Justia Class Action Opinion SummariesArticles Posted in Business Law
Killmer, Lane & Newman v. B.K.P., Inc.
The Colorado Supreme Court granted review in this case to consider whether the common law litigation privilege for party-generated publicity in pending class action litigation excluded situations in which the identities of class members were ascertainable through discovery. In 2018, two law firms, Killmer, Lane & Newman, LLP and Towards Justice (collectively, along with attorney Mari Newman of Killmer, Lane & Newman, “the attorneys”), filed on behalf of former employee and nail technician Lisa Miles and those similarly situated a federal class action lawsuit. This lawsuit named as defendants BKP, Inc.; Ella Bliss Beauty Bar LLC; Ella Bliss Beauty Bar-2, LLC; and Ella Bliss Beauty Bar-3, LLC (collectively, “the employer”), among others. The employer operated three beauty bars in the Denver metropolitan area. Pertinent here, the class action complaint alleged that the employer’s business operation was “founded on the exploitation of its workers.” The complaint alleged that the employer violated the Fair Labor Standards Act and the Colorado Wage Claim Act by not paying service technicians for hours spent performing janitorial work, electing to forgo hiring a janitorial service. The Supreme Court concluded the division erred in conditioning the applicability of the litigation privilege in pending class action litigation on whether the identities of class members were ascertainable through discovery. The Court reached this conclusion for two reasons: (1) ascertainability was generally a requirement in class action litigation, and imposing such a condition would unduly limit the privilege in this kind of case; and (2) the eventual identification of class members by way of documents obtained during discovery was not a substitute for reaching absent class members and witnesses in the beginning stages of litigation. The Court found the litigation privilege applied in this case: five allegedly defamatory statements at issue "merely repeated, summarized, or paraphrased the allegations made in the class action complaint, and which served the purpose of notifying the public, absent class members, and witnesses about the litigation, were absolutely privileged." View "Killmer, Lane & Newman v. B.K.P., Inc." on Justia Law
San Antonio Fire & Police Pension Fund v. Syneos Health Inc.
This case arose when two companies merged in the biopharmaceutical market. Biopharmaceutical companies develop medicines from living cells. Those medicines must be tested and then approved by the Food and Drug Administration before they can be publicly marketed. The two companies here—INC Research Holdings, Inc. and inVentiv Health, Inc.—did not develop their own medicines, but helped other companies that did. Pre-merger, INC Research specialized in assisting biopharmaceutical companies conduct clinical trials as part of the Food and Drug Administration’s approval process. Wanting to break into the approved-drugcommercialization market, INC Research sought to merge with inVentiv in 2017. Plaintiffs claim that they relied on allegedly misleading statements that INC Research and its executives made in three different communications: (1) the press release announcing the merger; (2) an earnings call held on May 10; and (3) an earnings call held on July 27. The district court dismissed Plaintiffs’ case for failure to state a claim. The Fourth Circuit affirmed. The court explained that INC Research’s investors have a right to be disappointed that their company’s performance did not meet its optimistic projections. But that does not mean that they also have a right to civil remedies under federal securities law. Securities fraud liability cannot be “predicated solely on an overly optimistic view of a future which may, in fact, encounter harsh economic realities down the road.” View "San Antonio Fire & Police Pension Fund v. Syneos Health Inc." on Justia Law
In re AMC Entertainment Holdings, Inc. Stockholder Litigation
The Court of Chancery declined to approve a settlement agreement negotiated between Plaintiffs and Defendants on behalf of a class of common stockholders Plaintiffs purported to represent, holding that the proposed settlement was not fair and did not fulfill the principles of due process.Plaintiffs, common stockholders of AMC Entertainment Holdings, Inc., brought direct claims on behalf of a putative class of common stockholders seeking injunctive relief to stop AMC from holding a special meeting at which Plaintiffs, along with holders of fractional units of blank check preferred stock, were scheduled to vote upon two charter amendments that would authorize more common stock triggering the conversion of the fractional units into shares of common stock and reverse a stock split. Before a preliminary injunctive hearing, Plaintiffs negotiated a settlement with Defendants. The Court of Chancery held that the settlement could not be approved as submitted because, among other things, the settlement purported to release claims that did not arise out of the same factual predicate as the claims asserted in this action and because the release of claims arising out of preferred interests was not supported by consideration. View "In re AMC Entertainment Holdings, Inc. Stockholder Litigation" on Justia Law
Anderson v. Magellan Health, Inc.
The Court of Chancery affirmed the judgment of the trial court awarding $75,000 in fees and expenses to Plaintiff's counsel in the underlying stockholder class action instead of the requested award of $1,100,000, holding that the amount requested in this case was unreasonable because the benefits achieved by mooting the lawsuit were insignificant.Plaintiff brought the underlying action challenging a merger agreement under which Centene Corporation agreed to acquire Magellan Health, Inc. Specifically, Plaintiff claimed that, as part of a sale process conducted by Magellan, prospective bidders entered confidentiality agreements that contained provisions that rendered stockholder disclosures materially deficient. Shortly thereafter, Magellan issued supplemental disclosures and waived its rights under three of the four confidentiality agreements. These actions mooted Plaintiff's claims and stipulated to dismissal. Plaintiff's counsel then petitioned the court for the $1,100,000 attorneys' fees and expenses award. The court awarded $75,000 in fees and expenses. The Court of Chancery affirmed and then issued this decision to warn other courts applying Delaware law of policy dangers in regard to mootness fee petitions, holding that there was no error in the award of fees and expenses in this case. View "Anderson v. Magellan Health, Inc." on Justia Law
Citizens Insurance Company of America v. Wynndalco Enterprises, LLC
After Wynndalco Enterprises, LLC was sued in two putative class actions for violating Illinois’ Biometric Information Privacy Act (“BIPA”), its business liability insurer, Citizens Insurance Company of America, filed an action seeking a declaration that it has no obligation under the terms of the insurance contract to indemnify Wynndalco for the BIPA violations or to supply Wynndalco with a defense. Citizens’ theory is that alleged violations of BIPA are expressly excluded from the policy coverage. Wynndalco counterclaimed, seeking a declaration to the contrary that Citizens is obligated to provide it with defense in both actions. The district court entered judgment on the pleadings for Wynndalco. The Seventh Circuit affirmed. The court explained that the narrowing construction that Citizens proposes to resolve that ambiguity is not supported by the language of the provision and does not resolve the ambiguity. Given what the district court described as the “intractable ambiguity” of the provision, the court held Citizens must defend Wynndalco in the two class actions. This duty extends to the common law claims asserted against Wynndalco in the other litigation, which, as Citizens itself argued, arise out of the same acts or omissions as the BIPA claim asserted in that suit. View "Citizens Insurance Company of America v. Wynndalco Enterprises, LLC" on Justia Law
In re Payment Card Interchange Fee and Merchant Discount Antitrust
A putative class of over 12 million merchants brought this antitrust action under the Sherman Act against Visa U.S.A. Inc., MasterCard International Inc., and numerous banks that serve as payment-card issuers for those networks. Plaintiffs alleged that Visa and MasterCard adopted and enforced rules and practices relating to payment cards that had the combined effect of injuring merchants by allowing Visa and MasterCard to charge supracompetitive fees (known as “interchange fees”) on each payment card transaction. After nearly fifteen years of litigation, the parties agreed to a settlement of roughly $ 5.6 billion, which was approved by the district court over numerous objections. In so doing, $900,000 in service awards was granted to lead plaintiffs, and roughly $523 million was granted in attorneys’ fees. Appellants are various objectors who argue that the district court erred when it certified the class, approved the settlement, granted service awards and computed attorneys’ fees. The Second Circuit affirmed in all respects the district court’s orders to the extent they constituted a final judgment, with the exception that the court directed the district court to reduce the service award to class representatives to the extent that its size was increased by time spent in lobbying efforts that would not increase the recovery of damages. The court made no ruling as to how damages should be allocated between branded oil companies and their branded service station franchisees, the reasonableness of the special master’s ultimate findings, or the legality of releasing an as-of-yet hypothetical future claim. View "In re Payment Card Interchange Fee and Merchant Discount Antitrust" on Justia Law
Delman v. GigAquisitions3, LLC
The Court of Chancery denied Defendants' motion to dismiss this action asserting that the management team (or sponsor) and directors of a special acquisition company (SPAC) breached their fiduciary obligations, holding that it was reasonably conceivable that Defendants breached their fiduciary duties.For a SPAC organized as a Delaware corporation, stockholders are assured that the SPAC's fiduciaries will abide by certain standards of conduct. Plaintiff, a stockholder, filed a putative class action alleging that Defendants undertook a value destructive deal that generated returns for the sponsor while impairing stockholders' ability to decide whether to redeem or to invest in the post-merger company. Defendants filed a motion to dismiss. The Court of Chancery denied the motion, holding that the complaint stated reasonably conceivable claims against Defendants in counts one, two, and three. View "Delman v. GigAquisitions3, LLC" on Justia Law
Laydon v. Coöperatieve Rabobank U.A., et al.
Plaintiff brought this putative class action against more than twenty banks and brokers, alleging a conspiracy to manipulate two benchmark rates known as Yen-LIBOR and Euroyen TIBOR. Plaintiff brought claims under the Commodity Exchange Act (“CEA”), and the Sherman Antitrust Act, and sought leave to assert claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). The district court dismissed the CEA and antitrust claims and denied leave to add the RICO claims. Plaintiff appealed, arguing that the district court erred by holding that the CEA claims were impermissibly extraterritorial, that he lacked antitrust standing to assert a Sherman Act claim, and that he failed to allege proximate causation for his proposed RICO claims. The Second Circuit affirmed. The court explained that the conduct—i.e., that the bank defendants presented fraudulent submissions to an organization based in London that set a benchmark rate related to a foreign currency—occurred almost entirely overseas. Indeed, Plaintiff fails to allege any significant acts that took place in the United States. Plaintiff’s CEA claims are based predominantly on foreign conduct and are thus impermissibly extraterritorial. Further, the court wrote that the district court also correctly concluded that Plaintiff lacked antitrust standing because he would not be an efficient enforcer of the antitrust laws. Lastly, the court agreed that Plaintiff failed to allege proximate causation for his RICO claims. View "Laydon v. Coöperatieve Rabobank U.A., et al." on Justia Law
Menora Mivtachim Ins. Ltd. v. Frutarom Indus. Ltd.
International Flavors & Fragrances Inc. (“IFF”), a U.S.-based seller of flavoring and fragrance products, acquired Frutarom Industries Ltd. (“Frutarom”), an Israeli firm in the same industry. Leading up to the merger, Frutarom allegedly made material misstatements about its compliance with anti-bribery laws and the source of its business growth. Plaintiffs, who bought stock in IFF, sued Frutarom, alleging that those misstatements violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder. The Second Circuit affirmed the district court’s dismissal of Plaintiffs’ complaint. The court concluded that Plaintiffs lack statutory standing to sue. Under the purchaser-seller rule, standing to bring a claim under Section 10(b) is limited to purchasers or sellers of securities issued by the company about which a misstatement was made. Plaintiffs here lack standing to sue based on alleged misstatements that Frutarom made about itself because they never bought or sold shares of Frutarom. View "Menora Mivtachim Ins. Ltd. v. Frutarom Indus. Ltd." on Justia Law
Salazar v. Walmart, Inc.
After Plaintiff-appellant David Salazar bought Walmart, Inc.’s “Great Value White Baking Chips” incorrectly thinking they contained white chocolate, he filed this class action against Walmart for false advertising under various consumer protection statutes. The trial court sustained Walmart’s demurrers without leave to amend, finding as a matter of law that no reasonable consumer would believe Walmart’s White Baking Chips contain white chocolate. The thrust of Salazar's claims was that he was reasonably misled to believe the White Baking Chips had real white chocolate because of the product’s label and its placement near products with real chocolate. Salazar also alleged that the results of a survey he conducted show that 90 percent of consumers were deceived by the White Baking Chips’ advertising and incorrectly believed they contained white chocolate. “California courts . . . have recognized that whether a business practice is deceptive will usually be a question of fact not appropriate for decision on demurrer. ... These are matters of fact, subject to proof that can be tested at trial, even if as judges we might be tempted to debate and speculate further about them.” After careful consideration, the Court of Appeal determined that a reasonable consumer could reasonably believe the morsels had white chocolate. As a result, the Court found Salazar plausibly alleged that “‘a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled’” by the chips' advertising. Judgment was reversed and the matter remanded for further proceedings. View "Salazar v. Walmart, Inc." on Justia Law