BILL ANALYSIS
AB 298
Page 1
Date of Hearing: March 31, 2009
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 298 (Tran) - As Introduced: February 17, 2009
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, which is identical to AB 1905 (Adams) of 2008 which
this Committee rejected by a vote of 3-7, would establish a new
rule allowing a right of immediate appeal from procedural
determinations regarding class certification. Supporters,
representing large business interests, argue that current 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 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 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
that an appeal may be taken as of right from an order granting
class certification.
EXISTING LAW :
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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, which is identical to AB 1905 (Adams) of
2008 which this Committee rejected by a vote of 3-7, 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:
Assembly Bill 298 allows defendants the same right that
plaintiffs already have -- the ability to appeal a judge's
decision to "certify" a class of plaintiffs and allow a
lawsuit to proceed . . . The current process forces
defendants to settle a lawsuit, rather than proceed to
trial. But with this change, we will send out a signal to
companies looking to invest in California that the state is
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an attractive place to do business.
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 298
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
Texas (2003).
CJAC goes on to argue:
California ranked in the bottom six states in the nation
regarding the fairness of our class action laws, according
to the 2008 Institute for Legal Reform and the Harris Poll.
A recent study by our organization of the six largest
counties revealed that in those counties alone, more than
four class action lawsuits are filed every day that the
courthouse is open! These cases put a heavy burden on our
courts. This bill would help discourage those class action
suits that are without merit.
A group of large businesses and business associations joins CJAC
in support of the bill, stating their views in language
identical to CJAC's letter.
To bolster their claim of increasing frivolous class actions,
CJAC also cites a California Judicial Council report released in
March 2009. According to "Findings of the Study of California
Class Action Litigation, 2000-2006," total unlimited civil
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filings decreased 17.8% between 2000 and 2005 in comparison to a
63.3% increase in class action filings. However, the same
report dismisses this filing trend as not a reliable predictor
of class action behavior:
It is important to note that class action cases represent
less than one-half of one percent of all unlimited civil
filings in the courts study during the study period. Very
few class action cases are filed as compared to the entire
unlimited civil category and, as previously discussed,
discreet events can create an immediate filing effect in
the class action segment. For example, a natural disaster
may cause a significant increase in insurance-related class
action activity without affecting overall unlimited civil
filings. Similarly, a change in the law, as in the CAFA
[Class Action Fairness Act of 2005] example cited above,
may also have an effect on this litigation type that is not
seen elsewhere.
Moreover, supporters have not provided the Committee with any
information regarding their claims that unmeritorious class
action cases are filed in any significant numbers, or that our
judges routinely certify such cases erroneously.
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
reversal at any point in the life of the case. As supporters
concede, a class action defendant may however 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 recently 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
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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 [will] lead to a better developed set of
laws regarding class certification." The Committee encountered
a similar argument two years ago in rejecting AB 1505, which was
said to be necessary in order to develop and clarify class
action 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
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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
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
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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.
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
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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.
Prior Related Legislation. AB 1905 (Adams) of 2008 would have
allowed appeals from class certification decisions. That
measure failed passage in Committee. AB 1505 (Parra) of 2007
would have similarly allowed appeals from class certification
decisions, among other provisions. That measure died in
Committee for lack of a motion.
REGISTERED SUPPORT / OPPOSITION :
Support
California Apartment Association
California Association of Health Facilities
CalChamber
California Citizens Against Lawsuit Abuse
California Hospital Association
California Manufacturers & Technology Association
California Restaurant Association
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California Retailers Association
Civil Justice Association of California
Cooperative of American Physicians, Inc.
Opposition
American Civil Liberties Union of N. Cal, S. Cal., and San Diego
and Imperial Counties
Asian Pacific American Legal Center
California Employment Lawyers Association
California Labor Federation
California Rural Legal Assistance Foundation
California Women's Law Center
Center for Public Interest Law
Center on Race, Poverty & the Environment
Consumer Attorneys of California
Disability Rights Advocates
Equal Justice Society
Equal Rights Advocates
The Impact Fund
Lawyers' Committee for Civil Rights of the San Francisco Bay
Area
Legal Aid Society of San Francisco-Employment Law Center
Legal Services for Prisoners with Children
Mexican American Legal Defense and Educational Fund (MALDEF)
National Center for Youth Law
National Consumer Law Center
National Senior Citizens Law Center
Public Advocates
Public Counsel
Public Interest Law Project/California Affordable Housing Law
Project
Public Interest Law Firm of the Law Foundation of Silicon Valley
Western Center on Law and Poverty
Women's Employment Rights Clinic of Golden Gate University Law
School
Youth Law Center
Analysis Prepared by : Drew Liebert and Edward Ahn / JUD. /
(916) 319-2334