The UCL Practitioner

"2007 Developments in California Class Action Law"

The Spring/Summer 2008 issue of Competition, the journal of the Antitrust and Unfair Competition Law Section of the State Bar of California, arrived in the mail last week. It includes several articles on antitrust law and one of interest to class action practitioners, "2007 Developments in California Class Action Law" by Pamela M. Parker of Coughlin Stoia Geller Rudman & Robbins LLP. The article is very comprehensive and discusses a number of recent class action cases of interest, including Capitol People First v. State Department of Developmental Services, 155 Cal.App.4th 676 (2007) and Lewis v. Robinson Ford Sales, Inc., 156 Cal.App.4th 359 (2007).

Articles from the Spring/Summer 2008 issue of Competition are not yet available online.

New Ninth Circuit class action decision: Negrete v. Allianz Life Insurance Co.

In Negrete v. Allianz Life Insurance Co., ___ F.3d ___ (9th Cir. Apr. 29, 2008), the Ninth Circuit invalidated a district court order that would have prohibited the defendant from settling similar class actions pending in other jurisdictions without the participation of plaintiff's co-lead counsel in the certified nationwide class action case before it. The concluding paragraphs of the opinion read:

The district court was troubled by the fact that settlements in other courts might draw the fangs from at least a portion of the class action case that it was then considering. Perhaps they will. But in this instance it was improper for the district court to react by issuing an injunction against other federal and state court proceedings.

Rather, the district court must live with the vicissitudes and consequences of our elegantly messy federal system. The restrictions inherent in the All Writs Act and explicit in the Anti-Injunction Act have helped to concinnate the elements of our national polity; this is not the time to disrupt the harmony.

Slip op. at 4594. There's no "harmony" when someone else files on top of you and then tries to settle your case out from under you — especially if the district court can do nothing to prevent it. However, the Ninth Circuit was concerned about a different kind of "harmony." This morning's Daily Journal reports that "Panel Finds Judge's Order Went Too Far" (subscription).

[Vocabulary word of the day: Concinnate. Verb, tr. "To place fitly together; to adapt; to clear."]

"Class Action Lawsuits"

A blog called Disgusted Beyond Belief has an interesting post refuting the criticisms often levied against class action cases generally and the class action bar in particular. An excerpt:

Dealing with the [class action attorney's] fees [and] whether they are "deserved" - I say that they clearly are. Were it not for those fees, as noted above, the poor could be trod upon with impunity (as it is, they still often are, but it would be much much worse without [class action cases]). Putting together a class action suit is hard work that requires specialized lawyers with years of experience and also requires spending a lot of cash upfront on the part of the law firm. Only a large, rich law firm can handle class action suits for that reason. Veteran lawyers with highly specialized skills are needed. They don't come cheap, for good reason. They work hard, working long hours, sometimes for years, and all with the chance that in the end, they will get nothing. So the winning cases not only have to pay them for their time for those cases, they also have to cover all of the money spent on losing cases or on cases that, despite winning, still did not cover the cost of their actual time spent. In short, they deserve every penny - they work hard for it.

Thank you. I don't necessarily think that only a "rich, large law firm" can handle a class action case, but you definitely have to be persistent and very hard-working to succeed in this area of practice.

[Via ClassActionBlawg.com]

New York decision on rights of absent class members: Wyly v. Milberg Weiss Bershad & Schulman LLP

In Wyly v. Milberg Weiss Bershad & Schulman LLP, ___ N.Y.S.2d ___, 2007 NY Slip. Op. 10506 (Dec. 27, 2007), the New York Supreme Court, Appellate Division (First Department) addressed the relationship between absent class members and class counsel. In holding that absent class members do not have the right to inspect class counsel's files, as does the client in a more traditional attorney-client relationship, the Court explained:

[I]t has been observed, by courts and commentators alike, that the relationship between appointed counsel and an absent member in a class action differs fundamentally from that found in the traditional [attorney-client] relationship (see e.g. Selection of Class Counsel, Third Circuit Task Force Report, 208 FRD 340, 347-348 [2002] ["absent class [*5]members are not individual clients. Thus, the ordinary attorney-client relationship does not exist between each class member and class counsel."]; In re Community Bank of N. Va. & Guaranty Natl. Bank of Tallahassee Second Mortgage Loan Litig., 418 F3d 277, 313 [2005] ["([c]ourts have recognized that class counsel do not possess a traditional attorney-client relationship with absent class members."]; In re J.P. Morgan Chase Cash Balance Litig., 242 FRD 265, 277 [2007] ["appointment of class counsel is an extraordinary practice with respect to dictating and limiting the class members' control over the attorney-client relationship and thus requires a heightened level of scrutiny to ensure that the interests of the class members are adequately represented and protected."]; In re Chicago Flood Litig., 289 Ill App3d 937, 942 [1997] ["attorney-client relationship is limited, however, and is different in the class context than it is in a traditional, nonclass situation"]; 2 Bus & Com Litig Fed Cts, § 16:3 2nd ed ["absent class members not only do not get to select their own counsel, but often they are unaware that their legal rights may be bartered and compromised by counsel who are not constrained by a traditional attorney-client relationship with the absent class members."]; G. Donald Puckett, Note, Peering Into a Black Box: Discovery and Adequate Attorney Representation for Class Action Settlements, 77 Tex L Rev 1271, 1291 [1999] ["[c]ourts have recognized that the class action context differs drastically from the traditional bipolar attorney-client relationship, and that salient differences make a strict application of traditional ethics rules to class representation both unwise and impractical."]; Howard W. Erichson, Beyond the Class Action: Lawyer Loyalty and Client Autonomy in Non-Class Collective Representation, 2003 U Chi Legal F 519, 524 [2003] ["in a class action, numerous plaintiffs depend upon the work of counsel with whom they have no meaningful individual lawyer-client relationship, [and] over whom they have no meaningful control . . ."]).

The United States Supreme Court, in Phillips Petroleum Co. v Shutts (472 US 797, 810-811 [1985]), succinctly addressed not only the status of an absent class action plaintiff, but also the relative detachment, and concomitant security, that characterizes that plaintiff's involvement in the litigation.

"Unlike a defendant in a normal suit, an absent class-action plaintiff is not required to do anything. He may sit back and allow the litigation to run its course, content in knowing that there are safeguards provided for his protection. In most class actions an absent plaintiff is provided at least with an opportunity to opt out' of the class, and if he takes advantage of that opportunity he is removed from the litigation entirely."

The Supreme Court further opined that:

"absent plaintiff class members are not subject to other burdens imposed upon defendants. They need not hire counsel or appear. They are almost never subject to counterclaims or cross-claims, or liability for fees or costs. Absent plaintiff class members are not subject to coercive or punitive remedies. Nor will an [*6]adverse judgment typically bind an absent plaintiff for any damages . . ." (id. at 810 [footnote omitted]).

In sum, while petitioner herein, as an absent class member in the federal action, was entitled to some of the benefits of the attorney-client relationship, such as the right to privileged communications with class counsel and the prohibition against attempts by defendants' counsel to communicate with him, he had no right to direct the course of the litigation, testify at trial, participate in discovery, or dismiss class counsel. Moreover, petitioner was free to hire his own counsel to appear in the class action if he wished to employ a traditional attorney-client relationship, although his input into the litigation would still have been curtailed, or to opt out of the class action altogether if he was unsatisfied with his limited role.

Given the above-delineated disparity in the roles, responsibilities, and potential liabilities assumed by a client in the traditional attorney-client context, as opposed to an absent class member's relationship to class counsel, and his/her status as a litigant, coupled with the potential for class counsel to be unduly burdened, even after the end of litigation, by a multitude of requests from absent class members for counsel's entire file, we reject a blanket extension of Sage Realty's presumptive-entitlement right to absent class members, and find that the better practice is to require absent class members to establish their entitlement to class counsel's file on a case-by-case basis. Petitioner, in this matter, has failed to shoulder that burden.

Slip op. at *5-*6 (hyperlink added) (citing Sage Realty Corp. v. Proskauer Rose Goetz & Mendelsohn, 91 N.Y.2d 30 (1997)). On December 28, 2007, Anthony Lin of the New York Law Journal reported on the decision: "Court Rejects Billionaire's Bid to Obtain Milberg Weiss Work Product."

ALI's "Principles of the Law of Aggregate Litigation"

The American Law Institute, which publishes the various Restatements, is now working on a project called "Principles of the Law of Aggregate Litigation." Here is the project's statement of purpose:

Purpose: This project aims to supply up-to-date coherence to the law of aggregate litigation, which has changed significantly in recent years. In addition to formal aggregation in litigated settings, such as with class actions, this project addresses a broader array of cases that are bundled together and settled or tried to test the value of related claims.

Several drafts have been prepared and the latest one, Discussion Draft No. 2 (April 6, 2007), is available for purchase at ALI's website. I have not seen a copy of the draft so I can't comment on it, but this is a project that's worth knowing about and following.

"Fees Account for 'Human Nature': Alameda Courts Delay Some Fees to Keep Class Counsel on Toes"

On the day before Thanksgiving, the Recorder had an article (subscription) discussing a recently-adopted practice in class actions in Alameda County. Apparently, the court is often withholding part of the plaintiffs' attorneys' fees in class action settlements to ensure that the attorneys follow through with the work needed to make sure the class members receive their distributions and to wind up the case. An excerpt:

Earlier this year, Alameda County Superior Court Judge Bonnie Sabraw approved a $275,000 attorneys fee award in a meal and rest-break suit against Ace Cash Express, a check cashing chain. She let plaintiff lawyers collect most of the money in April — but made them wait seven months, until last Friday, to pick up the last $25,000.

Sabraw says she held back a small part of the fee award — as she often does in class action settlements — so plaintiff lawyers would help ensure that as many class members as possible would receive a portion of the settlement funds.

"It's not because anybody did anything wrong," Sabraw said. "It's a little further incentive to make sure all the loose ends are tied up."

The local court's practice of withholding part of class action attorneys fees is a few years old at most, and some attorneys say the strategy isn't common elsewhere.

The article does not explain why the court would assume that the plaintiffs' attorneys are going to breach their ethical duties by abandoning the class members unless they have a financial incentive not to. Such an incentive has not been required or needed in my experience.

New Ninth Circuit FLSA collective action case: McElmurry v. U.S. Bank Nat'l Assn.

In McElmurry v. U.S. Bank Nat'l Assn., ___ F.3d ___ (Aug. 8, 2007), the Ninth Circuit held that a district court order denying plaintiffs' motion to issue notice of a collective action under section 16(b) of the Fair Labor Standards Act ("FLSA") (29 U.S.C. §216(b)) was not immediately appealable under the collateral order doctrine. The opinion contains this useful explanation of the difference between a class action and a FSLA "collective action":

A “collective action” differs from a class action. See generally CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, 7B FED. PRAC. & PROC. § 1807 (3d ed. 2005). In a class action, once the district court certifies a class under Rule 23, all class members are bound by the judgment unless they opt out of the suit. By contrast, in a collective action each plaintiff must opt into the suit by “giv[ing] his consent in writing.” 29 U.S.C. § 216(b). As result, unlike a class action, only those plaintiffs who expressly join the collective action are bound by its results. See 29 U.S.C. § 256; Partlow v. Jewish Orphans’ Home of S. Cal., Inc., 645 F.2d 757, 758-59 (9th Cir. 1981), abrogated on other grounds by Hoffman-LaRoche Inc. v. Sperling, 493 U.S. 165 (1989). Because non-parties to a collective action are not subject to claim preclusion, giving notice to potential plaintiffs of a collective action has less to do with the due process rights of the potential plaintiffs and more to do with the named plaintiffs’ interest in vigorously pursuing the litigation and the district court’s interest in “managing collective actions in an orderly fashion.” Hoffmann-LaRoche, 493 U.S. at 173. Although § 216(b) does not require district courts to approve or authorize notice to potential plaintiffs, the Supreme Court held in Hoffman-LaRoche that it is “within the discretion of a district court” to authorize such notice. Id. at 171; see Does I thru XXIII v. Advanced Textile Corp., 214 F.3d 1058, 1064 (9th Cir. 2000) (a district court “may authorize the named plaintiffs . . . to send notice to all potential plaintiffs”).

Slip op. at 9453-54. The court held that it lacked appellate jurisdiction over the trial court's order denying the motion for notice to the potential plaintiffs, and that post-judgment appellate review provided an adequate remedy. In particular, it cited the federal rule governing the appealability of class certification orders (which differs from the California rule):

[I]t is well-established that there is no collateral order jurisdiction over a district court decision to certify or not to certify a class action under Rule 23. See Coopers & Lybrand, 437 U.S. at 477 (no collateral jurisdiction over appeal from order refusing to certify the class); Blackie v. Barrack, 524 F.2d 891, 895 (9th Cir. 1975) (no collateral jurisdiction over appeal from order certifying the class).

Slip op. at 9457.

Supreme Court denies review in class member communication case: Belaire-West Landscaping, Inc. v. Superior Court

On Wednesday, July 25, 2007, the Supreme Court denied review in Belaire-West Landscaping, Inc. v. Superior Court, no. S152806. In that case, the Court of Appeal applied Pioneer Electronics in the context of a wage and hour class action, rejecting the argument that the Supreme Court's discovery-related decision should apply only to consumer cases. Belaire-West Landscaping, Inc. v. Superior Court, ___ Cal.App.4th ___ (Apr. 9, 2007). My original post on Belaire-West is here.

"Consumer Class Actions Usurping Personal Injury Claims"

On July 11, 2007, the National Law Journal had an interesting article called "Consumer Class Actions Usurping Personal Injury Claims." The article reports that "[p]aintiffs lawyers are filing an increasing number of class actions under state consumer-protection laws in conjunction with, or in place of, traditional personal injury class actions, which have become too difficult in recent years to certify." The article goes on to explain that these suits seek to recover the economic loss the consumers suffered, rather than damages for personal injury. Sounds familiar, as monetary relief under the UCL has long been limited to restitution, which encompasses economic loss.

"Managing Class Action Litigation: A Pocket Guide for Judges"

In 2005, the Federal Judicial Center published "Managing Class Action Litigation: A Pocket Guide for Judges" (pdf). The preface states that "[t]his pocket guide is designed to help federal judges manage the increased number of class action cases expected as a result of the Class Action Fairness Act of 2005." The guide makes for interesting reading.

Trial-level briefs and order interpreting Fireside Bank: In re Cellphone Termination Fee Cases

Many thanks to the blog reader who brought the following briefs and order to my attention. They were filed in In re Cellphone Termination Fee Cases, Alameda County Superior Court, JCCP no. 4332, and address the impact of Fireside Bank, the one-way intervention decision, on the scheduling of various types of motions:

• Plaintiffs' Supplemental Case Management Conference Statement (filed 04/20/07)
  

• Defendants' Supplemental Memorandum of Points and Authorities Regarding Fireside Bank v. Superior Court (filed 04/20/07)
  

• Order on Effect of Fireside Bank on Scheduling of Motions of (1) AWS for Summary Judgment (2) Plaintiffs for MJOP and (3) Plaintiffs for Class Certification (filed 04/25/07) (Hon. Bonnie Sabraw)

New class member communication decision: Belaire-West Landscaping, Inc. v. Superior Court

In Belaire-West Landscaping, Inc. v. Superior Court, ___ Cal.App.4th ___ (Apr. 9, 2007), the Court of Appeal (Second Appellate District, Division Seven) applied Pioneer Electronics in the context of a wage and hour class action, rejecting the argument that the Supreme Court's decision should apply only to consumer cases, not employment actions:

While it is unlikely that the employees anticipated broad dissemination of their contact information when they gave it to Belaire-West, that does not mean that they would wish it to be withheld from a class action plaintiff who seeks relief for violations of employment laws. Just as the dissatisfied Pioneer customers could be expected to want their information revealed to a class action plaintiff who might obtain relief for the defective DVD players (Pioneer, supra, 40 Cal.4th at pp. 371-372), so can current and former Belaire-West employees reasonably be expected to want their information disclosed to a class action plaintiff who may ultimately recover for them unpaid wages that they are owed.

Slip op. at 8. In fact, the Court of Appeal held that the reasons for making sure class plaintiffs have access to putative class members are even stronger in employment actions than in consumer cases:

The balance of opposing interests here tilts even more in favor of the court’s disclosure order than it did in Pioneer, because at stake here is the fundamental public policy underlying California’s employment laws. “‘[T]he prompt payment of wages due an employee is a fundamental policy of this state.’ [Citation.]” (Phillips v. Gemini Moving Specialists (1998) 63 Cal.App.4th 563, 571.)

Slip op. at 10.

"The Class Representative's Pre-Certification Bill of Rights"

This morning's Daily Journal has a focus article by yours truly, the full title of which is "The Class Representative's Pre-Certification Bill of Rights" (subscription). The article focuses on two recent decisions, LaLiberte v. Pacific Mercantile Bank, 147 Cal.App.4th 1 (2007) and First American Title Ins. Co. v. Superior Court (Sjobring), 146 Cal.App.4th 1564 (2007), both of which were decided on January 25, 2007. (Because the paper shortened the article's title to simply "Bill of Rights," it was classified under the heading "Government." Go figure.)

"Mootness in the Class Action Context"

Federal Civil Practice Bulletin points to a new law review article, "Mootness in the Class Action Context: Court-Created Exceptions to the 'Case or Controversy' Requirement of Article III," 26 Rev. Litig. 77 (Winter 2007). The "mootness" issues addressed in this article come up in California class actions as well. See, e.g., Shapell Industries, Inc. v. Superior Court, 132 Cal.App.4th 1101 (2005) (discussed in this blog post).

More thoughts on Alan v. American Honda Motor Co.

In Alan v. American Honda Motor Co., ___ Cal.4th ___ (Mar. 15, 2007), the Supreme Court did not address the appealability of orders denying class certification per se. Its discussion would apply to any appealable interlocutory order. The opinion contrues Rule of Court 8.104(a), which triggers the 60-day time to file a notice of appeal. Rule 8.104(a) states:

Rule 8.104. Time to appeal

(a) Normal time

Unless a statute or rule 8.108 provides otherwise, a notice of appeal must be filed on or before the earliest of:

(1) 60 days after the superior court clerk mails the party filing the notice of appeal a document entitled "Notice of Entry" of judgment or a file-stamped copy of the judgment, showing the date either was mailed;

(2) 60 days after the party filing the notice of appeal serves or is served by a party with a document entitled "Notice of Entry" of judgment or a file-stamped copy of the judgment, accompanied by proof of service; or

(3) 180 days after entry of judgment.

(Emphasis added.) Rule 8.104(f) is also relevant:

(f) Appealable order

As used in (a) and (e), "judgment" includes an appealable order if the appeal is from an appealable order.

In Alan, the trial court heard argument on plaintiff's motion for class certification and took the matter under submission. A few days later, the court clerk mailed a written statement of decision denying the motion, along with a minute order stating that the court had ruled on the motion and issued its statement of decision. While the minute order included the date of mailing, the statement of decision did not. And while the statement of decision was file-stamped, the minute order was not. Slip op. at 2-4.

The Court of Appeal held that the two documents combined triggered the 60-day period of Rule of Court 8.104(a)(1). Alan v. American Honda Motor Co., 131 Cal.App.4th 886 (2005). The Supreme Court disagreed:

Because no “document entitled ‘Notice of Entry’ ” (rule 8.104(a)(1)) exists, the clerk’s mailing cannot have triggered the 60-day period for noticing an appeal unless it contained “a file-stamped copy of the judgment” (ibid.) or appealable order (rule 8.104(f)). But the clerk’s mailing contained no such document. While it did contain a copy of the appealable minute order, that order is not file stamped. The typed or printed notation that appears at the bottom of that order—“MINUTES ENTERED 01/02/03 COUNTY CLERK”—is not a file stamp. (In re Marriage of Taschen (2005) 134 Cal.App.4th 681, 686.) Accordingly, the clerk’s mailing did not satisfy rule 8.104(a)(1), and Alan’s notice of appeal was timely filed under rule 8.104(a)(2).

Slip op. at 8. The Court explained that all of the elements of Rule of Court 8.104(a)(1) must be satisfied in a single document:

For these reasons, we conclude that rule 8.104(a)(1) does indeed require a single document—either a “Notice of Entry” so entitled or a file-stamped copy of the judgment or appealable order—that is sufficient in itself to satisfy all of the rule’s conditions, including the requirement that the document itself show the date on which it was mailed. That having been said, we see no reason why the clerk could not satisfy the single-document requirement by attaching a certificate of mailing to the file-stamped judgment or appealable order, or to a document entitled “Notice of Entry.” Obviously a document can have multiple pages. But the rule does not require litigants to glean the required information from multiple documents or to guess, at their peril, whether such documents in combination trigger the duty to file a notice of appeal. “Neither parties nor appellate courts should be required to speculate about jurisdictional time limits.” (Van Beurden Ins. Services, Inc. v. Customized Worldwide Weather Ins. Agency, Inc. (1997) 15 Cal.4th 51, 64.)

Slip op. at 12-13. Because the clerk's mailing was insufficient to trigger the 60-day period of Rule of Court 8.104(a)(1), the 60-day period of Rule of Court 8.104(a)(2) was triggered instead when the defendant served a formal "Notice of Entry of Order and Statement of Decision Denying Class Certification," with copies of both the minute order and the statement of decision attached to it. Id. at 13-14.

[Cross-posted to The Appellate Practitioner]

BREAKING NEWS: Supreme Court to issue opinion in Alan v. American Honda Motor Co. today at 10:00 a.m.

Yesterday's Notice of Forthcoming Filing says that the Supreme Court will hand down its opinion in Alan v. American Honda Motor Co., no. S137238, today at 10:00 a.m. This case addresses the timeliness of a notice of appeal from an order denying class certification. When posted online, the Supreme Court's opinion will be available at this link. Meanwhile, the Court of Appeal's opinion is here, and my original post on this case is here.

UPDATE: The opinion is now up. A quick scan reveals that the Supreme Court unanimously held that the notice of appeal from the order denying class certification was timely. The Court of Appeal's contrary holding has been reversed. I will try to put up more on the decision later, most likely tomorrow. UPDATE: I will have more on this decision next week, rather than tomorrow.

"Class-Action Dissonance"

Attorney Steven B. Katz of Jones Day has a focus article (subscription) in today's Daily Journal on the Pioneer Electronics decision. The article mentions this blog by name:

The California Supreme Court's decision in Pioneer Electronics (USA) Inc. v. Superior Court (Olmstead), 2007 DJDAR 1187 (Jan. 25, 2007), holding that California's right to privacy is satisfied by "opt-out" notice before disclosure of contact information for putative class members, has been greeted by the plaintiffs' bar as a great victory. Kimberly A. Kralowec, in her excellent Web log, The UCL Practitioner (www.uclpractioner.com), heralded Pioneer Electronics as "a pro-class-action decision." The California Wage and Hour Web Log (wagelaw.typepad.com), called it "a resounding victory for plaintiffs." Many in the defense bar seem to agree with this assessment. Cal Biz Lit (www.calbizlit.com) concluded that the "ruling is not good for the defense."

There is, however, less to Pioneer Electronics than meets the eye.

The main thrust of the article is to argue that Pioneer Electronics implicitly approved Best Buy Stores, L.P. v. Superior Court, 137 Cal.App.4th 772 (2006), and that opt-in notices may still be required for putative class members, depending on the purpose of the discovery request seeking their identities. The blog post that Mr. Katz quotes in his article is called "Thoughts on the class action aspects of Pioneer Electronics."

New Sixth Circuit class action objector opinion: In re Cardizem CD Antitrust Litigation

Last week, the Sixth Circuit issued an interesting opinion relating to class action objectors. In re Cardizem CD Antitrust Litigation, ___ F.3d ___ (6th Cir. Feb. 22, 2007). Specifically, the opinion relates to the costs that may (or may not) be charged to a class action objector whose objections were frivolous and served only to delay implementation of a beneficial settlement. [Via How Appealing.]

More thoughts on First American Title Ins. Co. v. Superior Court (Sjobring)

I was taking another look at First American Title Insurance Co. v. Superior Court (Sjobring), ___ Cal.App.4th ___ (Jan. 25, 2006) (see my original post here), and came across this paragraph:

California law is clear that a representative plaintiff must be a member of the class he seeks to represent. Indeed, Proposition 64 was enacted to prevent abuses of the class action system by “ ‘prohibit[ing] private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact.’ ” (Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 228.) We cannot permit attorneys to make an “end-run” around Proposition 64 by filing class actions in the name of private individuals who are not members of the classes they seek to represent and then using precertification discovery to obtain more appropriate plaintiffs.

Slip op. at 19 (emphasis added). This paragraph does not accurately capture the purpose of Proposition 64. Proposition 64 was not enacted "to prevent abuses of the class action system." Rather, it was enacted to prevent purported abuses of the "non-class" (to borrow a term from Will Stern) representative action system, which allowed unaffected plaintiffs to seek relief on behalf of the general public without class certification. The actions filed by the Trevor Law Group and others were not class actions; they were non-class, private attorney general actions. In fact, as the 1999 edition of Will's treatise noted, "these cases typically are not brought as class actions." William L. Stern, Unfair Business Practices and False Advertising: Bus. & Prof. Code §17200, para. 7:28 (Rutter Group 1999). Proposition 64 sought to prevent abuses of the non-class, representative action system by bringing UCL actions into the ambit of the class action system, a system of which such actions were not previously a part. Therefore, it is not correct to say that Proposition 64 was intended to prevent "abuses of the class action system."

If a plaintiff files a putative class action (as distinct from a pre-Prop. 64, non-class, representative action) knowing that he or she is not a putative class member, that really doesn't have anything to do with Proposition 64. Perhaps the plaintiff has abused the court system, or violated Code of Civil Procedure section 128.7, but Proposition 64 is not implicated. The First American Title case bears this out. In that case, the plaintiff pleaded causes of action for violation of the CLRA, breach of fiduciary duty, constructive fraud, and unjust enrichment, in addition to a UCL claim. Slip op. at 4. The Court of Appeal basically held that it was improper for the plaintiff to continue to pursue the class claims once he realized he was not a member of the class he sought to represent, and that such a plaintiff should not be allowed to conduct discovery to identify an appropriate class representative. Id. at 18-21, passim. That conclusion would obtain regardless of what causes of action the plaintiff was pursuing. In fact, the Court could simply delete the paragraph quoted above without altering the import of its holding. It should consider doing so, because the paragraph is misleading.

New class action decision: LaLiberte v. Pacific Mercantile Bank

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).

New pre-certification discovery case: First American Title v. Superior Court (Sjobring)

On the same day that the Supreme Court decided Pioneer Electronics, the Court of Appeal (Second Appellate District, Division Three) handed down First American Title Ins. Co. v. Superior Court (Sjobring), ___ Cal.App.4th ___ (Jan. 25, 2007), which relates to pre-certification discovery in a somewhat different context:

If a class action representative plaintiff is not – and never was – a member of the class he purports to represent, may he obtain precertification discovery from the defendants for the express purpose of identifying a member of the class who is willing to become a named plaintiff and pursue the action? As the current plaintiff is, in effect, a stranger to the action, we conclude the grant of such discovery would sanction an abuse of the class action procedure. We therefore conclude the trial court’s order granting the discovery was an abuse of discretion, and grant the defendants’ petition for writ relief.

Slip op. at 2.

Report on yesterday's oral argument in Fireside Bank

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.

For Petitioner: Jan T. Chilton, S.F. For Real Party: Carol McLean Brewer, S.F.

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.

Thoughts on the class action aspects of Pioneer Electronics

During the oral argument, the justices seemed uninterested in the fact that the persons whose privacy rights were being asserted were putative class members, rather than merely non-party witnesses. The opinion, however, points out several times that the case is a putative class action. In fact, the decision recognizes that the interests of the putative class members are most likely aligned with those of the class representatives—who are, after all, seeking relief on their behalf. For example, the court observed:

[I]t seems unlikely that [Pioneer's complaining] customers, having already voluntarily disclosed their identifying information to that company in the hope of obtaining some form of relief, would have a reasonable expectation that such information would be kept private and withheld from a class action plaintiff who possibly seeks similar relief for other Pioneer customers, unless the customer expressly consented to such disclosure. If anything, these complainants might reasonably expect, and even hope, that their names and addresses would be given to any such class action plaintiff.

Pioneer Electronics, Inc. v. Superior Court, ___ Cal.4th ___ (Jan. 25, 2007) (slip op. at 13-14) (emphasis in original). The fact that the case was a putative class action was also a key factor in the court's analysis of whether it would be fair to allow the defendant unequal access to these witnesses:

From the standpoint of fairness to the litigants in prosecuting or defending the forthcoming class action, Pioneer would possess a significant advantage if it could retain for its own exclusive use and benefit the contact information of those customers who complained regarding its product. Were plaintiff also able to contact these customers and learn of their experiences, he could improve his chances of marshalling a successful class action against Pioneer, thus perhaps ultimately benefiting some, if not all, those customers. It makes little sense to make it more difficult for plaintiff to contact them by insisting they first affirmatively contact Pioneer as a condition to releasing the same contact information they already divulged long ago.

Id. (slip op. at 16). The court concluded its discussion of fairness by reaffirming the importance of consumer class actions in California:

Similarly, amicus curiae Consumer Attorneys of California notes that the Court of Appeal’s ruling, by preventing or substantially delaying identification of witnesses and potential class members, could make it more difficult to obtain class certification, thereby reducing the effectiveness of class actions as a means to provide relief in consumer protection cases.

Id. (slip op. at 17) (emphasis added). I would definitely call Pioneer Electronics a pro-class-action decision, one that effectively balances the putative class members' interest in privacy against their interest in obtaining classwide relief.

Supreme Court decides pre-certification communication case: Pioneer Electronics (USA), Inc. v. Superior Court

The decision is up: Pioneer Electronics (USA), Inc. v. Superior Court, ___ Cal.4th ___ (Jan. 25, 2007). I haven't finished reading the entire opinion, but it is unanimous, and the introduction reads, in relevant part:

The Court of Appeal ruled that trial courts in such cases must assure not only that all prospective or potential class members receive actual notice of their right to grant or withhold consent to the release of their personal identifying information, but also that such consent must be exhibited by each potential class member’s own positive act of agreeing to disclosure, rather than by their mere passive failure to object. Because this ruling is overprotective of the purchasers’ privacy rights, inconsistent with established privacy principles, and likely to cause adverse consequences in future cases, we will reverse.

(Slip op. at 2.)

BREAKING NEWS: Supreme Court to issue Pioneer Electronics decision tomorrow

The Supreme Court just posted its Notice of Forthcoming Filing for tomorrow, which says that it will be issuing its decision in Pioneer Electronics, Inc. v. Superior Court, no. S133794. This is the case involving pre-certification communications with putative class members.

My lengthy post summarizing the December 5th oral argument is here. A follow-up post with another take on the argument is here. The Court of Appeal's opinion is Pioneer Electronics (USA), Inc. v. Superior Court (Olmstead), 128 Cal.App.4th 246, 249 (2005) (Second Appellate District, Division Four). And finally, when the Supreme Court posts its opinion tomorrow morning at 10:00 a.m., it should be accessible at this link.

Class member communication case to be argued December 5, 2006: Pioneer Electronics v. Superior Court

The Supreme Court just announced that it will hear oral argument in the class member communication case, Pioneer Electronics v. Superior Court, no. S133794, on December 5, 2006 at 9:00 a.m. The argument will be held at the Ronald Reagan State Office Building in Los Angeles. If anyone plans to attend the argument and would like to provide a report to be posted here, please let me know.

The Court of Appeal opinion in this case is Pioneer Electronics (USA), Inc. v. Superior Court (Olmstead), 128 Cal.App.4th 246 (2005) (Second Appellate District, Division Four). As I have previously reported, this case addresses precertification communications with putative class members, and the interplay between the right to discovery and the right to privacy.

"They pay but deny any guilt"

Columnist David Lazarus of the San Francisco Chronicle addressed class action settlements in his column last week. In particular, he addresses defendants' refusal to admit to any wrongdoing in the context of class action settlements. I was surprised to read a non-lawyer's take on no-admission-of-liability settlement provisions. He's probably not aware that such provisions are common in all settlement agreements, not just class action settlements. Some of our lawyer brethren did a good job explaning why this is so:

Bill Audet, a San Francisco attorney who specializes in representing consumers in class-action lawsuits, said settlements are like elaborate kabuki performances -- carefully choreographed to convey meaning through action or nuance.

"Any time money gets paid, someone is being held accountable," he said.

Audet said companies are free to "spin their PR machines" after a settlement, but most people understand that a multimillion-dollar payout generally means there was some truth to the charges in the case.

"Most class members would say they'd like to see some accountability," he said, "but the dollar talks."

Petition for writ of mandate filed in class member communication case: Conley v. Phillips-Van Heusen, Inc.

Many thanks to the reader who wrote to advise that a petition for writ of mandate was recently filed with the Court of Appeal (Second Appellate District) in a case involving pre-certification communications with putative class members. Conley v. Phillips-Van Heusen, Inc., no. B194038 (petition for writ of mandate filed 09/29/06). The writ petition contains an interesting discussion of these issues from a defense perspective. For more on the recent caselaw addressing pre-certification communications with putative class members, see these blog posts.

"Light" cigarette class certification order "not junk"

You've probably heard about the order granting class certification (540-page pdf file) in the "light" cigarettes case (49-page pdf file). San Francisco Chronicle columnist David Lazarus had this to say in his column Wednesday:

[E]very so often a case comes along that serves as a potent reminder of why class-action suits are a vital tool for consumer protection, and why politicians and judges should be wary of moves that tip the legal balance too much in favor of corporate defendants. .... The class-action system isn't perfect, and a very real need exists to shake things up. But there's a reason many large businesses are fighting so aggressively to change the rules -- because class-action lawsuits are one of the few means at consumers' disposal to stick up for themselves. You don't want that going up in smoke.

"Class Action Appeals"

For an interesting article on interlocutory appeals from class certification orders under Federal Rule of Civil Procedure 23(f), see Andrew M. Low, "Class Action Appeals," 35 The Colorado Lawyer 85 (June 2006).

[Hat tip: CAFA Law Blog]

New Ninth Circuit multidistrict litigation decision: In re Phenylpropanolamine (PPA) Products Liability Litigation

In In re Phenylpropanolamine (PPA) Products Liability Litigation, ___ F.3d ___ (Aug. 29, 2006), the Ninth Circuit addressed multidistrict litigation ("MDL") proceedings under 28 U.S.C. section 1407. The decision provides useful insights into the MDL process, where many federal class actions end up. The following language is worthy of note:

[M]ultidistrict litigation is different because of the large number of cases that must be coordinated, its greater complexity, and the court’s statutory charge to promote the just and efficient conduct of the actions. 28 U.S.C. § 1407. As a result, the considerations that inform the exercise of discretion in multidistrict litigation may be somewhat different, and may tip the balance somewhat differently, from ordinary litigation on an ordinary docket.

(Slip op. at 10305.) "[W]e grant additional deference to a district court administering a MDL proceeding ...." (Id. at 10361.)

Unpublished class notice holding: Small Property Owners of San Francisco v. City and County of San Francisco

In an unpublished portion of Small Property Owners of San Francisco v. City and County of San Francisco, ___ Cal.App.4th ___ (Aug. 9, 2006) (First Appellate District, Division Five), the Court of Appeal held that notice of the unfavorable outcome of a class action need not be provided to the class members in the same manner as the original notice:

In this case, appellants argue, notice of the adverse j