New decision on "a novel class action issue": Ortiz v. Lyon Management Group, Inc.

I hope to have a report on the Farm Raised Salmon Cases argument by tomorrow, but meanwhile, here is an interesting new decision. In Ortiz v. Lyon Management Group, Inc., ___ Cal.App.4th ___ (Dec. 3, 2007), the Court of Appeal (Fourth Appellate District, Division Three) held that after winning summary judgment as to the named plaintiff's claims, the defendant may not move for class certification in hopes of obtaining a judgment that will be res judicata as to all of the absent class members:

We hold defendant could not obtain class certification after the court decided the merits of plaintiff’s individual claim. As a general procedural rule, class certification should be determined before the merits are adjudicated. And as a general substantive rule, a precertification decision on the merits against a named plaintiff does not bind absent class members. The court did not abuse its discretion by holding defendant to these general rules.

Slip op. at 3. The opinion calls this question "a novel class action issue" and said several times that there is "no case in which a defendant has even tried this tactic." Id. at 2, 15. Indeed, I have never heard of a defendant moving for class certification in any context.

The Court of Appeal began its analysis by construing Fireside Bank v. Superior Court, 40 Cal.4th 1069 (2007), and holding that such a procedure would violate Fireside Bank's directives absent changed circumstances justifying the delayed class certification motion:

Fireside sets forth a strict rubric for postmerits certification. “If a party seeks and obtains a merits ruling before moving for class certification, it must demonstrate changed circumstances to justify its belated motion for class certification. [Citation.] Absent a showing of changed circumstances, the trial court may not consider the motion; absent a further finding of a compelling justification, it may not grant it.” (Fireside, supra, 40 Cal.4th at p. 1088.)

This rubric provides a procedural reason to affirm the court’s denial of defendant’s class certification motion. Defendant, having “s[ought] and obtain[ed] a merits ruling before moving for class certification,” failed to “demonstrate changed circumstances to justify its belated motion for class certification.” (Fireside, supra, 40 Cal.4th at p. 1088.) The record suggests no practical reason why defendant could not have moved for class certification sooner, other than to maximize its strategic advantage.

Slip op. at 16-17.

The Court of Appeal then held that "postmerits certification would wrongly give binding effect to a non-binding judgment":

Despite 50-plus pages of exhaustively researched briefing covering 30 years of federal and California class action jurisprudence, defendant cannot cite a single case in which a defendant obtained class certification after first obtaining summary judgment against the named plaintiff’s individual claim. This lack of precedent is telling.

....

None of [the cases on which defendant relies] allowed a defendant to seek postmerits certification. None allowed precertification summary judgment against the plaintiff’s individual claim to bind absent class members. None support defendant’s attempt to foist a binding judgment against absent class members by seeking postmerits certification. ....

.... Rather than seeking postmerits certification, defendant must resort to some other doctrine to combat the onslaught it fears of subsequent litigation by absent class members. Possible doctrines may include res judicata or stare decisis. But defendant must wait to assert these doctrines in subsequent litigation, if any; we express no opinion on their viability. We note only that they do not support postmerits certification in this case.

Id. at 22-24 (citation omitted).