Judge Forrest: Defendant’s “Unconditional Surrender” to Named Plaintiff Moots Class Action

In an opinion yesterday, Judge Forrest allowed a defendant in a putative class action concerning debt collection to submit to a judgment in the plaintiff’s favor, and moot the entire case:

Defendant has now offered judgment referencing “unconditional surrender” and affording complete relief to plaintiff. Accordingly, judgment shall be entered against defendant under Rule 68. This entry of judgment moots plaintiff’s individual claim. There is therefore no longer any named plaintiff with an interest in the litigation to proceed with a claim on behalf of a class. Plaintiff . . .  cannot nominally continue in some capacity as class representative as he would definitionally be atypical and not an adequate representative.

The Supreme Court is currently considering whether a Rule 68 offer of judgment to a plaintiff can moot a class action.  However, Judge Forrest emphasized that the case here went beyond a mere offer of judgment from the defendant to the plaintiff, because the defendant was not just offering a judgment but actually submitting to one.

Class Action Accuses Banks of Collusion in Market for Interest Rate Swaps

Last week, an investor class action was filed accusing a a group of banks dealing in interest rate swaps (IRS) of collusion.  According to the complaint, the banks have long dominated the market, and, in recent years, have worked together to stop buy-side investors from gaining the benefit of newly-developed exchanges that should have reduced their dominance: Continue Reading

Judge Furman Allows GM to Withhold Attorney Documents in Ignition Switch MDL, Rejects “Crime-Fraud” Exception

In an opinion today the GM ignition switch MDL (prior coverage here), Judge Furman rejected the plaintiffs’ attempt to force GM and its lawyers at King & Spalding to produce, under the “crime-fraud” exception to attorney-client privilege, documents relating to King & Spalding’s advice on earlier ignition switch cases that were settled confidentially.

GM had earlier produced a substantial portion of the documents voluntarily (such as case evaluations sent to GM) but the plaintiffs sought additional documents – primarily internal King & Spalding correspondence.  Judge Furman concluded that the plaintiffs had failed to show, as required for the “crime-fraud” exception, that these internal communications were made with the intent to further a crime or fraud, as opposed to merely relating to an evaluation of the legal risks of the cases that were settled: Continue Reading

Judge Crotty Rules that Securities Act Statute of Repose Bars Replacing Deceased Class Representative After Time Limit

Judge Crotty ruled yesterday that a proposed new class representative’s claims against Barclays (concerning the sale of American Depository Shares from 2006-2008) were barred by the Securities Act’s statute of repose, and thus untimely.  The original class representative died during the litigation.  The plaintiffs argued that the claims of the replacement plaintiff related back under Rules 15 and 21.  Judge Crotty found, however, that the Securities’ Act statute of repose barred claims raised after three years regardless of tolling or other principles.  Under the Rules Enabling Act, Rules 15 and 21 could thus not be used to enlarge or modify a substantive right — in this case, the ability to relate the new class representative’s claims back to those of the original class representative.

Second Circuit Affirms Judge Pauley’s Decision Rejecting Class Action Waiver Antitrust Claims Against Credit Card Companies

The Second Circuit yesterday affirmed an April 2014 decision by Judge Pauley (covered here) rejecting claims that American Express, Citi and Discover colluded to add arbitration clauses barring class actions to their standard card agreements.  Judge Pauley had previously ruled that the defendants had acted individually, and not collusively, when adding class action waivers to their arbitration clauses.  The Second Circuit declined to affirm on an additional ground proposed by American Express, which had argued that the plaintiffs lacked standing because they were not themselves cardholders.

Judge Briccetti Allows Man Who Swallowed a “Brittle Mass” in a Coke Can to Sue Coke on “Res Ipsa Loquitur” Theory

Judge Briccettii yesterday denied Coke’s summary judgment motion in a case brought by a plaintiff who claims to have been injured by swallowing a “dried, brittle mass” found in a Coke can.  He found that the plaintiff could prove his case under a res ipsa loquitur (the thing speaks for itself) theory:

Here, there is enough evidence for a jury to conclude the object found its way into the can as a result of defendant’s, rather than a third party’s, negligence. Plaintiff testified he “popped [the can] open” before drinking from it, meaning the top was sealed at the time. And defendant concedes the can had no other openings or perforations. Certainly, if the can was sealed before plaintiff opened it, a jury could “exclude the actions of . . . third parties as significant causes” of injury.

Coke’s expert is prepared to testify that “the object was so large it could not possibly have escaped defendant’s filtering process,” but Judge Briccetti found that the expert’s testimony  “merely creates an issue of fact” for trial.

Medallion Owners and Credit Unions Bring Constitutional Claims Against TLC Over Uber Expansion

A group of New York City yellow taxi medallion owners and the credit unions that finance them filed a complaint yesterday against the New York City Taxi and Limousine Commission (TLC) over alleged disparate regulatory treatment of smartphone ride hailing apps, such as Uber.  The plaintiffs claim that the TLC’s decision to exempt Uber and its drivers from the requirements imposed on yellow cabs (including surcharges, mandatory vehicle requirements, and strict medallion leasing rules) rises to the level of a regulatory taking under the Fifth Amendment.

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Judge Gardephe Rules that Congressional Committee Must Respond to SEC Subpoena, But May Withhold Internal Legislative Deliberations

In an opinion dated Friday but released this morning, Judge Gardephe largely upheld subpoenas to a congressional committee and a staffer concerning allegedly unlawful stock trading under the STOCK Act, which essentially extended insider trading laws to Congress.  (See our previous coverage of the case here.)

Judge Gardephe found that the subpoenas were not barred by the doctrine of sovereign immunity and further found that any immunity was waived by the passage of the STOCK Act:

[An] aspect of not being “exempt from the insider trading prohibitions” [as provided in the STOCK Act] is that a person is subject to (1) investigation by the SEC for suspected insider trading pursuant to Section 21(a) of the Exchange Act; and (2) the investigative tools authorized in Section 21(b) of the Exchange Act, including depositions and document requests. Respondents’ interpretation of the STOCK Act – that it makes Members of Congress and their staff subject to SEC civil enforcement actions and criminal prosecutions regarding insider trading but not to SEC investigations of insider trading – is not a tenable reading of the STOCK Act and is not consistent with its plain language.

Nonetheless, Judge Gardephe ruled that the Speech and Debate Clause of the Constitution “provides a non-disclosure privilege for documents that fall within the ‘sphere of legitimate legislative activity.’”  This would not include “dissemination of information outside of Congress,” but would  include internal documents “to the extent that they include information concerning planned future legislative activity or relate to information-gathering relevant to such activity.”

Judge Pauley Blasts SEC for Causing Collapse of Cayman Bank

In an opinion yesterday, Judge Pauley harshly criticized the SEC for obtaining an ex parte freeze on the assets of a Cayman bank premised on the bank’s participation in a pump-and-dump scheme for unregistered securities.  The SEC should have known or quickly discovered, according to Judge Pauley, that the bank was acting as a broker on the transactions, not as a principal.  The freeze caused a run on the bank, and led to its failure.  Judge Pauley was not pleased:

As the “statutory guardian, of the nation’s financial markets, the SEC is imbued with enormous powers to protect the investing public. It can halt securities trades and seek to freeze-through its representations to a court-the assets of any institution. However, the SEC’s canon of ethics cautions: “The power to investigate carries with it the power to defame and destroy.” 17 C.F.R. § 200.66. Judges rely on the SEC to deploy those powers conscientiously and provide accurate assessments regarding the evidence collected in their investigations. In that way, the integrity of the regulatory regime is preserved.

This case reveals the dire consequences that flow when the SEC fails to live up to its mandate and litigants yield to the Government’s onslaught. During an ex parte proceeding to freeze assets, where the adversary process is not in play, the SEC has an obligation to timely alert the court to foreseeable collateral damage. By overstating its case, the SEC can do great harm and undermine the public’s confidence in the administration of justice. And that damage can be compounded when financial institutions, anxious to appease a regulator, submit to unconscionable terms and permit their depositors’ assets to be held hostage without seeking immediate relief from a court. As this case demonstrates, these concerns are not hypothetical.

Judge Engelmayer Denies Class Certification for Medical Record Copying Claims, But “Stands Ready” to Approve Narrower Class

Judge Engelmayer denied yesterday a motion for class certification against a medical records copying firm accused of charging a price beyond the statutory limit.  HealthPort Technologies, LLC retrieved and photocopied patient records at the rate of 75 cents per page (the statutory limit set by New York Public Health Law § 18 for recovering “costs incurred”) but the its actual “costs incurred” allegedly fell far below that.

Judge Engelmeyer declined to certify a state-wide class of patients at the over 500 medical facilities where HealthPort operated, as the differences in determining the “costs incurred” for each location meant that common questions did not predominate as required by Rule 23(b)(3): Continue Reading