A California district court judge granted certification in a class action against Countrywide Financial.  The plaintiffs allege that the home mortgage giant, now owned by Bank of America, engaged in deceptive practices while selling billions of dollars in mortgage-backed securities.  See Maine State Retirement System v. Countrywide Financial Corp., No. 2:10-cv-00302 (C.D. Cal. Nov. 16, 2011) (order granting class certification) (available here).  The class consists of all persons and entities that bought Countrywide’s mortgage-backed securities before January 14, 2010, and includes participants in several public employee pension plans.  Id.

The certified class can now pursue claims that Countrywide and its investment banks made misleading statements and omissions in connection with the issuance of highly risky mortgage-backed securities, which were secured by mortgages virtually certain to result in defaults.  See Second Amended Complaint, Maine State Retirement System v. Countrywide, No. 2:10-cv-00302 (C.D. Cal., filed Dec. 6, 2010), ¶¶ 4-10.  The inevitable mortgage defaults revealed that the properties underlying the mortgages were worth materially less than the loans issued to the borrowers, and that the borrowers were unable to cover the outstanding mortgage balances.   Id. at ¶¶ 10-17. 

The class certification order came after Countrywide stipulated to a proposed class in conformity with the judge’s previous rulings in the case, thereby cutting short protracted legal argument over class certification.  See Maine State Retirement System v. Countrywide Financial Corp., No. 2:10-cv-00302 (C.D. Cal. Nov. 16, 2011) (order granting class certification).

The Southern District of New York has approved a $90 million cash settlement that confirms the distinctive role of class actions in compensating victims of the recent financial crisis.  See Rubin v. MF Global, No. 1:08-cv-02233 (S.D.N.Y. Nov. 18, 2011) (final order and judgment) (available here).  The settlement resolves claims against defendants, including MF Global, in connection with the company’s initial public offering.  The plaintiffs alleged that defendants erroneously assured investors that MF Global’s system of risk controls would be capable of monitoring risk on a continuous, “real time” basis.  See First Amended Class Action Complaint at ¶ 77, Rubin v. MF Global, No. 1:08-cv-02233 (S.D.N.Y. Nov. 5, 2010).  In fact, MF Global had deactivated trading and margin controls on brokers’ computers to speed up transaction times.  Id. at ¶¶ 14, 93.  When a single trader subsequently lost $141 million speculating in wheat futures in overnight trading, MF Global was forced to absorb those losses, sending MF Global’s stock into a tailspin.  Id. at ¶¶ 13-17. As a result, the company lost $1.1 billion in market capitalization over a two-day period.  Id. at ¶¶ 114-115.

Owing to the unusually large settlement fund of $90 million, class counsel was awarded 18 percent of the settlement fund in fees, rather than the usual 33 percent.  See Rubin v. MF Global, No. 1:08-cv-02233 (S.D.N.Y. Nov. 18, 2011) (order granting plaintiffs’ counsel’s petition for an award of attorneys’ fees).  The settlement follows on the heels of MF Global’s October 31 bankruptcy filing, which was directly tied to an additional scandal in which MF Global failed to segregate its own funds from customer funds as required by the rules of the Chicago Mercantile Exchange and was unable to satisfy customer redemptions. 

The U.S. Supreme Court’s Dukes v. Wal-Mart decision reversed certification of a class of approximately 1.5 million current and former Wal-Mart employees, partly on grounds that litigating the claims of a class so large would be unwieldy.  See Dukes v. Wal-Mart, 131 S. Ct. 2541, 2555-56 (2011) (“Even if [statistical proof] established (as it does not) a pay or promotion pattern that differs from the nationwide figures or the regional figures in all of Wal-Mart’s 3,400 stores, that would still not demonstrate that commonality of issue exists.”).  Now, despite that ruling, the California-based plaintiffs have filed a fourth amended complaint, which alleges sex discrimination against Wal-Mart, but only on behalf of a putative class of California employees.  See Plaintiffs’ Fourth Amended Complaint, Dukes v. Wal-Mart, No. 3:01-cv-02252 (N.D. Cal. October 27, 2011) (available here).  The named plaintiffs seek to represent approximately 90,000 prospective class members.  Id. at ¶¶ 15-17.

Still captioned Dukes v. Wal-Mart, the newly filed action could become a model for additional, regional lawsuits against Wal-Mart.  The plaintiffs’ attorneys in the California action have indicated their intention to file similar class actions in other states.  This suggests a potential new trend in class actions, marked by narrower class definitions more conducive to identifiable and answerable common questions.  This could also pave the way for more targeted “mass actions” that disaggregate class actions into simultaneously pending individual actions.

A federal judge has granted class certification in a lawsuit alleging that consumers relied on false representations by defendant Smoking Everywhere regarding the purported safety of its electronic cigarettes.  See Mathias v. Smoking Everywhere, Inc., No. 09-cv-03434 (E.D. Cal. Oct. 25, 2011) (order granting class certification motion) (available here).  This sets the stage for a potentially sizeable recovery for Californians who bought the $49.95 “starter kit” in reliance on claims that electronic cigarettes are non-toxic and a safe alternative to smoking conventional cigarettes.

The operative complaint alleges that Smoking Everywhere falsely advertised its electronic cigarettes as non-hazardous, and failed to warn consumers that the product contains carcinogens and other toxins.  Id. at 3-4.  The certified class comprises all California residents who bought the Smoking Everywhere product from December 2005 to October 2011, and seeks damages and injunctive relief pursuant to California’s Consumer Legal Remedies Act and Unfair Business Practices Act.  Id. at 1 and Class Action Complaint for Injunctive Relief and Restitution, Mathias v. Smoking Everywhere, Inc., No. 09-cv-03434 (E.D. Cal. filed Dec. 10, 2009).

The nascent but growing electronic cigarette industry—estimated to generate $100 million in annual gross revenues—has also been a target of state and federal government officials.  In August of 2010, Smoking Everywhere settled a lawsuit brought by the Oregon Attorney General, which resulted in Smoking Everywhere altogether discontinuing retail sales in Oregon.  The U.S. Food and Drug Administration has also been involved in litigation around the FDA’s attempts to regulate Smoking Everywhere and other electronic cigarette manufacturers.