Are Class Actions Passé?
A Wall Street Journal article published August 26 reports that class actions and mass tort litigation are on the wane nationwide.
Experts attribute the decline to a number of things: The growing scandal over and criminal investigations into fraudulent
silicosis cases; state legislation that has curbed asbestosis cases brought by asymptomatic plaintiffs; the recent misfortunes
of the Milberg Weiss law firm; the Class Action Fairness Act; and tort reform measures both legislative and judicial in former
"jackpot justice" states such as Alabama and Mississippi.
Adding a Reliance Requirement to State UDAP Laws?
The National Law Journal reports that tort reformers in Massachusetts, Illinois, and other jurisdictions are looking to California’s
Proposition 64 as a model for reforming their state "Little FTC Acts." The article cites "continuing fallout from California’s
Proposition 64, a landmark 2004 ballot initiative that tightened the reins on consumer cases," and notes that tort reformers
are circulating model legislation that would require consumers to have suffered economic losses or injuries from a company’s
alleged misstatements in order to file a class action—essentially what a recent California appellate court decision holds.
(See article, "The Writ Hits the Fan.")
Regulations to Cap Title Insurance and Escrow Fees
In what may be a growing trend, California Insurance Commissioner John Garamendi held hearings in late August on proposed
regulations that would roll back and then cap the fees for title insurance by an average of 23% for first-time buyers and
16% on refinancings. The regulations would also reduce average escrow costs by 27%. Under the proposal, title insurance fees
would be temporarily rolled back to 2000 levels as early as March 2007, and permanent rates would be established as early
as 2008. Mr. Garamendi, who is running for lieutenant governor, cited illegal rebates and kickbacks to builders, real estate
agents and brokers, and mortgage lenders as the basis for his regulations. The rules could get approved by January 2007.
Is Judicial Reference the New Arbitration?
Companies doing business in California have increasingly turned to general judicial reference clauses in their consumer contracts.
Judicial reference agreements have long been used in commercial transactions. They allow disputes to be submitted to a court-appointed
or party-selected "referee" for resolution, and they are becoming more attractive following the spate of recent decisions
barring most jury trial waiver provisions and restricting the utility of arbitration agreements in California. On August 21,
the California Court of Appeal decided Woodside Homes of California, Inc.v.Superior Court, __ Cal. App. 4th __, 2006 Cal. App. LEXIS 1273 (Aug. 21, 2006), rejecting an argument that a general judicial reference
agreement constituted an illegal jury trial waiver under the California Supreme Court’s decision in Grafton Partners L.P. v. Superior Court, 36 Cal. 4th 944 (2005). The court held that general judicial reference agreements do not run afoul of Grafton because the California Code of Civil Procedure specifically authorizes judicial reference as a method of nonjudicial dispute
resolution.
For more information, contact Will Stern at wstern@mofo.com or go to our August 2005 article "Should Your California Agreements Contain a ‘Judicial Reference’ Clause?" at http://www.mofo.com/news/updates/files/update02058.html.
Elderly Watch
Increasingly, banks will face liability for failing to report to law enforcement suspected incidents of elder abuse. And if
you do business in California, Florida, Georgia, or Mississippi, you need to know about the special elder abuse statutes that
make not reporting a crime, even if you undertake a perfectly adequate internal investigation. A bank in Hawaii is facing
two lawsuits that allege it failed to protect an elderly customer from financial abuse by a branch employee. The customer
alleges that the bank concealed or suppressed evidence of wrongful conduct by a branch operations supervisor who managed the
plaintiff’s finances.
Look Both Ways Before Tape-Recording
In the old days when blackberries were still just a fruit, no one worried about such things. Now, life is a bit more complicated.
To wit, the California Supreme Court held in July that companies that want to tape-record conversations with their California
customers must first obtain their informed consent. California has a two-party consent privacy statute, that is, both sides to a conversation must agree before either can record it electronically.
Most states allow one-party consent. But what if the calls into California are placed from a state that allows one-party consent?
In Kearneyv.Salomon Smith Barney, 39 Cal. 4th 95 (2006), the California Supreme Court ruled that California’s two-party consent law governs a lawsuit arising
from calls between a company’s location in Georgia (a one-party consent state) and clients located in California. The California
decision confirms that states with restrictive eavesdropping laws will not hesitate to enforce those laws against interstate
callers. The Supreme Court granted a small consolation: Salomon Smith Barney would not face damages, at least not in this
lawsuit, because it reasonably thought Georgia law would apply. Other defendants won’t get a free pass.
Our advice? Before you tape-record customer conversations, get their consent. Or buy yourself a pair of Kevlar-reinforced
Road Hog blue jeans. With matching vest.
For more information, contact Will Stern at wstern@mofo.com.
