Amid the excitement over Pioneer Electronics, another new case decided on the same day, LaLiberte v. Pacific Mercantile Bank, ___ Cal.App.4th ___ (Jan. 25, 2007), was almost overlooked. In LaLiberte, the Court of Appeal (Fourth Appellate District, Division Three) addressed what it means for a proposed class representative to be a member of the class he or she seeks to represent.
In LaLiberte, the named plaintiffs filed an individual action in May 2003. In November 2003, they filed an amended complaint with class action allegations. The defendant pointed out, by demurrer, that the cause of action (for statutory damages under TILA) carried a one-year statute of limitations that limits the size of the class. The named plaintiffs amended their complaint again, and sought to represent a class of borrowers who obtained their loans in November 2002 or later. The defendant renewed its demurrer, arguing that the named plaintiffs were not members of the class they sought to represent, because they had not obtained their loans during the class period of November 2002 or later, but in April 2002. The named plaintiffs responded that they could amend the class definition to include themselves and all borrowers who obtained their loans in November 2002 or later. The trial court held this would not cure the problem: "Because the named Plaintiffs were never a member of the class they purport to represent, they have no standing to sue on its behalf." The trial court sustained the demurrer to the class allegations without leave to amend. Slip op. at 2-5.
The plaintiffs appealed, and the Court of Appeal reversed, holding that leave to amend should have been granted and that the plaintiffs were, in fact, adequate to represent the proposed class. Citing La Sala v. American Sav. & Loan Assn., 5 Cal.3d 864 (1971), the Court of Appeal held that "plaintiffs' nonmembership in the class defined by the complaint stems not from a lack of a community of interest between plaintiffs and the class, but from arbitrary and inadvertent limitation of the class" created through operation of the statute of limitations. Slip op. at 6. The Court of Appeal determined that the named plaintiffs "have standing to bring individual claims mirroring those of the class members," that the "dates on which they obtained their loans do not in any way affect the community of interest alleged between the named plaintiffs and class members," and that any differences in situation resulting from the dates of the named plaintiffs' loans are "of no significance." Id. at 6, 8.
The defendant complained that the named plaintiffs had "nothing in common with other class members" and that a person should not be allowed "to become a class representative by simply adding his or her name to the class definition." Id. at 7. The Court of Appeal thought that argument stemmed from a misunderstanding of the "community of interest" concept:
True, one may become a class member by adding his or her name to the class. Doing so, however, does not ipso facto make that person an adequate class representative. The named plaintiffs' adequacy as class representatives in the present case derives from the community of interest in the law and facts involved in the case, not merely because they add[ed] themselves to the class definition.
Id. (emphasis added). (In the second half of the opinion, the Court of Appeal held that TILA recission claims cannot be asserted on a classwide basis as a matter of law. Id. at 8-12.)
In sum, LaLiberte reconfirms that the community of interest requirement of Code of Civil Procedure section 382 does not require strict and inflexible identity between the plaintiffs' claims and the letter of the class definition. The Court of Appeal's analytical approach to this issue provides a stark contrast to the approach taken in First American Title Ins. Co. v. Superior Court (Sjobring), ___ Cal.App.4th ___ (Jan. 25, 2007), also decided on the same day as Pioneer Electronics (and briefly discussed in this post).