June 2011: Class Action Litigation Update

Federal Courts Rein In California Supreme Court’s Tobacco II Decision: The California Supreme Court’s decision in In re Tobacco II Cases, 46 Cal. 4th 298 (2009), appeared to be grim news for companies defending consumer class actions under California’s Unfair Competition Law (“UCL”). The Court held that only the named plaintiffs, and not all absent class members, are required to show an “injury in fact” that resulted from the defendants’ conduct. The ruling appeared to gut a primary defense to certification in such cases: that individual issues of reliance, causation, and injury predominate over any common issues.

Many consumer class actions are now litigated in federal court under the Class Action Fairness Act, and an open question from Tobacco II was whether its relaxed standing approach conflicted with Article III’s requirement that federal court plaintiffs have suffered an injury in fact. The Eighth Circuit recently addressed the interplay of Article III and Tobacco II in Avritt v. Reliastar Life Ins., 615 F.3d 1023, 1034 (8th Cir. 2010). The Avritt plaintiffs were California residents who allegedly bought fixed deferred annuities based on a misleading rate-setting practice. They filed a class action that asserted, among other claims, violation of the UCL. The district court denied certification, finding that plaintiffs had failed to establish that common questions predominated over individual issues.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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