge Susan Illston of the Northern District certified a prisoner transport class against Transcor America, LLC, in Schilling v. Transcor Am., 2010 U.S. Dist. LEXIS 20786 (N.D. Cal. Feb. 16, 2010). Plaintiffs’ action alleges that defendant, whose business entails the transportation of pretrial detainees and prisoners, subjected prisoners in tow for more than 24 hours to inhumane conditions during the journey, including being shackled and kept in a cage, and deprived of access to regular food, water, and bathrooms. The Court certified a rule 23(b)(3) damages class based on its finding that plaintiffs’ constitutional claims arose from defendant’s systematic transport practices, including a wholesale failure to enact policies ensuring that minimal constitutional treatment was provided:
Plaintiffs challenge the conditions to which they were subjected during 24 hour transports, and it is undisputed that all inmates are restrained during such transports and not provided with a "rest over night." As in Baca and Dunn, plaintiffs challenge the failure to enact policies to ensure adequate access to food, water, and bathroom facilities, and they allege that as a result of such failures, they have been subject to the whim of TransCor employees responsible for each transport. In order to establish liability, plaintiffs must objectively show that they were deprived of something "sufficiently serious." Foster v. Runnels, 554 F.3d 807, 812 (9th Cir. 2009). Whether inmates who have been transported for more than 24 hours and who are not allowed to sleep overnight have been deprived of something "sufficiently serious" can be determined on a classwide basis. While there is also a subjective component to the analysis in that inmates must also show that a deprivation occurred with deliberate indifference the inmates' needs, id., that inquiry does not mean that the legality of policies and practices applied to all inmates cannot be litigated on a class basis.
Schilling, 2010 U.S. Dist. LEXIS 20786, at 31-33.

The Court also certified plaintiff’s claim under Cal. Civil Code § 52.1 – an enabling statute providing a private right of action for intentional deprivation of constitutional rights – despite acknowledging a split in authority on whether such a cause of action could be maintained on a representative basis.  See Schilling, 2010 U.S. Dist. LEXIS 20786, at 34-37.

Monday, March 8, 2010

Depublication Request filed in Jaimez v. Daiohs USA, Inc.

On March 5, 2010, a request was filed with the California Supreme Court to depublish the Second District’s opinion in Jaimez v. Daiohs USA, Inc., 181 Cal. App. 4th 1286 (2010). The request may be found here. This case was previously ordered to be published by the Second District, Division One, pursuant to several requests, including a request filed by myself.  Prior discussion of the opinion may be found here, here, and here.

Wednesday, March 3, 2010

Ninth Circuit Reverses Dismissal of State-Law Commute Time Claim in Rutti v. Lojack Corp.

On March 2, 2010, the Ninth Circuit reversed, in part, a district court’s grant of summary judgment in Rutti v. Lojack Corp., 2010 U.S. App. LEXIS 4278 (9th Cir. 2010). The case – a proposed class action/FLSA collective action brought on behalf of Lojack alarm installation technicians – challenged Lojack’s failure to pay for time spent commuting to client locations. The district court granted Lojack’s summary judgment, holding that the plaintiff’s commute was not compensable as a matter of law under both California law, as well as under the Portal to Portal Act (a component of the FLSA).

With regard to FLSA claim, the Court upheld the district court’s order, reasoning that a 1996 amendment to the Portal to Portal Act permitted an employer and an employee to informally agree that commute time and preliminary/postliminary activities are non-compensable where the employee uses a company vehicle. See Rutti, 2010 U.S. App. LEXIS 4278, at 11-14.

However, the exact opposite finding occurred with regard to the plaintiff’s state-law claim. As reasoned by the Court, “California law requires that employees be compensated for all time ‘during which an employee is subject to the control of an employer’” and based on Lojac’s policies, “[t]here is simply no denying that Rutti was under Lojack's control while driving the Lojack vehicle en route to the first Lojack job of the day and on his way home at the end of the day.” See Rutti, 2010 U.S. App. LEXIS 4278, at 40-44 (citing Morillion v. Royal Packing Co., 22 Cal. 4th 575, 578 (2000)).

Another point of particular significance -- the Court noted that the Ninth Circuit has not adopted a hard and fast rule that preliminary/postliminary activities which are only 10 to 15 minutes in duration are not per se de minimis under the FLSA:
Furthermore, we have not adopted a ten or fifteen minute de minimis rule. Although we noted in Lindow, that "most courts have found daily periods of approximately 10 minutes de minimis even though otherwise compensable," we went on to hold that "[t]here is no precise amount of time that may be denied compensation as de minimis" and that "[n]o rigid rule can be applied with mathematical certainty." 738 F.2d at 1062. The panel went on to set forth a three-prong standard, which would have been unnecessary if the panel had intended to adopt a ten or fifteen minute rule.
See Rutti, 2010 U.S. App. LEXIS 4278, at 31-32.

Tuesday, March 2, 2010

Second District Publishes Opinion Reversing Certification of Listerine False Advertisement Class: Pfizer Inc., v. Superior Court

On March 2, 2010, the Second District (Division 3) published its opinion, issued last week, in Pfizer Inc., v. Superior Court, __ Cal.App.4th __ (2010). The Court’s opinion reconsiders a 2006 decision that was subsequently taken up by the California Supreme Court and transferred back subsequent to the decision in Tobacco II. The Court’s new opinion, like its previous decision, concludes that the trial court abused its discretion by certifying a broad restitutionary class comprised of “all persons who purchased Listerine in California" during a six-month period.

The heart of the Court’s analysis turned largely on the short duration of the challenged promotional campaign coupled with the fact that there were a multitude of different Listerine bottles used during the time that did not contain the challenged misleading representation:
Here, the class certified by the trial court, i.e., all purchasers of Listerine in California during a six-month period, is grossly overbroad because many class members, if not most, clearly are not entitled to restitutionary disgorgement. The record reflects that of 34 different Listerine mouthwash bottles, 19 never included any label that made any statement comparing Listerine mouthwash to floss. Further, even as to those flavors and sizes of Listerine mouthwash bottles to which Pfizer did affix the labels which are at issue herein, not every bottle shipped between June 2004 and January 2005 bore such a label. Also, although Pfizer ran four different television commercials with the "as effective as floss" campaign, the commercials did not run continuously and there is no evidence that a majority of Listerine consumers viewed any of those commercials. Thus, perhaps the majority of class members who purchased Listerine during the pertinent six-month period did so not because of any exposure to Pfizer's allegedly deceptive conduct, but rather, because they were brand-loyal customers or for other reasons.
The circumstances herein stand in stark contrast to those in Tobacco II, where the tobacco industry defendants allegedly violated the UCL "by conducting a decades-long campaign of deceptive and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease." (Tobacco II, supra, 46 Cal.4th at p. 306.) Tobacco II allows a class representative who actually relied on the defendants' misleading advertising campaign to represent other class members who may have lost money by means of the unfair practice. Tobacco II does not stand for the proposition that a consumer who was never exposed to an alleged false or misleading advertising or promotional campaign is entitled to restitution.
As Pfizer argues, it is one thing to say that restitution can be awarded to purchasers of cigarettes where the cigarettes were marketed as part of a massive, sustained, decades-long fraudulent advertising campaign on the grounds the tobacco industry defendants "may have . . . acquired" (§ 17203) the purchase price as a result of such a pervasive fraudulent campaign. It is entirely another to say that restitution [*18] can be awarded to all purchasers of Listerine in California over a six-month period where the undisputed evidence shows many, if not most, class members were not exposed to the "as effective as floss" campaign and therefore did not purchase Listerine because of it.
In sum, the certified class, consisting of all purchasers of Listerine in California over a six-month period, is overbroad because it presumes there was a class-wide injury. However, large numbers of class members were never exposed to the "as effective as floss" labels or television commercials. As to such consumers, there is absolutely no likelihood they were deceived by the alleged false or misleading advertising or promotional campaign. Such persons cannot meet the standard of section 17203 of having money restored to them because it "may have been acquired by means of" the unfair practice. In the language of section 17203, with respect to perhaps a majority of class members, there is no doubt Pfizer did not obtain any money by means of the alleged UCL violation.
See Slip Opinion, at 11-12.