BILL ANALYSIS Ó
AB 271
Page 1
Date of Hearing: March 22, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 271 (Nestande) - As Amended: March 15, 2011
SUBJECT : APPEALS: CLASS ACTION CERTIFICATION
KEY ISSUE : SHOULD CALIFORNIA DEPART FROM LONG-ESTABLISHED
PRACTICE BY ALLOWING APPEALS AS OF RIGHT FROM PROCEDURAL
DETERMINATIONS THAT PERMIT CASES TO PROCEED TO TRIAL AS CLASS
ACTIONS?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill is substantively identical to proposals the Committee
has repeatedly heard and rejected, most recently in 2009 with AB
298 (Tran), which was preceded by AB 1905 (Adams) of 2008, both
of which the Committee rejected by a vote of 3-7. As with the
prior bids, this measure appears to be part of a national
campaign to establish a new rule allowing a right of immediate
appeal from procedural determinations regarding class
certification. Supporters, representing large business
interests, repeat their previous arguments that longstanding
existing law is unfair because it allows the plaintiff to seek
review of the denial of class certification but does not allow
the defendant the right to appeal the judge's decision to
certify a class. Supporters contend that many class actions now
settle after the class is certified only because the expense of
going to trial would be so great, despite the fact that the case
is of dubious merit. Opponents representing civil rights
advocates, consumers, workers and others once again counter that
current law reflects a sensible and long-established policy, and
that the practical effect of allowing an immediate appeal would
be to introduce greater costs and delays by staying entire
actions during the course of the appeal regardless of the
intervening harms and the relief sought in the action, including
actions that seek injunctive relief to stop ongoing illegal
behavior.
SUMMARY : Allows new appeals from procedural determinations
regarding class certification. Specifically, this bill provides
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that an appeal may be taken as of right from an order granting
class certification.
EXISTING LAW :
1)Provides pursuant to state statute that if the consent of any
one who should have been joined as plaintiff cannot be
obtained, he or she may be made a defendant, the reason
thereof being stated in the complaint; and when the question
is one of a common or general interest, of many persons, or
when the parties are numerous, and it is impracticable to
bring them all before the court, one or more may sue or defend
for the benefit of all. (Code of Civil Procedure section
382.) Case authority further specifies the standards and
procedures by which class certification is determined and how
such cases are administered, including the criteria of
ascertainability, numerosity, impracticability, and community
of interest. (See, e.g., Linder v. Thrifty Oil (2000) 23 Cal
4th 429, 437; Washington Mutual Bank v. Superior Court (2001)
24 Cal.4th 906, 922.)
2)Provides pursuant to the Consumer Legal Remedies Act that a
class action may be certified based on the criteria of
impracticability, predominant common questions, typicality of
claims or defenses, and adequacy of representation. (Civil
Code section 1781(b).)
3)Provides that an appeal is to the court of appeal, other than
in a limited civil case, and specifies certain judgments and
orders from which an appeal may be taken, but generally
prohibits immediate appeal from interlocutory rulings and
specifically does not allow immediate appeal from the
determination that a matter may proceed as a class action.
(Code of Civil Procedure section 904.1.)
COMMENTS : This bill is substantively identical to prior
measures this Committee has consistently declined to pass 3-7.
It seeks to establish a new rule allowing a right of immediate
appeal from procedural determinations regarding class
certification.
In support of the bill the author states:
California law regarding class certification is unfair. In
class action lawsuits, the all-important decision is that
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of class certification. Once the judge has certified the
class, that "certification" allows the class to proceed
with the lawsuit. If the plaintiff class bringing the
lawsuit tries to get a class certified and does not win,
the plaintiff is allowed to appeal that decision to a
higher judge. However, the reverse is not true: current
California law does not allow the defendant the same right
to appeal the judge's decision to certify a class. The only
option a defendant has to try to get a rare writ of
mandate. Currently, many class actions now settle after the
class is certified because the expense of going to trial
would be so great.
The problem is that there are numerous class action
lawsuits of dubious merit that settle after class
certification is granted. Moreover, without the ability to
appeal certification the pressure is on to settle before
certification. Class members get dollars and their lawyers
get millions. All consumers pay the price in the form of
higher prices for goods and services. In a class action
lawsuit against Netflix movie rental company, class members
got one free movie rental for one month while lawyers got
$2.5 million dollars
The sponsor, Civil Justice Association of California (CJAC),
writes in support:
Under current California practice, only the denial of a
class certification motion is appealable. In most class
action litigation, the battle over certification determines
the entire case. An order granting class certification
puts tremendous pressure on defendants to agree to
settlement - even in the face of meritless claims. This
phenomenon leads to the filing of more unmeritorious class
actions and the waste of important judicial resources.
CJAC observes that "Federal rules allow for a request to appeal
class action certification decisions." In contrast, AB 271
would allow an automatic appeal. CJAC contends that a number of
southern and Midwestern states "are trending to allow
interlocutory appeal of class certification decisions,"
specifically Alabama (1999), Colorado (2003), Florida (2006),
Georgia (2005), Kansas (2004), Missouri (2004), Ohio (1998), and
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Texas (2003).
CJAC goes on to argue:
Assembly Bill 271 promotes fairness by providing both sides
the same right to appeal the decision regarding class
certification. If this bill were to become law, a body of
law regarding class certification and the impact to both
parties would develop, thereby giving parties greater
certainty and predictability.
As in previous years, a group of advocates for big business
joins CJAC in support of the bill, stating their views in
language identical to CJAC's letter. Supporters also contend
that passage of the bill would improve the state's economy,
noting that a federal rule permits some appeals of class
certification decisions, and that other states have enacted the
rule they propose here. Supporters unfortunately have not
provided the Committee with any information regarding their
claims that economic vitality is correlated with - much less
caused by - class certification appeal rules (the dire state of
the national economy would appear to be at odds with this
contention) or to provide information to the Committee
documenting that unmeritorious class action cases are filed in
any significant numbers, or that our judges routinely certify
such cases erroneously.
This Committee Has Consistently Declined To Pass Recent Similar
Prior Measures. AB 298 (Tran) of 2009 and AB 1905 (Adams) of
2008 were substantively identical to the current proposal, both
of which were rejected by the Committee on identical 3-7 votes.
Other prior related measures include AB 2588 (Strickland) of
2010 which would have made a number of changes to class action
law, including the appeal provision in this bill, and was
virtually the same as AB 1505 (Parra) of 2008, both of which
failed passage 3-7 in the Committee. There have been many other
proposals to change class action procedures over the prior 10
years.
A Determination That A Case May Proceed As A Class Action Is A
Procedural Ruling That Is Currently Not Appealable . As the
author and supporters note, California law has long provided
that a ruling granting class certification is not subject to
immediate appeal. This rule reflects that the class
certification is a procedural question, and one that is
inherently tentative and subject to review, modification and
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reversal at any point in the life of the case. As supporters
concede, a class action defendant may nevertheless invoke the
writ process to obtain review if necessary to compel a trial
court to performance an act which the law specially requires,
although writs are intended to be limited to extraordinary
situations.
A determination that a case may not proceed as a class action,
on the other hand, may be appealed. Although supporters of this
bill see that difference as unfair, the reason for the
distinction lies in the nature of the class action procedure.
As this Committee has repeatedly observed, the aggregation of
individual claims in class-wide suits is designed to provide a
mechanism for judicial review where it is not economically
feasible to obtain relief within the traditional framework of
multiplicity of small individual suits for damages. Without the
class action procedure, aggrieved persons may be left without
any effective redress. (See Deposit Guaranty Nat'l Bank v.
Roper, 445 U.S. 326, 339 (1980).)
Class action lawsuits are said to offer a number of advantages.
Aggregation may increase the efficiency of the legal process,
and lower the costs of litigation, by avoiding the necessity of
repeating "days of the same witnesses, exhibits and issues from
trial to trial." (Jenkins v. Raymark Indus., Inc., 782 F.2d
468, 473 (5th Cir. 1986).) In addition, a class action
overcomes "the problem that small recoveries do not provide the
incentive for any individual to bring a solo action prosecuting
his or her rights." (Amchem Prods., Inc. v. Windsor, 521 U.S.
591, 617 (1997).) In other words, a class action ensures that a
defendant who engages in widespread harm - but does so minimally
against each individual plaintiff - must compensate those
individuals for their injuries. Thus, the denial of class
certification essentially serves as the end of the case because
the individual plaintiffs have no effective recourse by
individual suits, leading to the longstanding practice of
allowing appeal from the decision not to allow the plaintiffs to
proceed as a class action. Federal law is to the same effect.
Besides the claimed unfairness, supporters advance one
additional argument for a right to immediate appeal: "allowing
appeals in all cases Ýwill] lead to a better developed set of
laws regarding class certification." The Committee encountered
a similar argument in rejecting AB 1505, which was said to be
necessary in order to develop and clarify class action
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certification standards.
As the Committee observed in that context, the Rules and
Projects Committee of the Judicial Council considered a request
by CJAC in October 2001 to develop a rule containing class
certification standards. The Judicial Council's committee
recommended against adoption of such a rule after forming a
17-member working group to gain a variety of viewpoints on the
issue, including members of the Complex Litigation Subcommittee,
practicing attorneys, a member of the State Bar of California's
Committee on Administration of Justice, a member of the Civil
Justice Association of California, and two superior court judges
who handle class action cases. The Judicial Council committee
concluded that such a rule is unnecessary, in part because "the
basic criteria for class certification under California law are
well-settled. The case law does not reflect any substantial
uncertainty or confusion among the lower courts as to these
basic standards." (Judicial Council Rules and Projects
Committee memo, March 10, 2003.)
ARGUMENTS IN OPPOSITION : A coalition of nonprofit public
interest organizations, led by the Impact Fund, writes in
opposition to the bill on behalf of "people and groups that have
historically been disenfranchised including, but not limited to,
women, ethnic minorities, people with disabilities, older
persons, consumers, lesbians and gays, tenants, low wage workers
and the impoverished." This coalition comments:
Historically, and currently, an essential tool in all of
our struggles for equality is a viable class action
mechanism. This bill, however, would overturn decades of
well-established California law and severely undermine
class action cases in California, thus providing a windfall
to defendants who harm many people when they violate the
law.
Currently under California law, while there is a right to
appeal a denial of class certification, there is no
automatic right to appeal from a grant of class
certification. This approach makes sense: a denial of
class certification essentially ends the case, thus making
an appeal the only logical procedure. A grant of class
certification, on the other hand, does not act as a "death
knell" for either side, especially since class
certification rulings are not decisions on the merits, and
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may be modified or reconsidered as additional proceedings
occur.
The proposed bill would grant an automatic right to appeal
when a class is certified. The practical effect of this
would be to stay the entire action during the one or more
years of appeal. See C.C.P 916. This would be true no
matter what relief is sought in the action, including
actions that seek injunctive relief to stop ongoing illegal
behavior. Such a stay would delay the ultimate resolution
of the case and grant a windfall to defendants, since
justice delayed is often justice denied. This is
especially true in class cases, where the passage of time
makes it harder to locate class members who are unlikely to
know about the class action or their rights, since the
appeal would occur prior to the issuance of class notice.
Given the extremely broad discretion given to trial judges
in ruling on class certification, See Sav-On Drug Stores,
Inc. v. Superior Court, 34 Cal.4th 319, 326-327 (2004), it
is unlikely that most appeals from the grant of class
certification will succeed, yet an appealing defendant
automatically gains an advantage by filing an appeal,
stopping the action in its tracks.
The Western Center on Law and Poverty opposes the bill "because
it would allow defendants to delay and deny justice to members
of a class action lawsuit." Since judges retain significant
discretion to certify a class and are rarely reversed on appeal,
the right to appeal will only "give defendants an incentive to
file frivolous opposition for the sole purpose of delay." The
WCLP also provides an example of how such delay could cause
irreversible harm:
In Alford v. County of San Diego, we represented a class of
low-income San Diego County residents who were denied
potentially life-saving treatment under the County's
indigent health care program because of an $802 per month
income eligibility cap. Over opposition from the County,
we successfully moved to have the class certified and then
secured a writ of mandate ordering the county to provide
health services to indigents. If the County had been able
to appeal the order certifying the class, our clients would
have been denied health care in the interim.
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Consumer Attorneys of California (CAOC) also writes in
opposition, noting the importance of class actions:
Class action lawsuits give the average person a chance when
taking on the largest corporations. When Enron ripped off
its shareholders and employees, when major companies
discriminated against women employees and failed to pay
overtime, when HMOs denied needed health care to people who
paid for coverage, and when tobacco companies deceptively
marketed products they knew were dangerous, people were
able to hold these corporations accountable and get fair
compensation through class actions.
Opponents note that class actions have become even more
important in light of recent events. For instance, in March
2009, the California Public Employees' Retirement System was
granted class status for its shareholder lawsuit against the New
York Stock Exchange and specialist firms. The 2003 investor
lawsuit alleges that seven specialist firms traded for their own
accounts ahead of clients', resulting in inferior prices for
customers.
According to CAOC, however, this bill would "effectively kill
California class actions" by creating time delays and
undermining the trial court's discretion in class actions. CAOC
cites the California Supreme Court's decision recognizing the
importance of a trial judge retaining flexibility in the
pretrial and trial of a class action. (Vasquez v. Superior
Court 4 Cal. 3d 800, 821 (1971).) Since a trial court may
modify its class certification decision through trial, CAOC
explains that the trial court's decision is not a final order
subject to the appellate process:
Accordingly, defendants can (and do) continue to litigate
the issue after certification has been granted, most
notably by repeatedly moving to decertify the class.
Because the trial court may modify a non-final order
granting (or partially granting) certification, it makes no
sense for the Court of Appeal to become immediately
involved. This is a bedrock principle of appellate
jurisprudence.
REGISTERED SUPPORT / OPPOSITION :
Support
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Civil Justice Association of California (sponsor)
California Apartment Association
California Association of Health Facilities
CalChamber
California Citizens Against Lawsuit Abuse
California Hospital Association
California Manufacturers & Technology Association
California Retailers Association
Cooperative of American Physicians, Inc.
Opposition
American Civil Liberties Union of N. California
Asian Pacific American Legal Center
California Conference Board of Amalgamated Transit Union
California Conference of Machinists
California Employment Lawyers Association
California Labor Federation
California Nurses Association/National Nurses Organizing
Committee
California Official Court Reporters Association
California Rural Legal Assistance Foundation
California Teamsters Public Affairs Council
California Women's Law Center
Consumer Attorneys of California
Consumer Federation of California
Disability Rights Education and Defense Fund (DREDF)
Elder Law & Advocacy
Engineers and Scientists of CA
Equal Justice Society
The Impact Fund
International Longshore and Warehouse Union
Legal Aid Association of California
Legal Aid Society-Employment Law Center,
Legal Services for Prisoners with Children
National Center for Youth Law
National Housing Law Project
National Lawyers Guild, Labor and Employment Committee
National Senior Citizens Law Center
OneJustice
Professional and Technical Engineers, Local 21
Public Advocates
Public Interest Law Project/California Affordable Housing Law
Project
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Public Interest Law Firm of the Law Foundation of Silicon Valley
UNITE HERE
United Food and Commercial Workers - Western States Conference
Utility Workers Union of America, Local 132
Western Center on Law and Poverty
Women's Employment Rights Clinic of Golden Gate University Law
School
Worksafe, Inc., and
Youth Law Center
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334