No Business Owner is Safe: Class & Collective Actions are the "New Normal"

Alan L. Rupe
June 5, 2013 — 2,045 views  
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Aggressive, Preemptive Strategy Wins

No business is safe. Multiple-plaintiff class and collective actions are the “new normal.” These lawsuits arise from every aspect of business, ranging from claims regarding faulty products or unfair pricing; failure to reimburse employees for cell phone expenses; failure to pay overtime; and all manner of workplace claims by current and former employees. The reason for the rise in these claims? Plaintiffs’ attorneys are looking to cash in on laws that award attorneys’’ fees to the “prevailing party” in class actions. While the class/collective action plaintiffs may receive only a few hundred dollars for their claims, their attorneys often receive hundreds of thousands of dollars for their representation, and courts often give little consideration to the amount of recovery in proportion to attorneys’ fees. In a recent class action lawsuit involving the pricing of baby products, In re Baby Products Antitrust Litigation, a court allocated $3 million in payment to the class members, $18.5 million to charitable purposes, and $14 million in attorneys’ fees.

Case Study #1

Successfully battling class and collective actions is what we do for our clients. In two recent class action cases filed in courts on opposite sides of the country, we won significant victories for our clients. These two recent decisions illustrate how we defend class and collective actions: aggressively, quickly, and successfully.

In the case of Spellman, et al. v. AEX, filed in federal court in Pennsylvania, plaintiffs were delivery drivers who delivered pharmaceutical and financial cargo to customers of our client. Plaintiffs alleged our client misclassified them and other similarly-situated individuals as independent contractors and violated the Fair Labor Standards Act by failing to pay overtime compensation. The case was initially certified as a collective action under the “lenient” standard of Section 216(b) of the Fair Labor Standards Act. Two hundred twelve individuals “opted in” and consented to join as plaintiffs. The case was made difficult because our client is governed by federal regulations that impose specific requirements to ensure the safety of cargo. However, we aggressively defended the case and deposed a number of the opt-in class members.

The Result

The depositions revealed individual differences in relevant matters, including use of uniforms, call-in requirements, and amount of instruction. The court relied upon these differences in ruling that the case should be decertified. This resulted in a dismissal of all claims but for the nine individuals who originally filed the class action.

Case Study #2

Across the country in California, a group of plaintiffs at­tempted to certify a class of more than 1,500 current and former employees of another Kutak Rock client. These plain­tiffs sought to require the employer to reimburse employ­ees under the Cali­fornia Labor Code for certain alleged employee-incurred business expenses related to their cell phone use. The majority of California courts have ruled that these types of California Labor Code violations apply general­ly to other expenses. Plaintiffs retained an expert who opined that surveys could be used to identify the extent of liability and damages for failure to reimburse a putative class for cell phone use.

The Result

Over plaintiffs’ strenuous objections, we took the depositions of a representative group of putative plaintiffs. That deposition testimony illustrated a substantial variance among each individ­ual’s cell phone plan; a majority of the deponents had plans that allowed unlimited minutes. Since the depositions produced dif­ferent facts regarding liability, the Cali­fornia court ultimately ruled that class certification was improper, reasoning that a class action was not an appropri­ate method to determine the reimburse­ment loss to the putative plaintiffs. The class claims were summarily dismissed. Perhaps not sur­prisingly, plaintiffs have appealed the court’s ruling.

Two different cases—on opposite coasts. In both of these cases, we initiated an aggressive, preemptive strategy of filing a motion to strike class certification, following President Franklin D. Roosevelt’s often-cited strategy, “When you see a rattlesnake poised to strike, you do not wait until he has struck before you crush him.”

Our best defense was a strong offense. In both cases, our strategy reduced the time, the discovery, and the resources needed to defend the class action law suits.

Lucrative Lawsuits

Plaintiffs’ attorneys are going to extraordinary lengths to land those lucrative lawsuits. Take a look at the website “TopClassActions.com.”

Excerpt from the website:

Do you want to start a class action? If you think you have a case, a possible class action lawsuit, a prescription drug side effect lawsuit that’’s not currently covered in the active investigations section or another issue you would like to reports this is how to do it. All submissions via the form below are reviewed by Top Class Actions. If you have problems submitting your reports please send us the details listed below to [email protected] for review. Whenever possible, please use the form below. If that doesn’t works you can email Top Class Actions the information.

If you need to speak with an attorney about minimizing the risk of a class action suit, or in defending an impending class or collective action suit, please contact your Kutak Rock attorney, or Alan Rupe, the author of this case study.

This case study is a publication of Kutak Rock LLP. This publication is intended to notify our clients and friends of current events and provide general information about class and collective action lawsuits. This case study is not intended, nor should it be used, as legal advice, and it does not create an attorney-client relationship.

To ensure compliance with requirements imposed by the IRS, we inform you that any federal tax advice contained in this communication should not be used or referred to in the promoting, marketing or recommending of any entity, investment plan or arrangement, and such advice is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties under the Internal Revenue Code.

Alan L. Rupe