CALIFORNIA CLASS ACTION LAW

Tag: United States Court of Appeals for the Ninth Circuit

Ninth Circuit Holds That Deadline for Objection to Class Action Fee Award Must Be Set for Date After Plaintiff’s Counsel Files Fee Motion

B. B. Law, Attorney, Bozeman, Montana. (1911)
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The Ninth Circuit Court of Appeals yesterday clarified the timing of objections to class counsel’s fee requests under Fed. R. Civ. Proc. Rule 23(h), holding that objectors must be given a deadline to object after plaintiff’s fee application is submitted.  The litigation in In re Mercury Interactive Corp. Securities Litigation, No. 08-17372, — F.3d —-, 2010 WL 3239460 (9th Cir. Aug. 18, 2010), which involved stock option backdating, settled early on, at the motion to dismiss stage.

A settlement class was certified, the settlement of $117.5 million in cash was approved, and attorneys’ fees of 25% ($29.375 million) were awarded pursuant to the settlement agreement.  No objections were made to the settlement itself, but two objections were made to the proposed attorneys’ fees.  Id. *2.  The court described lead counsel’s fee application as follows: Read the rest of this entry »

Central District Denies Class Certification in Ink Jet Toner Class Action

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In Shein v. Canon U.S.A., Inc., No. CV 08-7323 CAS (Ex), 2010 WL 3170788 (C.D. Cal. Aug. 10, 2010), Judge Christina Snyder considered and denied a motion for class certification based on a lack of predominance under 23(b)(3).  The court held that “plaintiff fails to demonstrate how he will establish on a class-wide basis that a material amount of ink remained in each class members’ cartridges when the ‘ink out’ messages appeared.”

Plaintiff Steven Shein filed the class action case against defendant Canon U.S.A., Inc. (“Canon”) on November 4, 2008.  On January 2, 2009, plaintiff Shein, joined by plaintiff Jason Insalasco, filed a first amended complaint (“FAC”). In Plaintiffs third amended complaint (“TAC”), Plaintiff alleged three claims: (1) violation of CLRA; (2) violation of UCL; and (3) conversion. On September 22, 2009, the Court denied defendant’s motion to dismiss plaintiff’s CLRA claim.

On April 12, 2010, plaintiff Insalasco filed the instant motion for class certification. At the hearing, the Court tentatively indicated that it would grant certification as to plaintiff’s UCL claim and deny certification as to plaintiff’s CLRA claim. Upon further review of the record and the positions advanced at oral argument, the Court concluded that plaintiff’s motion for class certification should be denied without prejudice.

Class Definition

Plaintiff sought certification of the following class, with regard to his claims for violation of CLRA and for violation of UCL:

All residents of the State of California who purchased a Canon Pixma series inkjet printer on or after November 4, 2004.

The gravamen of the suit is that these Canon-brand Pixma series inkjet printers uniformly misinform users that “ink has run out” and that they must replace the purportedly empty ink cartridge, when in fact, at the time Canon issues its “ink out” messages, these ink cartridges still contain a significant amount of useable ink.  According to plaintiff, Canon earns a substantial profit from the sale of each cartridge, and thus, employs these deceptive messages in order to increase the sale of replacement ink cartridges.

23(a)

Defendant diputed typicality, but not numerosity, commonality, or, to a substantial degree, adequacy.  With regard to typicality, the court found that “[n]otwithstanding the asserted differences between plaintiff and members of the proposed class, plaintiff’s claims are based on an alleged common course of conduct by Canon whereby defendant’s Pixma inkj et printers prematurely indicate that an ink cartridge is out of ink and needs to be replaced. Therefore, plaintiff’s claims arise from the ‘same event or course of conduct’ as those of the various class members, as required under Rule 23(a)(3), and are typical of the claims of the proposed class.”

23(b)

Plaintiff sought certification under Rule 23(b)(3).  In analyzing predominance and commonality, the court found two “crucial questions”:

(1) whether plaintiff has shown that every printer model in the proposed class displays the same, or substantially the same, “ink out” message; and

(2) the existence of a plausible class-wide method for proving that when these “ink out” messages appear there is in fact a material amount of usable ink remaining in each class members’ printer cartridges, and not only a de minimis amount. Accordingly, the question is whether plaintiff can establish on a class-wide basis the materiality of Canon’s misrepresentations regarding the remaining ink level of the printers in question and that these allegedly deceptive statements caused injury to members of the class.

Despite Canon’s argument that different printer users receive a wide array of messages depending on their printer model and the operating system running on their computer, the Court was unpersuaded that these variations are the type of “material variation” in defendant’s representations regarding the ink level that would render fraud-based claims unsuitable for class treatment.  Citing In re First Alliance Mortgage Co., 471 F.3d 977, 990, 992 (9th Cir.2006) (“The class action mechanism would be impotent if a defendant could escape much of his potential liability for fraud by simply altering the wording or format of his misrepresentations across the class of victims.”). The court concluded that “it appears, that all of the printers plaintiff is seeking to certify issue a substantially similar ‘ink out’ message, combined with the ‘hard stop’ of the printer while receiving that message, and that class members allegedly receive this message before the printer cartridges may in fact be entirely empty.”  Id. *7.

The court then considered whether plaintiff had shown a plausible class-wide method for proving that these “ink out” messages appear when there is in fact a material amount of usable ink remaining in each class members’ printer cartridges, and thus constitute actionable conduct common to the entire Class.

Claim Under the UCL

Plaintiff argued that common issues of law and fact predominate as to his claim under the “fraudulent” prong of the UCL.  The court disagreed, finding that plaintiff failed to demonstrate his basis for establishing that a material amount of ink remained in each class members’ cartridges when the “ink out” messages appeared:

Although “relief under the UCL is available without individualized proof of deception, reliance, and injury,” see Tobacco II Cases, 46 Cal. 4th at 312, 320, in this case, plaintiff fails to demonstrate how he will establish on a class-wide basis that a material amount of ink remained in each class members’ cartridges when the “ink out” messages appeared. If only a de minimis amount of ink remained at that point, then no misrepresentation or omission was made, and certainly not one that could be deemed material or “likely to deceive” a “reasonable consumer” under the UCL. Plaintiff’s attempt to rely solely on the deposition testimony of Canon’s employee Yamamoto is unavailing. First, the Court is unpersuaded that his testimony can be construed in the way advanced by plaintiff–namely, that Canon concedes that all of its printers are programmed to “compensate” for a 10% margin of tolerance in determining when an “ink out” messages are displayed. Further, the fact that there is a ten percent variance inherent in the printer technology does not address the critical question of whether there is in fact a material amount of useable ink remaining in each class members’ printer cartridges when the “ink out” message appears. Because plaintiff fails to submit any evidence or expert testimony to the contrary, it appears based on the record that whether a printer receives an “ink out” message before, after, or at the same time that the ink in the cartridge has run out is an individual issue of fact that must be determined for each printer. Accordingly, the Court concludes, as to plaintiff’s UCL claim, that common issues of fact do not predominate over individual ones.

Claim under the CLRA

For the same reasons, the court found that plaintiff filed to satisfy the preodminance requirement for his CLRA claim.

In the instant case, the gravamen of plaintiff’s allegations is that Canon’s “ink out” statements and its concealment of the inaccuracy inherent in its ink level detection methods are material enough to compel a reasonable consumer to believe that the ink cartridge is empty and needs to be replaced. However, as noted previously, plaintiff fails to demonstrate how he will establish on a class-wide basis that a material amount of ink remained in each class members’ cartridges when the “ink out” messages appeared. Without such a showing, plaintiff cannot establish that “material misrepresentations were made to the class members [such that] at least an inference of reliance arises as to the entire class.” Mass. Mut., 97 Cal.App. 4th at 1292-93. Thus, the Court concludes that plaintiff fails to satisfy the predominance requirement as to his CLRA claim.

Thus, the court denied certification.

By CHARLES H. JUNG

Southern District of California Denies Remand in Wage & Hour Case Asserting CAFA Jurisdiction

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In Johnson v. U.S. Vision, Inc., No. 10-CV-0690 BEN (CAB), 2010 WL 3154847 (S.D. Cal. Aug. 9, 2010) the Southern District of California faced a remand motion in a wage and hour case that had been removed pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. §§ 1332, 1441, 1453.

Judge Roger T. Benitez denied the motion to remand.  Defendant presented a calculation of damages, supporting its calcualtions with declaration from, among other people, the Assistant Controller, Operations, for U.S. Vision, Inc., responsible for enforcing Defendants’ payroll policies and procedures.  The declaration set forth Plaintiff’s most recent hourly rate of pay, as well as the specific number of optical managers and optechs employed during the Class Period, average hourly rates of pay for managers and optechs, number of employees who separated their employment with Defendants, and number of possible wage statements for each employee per year.

Plaintiff argued that Defendants miscalculated the amount in controversy because:

Defendants erroneously assumed “each class member was damaged to the same extent that Plaintiff Johnson was, and that every putative class member, among other things, worked off the clock and incurred a break violation every single day of the entire class period.” Mot. 6. Plaintiff emphasizes that Defendants have access to more specific figures to calculate the amount in controversy and that “each [class] member can be identified using information contained in Defendants’ payroll, scheduling and personnel records.” Compl. ¶ 39.

But the Court held that absent a “persuasive argument that Defendants are required to prove actual damages in order to remove this action, however, the Court must consider the amount put in controversy by the Complaint, not the ultimate or provable amount of damages.”  (citing Rippee v. Boston Market Corp., 408 F. Supp. 2d 982, 986 (S.D. Cal. 2005).)  The Court found that, having based their calculations on allegations provided in the Complaint, Defendants proved with a legal certainty that CAFA’s jurisdictional threshold is satisfied.

Despite Plaintiff’s attempt to provide supplemental information in the motion to remand, Defendants were entitled to, and did, use the factual allegations in the Complaint to calculate the amount in controversy. See Gaus v. Miles, Inc., 980 F.2d 564, 567 (9th Cir. 1992) (holding that defendant must use specific factual allegations or provisions in the complaint to support its argument of proper removal). The Court finds that Defendants provided detailed and competent evidence supporting their calculations and showing, to a legal certainty, that the jurisdictional threshold under CAFA is met. To the extent subsequent events show that jurisdiction would not be proper, the Court can address remand at that time. 28 U.S.C. § 1447(c).

By CHARLES H. JUNG

Ninth Circuit Holds That No Private Right of Action Exists to Enforce the Provisions of § 13(a) of the Investment Company Act of 1940

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In a shareholder class action, Northstar Financial Advisors, Inc. v. Schwab Investments, et al., 2010 WL 3169400 (9th Cir. Aug. 12, 2010), the Ninth Circuit Court of Appeals addressed whether there is a private cause of action to enforce the provisions of § 13(a) of the Investment Company Act of 1940 (“ICA” or “1940 Act”), 15 U.S.C. § 80a-13(a).  That section generally requires an investment company to obtain shareholder approval before deviating from the investment policies contained in the company’s registration statement filed with the Securities and Exchange Commission (“SEC”).

The Court held that “nothing in § 13(a) as originally enacted or as subsequently amended either creates a private cause of action or recognizes one exists with the clarity and specificity required under Supreme Court precedent.”

Marc J. Gross argued for plaintiff-appellee Northstar Financial Advisors, Inc.

Darryl P. Rains argued for defendants-appellants Schwab Investments, et al.

The case was argued before Circuit Judges Mary M. Schroeder N. Randy Smith and Hon. James Maxwell Moody, the Senior United States District Judge for the District of Arkansas, who was sitting by designation.  Circuit Judge Schroeder wrote the opinion of the Court.

By CHARLES H. JUNG