The UCL Practitioner

Call for briefs in Murphy v. Kenneth Cole Productions

I would be grateful to anyone who can send me copies of the Supreme Court briefs in Murphy v. Kenneth Cole Productions, no. S140348. Please send them by email to uclpractitioner@gmail.com. I'm not planning to post them online (unless I am asked to by popular demand), but I would like to read them. Thanks in advance. UPDATE: Thanks to the reader who forwarded copies of the key briefs.

More thoughts on the Fireside Bank oral argument

On January 30, I posted a summary of the Fireside Bank oral argument, which a reader who attended the argument kindly provided. Another reader who also attended the argument subsequently emailed me with some more thoughts about the argument:

I was interested in seeing the observations one of your readers sent about oral argument before the Supreme Court last week. I think the reader generally got the gist of both the argument and the Court’s questions, but I hope that reader’s prediction about the outcome is wrong.

Your reader missed one central [fact about the underlying case]. The trial court ruled on [the plaintiff's] motion for judgment on the pleadings (MJOP)—which the trial court said would be off-calendar but was decided anyway—at the same time it granted [the plaintiff's] motion for class certification. The MJOP ruling itself was a mistake which no one expected. That ruling was what Fireside claimed was the impermissible one-way intervention.

But [the plaintiff's] MJOP only tested the validity of Fireside’s collection complaint against [him]. The validity of the class claims—[the plaintiff's] cross-complaint against Fireside—were never litigated or determined. Thus, the [plaintiff's] central [argument was] that the “rule” against one-way intervention only applies when the class claims are decided. Put another way, the rule only comes into play when the defendant’s liability is determined. Here, [the plaintiff's] liability to Fireside was determined.

.... I was really puzzled by the Supreme Court’s questions (or lack thereof). No one questioned Fireside’s counsel about its position that “the merits” of anything can’t be decided until after the class is certified; no one pointed out that the “rule” now applies only to the merits of class claims, not to the merits of any issue in the case, including the cross-complaint; no one asked about the conflict that Civil Code § 1781(c) seems to present in allowing class certification and “no merits” rulings in CLRA cases to be decided independent of each other or at the same time. Just a few questions about whether Fireside thought the case should be remanded to a different trial judge and why did the trial judge rule on the MJOP anyway??

After thinking about this ... , I conclude that the Court had already decided the case and didn’t feel like asking too many questions after its very active questioning in Balboa Island Village Inn v. Lemen, the first case argued.

Your point that defendants often agree to have the merits of class claims decided before class certification is well taken, and supported by authority. Here, you are correct that Fireside didn’t waive the “rule.” Rather, it asserted the rule at the same time it was withholding discovery necessary for the plaintiff to determine whether class certification was appropriate. (As the Ct of Appeal observed, delay is often the main defense tactic.) If the Supreme Court reverses, it will have to expand the “rule.” [Perhaps] the Court will note that the factual grounds of this case never presented an opportunity for one-way intervention; otherwise, in my opinion, defendants are likely to seize on any merits ruling in a case as critical to the class claims, and insist that the class be certified and notified before any merits issues can be decided.

This is quite interesting and adds another dimension to the argument. Many thanks again to the reader who took the trouble to write and share these thoughts.

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.

Upcoming Supreme Court oral arguments in two class action cases

Next week, on January 29 and 30, 2007, the Supreme Court will hear oral arguments in two pending class action cases:

• Monday, January 29, 1:00 p.m.: Fireside Bank v. Superior Court, no. S139171. This is the "one-way intervention" case, Fireside Bank v. Superior Court, 133 Cal.App.4th 742 (2005) (Sixth Appellate District). My prior posts on this case are here and here.

• Tuesday, January 30, 9:00 a.m.: Alan v. American Honda Motor Co. Inc., no. S137238. This case addresses the appealability of orders denying class certification. See Alan v. American Honda Motor Corp., 131 Cal.App.4th 886 (2005) (Second Appellate District, Division Three). My original post on Alan is here.

These arguments will take place in Sacramento at the Stanley Mosk Library and Courts Building. Please let me know if you're planning to attend one or both of the arguments and would like to email a written report to be posted on the blog.

More thoughts on the Pioneer Electronics argument

I received a couple of emails from readers in response to my summary of Tuesday's oral argument in the Pioneer Electronics case. Here's what one reader, who also attended the argument, had to say:

I read your report of the argument with great interest and some amazement that you could recount so accurately everything that was said. .... I'm not sure, though, that I agree with your crystal-gazing on what the outcome will be. It seemed clear to me from the remarks made at argument that Justice Kennard was with the plaintiffs and that Justices Chin and Baxter were with the defendants. I'm also guessing that Justice Corrigan was with the defendants, too, because she placed such emphasis on the desirability of giving the putative class members as much control as possible about whether they would be contacted or not. If I'm right, it would just take one more vote to turn the balance to the defense side, and I'm guessing that that vote would be most likely to come from the chief justice. Now all we have to do is wait 90 days.

It's interesting that two people who sat through the same argument could reach such differing conclusions. I thought Justice Corrigan's and Justice Chin's comments were the most plaintiff-favorable of all. We'll see what happens. Thank you, readers, for sharing your thoughts.

Yesterday's oral argument on class member communications: Pioneer Electronics v. Superior Court

Yesterday's oral argument in Pioneer Electronics did not focus on the fact that the case was a class action. The attorneys and justices spent more time debating whether the putative class members (whom Justice Kennard referred to as "percipient witnesses") had any right to privacy under the circumstances of the case, whether it was fair that the defendant, but not the plaintiffs, had access to these witnesses, and how hard it would really be for the witnesses to return a card if they did not want to be contacted.

By way of background, the action alleged that certain Pioneer DVD players would not play some types of DVDs because of compatibility problems. The plaintiffs sought the names and addresses of persons who had contacted Pioneer to complain about the performance of their DVD players. Pioneer produced its summaries of the complaints, but refused to identify the complainants, citing the right to privacy. Plaintiffs moved to compel. Ultimately, the Court of Appeal held that the complainants' names and contact information could be released only if they affirmatively consented after notice was sent to them by first class mail.

Jeff S. Westerman of Milberg Weiss argued for the plaintiffs. He started out by saying that, regardless of whether it's a class action or not, the case involved three issues: (1) whether there was a right to privacy under the circumstances of the case; (2) whether parties to litigation should be allowed equal access to witnesses; and (3) whether it is appropriate to allow witnesses to "self-select" or "veto their role in the case."

Justice Corrigan interrupted to ask who should be in control of a witness's role. If other people have decided to litigate over an issue, she asked, do we mandate a witness's participation? Westerman responded that the court should be involved in deciding whether a witness will have to participate in a case. Justice Chin then interrupted to ask whether it was appropriate for the Court of Appeal to rely on the Colonial Life case (which adopted a notice procedure similar to that mandated by the Court of Appeal). Westerman said no. The problem is in letting the witnesses self-select. It sets up a situation where the witnesses who are the maddest, or who have the most free time, participate in the case, but these witnesses are not necessarily those with the most relevant information. Also, he pointed out, the other side has full access to all witnesses with no limits. He cited the Discovery Act, the purpose of which is to ensure equal access by all parties to all relevant information.

Justice Chin then asked whether the procedures in Colonial Life were mandated by a statute? Westerman answered yes (and this, in my view, is a key distinction between this case and Colonial Life). Chin said, "Do we have such a statute in this case?" Westerman said, "No." Chin said, "Isn't that the difference?" Westerman said, "That's a big difference."

Justice Kennard (whose questions tend to be more detailed than those of the other justices) then mentioned the fact that the case was brought as a class action. She pointed out that Pioneer redacted the names of the complainants, and asked Westerman whether his argument was that his client has the right to know the identities of those persons. She then said that she assumes Westerman relies heavily on the Court's opinion in Hill, and that he focuses on the first element of Hill, and argues that the complainants have no privacy right because they voluntarily gave their identifying information to Pioneer, so that would be the end of the analysis.

Westerman responded that his answers were yes and yes. He also mentioned the second and third prongs of Hill, and said that the complainants did not request privacy, they weren't offered privacy, there's no privacy agreement, and Pioneer's website says it can do whatever it wants with information provided by customers.

Justice Corrigan said, "So if I complain, I no longer have a reasonable privacy expectation?" Westerman said yes, you have a diminished expectation of privacy. The fact that the person complained suggests that the person is a more knowledgeable witnesses (than a DVD owner who did not complain). Justice Corrigan asked if they had given up the right to privacy. Westerman said that's a case-by-case question, but in this case, the Court of Appeal went too far. Justice Kennard interjected that a key fact in this case is that the people who complained are "not just potential witnesses but percipient witnesses" with knowledge of a defect. Percipient witnesses have no right to conceal their knowledge from the court, she said, but then she asked Westerman if he would acknowledge that they have the right to refuse to talk to plaintiffs' counsel if contacted. Westerman agreed with that, and said that if he were to attempt to contact them, it would be in his best interest to try not to antagonize them.

Here, Justice Kennard interrupted again, but if she had not it would have been interesting to see if Westerman was going to point out that ultimately, they could be compelled to participate by subpoena. In any event, Justice Kennard made the point that witnesses have no legally protected right to conceal their identities as witnesses. Westerman readily agreed. He mentioned that law enforcement agencies have filed amicus briefs suggesting that the Court of Appeal's opinion would hinder their own enforcement efforts. He said that the way to deal with the problem is to enter a protective order restricting the use of information about the witnesses.

Justice Chin then asked Westerman's opinion on the trial court's ruling (which required notices to be sent to the witnesses, but their failure to respond would be deemed consent to disclose their names to plaintiffs' counsel). Westerman said that he would not have challenged that order in the appellate courts, even though he thought that a letter was not strictly necessary.

Justice Baxter asked about the "chilling effect on consumers who knew that if they choose to complain they'd suddenly be open game for use in a class action lawsuit. Shouldn't we be concerned about this?" He then asked whether "the most important thing is that the consumer be told in a very conspicuous way what his failure to respond will mean?" Westerman cited the Valley Bank case, and said that someone who complains about a product has no more reasonable expectation of privacy than someone who gets up in the morning, drives down the street and witnesses an accident. He argued that there would be no chilling effect because people make decisions to return products for all kinds of reasons and that would not stop.

Justice Moreno asked whether notice by first class mail is appropriate. Westerman said yes. Justice Moreno asked if he agreed with the concern that some people won't read it and therefore won't respond. Westerman said that if there's a notification on the outside of the envelope stating that it relates to a lawsuit people will be more likely to open it. Justice Chin said what about notice by fax or email. Westerman pointed out that this was the only contact information available for some people. Justice Chin asked if that's all you have, what's wrong with giving notice that way. Westerman said nothing's wrong with it; in fact it indicates a preference on the part of the witness as to how they'd like to be contacted.

Westerman's argument time was then over.

William T. Bissett of Hughes Hubbard & Reed argued for Pioneer. He started out by saying that although he's Pioneer's counsel, he's representing the interests of the witnesses. He said that Pioneer is trying to do what the consumers would want. Justice Kennard interrupted to point out that we're not just dealing with potential witnesses, but rather with percipient witnesses. Bissett said we have to start out with the proposition that everyone has a constitutional right to be left alone. Justice Chin said, "Is it absolute?" Bissett said no. Chin said, "How is it limited?" Bissett explained that it depends on whether another interest outweighs it. He then went into a detailed discussion of the facts, and was not interrupted for some time. He said that out of 1.5 million DVD players sold, between 700 and 800 people contacted the company. Not all of these were complaints about the DVD players; some were just inquiries. He said that the notice program (presumably that required by the Court of Appeal's opinion) was implemented; 731 letters were sent; 88 were returned as undeliverable; 178 people wrote back and said that plaintiffs' counsel may contact them.

He then asked whether you can really say, in the context of this case, this class action case, which alleges that everyone is similarly situated, and you have 178 people who waived their right to privacy, do you really need 500 more?

Justice Corrigan then said, "What about the argument that you know who they are and the plaintiffs don't?" Bissett said that these people provided information to Pioneer for a limited purpose and did not agree to let Pioneer do anything else with it. Justice Corrigan observed that you're reading something into it either way (i.e., either you assume that they thought Pioneer would not use their complaints for any other purpose, or you assume that they willingly shared their information with Pioneer thereby waiving any privacy right). Bissett said that when you call a company with a complaint you expect them to get back to you in response to the complaint, not to be called by a lawyer. Justice Corrigan says that goes to what's a reasonable expectation. Bissett said yes, it becomes a policy question. Justice Corrigan said she agreed. Bissett said that the 800 million people who signed up for the "do not call" list think it's important to be left alone. (I would point out, however, that those people affirmatively said they did not want to be contacted. The "do not call" list operates in the manner plaintiffs are advocating, not Pioneer (i.e., people may be called unless they affirmatively say "do not call").)

Justice Kennard then said that if you go back to the allegations of the complaint, she would think that these people would expect to be contacted later. Bissett said that they would expect someone at the company to get back to them, but they don't expect to hear from anyone else. "If a class had been certified," he started to say, but then Justice Kennard interrupted and said "I know this is a pre-certification case, but getting back to the point, what is your response to the argument that the name and address isn't particularly sensitive because it doesn't relate to business secrets, intimate information, things of that nature, nor does it constitute an undue intrusion such as a marketing campaign." Bissett said that if we were only talking about the name and address, it would not be a problem, but what we're really talking about is people being contacted at home, with some kind of court approval of that.

Justice Kennard then asked, "If we agree with you," how should the court deal with the argument made by the California District Attorneys' Association that it would have an adverse impact on government attorneys' ability to investigate and remedy consumer-related problems. Bissett said, basically, that it has to depend on the particular case. This is not a situation where one size fits all. You have to balance the rights. Justice Kennard asked whether the court has to engage in balancing when the other side is arguing under the first prong of Hill that there is no privacy right at all. Bissett then talked about the Hill case at some length, basically saying that it's factually distinguishable. Justice Chin joined in discussing the Hill case as well. Eventually Bissett circled back to the argument that 178 people have consented; why do you need 500 more? He pointed out that no one is going to call 500 witnesses to the stand at trial, and argued that all it would do is establish that everyone's circumstances are different (thereby defeating class certification).

Justice Baxter asked what happens if you tell them that if they don't respond, their information will be disclosed? Bissett said that you put the burden on them to act. Justice Chin asked what's wrong with that? Tell them if you really want to be left alone, return this post card. Bissett said it should be made as easy as possible for people to exercise their privacy rights. Justice Corrigan said both are easy. Requiring them to respond to protect their privacy rights is "not hair-raisingly unreasonable." Bissett had to agree with the "not hair-raisingly unreasonable" characterization. Justice Corrigan said that this puts the individual consumer in the driver's seat AND serves to strike a balance between the adversaries in the litigation. (I think this strongly suggests where she is going; in fact Corrigan, Chin and Baxter all seem to be favoring the plaintiffs' position so far.)

Bissett then made what might be described, with 20-20 hindsight, as a mistake. He said he did not think that the fact that one side does not know all the witnesses is that important. Justice Chin said, "But that's becase you know!" and the courtroom chuckled. Bissett re-grouped. If you're saying someone can waive the right to privacy, he argued, why not make it an affirmative choice? Why presume someone has chosen to waive their rights by inaction? Justice Corrigan said, "Why not? It is such a huge deal either way?" Bissett said, "Well, you have to pick." Justice Corrigan said, "Yes, yes, that's why we're here." (This was an interesting exchange because during an earlier argument that morning, Justice Corrigan had said that she was trying to keep the argument focused on a particular issue because "we have to write a rule" on that issue.)

Bissett gamely responded that in this particular case, we are way at one end of the spectrum, there's just no need to presume that people waived their rights. Both sides know what these people's complaints were (about the DVD players). Justice Corrigan pointed out that both sides don't know whether the people who affirmatively consented are the ones who had the most serious complaints. Bissett said that all of the complaints had to do with the compatibility problem alleged in the action, and that there's no need to call people at home if you already know what they said, and especially where you have 178 people who have consented to being called—unless the court holds that merely contacting Pioneer constitutes waiver. Why burden the exercise of the right to complain without a significant need on the other side? There might be other cases in which the balancing of the rights comes out differently, and he posed as a hypothetical a case in which the private information might help find a kidnapped child. But in this case, the rights at stake are not very important. He said that Pioneer has won summary judgment in five out of five cases (apparently there are other cases pending in other states that allege the same defect; Bissett took pains to point out that these were "filed by the same law firm"). The claim is that some DVDs won't play right.

And that was the end of Bissett's time.

Before Westerman could say word one in rebuttal, Justice Kennard broke in with a lengthy summary of what she understood Westerman's argument to be. Westerman agreed that she had accurately summarized his position. He pointed out that Pioneer did produce their summaries of the complaints, but that those summaries are not evidence. To establish the right to class certification, he needs evidence. He then pointed out that this issue happens to have arisen in the context of a class action, but the principles laid out by the Court of Appeal apply to all cases. He said that the "defense bar" has seized on the right to privacy as a way to prevent access to witnesses. But if the Court of Appeal's opinion stands, then "if I'm in an auto accident and a witness gives me his card, I can refuse to identify that person" to the other side. Nothing in the Court of Appeal's opinion prevents its application that way.

And that was the end of the argument. Neither Chief Justice George nor Justice Werdegar made any comments, so it is hard to read their tea leaves, but I think on balance the justices' comments suggest that they are leaning in favor of the plaintiffs, primarily due to the unequal access to witnesses and because of how easy it would be for a potential witness to return a card affirmatively saying that they do not wish to be contacted. I also think that the argument would have been very different if the witnesses had been members of a certified class. It does not seem that the fact that they are putative class members is going to affect the court's analysis at all; it had no impact on the argument. A decision is due in ninety days.

Oral argument preview: Pioneer Electronics v. Superior Court

Today, the California Supreme Court will hear oral argument in Pioneer Electronics v. Superior Court, no. S133794, which involves pre-certification communications with putative class members. I am planning to attend the argument, and hope to be able to put up a post either later today or tomorrow morning.

My prior posts on this case are collected here, and one of the amicus briefs is available here. In a nutshell, the Court of Appeal imposed a limitation on the plaintiff's right to discover information about the putative class members, citing the right to privacy: "The court must take reasonable steps to assure that the consumer receives actual notice of his or her right to grant or withhold consent of the release of personal information, and that consent for such release be by the consumer's positive act, rather than by mere failure to respond." Pioneer Electronics (USA), Inc. v. Superior Court (Olmstead), 128 Cal.App.4th 246, 249 (2005) (Second Appellate District, Division Four). The amicus brief linked to above refers to this as an "opt-in discovery mechanism" and argues that it is inconsistent with the policies behind the class action device and will hinder employment and civil rights litigation.

Today's oral argument on Prop. 64 retroactivity

In Californians for Disability Rights v. Mervyn's, James C. Sturdevant of the Sturdevant Law Firm in San Francisco argued for the plaintiff, while David F. McDowell of Morrison & Foerster's Los Angeles office appeared for Mervyn's. In Branick v. Downey Savings & Loan Assn., plaintiff Branick was represented by Michael C. Spenser of Milberg Weiss in New York, while Matthew A. Hodel of Hodel Briggs Winter in Irvine argued for Downey Savings.

Every seat in the courtroom was taken, and my handwritten notes are eighteen pages long. All seven justices asked at least one question, and Justices Kennard and Baxter were particularly active questioners. However, there were also periods of silent listening, most notably during the discussion of the "statutory repeal rule." I don't think any justice asked even one question relating to that rule.

McDowell went first, and he had hardly begun speaking when Justice Kennard interrupted, asking him to articulate the "main differences between the old law and the current law." He obliged, focusing on the standing and "actual injury" requirements. Justice Kennard then asked why, in light of the ordinary presumption against retroactive application, reaffirmed just two years ago in Elsner (phonetic), the Court should agree with his client's position. McDowell started to talk about the "statutory repeal rule," but was again interrupted. Justice Kennard said she wanted to focus on the principle she just mentioned. "What do we have in this piece of legislation" that is a "clear indication that the legislature intended it to apply retroactively?"

McDowell argued that standing is an ongoing jurisdictional requirement, and that there is no issue of "retroactive" application if a new standing rule is applied to a pending action. Then Chief Justice George asked whether McDowell was saying that the general rule Justice Kennard mentioned doesn't apply. McDowell said yes. A new statute applies retroactively only if it affects "existing rights." In other words, the questions of Justices George and Kennard combined to focus the argument, at the outset, on whether the amendments (at least the standing amendment) was substantive or procedural.

McDowell then cited Government Code section 9606, which he views as a codification of the "statutory repeal rule." Justice Moreno asked McDowell to confirm whether he considered the standing amendments to be a procedural change, which McDowell did. Justice Chin then asked whether Prop. 64 changed or expanded the liability standards. McDowell said no, except possibly the element of causation.

Justice Baxter then asked, "What consequence is there, if any, where plaintiff and counsel have expended substantial funds (such as attorneys fees) prior to the change in law?" McDowell said, essentially, that's too bad for them, there have been plenty of cases in which the plaintiffs prevailed only to lose out on appeal after a change in law. He then pointed out that the plaintiff in Mervyn's sought injunctive relief only, that any injured persons still have a claim. No one has lost any rights, he said; Mervyn's could still be sued.

Justice Kennard then said that retrospective application is one that improperly changes the legal consequences of past conduct. "Focusing on past conduct, is it your view that the legal consequences have not changed?" McDowell said that the question of whether Mervyn's discriminated against people with disabilities has not changed. Justice Kennard then said, basically, "So your view is that the unfair competition alleged is still illegal?" McDowell said the claim still exists. Justice Kennard then asked whether it would be "proper to say that the only party whose rights have been changed are the rights of the injured party." McDowell was careful not to adopt Justice Kennard's term "rights," and argued that it is merely a change in procedure. Justice Kennard replied, "You argue that because standing is a jurisdictional issue, applying it to pending cases would be prospective application," and McDowell agreed.

Chief Justice George then interrupted saying McDowell's time was up.

Mr. Sturdevant's first question came from Justice Moreno: "Is it correct you're only seeking injunctive relief? If so, what law applies"? Sturdevant replied yes, but standing, in the context of this case, when you look at its effect, not its label, is a substantive issue. In 2002, he said, when Californians for Disability Rights ("CDR") filed suit, and in 2003 when the case went to trial, Stop Youth Addiction and Korea Supply allowed anyone to sue. The change in the standing requirement is substantive, not procedural, he argued.

Justice Moreno then said let's assume you do have standing, but in the interim the law changes, and you are seeking injunctive relief, does the trial court apply the old or new law? Sturdevant said there is no change in the cause of action, the remedy or the liability standards. CDR had standing when it brought the case and tried it, and it should have standing to continue to prosecute it. He pointed out that the trial court made three specific findings of disability discrimination, but ruled in Mervyn's favor only because it permitted Mervyn's to assert certain defenses that only exist under federal law, not state law. (That was apparently the original basis for the appeal that was pending in Nov. 2004, when Prop. 64 passed.) Assuming CDR prevailed on that substantive argument, the only issue on remand for the trial court to address is the scope of the injunctive relief.

Justice Chin then said, "Didn't the voters intend to allow these actions to continue?" Sturdevant caught this soft ball and replied that "intent is paramount"; nothing in the language of the initiative says anything about retroactive intent; at best the language sends a mixed message. He then quoted from Myers (without naming the case), in which the Supreme Court said that if the retroactivity language is ambiguous, then the amendment is "unambiguously prospective." He pointed out that caselaw holds that voters should not be presumed to understand "complex legal documents and technical terms." He said that Mervyn's argues the statutory repeal rule, which hinges on an assessment of whether the rights have a common-law origin or are purely statutory, and asserts that the amendments are merely procedural rather than substantive, yet there's nothing in the ballot materials that explains this. There's nothing in those materials suggesting that the voters knew all this.

Justice Baxter asked (following up on Justice Moreno's earlier question) if it's irrelevant whether the plaintiff's claim is for "damages" or injunctive relief. Sturdevant said there is no real distinction for purposes of the amendments here. He pointed out that there are other "grant and hold" cases that involve both injunctive relief and restitution. He gave two examples: Schwartz, in which a multi-million-dollar restitution award was reversed (see my posts on Schwartz here and here); and Benson v. Kwikset, in which the trial court ordered a "refund system" (to rectify misstatements about whether certain products were "Made in U.S.A."). Sturdevant then said, "We're asking the Court in this case to provide clarity to voters" that their intent is paramount, and also that amendments will apply prospectively only if there's a clear retroactive intent.

Justice Corrigan then asked her first question: "Is standing a question of jursidictional magnitude?" Sturdevant said yes, it is. The question is whether CDR had standing when the case was brought. Justice Corrigan replied, "If it's a question of jurisdiction, doesn't that requirement exist throughout the case, and isn't that a problem?" Sturdevant said that to apply the amendment to this case, the Court would have to hold that it is retroactive, but there is no retroactive intent. Corrigan was dissatisfied with that response, and basically told him to answer the question. Sturdevant rose to the challenge, pointing out that standing can be lost in many ways, for example, as in the LaSala case (phonetic), or if the plaintiff files bankruptcy and the trustee has to step in, or in cases of death or disability. Here, none of those things happened. The only thing that happened was Prop. 64, but there is no indication in Prop. 64 that it should apply retroactively.

Justice Corrigan said, "If standing can be lost at any time because of a change in circumstances, why can't we hold there's been a change in the law. Why not be consistent?" Sturdevant said the Court should not so hold because there's been no expression of retraoctive intent. He also pointed out that the Court has said (citing the case involving Prop. 51) that amendments should not be held retroactive when substantial resources have been expended in reliance on the old law. He invoked "fundamental notions of fairness, notice, reasonable reliance, fair play and substantial justice," and argued that CDR took steps based on the law that was in effect in 2002.

Justice Baxter then said: "Suppose there was a restrictive standing requirement, but because of an amendment it was expanded. In other words, reverse it. Would your argument be the same?" Sturdevant cited the Aetna Casualty case, in which an amendment expanded the measure of payments owed to the plaintiff. The Court held this amendment was not retroactive because there was no unambiguous expression of intent. Sturdevant's point was yes, his argument would be the same, even if it would be to the plaintiff's detriment, because the ultimate question is intent.

Sturdevant then turned, of his own accord, to the "statutory repeal rule." He talked about this for quite a long time with no questions from any justices.

At length, Justice Kennard brought up something that I've never heard anyone mention in the discussions about Prop. 64 retroactivity. She asked whether the Court should consider the ramifications of Code of Civil Procedure section 1021.5 (the statute that allows attorneys fees awards in cases in which the plaintiff achieved a substantial benefit for the general public or a large class of persons). Sturdevant said no, other than as the Court construed Prop. 51 in the Evangelatos case, affording deference to the parties' reasonable expectations and reliance.

Sturdevant wrapped up his argument with a bang. He accused Mervyn's of perpetrating a "fiction." He asked the Court to assume that the proponents took a poll and that poll told them that they'd likely get a "yes" vote without retroactivity language, but with it, the proposition would probably fail. (Which probably is not far from the truth; in late 2004, the newspapers reported interviews with the drafters saying they deliberately omitted express retroactivity language.) Sturdevant said the drafters called Prop. 64 an "amendment"; included no statement of retroactivity; nothing saying it's a repeal; and lots of forward-looking language. "It's the intent of the voters that should be paramount. The voters should get what they enacted, not more and not less" (quoting one of the Supreme Court cases).

Then it was McDowell's turn for rebuttal. He cited a case called McKinney v. Board of Trustees (phonetic), holding that a plaintiff who lacks standing cannot state a valid claim. Justice Kennard jumped in: "What is your response to the argument that it would destroy the settled rights and expectations of the other side?" McDowell said that argument "rings quite hollow in light of the Government Code provision" and is inconsistent with the Court's holding in Tapia that the rules governing trials are subject to change.

Chief Justice George asked whether we are to infer that the voters had knowledge of all that. McDowell said that the voters, like the legislature, are presumed to know what the law is. Justice Kennard asked, "What about the expectation of fees under section 1021.5?" McDowell said that's not relevant. If the plaintiff has no claim, then it has no expectation of anything. Justice Kennard said is it your position that it's not a right but just an expectation, contingent on success in the litigation. McDowell confirmed it's not a right, and then sat down.

Next, Mr. Hodel argued on behalf of Downey Savings. He began his argument by discussing the "statutory repeal rule," and again was allowed to go on for quite some time with no questions. Much of what he said responded to Sturdevant's argument on this point. Eventually, he said that the true underpinning of the plaintiffs' position is that the voters aren't smart enough to understand the law. Chief Justice George then chimed in, "Of course, you're saying voters should be smart enough to know" all the rules about retroactive application. Hodel said, "Absolutely, because that's the law. Voters are presumed to know the law."

Justice Baxter then asked an interesting hypothetical question: "Isn't this also an area where advocates on both sides have an opportunity to explain to the voters the potential adverse impacts or positive consequences?" Hodel said, "That is not how the statutory repeal rule works"—attempting, I suppose, to get away from the question of the voters' intent. Justice Baxter said, "I'm not sure you understood my question. Don't they have an opportunity to present argument in the voters' pamphlets about the potential adverse impacts or positive consequences?" Hodel said yes, but it would not be incumbent upon anyone proposing a new law to warn the voters about the statutory repeal rule. He argued that in essence, plaintiffs are saying that there ought to be a different law for amendments by initiative.

Justice Baxter persisted: "What I'm really suggesting is that if a statute could be applied retraoctively, that is an argument that those opposed to the initiative could make in the ballot materials."

An aside here: If I were drafting the ballot argument against Prop. 64, there's no way I would feel comfortable asserting that if enacted, it would apply retroactively to pending cases and halt those cases in their tracks. We already know that the Courts of Appeal themselves have split on this issue. Without express retroactivity language, what would justify the opponents in unequivocally asserting that the amendments would apply retroactivity and halt pending cases? Plus, if you put that in your argument against the measure, then if the measure passed, that itself would certainly be taken as evidence of the voters' retroactive intent. Justice Baxter's hypothetical creates a no-win situation for the opponents.

Hodel turned back to the language of the ballot materials, saying that they put the voters on notice that there will be a change in law, and that rights will be affected. He said that the harm (that the voters were trying to rectify) is "immediate merely by the existence of attorney-driven cases with professional plaintiffs." These "unsupervised" cases "clog our courts" and cause businesses to leave the state. Voters were on notice, he argued, that the new law would change this.

He then said that the cases plaintiffs cite fall into one of two categories: (1) cases involving a change in a common-law rule (such as Evangelatos); or (2) cases like Myers, which involved a change in the consequences of past conduct (the substantive/procedural argument).

Justice Kennard then brought up the issue of whether it is proper to allow these unaffected plaintiffs (who have had no opportunity to seek leave to amend) to ask the trial court to be allowed to substitute an affected person. (The Supreme Court granted review of this question in Branick but not in Mervyn's). She asked whether it would frustrate the objectives of the voters to allow this, pointing out that the main objective was to prevent frivolous lawsuits and make sure that they involve only plaintiffs who have been harmed. She also asked whether this issue isn't always one for the trial court's sound discretion.

Hodel answered no, then started back on retroactivity, when Justice Werdegar jumped in for the first time, basically telling him to answer the question about leave to amend. Hodel said no, "for three reasons." He only got a chance to give the first two: (1) Granting leave to amend would "do violence" to the statutory repeal rule. The action terminates, disappears. The right to maintain the action no longer exists. Plaintiffs here have no duties to anyone, they are strangers to the dispute. The Court would have to find an exception to the statutory repeal rule that would resuscitate their rights; allow them to be "professional place holders"; but the voters don't want them to be. (2) "Wouldn't the voters be surprised to hear, after saying we no longer want you or your counsel involved, that they're grandfathered in; that they're still in control; that they get to pick the new plaintiff and communicate with them; that they get to draft the motion to amend?"

Another aside here: I do not think it serves the interests of any appellate advocate to adopt an insulting tone of voice. Prop. 64 did not purport to alter the First Amendment or curtail anyone's right to "communicate" with potential class representatives. Hodel went too far with this argument, in my opinion.

Justice Corrigan then said that there is a long-standing notion that when circumstances change, the complaint can be amended. Hodel said yes, but here, the proposal is simply to substitute one plaintiff for another with "no further scrutiny." Justice Kennard pointed out that amendment is within the trial court's discretion (in other words, the trial court would scrutinze whether the proposed amendment was proper). Hodel said there's no discretion where the plaintiff has no rights, no standing, no authority. Justice Kennard said that the plaintiff would merely be substituting an injured party. Hodel cited two cases involving proposed amendments substituting parties, in which leave to amend was denied.

Chief Justice George then said that Hodel's time was up.

Mr. Spencer began his argument by saying he would respond to Justice Baxter's question about whether the voters should be "allowed to engage in a robust debate" about retroactivity. He said that everyone would agree that the voters should be able to. The problem is, in this case, it was not clear that retroactivity was part of the debate.

Chief Justice George asked whether we presume that the voters are aware of the governing law. Spencer said yes. The Government Code provision talks about a "repeal"; the question is whether Prop. 64 is a repeal. The Government Code provision is not self-executing, he said. Are the voters cognizant of case law? They are presumed to know it — but what do these cases say? Is there such a thing as an automatic, mechanical repeal rule? "That is not the law." (In other words, the voters are presumed to know the law, but the law is not clear that a statutory repeal automatically applies retroactively.)

He then went on to discuss the "statutory repeal rule" in more detail, again with no questions from the justices. After he concluded by saying that the courts look at intent, Justice Werdegar asked, "If we do that, what do we see here?" Spencer then talked about how the word "repeal" is never used, but the present-tense word "file" is used repeatedly in the ballot materials.

Justice Werdegar then asked Spencer to address the right to amend. Spencer replied that he would get to that in a minute, but that first he wanted to talk about the "statutory repeal rule" some more. He said that numerous cases from the 1930s forward involved a "repeal" of a statutory right, yet the Court held that the amendments applied prospectively only (and he named a series of cases, ending with Myers). He then said there is no language in Prop. 64 clearly suggesting in either direction what the law will be, so there can't be informed public debate.

Justice Baxter took the hint, and asked: "Did the opponents have an opportunity to point this out in the arguments against?" Spencer said he respectfully disagreed that the voters rely on the ballot arguments (as opposed to other parts of the ballot materials). Justice Baxter said, "It seems to me so obvious that the issue of whether it was retroactive was common knowledge among the plaintiff's bar and the defense bar" prior to the election, and "both sides were afraid to mention it. The voters were, in effect, denied a discussion of the issue."

Another aside here: I personally do not recall any discussion of retroactivity until after Prop. 64 passed. Prop. 64 was trailing in the polls all the way up to election day, and I did not think it was going to pass. Perhaps Justice Baxter is referring to something in the record in either Mervyn's or Branick that I haven't seen.

Spencer replied that for the voters to have an opportunity for discussion, retroactivity language should have been put in the text of the law, explicitly. Justice Baxter then said he thought both sides made a political decision not to address the issue in the ballot arguments, and instead to "dump it in the laps of the judiciary." Spencer replied that's why there's a clear rule in the case law: when in doubt, apply the amendment prospectively.

Spencer then turned to the amendment issue, pointing out that amendment would also allow a public prosecutor to be substituted in. Justice Kennard asked whether it was his view that Prop. 64 doesn't say anything about amendment and therefore doesn't affect the normal rules regarding amendment? Spencer said yes, Prop. 64 does not affect Code of Civil Procedure section 473. He said that the fundamental rule that cases should be decided on the merits favors allowing amendment.

Justice Chin asked about one of the cases cited by Hodel at the end of his argument, in which leave to amend was not granted to substitute a new plaintiff. (That case apparently involved two sisters who were in a car wreck, only one was injured, and their lawyer accidentally put the wrong name in the complaint. The problem was not noticed until after the statute of limitations had run, and the court denied leave to amend.) Spencer distinguished the case on its facts, saying that amendment was not fair to the defendant in that case because the complaint gave no notice that any other person had even been present during the accident. This case, by contrast, was brought for the benefit of all injured persons, and it raises the same issues that any injured plaintiff would have raised. The general rule is that amendment should be allowed unless it brings up a wholly different liability or obligation. The amended complaint would be "virtually the same lawsuit."

Justice Moreno asked whether Spencer was saying that the trial court would have virtually no discretion, then, in deciding whether to grant leave to amend. He pointed out that typically, the trial court considers a variety of factors (e.g., due diligence, etc.), and here we have a change in the legal landscape. Spencer replied that, in his view, the scope of the trial court's discretion is the most important issue in the case. He said that unless the Court wants these cases coming back up with differing results, the Court should give some indication of what the trial courts should do.

Spencer then addressed two arguments raised in amicus curiae briefs about why leave to amend should not be granted. He dismissed the first—prejudice to the defendant—as a non-issue. He then addressed the second, which was that if the case is allowed to proceed as a class action, that would impose additional burdens on the defendant. He then made a very interesting argument. He said that all Prop. 64 says is that the case must "meet the requirements of" Code of Civil Procedure section 382 (the class action statute). However, section 382 "doesn't say that the case needs to be class certified. In appropriate cases, a class does not need to be certified when it goes back to the trial court." He pointed out that the injunctive relief statute (Code of Civil Procedure section 572(b)(1)) states that injunctive relief can be prosecuted in a class action "whether or not a class is certified." In injunctive relief cases, the trial court does not have to hold class certification proceedings because the injunction can proceed without that. He said it should be an easy matter for the trial court to decide that the "requirements" of section 382 are met.

Then, he turned to restitution cases. He mentioned the Schwartz case as an example, and said that if the Court holds Prop. 64 retroactive, that case will go back to the trial court, which entered a large restitution judgment. What will the trial court do then? He said that the Supreme Court had always been very liberal in allowing consumer claims to go forward without class certification (citing cases called Jensen, Gas Retailers, Pacific Land, Lowery (a Court of Appeal decision) and Kraus).

He then said that the trial courts should be told that on remand, pre-existing proceedings, especially judgments, should be left intact once a substitute person or public entity is added.

That was the end of his time.

On rebuttal, Mr. Hodel said that if the plaintiffs' argument is that, with every statutory repeal, the inquiry should be intent, then why have a statutory repeal rule? "To find for plaintiffs, you'd have to repeal the repeal rule, or say that you have a different rule for voters." He said that no one would argue that the legislature didn't know about the repeal rule, and that it would be "paternalistic" to hold that the voters needed it explained to them.

He then went into a fact-specific discussion of two more cases involving substitution of plaintiffs. One case involved substitution of one decedent's estate for another, a technical change where amendment was allowed. Another case involved a homeowners' association. While the case was pending, the Court of Appeal ruled that homeowners' associations lack standing, so the members were substituted in. Hodel distinguished these cases on the facts, arguing that these cases involved "simple X-ing out of one plaintiff's name and putting in another."

Hodel argued that the plaintiffs in this case have suffered no prejudice because they have no rights, and they always knew they had no rights because statutory rights are subject to repeal at any time. He also observed that no one is clamoring to bring these claims. He asked, if substitution is allowed, "How will this be supervised? Why does this plaintiff have a right to continue to control, dictate, communicate, to draft the motion to amend?" "Plaintiffs always knew that this day would come, since the Younger case in 1978. You always operate in full contemplation that your rights could end at any time." He ended by referring to the plaintiff's right as an "unnatural right" (as distinct from a "natural right" deriving from the common law).

And that was the end of the argument. I'm not going to venture a guess as to the outcome here. I think the justices' questions revealed very little. I'd like to hear what others think. Please post comments (or send me an email) with your thoughts, and for those who attended, please add feel free to expand on my summary (or offer corrections) about any aspect of the arguments.