Court Refuses to Certify Class in Product Defect Case

View David Wright's Complete Bio at robinsonbradshaw.comIn February 2014, the Panel on Multidistrict Litigation transferred a series of cases against Pella Corporation, a window manufacturer, to the District of South Carolina. Judge Norton dismissed most of the claims, but preserved claims alleging breach of express warranty with respect to Pella’s failure to repair or replace windows under its limited warranty. The windows, so plaintiffs alleged, leaked, and the plaintiffs sought certification of a class consisting of owners of structures in New York from 1997 through 2007 who had made a claim under Pella’s Limited Warranty. The “common issue” upon which Plaintiffs founded their class certification contentions was whether the windows were defective.

The court first grappled with whether changes in the design of the windows during the class period destroyed commonality under Rule 23(a). The issue there, as Judge Norton saw it, was whether “the design variations had any impact on the windows’ vulnerability to water intrusion.” Without deciding this issue, the court assumed that the design changes did not, and focused on another problem created for class certification – New York law requires that a warranty “actually be breached,” not simply that a product exhibit a defect. Pella, the court reasoned, could not be said to have breached the terms of its own warranty unless it received notice of a defect. And the multiple defects asserted compounded this issue, leading the trial judge to observe that “[w]hatever the outcome of plaintiffs’ proposed class trial, the court will need to make individual determinations as to the underlying cause of each class member’s warranty claim.” Without definitively resolving the commonality issue, the Court determined that plaintiffs had problems showing predominance under Rule 23(b)(3). The court acknowledged that it was not uncommon to certify product liability claims, but distinguished the case before it – which principally involved a challenge to the failure to repair and replace the windows, rather than the plaintiffs’ initial purchase of a defective window. Relying on Fourth Circuit precedent, the court observed that “[t]here is no question that individual inquiries into causation and affirmative defenses may preclude class certification.” (citing to Lienhart v. Dryvit Sys. Inc., and Broussard v. Meineke Discount Muffler Shops, Inc.).

This case is one of several where plaintiffs – recognizing potential commonality problems – have moved for issue certification under Rule 23(c)(4), a subject we have addressed in earlier posts here. Judge Norton noted that “the emerging majority,” including two district court decisions in the Fourth Circuit, have “found that a court ‘may use Rule 23(c)(4) to certify a class as to an issue regardless of whether the claim as a whole satisfies the predominance test in Rule 23(b)(3).’” Although Judge Norton seemed amenable to avoiding the predominance problem through issue certification, he articulated – like many courts – that issue certification would not make a Rule 23 proceeding “superior,” citing Farrar (which we previously covered here). In the end, the court’s decision was founded on this point, concluding that “class certification – even on the limited issue of whether the windows contained a defect – is not superior to other methods of adjudication.”

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Recent Filings – May Digest

View Amanda Pickens’ Complete Bio at RBH.com Not every class action court filing in North and South Carolina becomes a full-length post on our blog. Here is a recap of May’s filings:

Garey, et. al. v. James S. Farrin, P.C., et. al., No. 1:16-cv-00542 (M.D.N.C. May 27, 2016) (putative class action brought under the Driver’s Privacy Protection Act alleging that defendant law firms obtained protected personal information from DMV records and accident reports to market their legal services in violation of the Act).

Spallone v. Chen Sushi King, LLC, No. 4:16-cv-01684 (D.S.C. May 25, 2016) (purported collective and class action brought under the FLSA and state wage and hour laws for an improper “tip pool”).

McKinnon v. Knight Enters. S.E., LLC, No. 2:16-cv-01664 (D.S.C. May 24, 2016) (cable installation technicians filed purported collective and class action under the FLSA and state wage and hour laws alleging that defendant misclassified the technicians as independent contractors and failed to pay overtime and minimum wage).

Carmichael v. Hilton Head Island Dev. Co., LLC, et. al., No. 9:16-cv-01641 (D.S.C. May 23, 2016) (purported class action brought under state consumer protection laws alleging that defendants made several misrepresentations when they sold timeshare units at the beach).

South Carolina Clean Air Initiative, LLC v. Harbor Freight Tools, No. 7:16-cv-01631 (D.S.C. May 20, 2016) (putative class action brought under the Clean Air Act alleging that defendant hardware retailer defrauded consumers and sold engines without emissions warranty language required by the Clean Air Act).

Bettini v. Windstream of South Carolina, LLC, et. al., No. 3:16-cv-01611 (D.S.C. May 19, 2016) (notice of removal of putative class action alleging defendant internet providers’ “Price for Life” promotion was misleading because the providers’ price guarantee expired after one year).

Linnis, et. al. v. Haeco Americas, LLC, No. 1:16-cv-00486 (May 17, 2016) (putative class action based on state law tort claims alleging defendant disclosed personally identifying information about its 3,000 employees to a third party internet scammer, allowing the scammer to file fraudulent tax returns and steal the employees’ identities).

Saunders v. Margaritaville of Myrtle Beach, LLC, No. 4:16-cv-01559 (D.S.C. May 16, 2016) (notice of removal of purported collective and class action brought under the FLSA and state wage and hour law alleging defendant required restaurant workers to work off the clock without pay).

Napier v. Adiz, LLC, et. al., No. 1:16-cv-01548 (D.S.C. May 13, 2016) (notice of removal of purported South Carolina class action by residential homeowners alleging defendants negligently designed and built their homes).

Wilson v. Hatteras Fin. Corp., et. al., No. 1:16-cv-00445 (M.D.N.C. May 11, 2016) (putative class action on behalf of shareholders of Hatteras Financial Corporation against the company’s officers and directors alleging violations of the Exchange Act and other claims arising out of a proposed merger of its real estate investment trust operations with Annaly Capital Management, Inc.).

Crosbie v. Bizfi, No. 4:16-cv-00061 (E.D.N.C. May 9, 2016) (alleging violations of the Telephone Consumer Protection Act based on autodialed collection calls sent without plaintiffs’ consent).

Morris v. Southern Concrete and Construction, Inc., No. 8:16-cv-01440 (D.S.C. May 5, 2016) (class and collective action brought under FLSA and state wage and hour laws by construction workers alleging that defendant failed to pay travel time and overtime).

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Recent Filings – April Digest

View Amanda Pickens’ Complete Bio at RBH.com Not every class action court filing in North and South Carolina becomes a full-length post on our blog. Here is a recap of April’s filings:

EEOC v. Mission Hospital, Inc., No. 1:16-cv-00118 (W.D.N.C. April 28, 2016) (putative class action alleging violations of Title VII for allegedly refusing to honor employees’ requests for religious exemptions from the hospital’s flu vaccine policy).

Velez v. Healthcare Revenue Recovery Group, LLC, No. 1:16-cv-377 (M.D.N.C. April 25, 2016) (putative class action brought on behalf of consumers residing in North Carolina alleging violations of the Fair Debt Collection Practices Act).

ARcare v. Zylera Pharmaceuticals, LLC, No. 1:16-cv-378 (M.D.N.C. April 25, 2016) (putative class action based on the Telephone Consumer Protection Act and state consumer protection laws against pharmaceutical company for sending unsolicited fax advertisements).

Stayler v. Rohoho, Inc., No. 2:16-cv-1235 (D.S.C. April 21, 2016) (collective action brought under FLSA alleging that Papa John’s failed to properly reimburse pizza delivery drivers for their car expenses).

Jenkins v. The Moses H. Cone Memorial Health Servs. Corp., et. al., No. 5:16-cv-188 (E.D.N.C. April 21, 2016) (putative class action brought on behalf of hospital patients alleging defendant hospital breached its fiduciary duties and other state laws by seeking improper payments from patients and sending debt collection notices).

Jantz v. Berry, No. 1:16-cv-307 (M.D.N.C. April 11, 2016) (action filed to enjoin merger of grocery chains, alleging – inter alia – deficiencies in proxy materials)

Regan, et. al. v. City of Hanahan, No. 2:16-cv-01077 (D.S.C. April 7, 2016) (collective and class action brought under FLSA and state wage and hour law by EMS workers for city’s failure to pay overtime).

Balint v. The Fresh Market, Inc., No. 16-CVS-4144 (N.C. Bus. Ct. April 5, 2016) (action by public shareholders challenging merger consideration in proposed acquisition; Defendants have moved to dismiss on venue grounds, contending that the Company’s by-laws provide for exclusive jurisdiction in Delaware).

Peiffer v. Charleston County School District, No. 2:16-cv-01042 (D.S.C. April 4, 2016) (notice of removal of collective and class action brought under FLSA and South Carolina Payment of Wage Act alleging that defendant school system failed to pay teachers for attending new employee orientation).

Manigault v. Utopia Home Care, Inc., et. al., No. 2:16-cv-01036 (D.S.C. April 4, 2016) (collective and class action brought under FLSA and South Carolina Payment of Wages Act alleging that defendant home care agency failed to pay overtime and improperly classified certified nurses as exempt employees).

Perez v. Merrill Lynch & Co., No. 3:16-cv-00157 (W.D.N.C. April 1, 2016) (putative class action founded on CAFA and Title VII alleging breach of contract and violation of Title VII arising out of policy changes allegedly made by Merrill Lynch affecting international financial advisors).

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Multiple Studies Show Increase in Securities Class Actions

View Adam Doerr's Complete Bio at robinsonbradshaw.comRecent studies by PricewaterhouseCoopers, NERA Economic Consulting, Cornerstone, and Kevin LaCroix of D&O Diary have all found that federal securities class actions are on the rise. According to PwC, the data shows a trend towards more cases filed against smaller companies, especially for claims regarding accounting irregularities. Smaller companies also face a significant risk of claims regarding inadequate internal controls over financial reporting, likely due to their smaller size and more limited resources.

NERA found that standard federal securities class actions – complaints alleging violations of Rule 10b-5, Section 11, or Section 12 – increased for the third straight year. Both PwC and NERA determined that the number and proportion of federal cases challenging mergers and acquisitions also increased in 2015. It is unclear whether this is a result of Delaware’s increased scrutiny of merger litigation settlements, but we will monitor this trend, which also affects merger litigation in state courts, including the North Carolina Business Court.

Cornerstone analyzed the timing and progress of cases and found that the time to resolution appears to be increasing. Fewer cases were dismissed within the first year after they were filed, and the percentage of cases settled within three years also decreased. Despite this, only a small proportion of cases – just 26% — made it to a motion for class certification. The other 74% of cases were dismissed or resolved prior to class certification. When courts actually decided class certification motions, they granted them 75% of the time.

The studies were not consistent in identifying the number of cases filed in the Fourth Circuit, but all agreed that filings here are well behind those filed in the Second and Ninth Circuits, which saw more than 60% of securities class action filings. Although the Fourth Circuit did not see as much volume as these courts, one of the 10 largest settlements of 2015, a $146.3 million settlement of misrepresentation claims against an energy company, took place in the Western District of North Carolina.

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Recent Filings – March Digest

View Amanda Pickens’ Complete Bio at RBH.com Not every class action court filing in North and South Carolina becomes a full-length post on our blog. Here is a recap of March’s filings:

King v. Managed Recovery Systems, No. 7:16-cv-00954 (D.S.C. March 24, 2016) (action brought on behalf of consumers residing in South Carolina alleging violation of Fair Debt Collection Practices Act).

Storey v. King Street Grille, LLC, No. 2:16-cv-942 (D.S.C. March 24, 2016) (collective and class action brought under the FLSA and state wage and hour law alleging improper “tip credits”).

Filar-Collins et. al. v. Buffets, LLC, et. al. No. 6:16-cv-00888 (D.S.C. March 18, 2016) (notice of removal of putative class action on behalf of former employees alleging that defendants failed to make severance payments after being laid off).

Scrogham v. Reid, et. al., No. 5:16-cv-00045 (W.D.N.C. March 14, 2016) (putative class action on behalf of shareholders of CommunityOne Bancorp against Community Bank’s officers and directors alleging violations of the Exchange Act and other claims arising out of a proposed merger of its bank operations with Capital Bank Financial Corp.).

Carroll, et. al. v. Dewitt, et. al., No. 2:16-cv-00792 (D.S.C. March 11, 2016) (class action on behalf of detention center officers alleging that the officers were required to work off the clock without pay in violation of the South Carolina Payment of Wages Act).

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