Articles from December 2012

Tchoboian v. FedEx: Parties Settle FACTA Class Action With Gift Cards

A settlement has been reached in a class action alleging that FedEx Office stores violated the Fair and Accurate Credit Transactions Act (FACTA) by printing receipts that reveal too many digits of consumers’ debit and credit card account numbers. See Tchoboian v. FedEx Office and Print Servs. Inc., No. 10-1008 (C.D. Cal. Nov. 29, 2012) (Order Granting Motion for Preliminary Approval). Per the Settlement Agreement, the plaintiff class members find themselves in line to receive FedEx “Store Value Cards” worth $50 each, upon submission of a valid claim form. The cards can be used on purchases of items and services related to those through which the class members encountered the FACTA violations. These include use of the store’s copy machines, computer rentals, faxes, printing, and binding. The case moved toward settlement after FedEx’s summary judgment motion was denied in November of 2011.

The proposed class at issue in Tchoboian is defined as “All consumers . . . in the United States of America who can present an original or copy of a printed FedEx Office receipt printed between April 2009 and April 2010 displaying the first two and last four digits of their credit or debit card number.” Order at 2. The FACTA provides that credit card receipts may not show more than the last five digits of the card number, nor may the receipts show credit or debit card expiration dates.

Although the Class Action Fairness Act (CAFA) heightened the scrutiny on coupon settlements such as Tchoboian, there exists a misconception that CAFA categorically prohibits such settlements. Coupon settlements are not disfavored, particularly where coupons or gift cards represent a substantial proportion of what could have been recovered at trial. There is no cap on total damages under the FACTA, and FedEx faced the possibility of fines between $100 and $1000 per violation. Such damages are available under theories of either negligence or willful violation, though if the violations are shown to have been committed negligently, plaintiffs must show that they incurred damages as a result.

In Re ING ERISA Litigation: $3.5 Million Settlement Illuminates Time-Risk Calculus

ING, the global investment and insurance concern, has agreed to settle two class actions alleging that ING violated its fiduciary duty under the federal Employee Retirement Income Security Act of 1974 (ERISA) by investing retirement funds in stocks that performed poorly. See In Re ING Groep, N.V. ERISA Litigation, No. 09-0400 (N.D. Ga. Nov. 14, 2012) (MPA ISO Preliminary Approval). The pending preliminary approval motion is seeking the court’s authorization to send class members the notice required by Federal Rule 23 informing them of the terms of the settlement, which is valued at $3.5 million.

The underlying actions arose around facts coated in irony, as ING, whose primary business is managing the investments of other companies and individuals, was accused by the plaintiffs of mismanaging its own employees’ retirement accounts, in part by investing in ING’s own stock. See MPA at 5-6. The litigation invited inquiry around an unsettled ERISA doctrine: whether there is a lesser standard of care applied to claims involving investments in a company’s own stock (or, alternatively, whether there is a heightened presumption that the investment is prudent). See MPA at 12. The presumption of prudence accorded defendants is known as the “Moench presumption,” as articulated in Moench v. Robertson, 62 F.3d 533 (3d Cir. 1995). Indeed, the Moench presumption issue was before the Eleventh Circuit in an appeal from one of the ING actions when the settlement was negotiated. The settlement thus mooted that appeal, leaving the Moench prudent investor doctrine to be parsed another day.

The risk attendant to the pending appeal was cited as one of the bases for the settlement, as the Eleventh Circuit has recently given indications that it would adopt the more permissive Moench standard as to same-company stock purchases by retirement funds. See Lanfear v. Home Depot, Inc., 679 F.3d 1267 (11th Cir. 2012). Even had the plaintiffs obtained a favorable ruling from the Eleventh Circuit, the class members would likely have had to wait several years before the claims were tried to judgment and, thereafter, endure another round of appeals on entirely new issues engendered by a trial. See MPA at 13-15.

Malakhov v. CMGRP: Off-the-Clock Settlement Underscores Importance of Informal Workplace Rules

Public relations company Rogers & Cowan has resolved a class action lawsuit filed by employees alleging that they were compelled to work off-the-clock without pay, in a settlement that is likely to influence other classwide off-the-clock litigation. See Malakhov v. CMGRP, Inc., No. 11-06605 (C.D. Cal. Oct. 22, 2012) (MPA ISO Conditional Certification & Preliminary Approval).

As set forth in the recently filed preliminary approval papers, the plaintiffs allege that “junior employees, who wanted to move up and create a career from themselves in the Defendant companies, had to put in a lot of ‘volunteer’ hours if they wished to succeed.” MPA at 6.

The settlement covers 169 employees, and although relatively modest in its total value (just $327,500), the Malakhov settlement embodies several encouraging signs for off-the-clock class actions. First, the allegations of off-the-clock work were premised entirely on unofficial and unwritten company “policies.” Specifically, the plaintiffs claim that the defendant’s prevailing workplace culture sent the unmistakable message to employees that only by performing off-the-clock work could they advance.

Additionally, Malakhov is notable for settling without class certification having been granted. As such, the settlement will function as a benchmark for both pre- and post-certification settlement of off-the-clock claims, with the settling class members in Malakhov in line to receive an average of approximately $1,000 per class member in back pay for their off-the-clock work.

The approval papers simultaneously seek conditional certification and settlement approval as to a federal Fair Labor Standards Act collective class, as well as a California-based class seeking approval and certification under Federal Rule 23.