Class Action

Sprint Class Action Defense Cases–Hesse v. Sprint: Ninth Circuit Court Reverses Summary Judgment Dismissing Class Action Holding That Prior Nationwide Class Action Settlement Did Not Bar Present Class Action Complaint

By Michael J. Hassen

Broad Release Language in Prior Nationwide Class Action Settlement did not Preclude Instant Class Action Lawsuits because Class Representative in Nationwide Class Action was not Adequate Representative of Instant Class and because Class Actions were not Premised on “Identical Factual Predicate” Ninth Circuit Holds

Plaintiffs filed separate putative class action lawsuits in Washington state court against Sprint alleging violations of the state’s Business & Occupation Tax (“B&O tax”) and Consumer Protection Act (“CPA”), as well as breach of contract and unjust enrichment; specifically, the class action complaints alleged that Sprint unlawfully passed the B&O tax on to consumers. Hesse v. Sprint Spectrum LP, ___ F.3d ___ (9th Cir. March 10, 2010) [Slip Opn., at 3845, 3849-50]. According to the allegations underlying the class action complaints, Sprint included “a separate line item labeled ‘Washington State B&O Tax Surcharge’” on customer invoices, id., at 3850; however, “Washington law specifies that the B&O tax must be collected from a business as part of its ‘operating overhead’ rather than imposed as a separate ‘tax[] upon purchasers or customers,” id., at 3849-50 (citation omitted). Defense attorneys removed the class actions to federal court, and the moved to dismiss the class action complaints. Id., at 3850. The district court granted the motion with respect to all class action claims “predicated on the B&O Tax Statute,” finding that the claims were preempted by the Federal Communications Act; however, the court otherwise denied the motion to dismiss. Id. Eventually, the class action complaints were consolidated, and the district court certified the litigation as a class action. Id. Sprint answered the class action complaint and then moved for summary judgment on the grounds that the claims were “barred by a [nationwide class action] settlement between Sprint and its customers approved by a Kansas state court in 2006” known as the Benny Settlement. Id. The district court granted the motion, concluding that the prior class action settlement barred the present lawsuit. Id., at 3849. The Ninth Circuit reversed.

The Circuit Court explained that the Benny Settlement resolved several class actions that had been filed “in various state courts and then dismissed and refilled in Kansas state court in 2005 for the purposes of settlement.” Hesse, at 3850. One of those class actions challenged Sprint’s practice of imposing surcharges to “recoup federal regulatory fees” – defined in the class action settlement agreement “to include only specified fees imposed to recover the cost of compliance with federally mandated programs” – in violation of consumer protection laws, and alleging breach of contract and unjust enrichment. Id., at 3850-51. Plaintiffs in the present class action did not dispute that they were members of the class covered by the Benny Settlement and that they did not opt out of that class, id., at 3851. The question was whether the instant class action claims were barred by the broad release language of the Benny Settlement.

Full post as published by Class Action Defense Blog on March 15, 2010 (boomark / email).