Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_05-cv-00819/USCOURTS-casd-3_05-cv-00819-1/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1441 Petition for Removal- Fraud

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

In re: 

JAMSTER MARKETING LITIGATION,

MDL NO. 1751

Master File: 05cv-0819 JM(CAB)

ORDER DENYING PLAINTIFFS’

MOTION FOR SANCTIONS;

GRANTING IN PART AND

DENYING IN PART PLAINTIFFS’

MOTION TO ENJOIN AT&T FROM

PROSECUTING MCFERREN

ACTION; DENYING AT&T’S

MOTION TO STAY THIS ACTION

This document relates to all cases.

Plaintiffs move (1) to enjoin Defendants Cingular Wireless, LLC, also known as AT&T

Wireless Services, Inc., New Cingular Wireless Services, and AT&T Mobility (collectively “AT&T”)

from consummating or otherwise moving forward with the proposed settlement in Tracie McFerren

v. AT&T Mobility, LLC, Civil No. 2008EV004400F (the “Georgia Action” or “McFerren”), an action

pending in Fulton County, Georgia state court and (2) to impose sanctions on AT&T on the ground

that it failed to disclose related or tag-along actions. Defendants VeriSign, Inc. and Jamster LLC

oppose Plaintiffs’ motion to stay. AT&T opposes the motions and separately moves to stay all pretrial

proceedings in this MDL proceeding as they relate to AT&T. Plaintiffs oppose AT&T’s motion to

stay. Having carefully considered the record, pertinent legal authorities, the arguments of counsel,

and for the reasons set forth below, the court denies Plaintiffs’ motion for sanctions, grants in part and

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denies in part Plaintiffs’ motion to enjoin AT&T from prosecuting the McFerren action, and denies

AT&T’s motion to stay.

BACKGROUND

On March 8, 2005 Plaintiff Charles Ford filed an action entitled Charles Ford, et al. v.

VeriSign, Inc., et al., in the Superior Court of San Diego County seeking to represent a class of

individuals who had been charged for unauthorized mobile content on their mobile telephone bills

arising from allegedly deceptive marketing practices. (Compl., Docket No. 1). In addition to the

AT&T defendants, the putative class action also named as defendants VeriSign Inc. (“VeriSign,”),

Jamster International SARL (“Jamster”) and T-Mobile USA, Inc. (“T-Mobile”). Jamster and VeriSign

are in the business of selling mobile content. On April 18, 2005 Defendants filed a Notice of Removal

alleging that the court had original jurisdiction under the Class Action Fairness Act (“CAFA”), 28

U.S.C. §1332(d).

After the commencement of the Ford action, five other complaints were filed that are now

pending before this court as part of the MDL proceeding (as of June 1, 2008):

 • Cervantes v. Pacific Bell Wireless, LLC, No. 05cv146, filed on July 22, 2005 in the

Southern District of California;

 • Herrington, et al. v. VeriSign, Inc., et al., No, 05cv1915, filed on October 7, 2005 in

the Southern District of California;

 • Page v. VeriSign Inc., et al., No. 05cv1629, filed on October 26, 2005 in Pulaski

County Circuit Court in Arkansas and transferred to this court by Judicial Panel on

Multidistrict Litigation; and

 • Harmon v. VeriSign, Inc., et al., No. 06 C0926, filed on January 16, 2006 in Cook

County Circuit Court in Illinois and transferred to this court by the Judicial Panel on

Multidistrict Litigation.

 • Steffan v. VeriSign Inc., et al., No. 08cv0579, filed on March 27, 2008 in the Southern

District of California.

AT&T is named as a defendant in the Ford, Cervantes, and Steffan actions. AT&T represents that the

proposed class-wide settlement in the McFerren action encompasses the class of plaintiffs in the three

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actions pending against them in the present MDL action. (AT&T Oppo. at p.3:3-6).

After removal of the actions, AT&T and T-Mobile moved to compel arbitration pursuant to

the arbitration provision included in customer service agreements. The court denied the motions to

compel arbitration on the ground that the class action waiver contained in the arbitration provisions

was unconscionable, thereby causing the entire arbitration agreement to be unenforceable. On March

8, 2006 the court granted Defendants’ motion to stay pending resolution of the appeal from this court’s

denial of the motion to compel arbitration. Ultimately, the Ninth Circuit denied Defendants’ appeal

and T-Mobile filed a petition for certiorari before the Supreme Court. On May 26, 2008 the Supreme

Court denied the petition for certiorari.

At the time of the May 30, 2008 status conference, this court authorized the parties to proceed

with the litigation by filing a coordinated complaint and set a briefing schedule on the anticipated

motions to dismiss. A hearing on the motions to dismiss is calendared for November 6, 2008. 

The MDL Proceeding

On January 16, 2006, Plaintiff’s counsel in Ford filed a motion before the Judicial Panel on

Multidistrict Litigation, requesting all related cases be centralized before this court. AT&T and TMobile initially opposed Multidistrict Litigation (“MDL”) but subsequently withdrew their opposition.

On April 14, 2006 the MDL Panel transferred Page to this court and assigned the MDL Docket No.

1751. Pursuant to J.P.M.D.L. Rules of Procedure, and this court’s Pretrial Order, the parties were

required to promptly advise the court of any potential tag-along action. Only two tag -along actions

have been identified: Harmon v. VeriSign, Inc., et al., No. 06 C0926 (S.D. No. 06cv1380), originally

filed in the Northern District of Illinois and Edwards v. VeriSign, Inc., No. 06-61234 (S.D. No.

06cv2277), originally filed in the Southern District of Florida but subsequently voluntarily dismissed

by plaintiff Edwards.

The Georgia Action

On April 1, 2008 plaintiff McFerren commenced the Georgia Action naming AT&T Mobility,

LLC as the sole defendant. The McFerren complaint defines the putative class as “all AT&T wireless

telephone subscribers in the nation who suffered losses or damages as a result of AT&T billing for

mobile content products and services not authorized by the subscriber.” (Ricket Decl., Exh. G at 192-

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1

 On August 4, 2008 the court entered an order requested further briefing and evidentiary

support related to AT&T’s representation that no purported plaintiff “would predate January 1, 2004

in terms of having a [mobile content] transaction.” (R.T. 27:18-20). In response, AT&T submitted

substantial evidence in support of this representation. Plaintiffs responded, in essence, that discovery

has yet to commence in this case and therefore this representation can neither be rebutted nor

confirmed. (Docket No. 253). 

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93). 

The docket in McFerren reflects little activity. No answer has yet been filed nor any other

pleading or motion. However, on May 30, 2008 counsel for AT&T, the same counsel that represents

AT&T and VeriSign in this action, and McFerren’s counsel, presented a proposed settlement to the

Fulton County court for preliminary approval. The class period in McFerren is defined as the period

from January 1, 2004 to the date of notice of settlement (the class period in Ford extends back to

March 2001).1

The settlement generally provides the class with refunds equal to the amount of all

unauthorized third-party mobile content damages. (Ricket Decl. Exh. F). Class members must

identify and provide a certification of the date of the charges, description of the charge, and the

amount of each third party mobile content charge. Id. Further, AT&T agreed to take other steps to

inform its customers about mobile content and the use of parental controls to limit access to mobile

content. The settlement also encompasses 15 additional cases commenced between 2007 and 2008

that name AT&T as a defendant. Id. AT&T has not provided notice to the court of the existence of

these potentially tag-along or related cases. Further, the settlement also provides for the payment of

$4.3 million in attorney’s fees.

The McFerren class counsel have, since January 2006 filed a total of 15 additional actions that

joined in support of the Georgia settlement. Defendants in those cases were “AT&T Mobility, every

major U.S. aggregator, and several third party content provides.” (Special Appearance Oppo. at

p.2:25-26). 

DISCUSSION

Plaintiffs’ Motion for Sanctions

Plaintiffs move for sanctions against AT&T on the ground that its failure to notify this court

of the McFerren litigation violated both JPML Rule 7.4(e) and Southern District of California Civil

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Local Rule 40.1. The Local Rule provides that “[w]henever counsel has reason to believe that a

pending action or proceeding on file or about to be filed is related to another pending action or

proceeding on file in this or any other federal or state court )whether pending, dismissed or otherwise

terminated), counsel shall promptly file and serve on all known parties to each related action or

proceeding a notice of related case . . .” L.R. 40.1(e). The criteria for determining whether an action

is related is set forth in L.R. 40.1(d). An action is deemed related where the actions appear:

(1) to arise from the same or substantially identical transactions, happenings, or events;

or (2) involve the same or substantially the same parties or property, or (3) involve the

same patent or the same trademark, except where in one or both of the actions

concerned, the same patent or trademark is joined with other patents or trademarks

which do not cover the same or substantially identical things or devices; or (4) call for

determination of the same or substantially identical questions of law; or (5) where a

case is refiled within one year of having previously been terminated by the Court; or

(6) for other reasons would entail substantial duplication of labor if heard by different

judges.

L.R. 40.1(d). Whether a potential tag-along action is a related action is to be determined “in

accordance with local rules for the assignment of related actions.” JPML 7.5(a).

As a threshold matter, the parties are in general agreement that the MDL action and the

McFerren action, as presently pled, are virtually the same action given that the present focus in both

actions is the core allegation that class members were improperly billed for third party content. The

recently filed (July 1, 2008) Coordinated Class Acton Complaint (“CCAC”) clearly seeks to represent

a class of individuals who were “charged and paid for unauthorized products or services by Wireless

Providers.” (CCAC ¶¶67, 68). The CCAC also makes clear that the unauthorized charges arise from

third party mobile content. (CCAC ¶¶80-130). The McFerren settlement, as preliminarily approved

on May 30, 2008 by the Fulton County Superior Court, provides relief to class members who were

improperly “billed for third party mobile content.” (Plaint. Exh. Y at 556). 

When commenced, however, the central class-wide allegation in the Ford action centered on

a class of individuals “who responded to VeriSign’s advertisements” and were subsequently billed for

text messages. (Ford Compl. ¶ 22). The class allegations in the Cervantes action centered on third

party providers who sponsored “advertisements run on cable television channels targeting children

and young adults.” (Cervantes Compl. ¶¶25-26). Similarly, the Steffan action centered on

“advertisment[s] offering a free mobile content product or service.” (Steffan Compl. ¶12). As seen

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from a review of the original complaints in Ford, Cervantes, and Steffan the predominate focus of the

complaints is the false advertising for mobile content which resulted in the improper billing for such

mobile content.

The McFerren related cases originally comprised two distinct theories of liability. In Jiran,

class members consist of individuals who were charged for mobile content “where the date of

authorization for such charges preceded the date that the telephone number was assigned by AT&T

to such subscriber.” (Plaint. Exh. O at 388, ¶93(A). These allegedly unauthorized charges arise from

AT&T’s failure to remove services and charges to recycled mobile telephone numbers. (Id. at ¶¶1-2).

The Fiddler and Dedek complaints identify a class consisting of AT&T subscribers “who suffered

losses or damages as a result of AT&T billing for mobile content products and services not authorized

by the subscriber.” (Fiddler Compl. ¶43(A), Plaint. Exh. Q at 437). The alleged wrongful conduct

arises from mobile content aggregators, like m-Qube, instructing AT&T to charge subscribers for

mobile content that was never requested by the subscriber. (Id. at ¶¶14-33). The McFerren related

cases do not allege injuries caused by false advertising content. (Danos Decl. Exh. 4). Rather, the

focus centers on allegations that AT&T possessed insufficient internal controls to prevent

unauthorized billing practices by mobile content providers and aggregators. (Id. ¶¶ 5-22).

After careful consideration of the complaints filed in the McFerren and Ford actions, the court

concludes that the actions, as originally filed, are not sufficiently related to the degree required for the

imposition of sanctions against AT&T. There is no precise acid test for determining the “relatedness”

of two actions. On the one hand, the MDL and McFerren actions both arise from alleged acts of

improper billing. However the genesis of the claims is fundamentally different for the McFerren and

MDL actions. The focus of the MDL claims, as they relate to AT&T, is that class members were

misled through false advertising. The focus of McFerren , in contrast, is that AT&T did not require

adequate proof of customer authorization prior to billing for third party mobile content. 

While the court concludes that there is a good faith argument that the McFerren and MDL

actions were not sufficiently related at the time of their respective filings, the character of the

McFerren action changed over time. By May 30, 2008, the date of the preliminary approval hearing

before Judge Bonner of the Fulton County Superior Court, the actions encompassed substantially

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2

 AT&T has not provided clear and concise information of the dates of the mediation. Mr.

Duffy, counsel for AT&T declares that the mediation occurred over a two day period “during May,

2008.” (Duffy Decl. ¶21). 

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similar and related transactions and occurrences. At some point in time prior to May 30, 2008 there

is no doubt that AT&T knew full well that the McFerren and MDL actions had morphed beyond the

original scope of the complaints and merged into substantially similar actions. Precisely when that

transition occurred is not determinable from the record before the court. Neither at the time of oral

argument, nor in the declarations submitted in relation to this motion, does AT&T inform the court

when it envisioned using the McFerren action as a vehicle to globally settle all claims broadly related

to allegations of improper billing for mobile content. 

At the time of oral argument, Mr. Balser, counsel for AT&T, was asked if he ever “saw this

case - - that is, the Georgia case - - as a potential tag-along case until the ultimate settlement in this

case was tentatively reached.” (RT at p.8:18-20. Mr. Balser responded that he was not retained until

the end of the settlement process (sometime in May 2008)2

 and that the declaration of Mr. Duffy

provided an analysis on the relatedness of the actions. (RT at p.9:8-9, “that analysis is set forth [] in

Mr. Duffy’s affidavit”). The declaration of Mr. Duffy, however, while providing an analysis of the

relatedness of the actions at the time of filing, is silent on the time frame when AT&T sought to pursue

the litigation strategy of using the McFerren action as a vehicle to resolve all related litigation. (Duffy

Decl.). Presumably, counsel for AT&T first learned at the mediation sessions conducted in May of

the viability of its legitimate litigation strategy of folding in related actions to achieve a global

settlement. As AT&T moved to inform this court of the status of the McFerren action within days,

or a few weeks at most (the record is not fully developed on this point), of learning of the viability of

its settlement proposal, there is no basis to impose sanctions on AT&T. Accordingly, the court

concludes that the imposition of sanctions is not warranted under the circumstances.

In sum, the motion for sanctions is denied.

Legal Standards, The Motions to Stay

The All Writs Act provides that: “The Supreme Court and all courts established by Act of

Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and

agreeable to the usages and principles of law.” 28 U.S.C. §1651(a). This broad grant of authority is

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tempered by the Anti-Injunction Act which provides that “[a] court of the Untied states may not grant

an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress,

or where necessary in aid of its jurisdiction, or to protect or effectuate its judgment.” 28 U.S.C.

§2283. Moreover, “[a]ny doubts as to the propriety of a federal injunction against state court

proceedings should be resolved in favor of permitting the state courts to proceed in an orderly fashion

to finally determine the controversy.” Atl. Coast Line R.R. Co. v. Brotherhood of Locomotive Eng’rs,

398 U.S. 281, 297 (1970). In exercising its authority under the All Writs Act, the Supreme Court

emphasized that such authority is necessary only if “some federal injunctive relief may be necessary

to prevent a state court from so interfering with a federal court’s consideration or disposition of a case

as to seriously impair the federal court’s flexibility and authority to decide that case.” Id. at 295. 

 The All Writs Act has had particular application in the context of MDL proceedings. “[W]here

complex [MDL] cases are sufficiently developed, mere exercise of parallel jurisdiction by the state

court may present enough of a threat to the jurisdiction of the federal court to justify issuance of an

injunction.” In re Diet Drugs Prods. Liab. Litig., 282 F.3d 220, 225 (3rd Cir. 2002). Where the AntiInjunction Act applies, “the injunction should be directed at a litigant . . . instead of the state court

proceedings itself.” California v. Randtron, 284 F.3d 969, 975 (9th Cir. 2002).

The Motions to Stay

Scope of the MDL Proceeding

One threshold issue not fully flushed out by the parties concerns the scope of this court’s

jurisdiction as it relates to the MDL litigation. The MDL panel concluded that the MDL actions

involve common factual allegations that:

(I) VeriSign and Jamster defendants have falsely represented to consumers that mobile

customers can get a free ring tone or other phone service by sending a message to

Jamster or by registering on the internet; and ii) instead of receiving the free content,

those customers then received repeated text messages from defendants for which they

were charged by defendants.

(Hartman Decl., Exh. A). These core common factual allegations, properly characterized as deceptive

marketing practices, form the basis for the MDL’s transfer and instructions to this court to preside

over coordinated or consolidated pretrial proceedings. 

As presently pled in the CCAC, the nationwide class now consists of “[a]ll persons who were

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charged [and] paid for unauthorized products or services by a Wireless Provider during” the class

period. CCAC ¶ 67. This a sweeping expansion of the scope of the MDL mandate. As presently

defined, virtually all claims that are capable of being characterized as “wrongful billing claims” would

now potentially be folded into the MDL proceeding. Claims arising from conduct unrelated to

deceptive marketing practices would significantly alter the course of this MDL proceeding. Claims

involving “unscrubbed numbers,” fees for “free” upgrades, inadequate internal controls, accounting

irregularities, deceptive billing practices, and the like would form a part of this MDL proceeding.

Virtually any state or federal claim that could loosely be characterized as a wrongful billing claim

could be identified as a potential tag along action. Among other things, such a broad view of the

scope of the MDL action, raises comity and federalism concerns and would exceed the scope of this

court’s MDL jurisdiction. See Manual for Complex Litigation, Fourth, §§22.36 - 22.4. This court’s

authority to interfere with on-going state court proceedings is limited and not all encompassing. See

Atl. Coast Line, 395 U.S. at 295.

For the reasons set forth below, and after careful review of these issues and the scope of the

JPML’s instructions as to the limits placed on the exercise of this court’s jurisdiction, the court finds

that claims unrelated to the deceptive marketing claims do not share the common facts or issues of the

core cases comprising the MDL litigation. The primary purpose of MDL proceedings is to provide

efficiencies in coordinated pretrial discovery and other pretrial matters - not to use the MDL

proceedings as a means to expand the scope of the litigation beyond the core issues identified by

JPML. 

Plaintiffs’ Motion to Stay

Plaintiffs argue that AT&T must be enjoined from pursuing the settlement in the McFerren

action as a necessary aid to this court’s jurisdiction. Unless AT&T is enjoined, Plaintiffs conclude,

this court’s jurisdiction will be wrongfully usurped. “[W]here jurisdiction over federal MDL class

action litigation is threatened by a potential settlement of the same claims in a state court, the federal

court can act pursuant to the All Writs Act even when the federal court has not already entered an

order that requires preservation.” In re Lease Oil Antitrust Litigation No. II, 48 F.Supp.2d 699, 705

(S.D. Tex. 1998). Any litigant may be enjoined from proceeding with a state court action where it is

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“necessary to prevent a state court from so interfering with a federal court’s consideration or

disposition of a case as to seriously impair the federal court’s flexibility and authority to decide the

case.” In re Diet Drugs Prod. Liab. Litig., 282 F.3d 220, 234 (3d Cir. 2002); Keith v. Volpe, 118 F.3d

1386, 1390 (9th Cir. 1997) (federal courts have authority to enjoin “state proceedings that interfere,

derogate, or conflict with federal judgments, orders, or settlements”).

The court concludes that a partial stay of the McFerren action as it relates to the core MDL

deceptive marketing claims is required to preserve the integrity, efficiency and fairness of the MDL

related actions. Moreover, implementation of a stay will foster the proper administration of justice

and permit Plaintiffs to obtain complete relief on the core MDL claims to which they may be entitled.

In In re America Online Spin-Off Accounts Litig., 2005 WL 5747463 (C.D. Cal. 2005), 12 class

actions where transferred to the Central District by the MDL Panel for pre-trial proceedings. One

central allegation was that America Online, through the use of deceptive pop-up ads, allegedly opened

spin-off accounts without the permission of the account holders. The plaintiffs in America Online had

initiated settlement discussions with America Online when the plaintiffs sought injunctive relief under

the All Writs Act to enjoin America Online from proceeding with a settlement of plaintiffs’ claims

in Illinois state court. The district court concluded that a settlement in the Illinois action would

diminish the court’s “ability to bring the MDL litigation to a natural conclusion,” and therefore

enjoined America Online from proceeding with the state court settlement. Id. at *4. The court further

noted that America Online was under a duty to inform the court of the Illinois tag-along action and

concluded that “the underlying policy behind MDL litigation, coupled with a threat to the Court’s

jurisdiction over the MDL plaintiffs, weighs in favor of granting Plaintiffs motion for injunctive

relief.” Id. 

Here, AT&T is one of the central figures in the alleged deceptive marketing scheme. The

dismissal of AT&T as a party, and potentially Jamster and VeriSign as well (as urged by AT&T,

Jamster, and VeriSign), will severely hinder this court’s ability to efficiently and effectively bring the

MDL litigation to a conclusion. See Id. In the context of complex litigation, the All Writs Act plays

an important role:

[W]e did recognize in In re Diet Drugs that complex class action cases are one

“category of federal cases for which state court actions present a special threat to the

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jurisdiction of the federal court.” As we explained, [u]nder an appropriate set of facts,

a federal court entertaining complex litigation, especially when it involves a substantial

class of persons from multiple states, or represents a consolidation of cases from

multiple districts, may appropriately enjoin state court proceedings in order to protect

its jurisdiction.” This is so because “maintaining ‘the federal court’s flexibility and

authority to decide’ such complex nationwide cases makes special demands on the

court that may justify an injunction otherwise prohibited by the Anti-Injunction Act.”

500 F.3d at 300 n.3. Accordingly, in cases such as this, a federal court has the

discretion to enjoin parallel state actions which - - due to the risk of inconsistent

decisions - - may undermine or eliminate the court’s “authority” over a class action.

Grider v. Keystone Health Plan Cent., Inc., 500 F.3d 322 (3d Cir. 2007); In re Lease Oil Antitrust

Litigation No. 11, 48 F.Supp.2d 699, 705 (S.D. Tex. 1998) (“[W]here jurisdiction over federal MDL

class action litigation is threatened by a potential settlement of the same claims in a state court, the

federal court can act pursuant to the All Writs Act even when the federal court has not already entered

an order that requires preservation.”); In re Diet Drugs Prods. Liab. Litig., 282 F.3d at 234 (three

factors are considered in determining whether the state court action sufficiently interferes with the

MDL proceedings to warrant entry of an injunction under All Writs Act: (1) a determination of what

kinds of state court interference would sufficiently impair the federal proceeding; (2) the state court

actions are to be assessed to determine whether they present a sufficient threat to the federal action;

and (3) principles of federalism and comity are to be considered as the primary aim of the AntiInjunction Act is to prevent needless friction between state and federal courts).

The proposed settlement in McFerren also appears inadequate to protect the rights of Plaintiffs

and the class they seek to represent. While AT&T represents that the contemplated settlement

provides a “full refund,” the court notes that the terms of the settlement place the burden on the

putative class members to discovery any improperly billed mobile content. In order to receive a

refund, the class members must identify the transaction date, describe the charges, and set forth the

amount of third party content to be refunded. It is foreseeable that many class members have not

maintained their telephone billing records over the multi-year class period. The structure of the

settlement appears designed to limit a consumer’s incentive and ability to adequately assess their

claims. In In re Managed Care Litigation, 236 F.Supp.2d 1336 (S.D. Fl 2002), the district court

presided over a MDL proceeding where the plaintiffs, consisting of a class of physicians, alleged

RICO violations against managed care insurance companies. One insurance carrier, Cigna, had

engaged in settlement discussions in a parallel state court action. In the state court action the plaintiffs

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amended the complaint to create federal jurisdiction and, on Friday November 22, 2002 Cigna

removed the action to federal court. Then, on Monday November 25, 2002 at 9:11 a.m. the parties

filed a settlement agreement and motion requesting preliminary approval of the settlement and

conditional certification of the settlement class. By 10:25 a.m. that same day, the state court approved

the motion to preliminarily approve the settlement. The motion for preliminary approval did not

advise the court of the existence of the MDL proceedings. The district court enjoined Cigna from

proceeding with the proposed settlement noting that the settlement “might” be “woefully inadequate”

and that the settlement would render the MDL panel’s “decisions and existence moot.” Id. at 1344.

The court enjoined Cigna from proceeding with the settlement.

Here, as in In re Managed Care, the state and federal courts have not been well-served by the

settling parties. On March 6, 2006 this court stayed the Ford action pending appeal of this court’s

order denying the motion to compel arbitration. The stay was imposed, in part, based upon AT&T’s

argument that it should not incur litigation costs pending appeal. (Docket No. 137). Then, after the

Ninth Circuit affirmed this court’s ruling denying the efforts of AT&T and others to compel

arbitration, this court again, over the strenuous objections of class counsel, continued to stay the

litigation to allow Defendants to seek Supreme Court review. Rather then forthrightly advising this

court that AT&T was devising a “global settlement” in the McFerren litigation, defense counsel

requested this court to maintain its stay on the premise of saving AT&T litigation costs in the event

of a favorable ruling by the Supreme Court. While the present action was stayed, AT&T litigated the

McFerren actions and, without informing this court or Plaintiffs, reached a purported global settlement

of all claims. On May 30, 2008 AT&T filed a motion for preliminary approval of settlement in the

McFerren action and several hours later the settlement had been preliminarily approved. At the

hearing before Judge Bonner, Mr. Balser, counsel for AT&T, and Mr. Edelson, counsel for the

McFerren plaintiffs, represented that the MDL action “involves really a subset of the issues in

McFerren,” (RT 6:15), and that “some of those actions (the MDL related actions) are directed only

at the third party content providers.” (RT 7:21-22). Judge Bonner “understood from the (statements

of counsel) that the issues are not precisely the same, although, there may be some overlap in the

multi-district case and that the parties in that case have been at least aware of this case.” (RT 8:3-7).

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The court highlights that counsel for AT&T represented before this court that the settlement in

McFerren would extinguish all of Plaintiffs’ claims asserted against AT&T, (RT 15:24-25), and

possibly those of Jamster and VeriSign as well. (RT 15:12 - 16:18). From this portion of the record,

it does not appear that AT&T adequately corrected Judge Bonner’s perception that, with respect to

AT&T, the issues in the two actions arise from substantially the same occurrences and transactions

and that the settlement in McFerren would significantly impact this court’s flexibility and authority

to decide issues raised in the MDL related actions. 

Finally, principles of federalism and comity are furthered by entry of an injunction narrowly

tailored to enjoin AT&T from proceeding with the McFerren settlement as it relates to the deceptive

marketing claims. See In re Diet Drugs, 282 F.3d at 234. Federal courts have long recognized that

principles of comity require federal district courts to exercise care to avoid interference with each

others’s affairs. See Sutter Corp. v. P & P Industries, Inc., 125 F.3d 914, 917 (5th Cir. 1997). Here,

entry of a limited and narrowly crafted stay in the McFerren action as to the deceptive marketing

claims does not so much interfere with the Georgia action but, rather, prevents that action from

interfering with this federal proceeding consisting of MDL related actions that present complex issues

involving a substantial class of individuals from many different states. 

Among other things, AT&T contends that this court’s authority to issue the injunction is

limited to in rem proceedings, MDL proceedings with pending preliminarily approved settlement, or

proceedings involving collusive settlements. These arguments are not persuasive. While an in rem

action by its very nature may present more compelling reasons for entry of an injunction, entry of an

injunction also extends to complex in personam actions. Negrete v. Allianz Life Ins. Co. of North

America,523 F.3d 1091, 1102 (9th Cir. 2008). In in personam actions “some federal injunctive relief

may be necessary to prevent a state court from so interfering with a federal court’s consideration or

disposition of a case as to seriously impair the federal court’s flexibility and authority to decide that

case.” Id. at 1101 (quoting Atl. Coast Line, 398 U.S. at 295). 

While the mere existence of a parallel state court action is insufficient to warrant injunctive

relief, here, the MDL action is sufficiently advanced and presents unique circumstances such that entry

of a limited injunction to enjoin AT&T from proceeding with the settlement of the deceptive

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marketing claims is necessary to aid this court’s jurisdiction. The parties have engaged in substantial

motion practice centered on the validity of the arbitration provisions contained in customer

agreements, filed several motions to dismiss, and filed several motions to stay (including the present

ones). Further, the proposed settlement threatens to prevent Plaintiffs from recovering damages from

either Jamster or VeriSign. These MDL defendants represent that, upon final approval of the

McFerren settlement, they must be dismissed from the MDL action because they will obtain liability

releases via the McFerren settlement as AT&T has made an indemnity demand against them. (R.T.

at pp. 43:16 - 44: 11; (RT 15:12 - 16:18) . The court notes that neither Jamster nor VeriSign are

parties to the McFerren action but are at the center of the deceptive marketing and advertising claims

in the MDL related actions. The complexities surrounding the nature of the deceptive and false

marketing claims present a unique challenge requiring a limited injunction to enjoin AT&T from

proceeding with the settlement in the McFerren action only as it relates to the deceptive marketing

claims asserted in the MDL action. Such a limited stay will likely have minimal impact on the state

court to globally settle all other claims related to third party mobile content. AT&T is not enjoined

from proceeding with any other claim in the Georgia Action. 

In sum, the court denies Plaintiffs’ motion for sanctions, grants in part and denies in part

Plaintiffs’ motion for a stay, and denies AT&T’s motion for a stay as moot. AT&T is hereby enjoined

in the McFerren action from proceeding to settle or otherwise litigate the deceptive marketing claims

encompassed within the scope of this court’s MDL jurisdiction. Finally, the court is mindful that the

present order will likely impact the scope of the motions to dismiss and to compel arbitration presently

set for hearing on November 6, 2008. In the event any party to this action requires additional time to

address any issue raised by the present order (as it bears on the motions to dismiss), the court will

entertain limited ex parte motions for an enlargement of time to address such issues.

IT IS SO ORDERED.

DATED: September 29, 2008

 Hon. Jeffrey T. Miller

 United States District Judge

cc: All parties

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