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Recent Filings – May Digest

View Amanda Pickens’ Complete Bio at robinsonbradshaw.comNot 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:

Kasprzyk, et al. v. Hilton Grand Vacations Company, LLC, et al., No. 4:17-cv-01393 (D.S.C. May 26, 2017) (purported collective and class action brought under FLSA alleging defendants deducted wages, straight time and overtime pay from commissions earned.)

Berg, et al. v. Span-America Medical Systems, Inc., et al., No. 6:17-cv-01399 (D.S.C. May 26, 2017) (putative class action alleging defendants, who entered into an agreement and plan of merger in early May 2017, filed a solicitation statement that contained false and misleading information and omitted material information thereby violating federal securities laws.)

Giles, et al. v. BNC Bancorp, et al., No. 1:17-cv-00482 (M.D.N.C. May 25, 2017) (putative class action on behalf of shareholders of defendant BNC Bancorp, a publicly traded bank holding company, and its officers and directors, asserting securities violations for failing to disclose material information through incomplete and misleading proxy statements in advance of a proposed merger with Pinnacle Financial Partners, Inc.)

Pill, et al. v. Span-America Medical Systems, Inc., No. 6:17-cv-01375 (D.S.C. May 25, 2017) (putative class action alleging defendants Span-America Medical Systems and Savaris (SC), Inc., who manufacture various products for the medical market, entered into a flawed sales process in early May 2017 which favored Salvaria at the expense of Span’s shareholders, thereby alleging violation of federal and state securities laws.)

Porter, et al. v. Span-America Medical Systems, Inc., No. 6:17-cv-01357 (D.S.C. May 25, 2017) (putative class action alleging defendants entered into an agreement/plan of merger in early May 2017 which is materially deficient regarding financial projections and potential conflicts of interest regarding various managers and directors in violation of federal and state securities laws.)

Gagliastre, et al. v. Capt. George’s Seafood Restaurants, LP, et al., No. 4:17-cv-01308 (D.S.C. May 19, 2017) (putative class action and collective action alleging defendants, who own seafood buffet restaurants, misappropriated tips, required servers to work off the clock and otherwise failed to pay overtime compensation to employees under FLSA and state wage and hour laws.)

Salvo, et al. v. NightCap Inc. Food & Spirits, et al., No. 2:17-cv-01266 (D.S.C. May 17, 2017) (putative class action and collective action brought by servers, bartenders and other “tipped workers” alleging defendants failed to pay compensation due under FLSA and state wage and hour laws seeking to recover minimum wages, unlawful deductions and other wages due to employees.)

Christian, et al. v. TOWERCOMM, LLC, No. 5:17-cv-00223 (E.D.N.C. May 9, 2017) (putative class action and collective action brought by employees of defendant who were tower technicians performing maintenance, repair and installation and allege they were not paid overtime compensation that was due under FLSA and state wage and hour laws.)

Walton v. Maury Cobb & Associates, LLC, et al., No. 5:17-cv-00209 (E.D.N.C. May 2, 2017) (putative class action brought under federal consumer protection laws on behalf of consumers residing in North Carolina alleging defendants sent collection letters with original creditor information which was false and/or misleading.)

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Is a Class Representative Adequate if He Waives Viable Claims in Order to Preserve Commonality?

View David Wright's Complete Bio at robinsonbradshaw.comClass actions don’t work if the class representative has a conflict with the class he or she purportedly represents. As the United States Supreme Court noted over 70 years ago, “a selection of representatives for purposes of litigation, whose substantial interests are not necessarily or even probably the same as those whom they are deemed to represent, does not afford that protection to absent parties which due process requires.” Hansberry v. Lee, 311 U.S. 32, 45 (1940). A decision this week from Judge Higginson out of the Fifth Circuit provides an interesting commentary on this subject in the context of a consumer class action.

In Slade v. Progressive Insurance Co., No. 15-30010 (5th Cir. May 9, 2017), plaintiffs claimed that Progressive Insurance shorted its insureds when paying for vehicle losses. Progressive used something called “WorkCenter Total Loss” to calculate the base value of total loss vehicles. Plaintiffs said that “lawful sources” – such as the NADA Guidebook or the Kelly Blue Book – had higher values and therefore resulted in plaintiffs “receiving lower payouts on their insurance claims.”

The Fifth Circuit treated with dispatch a couple of aspects of the district court’s class certification decision. First, the Court held that the damages theory was in fact “class wide,” and therefore consistent with Comcast v. Behrend, 133 S. Ct. 1426 (2013). Second, the district court had inexplicably certified a fraud class. As the Court of Appeals observed, “[t]his court has held consistently that a ‘fraud class action cannot be certified when individual reliance will be an issue.’”

But the bulk of Judge Higginson’s opinion discusses a more complicated issue. The insurance company used two basic factors to determine a vehicle’s value. First, it used a “base value” based on the WorkCenter Total Loss calculation. Second, it used a “condition adjustment,” recognizing that the value of the automobile in question might have either a higher or lower value based on its particular condition. The former sounds like a class-wide issue, but the latter looks to be quite individualistic.

Recognizing this dilemma, the named plaintiffs decided not to challenge the “condition adjustment.” As the Court of Appeals observed, “Plaintiffs’ class certification motion may have run into predominance problems because condition adjustments appear to be highly individualized.” But this waiver, the Fifth Circuit noted, comes with a potential cost. Although the plaintiffs’ waiver solved the predominance problems, it raised questions about the adequacy of the class representatives. “When the class representative proposes waiving some of the class’s claims, the decision risks creating an irreconcilable conflict with the class.” As the Court observed, citing a Seventh Circuit opinion, “A representative can’t throw away what would be a major component of the class’s recovery.”

But simply because a class plaintiff decides, as a strategic matter, to waive a claim does not necessarily mean she is inadequate. The court must inquire into, at least, “(1) the risk that unnamed class members will forfeit their right to pursue the waived claim in future litigation”; (2) the value of the waived claim; and (3) the strategic value of the waiver, which can include the value of proceeding as a class (if the waiver is key to certification).” In its opinion, the Fifth Circuit directed the district court to undertaken this analysis on remand. A central aspect of this inquiry is the res judicata effect of the waiver, which the Fifth Circuit said was “uncertain here.” Indeed, the Court observed that “courts have inconsistently applied claim preclusion to class actions.”

The Court of Appeals provided a bit of a road-map to the district court, identifying – as possible options on remand –

  • declining to certify the class because of preclusion risks
  • certifying the class, but tailoring the notice and opt-out procedure to alert the class to the risk of preclusion
  • concluding that the benefits of proceeding as a class outweigh any preclusion risks or
  • defining the class in a way to exclude individuals who have a quarrel with the condition adjustment.

Stay tuned, and consider carefully how class representatives and courts resolve the tension between waiving the claims of absent class members and strategically limiting the class to claims that can actually be certified.

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Recent Filings – April Digest

View Amanda Pickens’ Complete Bio at robinsonbradshaw.comNot 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:

Sanda, et al. v. Samsung Electronics America, Inc., et al., No. 6:17-cv-00988 (D.S.C. April 17, 2017) (putative class action brought under federal and various state consumer protection laws alleging defendants manufactured defective home washing machines that caused damage during normal usage and additionally had a flawed recall of this product.)

Krebs, et al. v. Charlotte School of Law, LLC, et al., (originally filed in M.D.N.C. on December 22, 2016 – Case No. 1:16-cv-1437 and transferred to W.D.N.C. on April 10, 2017 – Case No. 3:17-cv-190) (putative class action brought by law students alleging the school misrepresented its compliance with ABA requirements and seeking refund/reimbursement of tuition and loan discharge.)

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Seventh Circuit Weighs In on “White or No Underwear” Policy

View David Wright's Complete Bio at robinsonbradshaw.comOccasionally, we see something outside of the Carolinas that is quirky enough to merit a mention in this space.  Such is the Seventh Circuit’s recent decision in Mulvania v. Sheriff of Rock Island County, No. 16-1711 (7th Cir. Mar. 9, 2017).  According to Wikipedia, “In 2015 Rock Island (Illinois) was ranked the 32nd ‘Best Small City’ in the country.”  Not influencing those rankings, apparently, was the policy of the Rock Island County Jail, which “requires female detainees to wear either white underwear or no underwear at all.”  What, you ask, might be the “compelling government interest” that allegedly supports such a policy?  As the Seventh Circuit described, “[t]he Sheriff’s sole stated rationale for the underwear policy was to prevent detainees from extracting ink from colored underwear.”  This was a problem, in the Sheriff’s mind, because “detainees could use that ink to make tattoos.”   Despite the dearth of examples of such tattoo creation by detainees, the Sheriff testified that the policy was founded on such “security concern[s].”  This policy apparently has not been confined to Rock Island County; indeed, the defense argued that the white underwear policy was “within the correctional mainstream.”

The district court denied certification of the “underwear class” and granted summary judgment in favor of defendants.  On the merits, the Seventh Circuit reversed, holding that the record supported the inference that “the asserted security concern about tattoo ink from underwear is not genuine.”

The district court’s class certification decision was based on predominance and numerosity.  As to predominance, the court found that the “damages would vary for individual class members based on factors such as how long a detainee was deprived of her underwear, whether she was on her menstrual cycle or pregnant and other considerations.”  The absence of a “simple or formulaic method to calculate damages,” in the view of the lower court, precluded class certification.

The Seventh Circuit summarily reversed this determination, noting that “this reasoning was a mistake.”  According to the Court of Appeals, “it has long been recognized that the need for individual damages determinations at [a] later stage of the litigation does not itself justify the denial of certification.”

Alas, however, there were not enough underwear detainees to mount a class challenge.  After observing that “a forty-member class is often regarded as sufficient to meet the numerosity requirement,” the Seventh Circuit held that the class period only yielded 29 members–there was no basis upon which the plaintiffs’ amended complaint “related back” to the initial complaint, which might have supported a higher number.

It remains unclear, as of this post, whether Rock Island’s policy has been amended and whether this case will impact its ranking as the “Best Small City.”

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Recent Filings – March Digest

View Amanda Pickens’ Complete Bio at robinsonbradshaw.comNot 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:

Angeles-Gomez, et al. v. Rick Wolf Landscape, LLC, et al., No. 2:17-cv-00009 (E.D.N.C. March 31, 2017) (putative collective and class action brought under FLSA and state wage and hour laws by current and/or former employees of the defendant landscaping and lawn care business and its managing members for alleged unpaid overtime compensation).

Isaman, et al. v. Housekeeping Services of Hilton Head, LLC, et al., No. 9:17-cv-00800 (D.S.C. March 26, 2017) (putative class action and purported collective action brought under FLSA and state wage and hour laws alleging Housekeeping Services of Hilton Head, the low country’s largest cleaning service, failed to pay hourly wages due including overtime compensation).

Oldfield Community Association, et al. v. TI Oldfield Development, LLC, et al., No. 9:17-cv-00794 (D.S.C. March 24, 2017) (purported class action removed from South Carolina state court to federal court brought by a non-profit corporation formed for the benefit of homeowners and lot owners of Oldfield, a Beaufort County community, alleging defendant board and director members misappropriated funds, breached fiduciary duties, etc. and requesting a preliminary injunction).

Beasley, et al. v. Bojangles Restaurants, Inc., et al., No. 1:17-cv-00255 (M.D.N.C. March 21, 2017) (purported class action and collective action brought under FLSA by employees alleging defendants misclassified them and failed to pay overtime compensation).

Blue Ridge Podiatry Assocs., P.A. v. Annexmed Billing Servs. Inc., et al., No. 1:17-cv-00078 (W.D.N.C. March 20, 2017) (putative class action brought under the Telephone Consumer Protection Act alleging the defendants sent unsolicited fax advertisements to plaintiff and the proposed class in June 2016 without prior express consent).

Sandviks v. PhD Fitness, LLC, No. 1:17-cv-00744 (D.S.C. March 17, 2017) (products liability class action lawsuit alleging defendant, a manufacturer of sports-oriented dietary supplement products, has marketed their products in a systematically misleading manner and these misrepresentations regarding ingredients and proper dosing have injured plaintiffs).

Bobiak, et al. v. The Morgan Group, Inc., No. 3:17-cv-00142 (W.D.N.C. March 17, 2017) (putative collective and class action brought by employees of The Morgan Group, a high-end multifamily development, construction and property management company, for recovery of unpaid wages and unpaid overtime/bonus compensation under FLSA and state wage and hour laws).

Indian Harbor Insurance Co. v. Kriewaldt, et al., No. 2:17-cv-00732 (D.S.C. March 17, 2017) (putative class and declaratory judgment action brought by Indian Harbor Insurance Co. seeking a determination from the federal court of its defense and coverage obligations based on two underlying South Carolina state court lawsuits, one a class action, which allege construction defects caused by the defendants in a Charleston townhome development).

Fuerte, et al. v. Convergys Corp., et al., No. 4:17-cv-00701 (D.S.C. March 14, 2017) (putative collective and class action brought under FLSA and state wage and hour laws by at-home customer representative employees of Convergys, a customer outsourcing company, who performed required “off the clock” and computer technical malfunction work but allege not to have been compensated for this time).

Mauer v. Argos Therapeutics, Inc., et al., No. 1:17-cv-00216 (M.D.N.C. March 14, 2017) (putative class action brought by shareholders of Argos, an immune-oncology company, alleging the company violated federal securities laws by making false statements in its securities filings).

Hegeman v. Babcock & Wilcox Enters., et al., No. 3:17-cv-00125 (W.D.N.C. March 13, 2017) (putative class action on behalf of shareholders of Babcock & Wilcox, a provider of energy and environmental technologies and services for power and industrial markets, asserting federal securities violations for the company providing alleged false and misleading statements and failing to provide material facts about the company).

Lawrence, et al. v. General Panel Corp., No. 2:17-cv-00600 (D.S.C. March 3, 2017) (putative class action removed from South Carolina state court and brought by homeowners alleging structures known as SIPS, manufactured by Defendant using sheets of oriented strand board, were defective and have caused damage to their homes and buildings).

Ollila, et al. v. Babcock & Wilcox Enters., Inc. et al.; No. 3:17-cv-00109 (W.D.N.C March 3, 2017) (putative class action brought by shareholders of Babcock & Wilcox Enterprises, Inc., a technology-based provider of power generation equipment, alleging violations of securities laws claiming the company’s officers and/or directors made false and misleading statements in press releases, analyst conference calls and SEC filings starting in 2015).

Speights, et al. v. Blue Cross and Blue Shield of South Carolina; No. 9:17-cv-594 (D.S.C. March 3, 2017) (putative class action removed from South Carolina state court brought by consumers alleging Blue Cross and Blue Shield denied requests to pay for healthcare that was approved and/or requested by physicians).

Jeffers, et al.v.Toyota Motor Corporation, et al., No. 4:17-cv-00577 (D.S.C. March 2, 2017) (purported class action brought under consumer protection laws alleging defendants manufactured defective dashboards in various car models and have not adequately handled a warranty program that was promised in previous litigation relating to the same issue).

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