Yesterday, the Supreme Court heard oral argument in the "one-way intervention" case, Fireside Bank v. Superior Court, no. S139171. (See my prior posts on this case here and here.) A reader in Sacramento who attended the argument very kindly wrote up the following report:
Fireside Bank v. Superior Court of Santa Clara County (Sandra Gonzalez, Real Party) S139171
Oral argument before California Supreme Court, Jan 29, 2007.
Petition for writ of review after the Court of Appeal denied a petition for peremptory writ of mandate. This case includes the following issue: May a trial court ever depart from the preferred practice of deciding whether to certify a class action before adjudicating any class claims on the merits, or it the rule against such a “one way intervention” in class actions a firm prohibition applicable in all circumstances?
Counsel for petitioner contended that the courts balance the rights of plaintiffs and defendants. Petitioner asked the Supreme Court to reverse the decision of the court of appeal, (1) reaffirm the Rule of Home Savings against deciding any class claims on the merits prior to determination as to class certification, as mandatory, and reject the appellate court’s opinion that the Rule is merely a “preference”. The class action issues must be decided first, including the opt out period. (2) Where premature merits rulings are made, the plaintiff may only proceed as an individual, not as a class action.
Petitioner argued that the Rule has worked well in federal courts for over 40 years, and in the California state courts for 30 years. There are few appellate court cases because the Rule is well known and easy to follow. No amicus briefs were filed, and even the plaintiff’s bar is comfortable with the Rule.
Justice Werdegar asked whether the Rule was mandatory, and precluded the trial court from exercising its discretion to deviate.
Petitioner insisted that the Rule could not work that way. If some plaintiffs have the merits decided first, all plaintiffs will want to do so. It’s a no lose strategy. Use of a mere “preference” would have dramatic effect on defendants.
Justice Werdegar asked what the Court should do if they agree.
Petitioner responded they should reverse. There is only a single remedy: once the trial judge has issued an erroneous premature ruling on the merits, there can be no class, citing Peritz v. Liberty Loan Corp. (7th Cir. 1975) 523 F.2d 349.
Both Justices Baxter and Kennard questioned petitioner about a remand to a different judge.
Petitioner said neither party suggested that remedy, because judges respect and are influenced by their peers, and this is not a case involving bias, only error by the trial judge.
Petitioner contended that the Rule should not be abolished as the practical effect would be to have plaintiff’s cases converted to class actions after rulings on the merits were made. This would force the defense to litigate every action as though a million dollars was at stake.
Here, Real Party Gonzalez filed a motion for judgment on the pleadings. The defense warned her in its opposition papers, that based on the Rule of One Way Intervention, she was electing not to have a class action in this case. Nonetheless, she persisted. The only appropriate remedy is to preclude the plaintiff in this case from bringing a class action. It will not preclude this plaintiff from obtaining relief, nor preclude other members of the putative class from brining their own actions, or a separate class action.
Counsel for the Real Party argued that the merits of this action have never been decided. The lower courts only determined that the complaint did not state a cause of action on the judgment on the pleadings. The one-way-intervention rule never came into effect, as the merits were never decided.
The only reason for the delay in the motion to certify the class was Fireside’s failure to respond to discovery requests, requiring a motion to compel. Once the discovery had been obtained, Gonzalez filed her motion to certify the class within six weeks.
J. Chin asked Real Party’s counsel is she was surprised by the Court’s order and conclusion that Green was discretionary.
Real party stated that counsel thought that the motion for judgment on the pleadings had been taken off calendar by the trial judge. However, Real Party agreed with the court of appeal’s interpretation of Green v. Obledo (1981) 29 Cal. 3d 126. There is no ironclad Rule in Green.
Also, the Rule is not ironclad because of the Consumers Legal Remedies Act. Civil Code section 1781(c) permits the court to decide if a consumer class action is appropriate and to determine the merits of the action.
Real party argued that Peritz was distinguishable, because there the case went to trial, and the trial court certified the class after a trial by jury.
Decertification is not the appropriate remedy here, as Gonzalez did everything she could to certify the class as promptly as possible.
That's the end of the reader's report on the argument, but the reader also writes: "My take on this case is that the Supreme Court will find the Rule against a determination on the merits prior to class certification to be mandatory, and will apply the remedy of a bar against a class action brought by this plaintiff."
That would be a pretty harsh outcome. What if the defendant waives the one-way-intervention problem by not raising it in response to a plaintiff's request for a pre-certification merits-related ruling? I've had that happen. I've also used the "one-way-intervention" rule to try to convince the court that my class certification motion should be heard before the defendant's summary judgment motion. The defendant responded, basically, that's our problem, and we choose to waive the protection of the "one-way intervention" rule. From the summary of the argument, it sounds like the defendant in Fireside Bank did not waive the issue. It will be extremely interesting to see what the Supreme Court says about all this. A decision is due in 90 days. Many thanks to the reader who provided us with this report.