BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
SB 737 (Huff)
As Introduced
Hearing Date: April 30, 2013
Fiscal: No
Urgency: No
RD
SUBJECT
Appeals: Representative Actions
DESCRIPTION
Existing California law establishes that the right to appeal
from specified judgments and orders-most commonly, from final
judgments. Existing case law establishes that the denial of
certification to an entire class is an appealable order.
This bill would permit appellate review of trial court orders
granting or denying class action certification, provided a
notice of appeal is filed within 14 days after entry of the
certification order. This bill would also specify the following
factors that the court must review in considering whether or not
to permit an appeal under this provision:
whether an order by the trial court denying class status would
effectively end the litigation and any reasonable possibility
of prosecuting individual claims;
whether an order by the trial court granting class status
would place substantial pressure on the defendant to settle
without regard to the merits of the case;
whether an interlocutory appeal of the order would facilitate
the development of the law pertaining to class actions; and
whether the order granting or denying class certification is
clearly erroneous; and
whether other special circumstances exist that justify an
interlocutory appeal.
BACKGROUND
Class actions are lawsuits in which the court authorizes a
(more)
SB 737 (Huff)
Page 2 of ?
single person or small group of people to represent the
interests of a larger group in the suit. Before a class action
lawsuit proceeds to trial on the merits, the court hears a
motion to "certify" a generally defined group of people as the
class entitled to seek relief in the suit. The court's decision
on this motion can be dispositive of the entire case: If the
motion is denied, the individual members of the group who sought
certification are often rendered unable to proceed with
individual cases; whereas if the motion is granted, defendants
often choose to settle early rather than face a trial with a
large group of claimants.
The ability of parties to appeal certification rulings is
limited. Under California law, the right to appeal is generally
governed by the "one final judgment" rule. Because of policies
against piecemeal review of litigation, most "interlocutory"
orders (those issued before or during trial) are not appealable
until a final judgment on the entire case has been entered.
However, since denial of class certification generally is viewed
as the "death-knell" to the case, California courts usually
allow appeals when motions for class certification have been
denied. This term traces back to a 1966 case which provided
that "[w]here the effect of a district court's order, if not
reviewed, is the death knell of the action, review should be
allowed." (Eisen v. Carlisle & Jacquelin, 370 F.2d 119, 121.)
As summarized by the California Supreme Court:
Given the one final judgment rule's deep common law and
statutory roots and the substantial policy considerations
underlying it, we are reluctant to depart from its principles
and endorse broad exceptions that might entail multiple
appeals absent compelling justification. [ . . . ]
Accordingly, "exceptions to the one final judgment rule should
not be allowed unless clearly mandated."
We found compelling justifications for one such exception in
Daar [v. Yellow Cab Co. (1967)] embracing what is known in
this and other jurisdictions as the "death knell" doctrine. [
. . . ] What mattered was not the form of the order or
judgment but its impact. Because the order effectively rang
the death knell for the class claims, we treated it as in
essence a final judgment on those claims, which was appealable
immediately.
Two procedural circumstances were critical to our decision in
Daar: First, that the appealed-from order was the practical
SB 737 (Huff)
Page 3 of ?
equivalent of a final judgment for some parties, and second,
that in the absence of our treating the order as a de facto
final judgment, any appeal likely would be foreclosed. (In re
Baycol Cases I & II (2011) 51 Cal.4th 751, 757, internal
citations omitted.)
As further commented upon in a recent Court of Appeal decision,
the [death knell] doctrine does not apply "when a final judgment
resolving all claims (including the individual plaintiff's
action) will follow as a matter of course." (Aleman v. Airtouch
Cingular (2012) 209 Cal.App.4th 556, 585, citing Baycol, 51
Cal.4th at 758-759.) Accordingly, because an order granting
class certification merely means the trial can proceed, defense
appeals from such orders generally have not been permitted until
final judgment in the case.
This bill seeks to allow the appeal of an order granting class
certification by codifying that either an order granting or
denying class certification may be appealed within 14 days.
This bill would also specify factors that the court must review
in considering whether or not to permit an appeal of an order
granting or denying class certification.
CHANGES TO EXISTING LAW
Existing law specifies that the right to appeal is granted and
governed by statute. Existing law permits an appeal in a civil
action, other than a limited civil case, to be taken to the
court of appeal from any of several specified judgments and
orders, including, among others, final judgments. Existing law
generally limits appeals from interlocutory judgments. (Code
Civ. Proc. Secs. 902, 904, 904.1(a).)
Existing law , in relevant part, authorizes class actions 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 Civ. Proc. Sec.
382.)
Existing case law establishes that the denial of certification
to an entire class is an appealable order under the death knell
doctrine. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429,
435, citing Richmond v. Dart (1989) 29 Cal.3d 462, 470 and Daar
v. Yellow Cab Co. (1967) 67 Cal.2d 695, 698-699; In re Baycol
Cases I & II (2011) 51 Cal.4th 751, 757.)
SB 737 (Huff)
Page 4 of ?
Existing Federal Rule of Civil Procedure (FRCP) allows a court
of appeals to permit an appeal from an order granting or denying
class-action certification, as specified, if a petition for
permission to appeal is filed within 14 days after the order is
entered. Existing FRCP provides that an appeal does not stay
proceedings in the district court unless the district judge or
the court of appeals so orders. (FRCP 23(f).)
This bill would allow an appeal from an order granting or
denying class action certification if the petition to appeal is
filed within 14 days of the entry of the order. This bill would
require the court to consider all of the following in reviewing
a petition:
whether an order by the trial court denying class status would
effectively end the litigation and any reasonable possibility
of prosecuting individual claims;
whether an order by the trial court granting class status
would place substantial pressure on the defendant to settle
without regard to the merits of the case;
whether an interlocutory appeal of the order would facilitate
the development of the law pertaining to class actions; and
whether the order granting or denying class certification is
clearly erroneous; and
whether other special circumstances exist that justify an
interlocutory appeal.
COMMENT
1. Stated need for the bill
According to the author:
Current state law regarding class certification is one-sided.
In class action lawsuits, the important decision is that of
class certification. "Certification" allows a few plaintiffs
to bring an action on behalf of countless others, whereby
alleged infractions result in huge settlements or judgments
even though the offense was minimal. If the plaintiff 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 specifically allow the defendant the same right
to appeal the judge's decision to certify a class. The only
recourse a defendant has is to litigate the entire case and
appeal the issue afterward, or attempt to get a rarely-issued
writ of mandate. Currently, many class actions now settle
SB 737 (Huff)
Page 5 of ?
because the expense of going to trial would be so great.
Federal law however, allows defendants to also appeal class
certification decisions and there are many examples of federal
courts overturning such orders.
SB 737 would add to the list of actions that may be appealed
under Section 904.1 of the Code of Civil Procedure a decision
regarding class certification if certain elements are present.
This bill would allow both parties to timely appeal the
decision of class certification. This equitable change to
state law would align it with federal law. Federal law
(Federal Rule of Civil Procedure 23(f)) allows a defendant to
request an appeal and case law has identified several
reoccurring and important factors making such appeal
equitable.
In support of the bill, the Civil Justice Association of
California adds that, "[t]he Federal rules allow for a request
to appeal class action certification decisions. [ . . . ] There
is extensive case law where federal courts have identified
reoccuring distinct and very significant reasons to hear an
appeal of class certification order. For example, where a
denial of certification effectively ends the litigation for the
plaintiff, when a grant of certification may 'force a defendant
to settle rather than incur the costs of defending a class
action and run the risk of potentially ruinous liability,' and
where the certification decision turns on a novel or unsettled
question of law (Chamberlan v. Ford Motor Co., (2005) 402 F.3d
952). [Senate Bill 737] would align California law with federal
treatment of this important issue, bringing fairness to these
proceedings."
Also in support of this bill, a coalition of organizations notes
that "[a]n order granting certification puts tremendous pressure
on defendants to agree to settlement - even in the face of
meritless claims. (Starbucks Corp. v. Superior Court, (2008)
168 Cal.App.4th 1436.) This phenomenon leads to the filing of
more unmeritorious class actions and the waste of important
judicial resources, because the cost of going to trial is too
great. This bill simply puts plaintiffs and defendants on equal
footing on this all-important issue."
2. This bill could severely undermine the remedy of class
actions
This bill seeks to allow the appeal of an order granting class
SB 737 (Huff)
Page 6 of ?
certification, as specified. In doing so, the bill raises
fundamental issues regarding class actions.
California courts have long recognized that a class action can
not only serve to avoid overburdening the courts with multiple
claims involving the same issue, but also, often times can
determine whether or not certain parties are able to seek
recourse in the courts. This is because it is not uncommon for
a class action to involve a case where the individual losses
suffered by the members of the class are so minimal that it
would not be practical to sue upon on an individual basis. In
those same cases, however, the relatively small individual
losses, in the aggregate, result in a substantial benefit to the
bad-acting defendant who engaged in fraudulent or discriminatory
practices. In such a situation, a successful class action
prevents that defendant from retaining the benefits of its
wrongful conduct and arguably serves to protect the public by
discouraging the continuation of the fraudulent or
discriminatory practices. In other words, in the absence of that
class action, the defendant may well continue his or her
misconduct with impunity.
The issue of class certification is procedural and, yet, has a
significant impact on any class action: before a class action
can commence on the merits, the class must be certified by the
court. Thus, the issue of class certification can be
dispositive as to whether or not any case will proceed.
Where the class is denied, often times, the cases are dropped
entirely because, again, the underlying claims can be
impracticable to litigate on individual bases. Accordingly, the
California courts usually allow appeals when motions for class
certification have been denied because the denial of class
certification results in the termination of that class action
and, as a practical matter, the plaintiffs may be left unable to
pursue the litigation any further. As noted by the California
Supreme Court, "[w]hile the mere denial of certification does
not, as a legal matter, terminate the right of any plaintiff to
pursue claims on an individual basis, it is likely to have that
net effect when there has been injury of insufficient size to
warrant individual action." (Linder v. Thrifty Oil Co. (2000)
23 Cal.4th 429, 441.)
In contrast, where the class is granted, the plaintiffs must
proceed to prove their case against the defendant. Therefore,
an order granting class certification does not result in any
SB 737 (Huff)
Page 7 of ?
sort of victory to either side-it merely means the trial can
proceed on the merits. Accordingly, defense appeals from such
orders generally have not been permitted until final judgment in
the case. This bill would change this general rule in
California by allowing defendants to appeal an order granting
class certification, as opposed to requiring them to raise class
certification as issue upon final judgment, or to request review
pursuant to a writ of mandate. (See Comment 4 for more on this
issue.)
The California Rural Legal Assistance Foundation argues, in
opposition, that in allowing defendants the ability to seek
appeal of an order granting class certification, this bill may
in fact "facilitate frivolous appeals by unscrupulous defendants
that will not only delay consideration of a case on the merits,
but also greatly (and unnecessarily) add to the costs of
litigation." Similarly, the Elder Law & Advocacy argues that,
"[i]n the simplest of terms, this will have serious
ramifications for litigants. It will mean that while all class
action cases will proceed to the class certification ruling, and
then potentially stall while the appellate court decides the
appeal from that ruling. That process could take several years,
depending on the appellate district." The Legal Aid
Association of California comments also that "[t]he obvious goal
of SB 737 is to set up sufficient roadblocks to effectively
eliminate class actions."
Thus, ultimately, the bill could significantly impact the
efficacy of class actions in this state, at the risk of allowing
bad actors to continue unfair, fraudulent, or discriminatory
practices with impunity, to the detriment of the public and
other businesses.
3. This bill substantially limits appellate discretion in
contrast to the federal rule
In proposing the addition of a new ground for appeal under
California law for orders denying class certification, the
proponents of this bill argue that existing law is inequitable
and cite the recently amended federal rule of civil procedure
Rule 23(f) (hereinafter, Federal Rule 23(f)), as a workable
alternative to California's approach.
This reliance on Federal Rule 23(f), however, fails to account
for a notable distinction between that rule and this bill: the
federal rule permits interlocutory appeal at the appellate
court's discretion, but also provides that an appeal does not
SB 737 (Huff)
Page 8 of ?
stay proceedings unless the district judge or the court of
appeals so orders. In contrast, this bill contains no such
language limiting the stay of proceedings during the appeal.
Under California law, the perfecting of an appeal generally
stays proceedings in the trial court upon the judgment or order
appealed from or upon the matters embraced therein or affected
thereby. (Code Civ. Proc. Sec. 916(a).) As commented by the
Legal Aid Association of California, the "practical effect of
this is usually to stay the action, and at a minimum will
prevent the trial court from moving forward on any matter
potentially impacted by the class certification order, such as
ordering class notice, ruling on summary judgment and other
dispositive motions, permitting class wide merits discover, or
going forward to trial on a class wide basis. In effect, the
entire case may be stalled."
Committee staff notes that, as such, this would only operate to
the benefit of defendants who seek appeal of an order granting
the class certification because it could effectively pause a
class action that would otherwise commence upon that
certification to be heard on the merits, whereas the denial of
the class certification ends the class action for the plaintiffs
and there are no proceedings to be stayed.
Committee staff also notes that the 1998 Advisory Committee
Notes to the amended federal rule imply that the new right to
seek interlocutory review of certification orders was actually
intended to be used sparingly. Acknowledging that the federal
appellate courts were being given "unfettered discretion" to
hear such appeals under the new Federal Rule 23(f), the Advisory
Committee Notes surmised that the courts were most likely to
permit them only "when the certification decision turns on a
novel or unsettled question of law, or when, as a practical
matter, the decision on certification is likely dispositive of
the litigation." Moreover, the Advisory Committee Notes
commented that, ultimately, "[p]ermission to appeal may be
granted or denied on the basis of any consideration that the
court of appeals finds persuasive."
Again, in contrast, this bill lacks the flexibility that exists
in Federal Rule 23(f) and requires instead that any court
reviewing a petition to appeal a class certification consider a
specific set of factors in making its determination. The
Consumer Attorneys of California asserts that by requiring the
courts to consider this multitude of factors in reviewing a
petition to appeal class certification, this bill could actually
SB 737 (Huff)
Page 9 of ?
"dramatically increase the burden on the appellate courts"
whereas, "[o]rdinarily, the appellate court defers to ongoing
trial-level proceedings that may eliminate the need for
appellate-level proceedings." This argument is echoed in
numerous letters of opposition.
As a result, Committee staff notes that while the proponents
rely in part on Federal Rule 23(f) to justify this new ground
for appeal under California law, this bill actually seeks to
enact what is effectively a very different rule than that used
in practice in the federal courts. Furthermore, as a matter of
public policy, it is not clear that adopting a version of the
federal rule in California provides for a more equal playing
field, as opposed to giving defendants another tactic to attempt
to stall the case and cause plaintiffs to settle or drop the
case due to the additional cost of the appeal. (See Comment 4
below.)
4. This bill circumvents the final judgment rule and would may
actually tip the balance in favor of defendants
As a general rule, the Code of Civil Procedure provides that
appeals may be taken only from such judgment or orders as are
made appealable by statute. Normally, this right to appeal in
civil cases exists only upon a judgment, except there may be an
appeal from an interlocutory judgment that is made final and
conclusive (See Code Civ. Proc. Sec. 904.1.) In turn, a
judgment is the final determination of the rights of the parties
in an action or proceeding. (Code Civ. Proc. Sec. 577.) This
final judgment rule seeks to limit the number of appeals
possible in light of the court's interests in expediency,
efficiency, and economy.
This bill would provide a new statutory ground for appeal of any
grant or denial of a class certification. In light of existing
case law which already recognizes, consistent with the final
judgment rule, that denials of appeals can at times be appealed,
this bill essentially seeks to give the courts the ability to
consider petitions to appeal the granting of a class
certification. The author argues that "SB 737 simply provides a
court the opportunity, in the court's discretion, to treat all
parties to class actions equally and fairly. That equality has
long been provided in federal courts."
In opposition to this bill, the Consumer Attorneys of California
(CAOC) explains the reason for the disparity under existing law,
as follows:
SB 737 (Huff)
Page 10 of ?
For over 40 years California has followed the death knell
doctrine, which allows orders denying certification of an
entire class to be appealed. The rationale is simple. "In
'its legal effect' the order is tantamount to a dismissal of
the action as to all members of the class other than [the
name] plaintiff. It has virtually demolished the action as a
class action. If the propriety of such disposition could not
now be reviewed, it can never be reviewed (citations
omitted)." (Emphasis added.) See Daar v. Yellow Cab, 67
Cal.2d 695, 699 (1967), Linder v. Thrifty Oil Co., 23 Cal.4th
429, 436 (2000).
California law has long provided that an order granting class
certification is not subject to immediate appeal. This rule
reflects that the class certification is a procedural
question, and in no way is final, but rather is tentative and
subject to review, modification and reversal at any point in
the life of the case. [Citations omitted.] AB 737 would flout
this longstanding rule.
The existing rule makes sense. A defendant already has an
interlocutory appeal right under California law -the ability
to file a writ-and can continue litigation after a case is
certified and take actions to attack the certification order.
[ . . . ] Again, they are not treated as final orders.
[Emphasis in original.]
Changing the rule to allow defendants to appeal certification
orders, CAOC adds, will provide "wrongdoing defendants [ . . .
] an incentive to delay cases. They will simply wait until
certification is granted and then appeal the order because the
appeal will trigger an automatic delay. If courts of appeal are
allowed to grant these class decertification appeals [ . . .
delays] of two years or more will become common and legitimate
class action cases will be unnecessarily stalled."
Committee staff notes also that this bill arguably does not put
the parties on equal footing. As noted above, a party that is
appealing the denial of class certification is effectively
appealing a ruling that is final and that can render their case
over. As noted by the courts, for those parties, there would be
no other time at which an appeal could even be made-"the action
has in fact and law come to an end, as far as the members of the
alleged class are concerned." (In re Baycol Cases I & II (2011)
51 Cal.4th 751, 760, citation omitted.) Thus, under the "death
SB 737 (Huff)
Page 11 of ?
knell" doctrine, allowing appeal from certain denials of class
certification, "fits comfortably within the existing statutory
framework of this final judgment rule." (Id.) This bill in no
way appears to suddenly allow plaintiffs to appeal denials of
class certification that do not render the case effectively
over. Indeed, the first factor that the courts would be
required to examine in considering whether to allow appeal of a
class certification denial under this bill is: "whether an order
by the trial court denying class status would effectively end
the litigation and any reasonable possibility of prosecuting
individual claims." In other words, this first factor is
essentially a restatement of existing case law, which already
limits the appeals of denials of class certifications to those
cases in which it operates like a final judgment and dismissal
of a case. Meanwhile, the bill would permit a defendant seeking
denial of the class could petition the court to appeal any grant
of a class certification without any regard being given to the
final judgment rule.
Moreover, as noted by some of the opponents to this bill,
including the Legal Aid Association of California and the Impact
Fund, California case law already allows defendants to seek
immediate review of such an order by writ of mandate. (Blue
Chip Stamps v. Superior Court (1976) 18 Cal. 3d 381, 387, at n.4
(writ issued ordering decertification of class); see also
Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906
(writ issued ordering decertification of class).) As such, it
is not clear that this bill in practice, would place parties on
equal footing or tip the balance in favor of defendants. It is
clear, however, that the bill would create a new ground for
appeal that is in direct violation of the final judgment rule.
As a matter of public policy, it is not clear whether this
exception to the final judgment rule would be warranted.
5. Other arguments in opposition
The Legal Aid Association of California also writes that
"[c]lass actions are intended to level the playing field between
consumers with small claims and large corporations that have
harmed them" such as "[w]hen Enron deceived its shareholders and
employees; when major companies discriminated against their
female employees and failed to pay them overtime; and when
tobacco companies deceptively marketed products they knew were
deadly . . . ." At the same time, "class action lawsuits
represent a tiny fraction of all civil filings in California
state courts, according to a study issued by the Judicial
SB 737 (Huff)
Page 12 of ?
Council of California." That report, LAAC comments, "concluded
that 'class action cases represent less than one-half of one
percent of all unlimited civil filings in the study courts
during the study period.'" (Citation omitted, emphasis added by
LAAC.)
6. Prior attempt to enact similar legislation failed passage
in this Committee
In 2001, SB 1133 (Poochigian, 2001) sought to require appellate
review of trial court orders granting or denying class action
certification, provided a notice of appeal is filed within 10
days after entry of the certification order. There too, the
proponents argued that this would bring California in line with
Federal Rule of Civil Procedure 23(f). That bill, for similar
reasons raised in the Comments above, failed passage in this
Committee.
7. This bill is double-referred to Appropriations Committee
Though this bill is not keyed fiscal, it will be referred to the
Appropriations Committee if approved by this Committee.
Support : California Allied Health Facilities; California
Apartment Association; California Building Industry Association;
California Chamber of Commerce; California Farm Bureau
Federation; California Hospital Association; California
Manufacturers and Technology Association; California Restaurant
Association; California Retailers Association; Californian's
Against Lawsuit Abuse; Civil Justice Association of California;
Culver City Chamber of Commerce; Cooperative of American
Physicians; Glendora Chamber of Commerce; Greater Conejo Valley
Chamber of Commerce; Orange Chamber of Commerce; National
Federation of Independent Business; Redondo Beach Chamber of
Commerce; Santa Clara Chamber of Commerce and
Convention-Visitors Bureau; Southwest California Legislative
Council; The Doctors Company
Opposition : California Employment Lawyers Association;
California Rural Legal Assistance Foundation; Consumer Attorneys
of California; Elder Law and Advocacy; Impact Fund; Legal Aid
Association of California
HISTORY
SB 737 (Huff)
Page 13 of ?
Source : Author
Related Pending Legislation : None Known
Prior Legislation :
AB 2043 (Wagner, 2012) was identical to this bill and failed
passage in Assembly Judiciary on a vote of 3-7.
AB 271 (Nestande, 2011) was identical to this bill in its
introduced form. That bill was later amended to require an
appeal as a matter of right from an order granting or denying
class certification, under specified law, so long as the
petition was made within 14 days. That bill failed passage in
the Assembly Judiciary Committee on a vote of 3-7.
**************