BILL ANALYSIS �
AB 2043
Page 1
Date of Hearing: April 24, 2012
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 2043 (Wagner) - As Introduced: February 23, 2012
SUBJECT : APPEALS: CLASS ACTION CERTIFICATION
KEY ISSUE : SHOULD CALIFORNIA DEPART FROM LONG-ESTABLISHED
PRACTICE BY ALLOWING APPEALS 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
In recent years the Committee has repeatedly reviewed and
rejected various business-sponsored proposals to depart from the
time-honored rule disallowing appeals from an order granting
class certification. Prior to the current measure, the
Committee last heard AB 271 (Nestande) of 2011 to allow an
appeal as of right. That measure was substantively identical to
proposals the Committee repeatedly heard and rejected in prior
years - including AB 298 (Tran) in 2009, which was preceded by
AB 1905 (Adams) of 2008, all 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 by business interests to
establish new rules against class certification. This measure
is slightly different however in that it would not make the
right to appeal automatic, but would establish specific criteria
by which, supporters presumably hope, defendants would be able
to persuade the court to grant the appeal. Business interests
frequently complain about class action cases brought against
them, although they benefit by the protection provided by
settlements and judgments in class cases and thus actively
attempt to keep individuals from separate suits, as demonstrated
by the recent reports regarding the efforts of Honda Motor Co.
to fight a Los Angeles County small claims case regarding hybrid
vehicles.
Business supporters of this measure 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
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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 against piecemeal
litigation and interlocutory motions, 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 :
1)Provides that a court of appeal may permit 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.
2)Provides that in permitting an appeal the court is to consider
- presumably among any other factors the court wishes to
consider - the following circumstances: Whether the trial
court's order denying class status would effectively end the
litigation and any reasonable possibility of prosecuting
individual claims; whether the trial court's order 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; whether
the order granting or denying class certification is clearly
erroneous; and whether any other special circumstances exist
that are sufficient to justify an interlocutory appeal
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
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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 similar to prior measures this Committee
has consistently declined to pass. 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:
This proposal would allow both sides in a class action
lawsuit the same right of appealing the all-important
decision of class certification.
California law regarding class certification is unfair and
one-sided. In class action lawsuits, the all-important
decision is that 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
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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
A coalition of business groups lead by the Civil Justice
Association of California (CJAC) and the California Chamber of
Commerce, writes in support:
Assembly Bill 2043 (Wagner) ? brings fairness to California
class actions by giving the defendant the right to appeal
the class certification decision.
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, because the cost of
going to trial is too great.
This bill would help California's economic recovery and
would bring the same balance to class action litigation
that exists in federal courts and many states. Several
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states already allow appeal of class certification
decisions, including South Carolina, Ohio, Missouri, Texas,
Kansas, Alabama, Georgia and Colorado.
Specifically, the rule proposed by this bill appears to be based
on the law of one state - Missouri - passed in 2004 with the
backing of the American Tort Reform Association. (See � 512.020
R.S.Mo, enacted by H.B. 1211 (2004).)
This Committee Has Consistently Declined To Pass Recent Similar
Prior Measures. AB 271 (Nestande) of 2011, as well as AB 298
(Tran) of 2009 and AB 1905 (Adams) of 2008 were similar measures
to allow an appeal from the certification of a class. These
measures have been consistently rejected by the Committee.
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
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
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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.
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,
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women, ethnic minorities, people with disabilities, older
persons, consumers, lesbians and gays, tenants, low wage workers
and the impoverished." This coalition comments:
The bill, if adopted, would create a new exception to the
"one final judgment rule" and make court orders granting
class certification immediately appealable for the first
time. This legislation would overturn decades of precedent
and severely undermine class action cases in California. ?
�W]e know from first-hand experience that this proposed law
would dramatically curtail rather than encourage the use of
class actions, provide a procedural windfall to defendants,
and clog the already overburdened judicial system with
piecemeal appeals of certification decisions.
Public policy favors use of the class action device.
Historically, an essential tool in our clients' struggles
for justice and equality is a viable class action
mechanism. California "has a public policy which
encourages the use of the class action device." Sav-On v.
Superior Court, 34 Cal. 4th 319, 340 (2004).
For almost half a century, California courts have held that
an order denying class certification is immediately
appealable as a matter of public policy, while an order
granting class certification, like most interlocutory
orders, is subject to the "one final judgment rule,"
reviewable only for abuse of discretion by petition for
writ of mandamus. Under the one final judgment rule, an
appeal may be taken only from the final judgment in an
entire action. See Code Civ. P. � 904.1; Morehart v.
County of Santa Barbara, 7 Cal. 4th 725, 743-44 (1994)
(holding that "an appeal cannot be taken from a judgment
that fails to complete the disposition of all the causes of
action between the parties;" "�a] petition for a writ, not
an appeal, is the authorized means for obtaining review of
judgments and orders that lack the finality required by
Code of Civil Procedure section 904.1, subdivision (a).).
The reasons for this procedure are both fair and sensible:
An order denying class certification "has virtually
demolished the action as a class action. If the propriety
of such disposition could not �immediately] be reviewed, it
can never be reviewed." Daar v. Yellow Cab Co., 67 Cal.2d
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695 at 699 (1967). Orders denying certification are
"tantamount to a dismissal of the action as to all members
of the class other than plaintiff." Daar, 67 Cal. 2d 695
at 699. An immediate appeal is allowed, as a matter of
state policy, because the order has the "'death knell'
effect of making further proceedings in the action
impractical." Stephen v. Enterprise Rent-A-Car, 235 Cal.
App. 3d 806, 811 (1991). The "death knell" effect
provides a compelling justification to depart from the one
final judgment rule where orders denying class
certification are concerned. Daar, 67 Cal.2d 695, 699.
No such compelling justification exists to depart from the
"one final judgment rule" where orders granting class
certification are involved. Unlike orders denying class
certification, orders granting class certification do not
act as a "death knell" for either side. They are not
decisions on the merits and may be modified or reconsidered
at later stages of the proceedings. Occidental Land, Inc.
v. Superior Court, 18 Cal.3d 355, 360 (1976). In this
respect, orders granting class certification are similar to
the overruling of a demurrer and are similarly subject to
the one final judgment rule. Safaie v. Jacuzzi Whirlpool
Bath, Inc. 192 Cal. App. 4th 1160 (2011).
The "one final judgment rule" is a "'a fundamental
principle of appellate practice' recognized and enforced in
this state since the 19th century." In re Baycol Cases I &
II, 51 Cal. 4th 751 at 756. The rule "reduces the ability
of litigants to harass opponents and to clog the courts
through a succession of costly and time-consuming appeals."
Flanagan v. United States, 465 U.S. 259, 264 (1984). It
also ensures a complete record for the reviewing court and
reduces trial court uncertainty and delay. Morehart, 7 Cal.
4th 725, 741 & fn. 9.
As the Supreme Court recently explained in In re Baycol
Cases I and II, 51 Cal. 4th 751 at 757, "the theory �behind
the rule] is that piecemeal disposition and multiple
appeals in a single action would be oppressive and costly,
and that a review of intermediate rulings should await the
final disposition of the case?.
The practical effect of AB 2043 would be to grant class
defendants a tactical trump card, enabling them to continue
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operating with impunity while an interlocutory appeal is
pending, reducing their risk of claims as class members
move away and cannot be located, become discouraged, or
pass away. In such cases, justice delayed would truly be
justice denied.
REGISTERED SUPPORT / OPPOSITION :
Support
California Chamber of Commerce (co-sponsor)
Civil Justice Association of California (co-sponsor)
Association of California Insurance Companies
California Association for Health Services at Home
California Building Industry Association
California Hospital Association
California Association of Health Facilities
California Farm Bureau Federation
California Fence Contractors Association
Los Angeles Chamber of Commerce
Vista Chamber of Commerce
Simi Valley Chamber of Commerce
Greater Stockton Chamber of Commerce
California Framing Contractors Association
Marine Builders Association
Engineering Contractors Association
Greater Fresno Chamber of Commerce
California Independent Grocers Association
California Grocers Association
California Apartment Association
Fullerton Chamber of Commerce
Lancaster Chamber of Commerce
Santa Clara Silicon Valley Central Chamber of Commerce &
Convention - Visitors Bureau
Orange Chamber of Commerce
Glendora Chamber of Commerce
Association of California Insurance Companies
United Chambers of Commerce San Fernando Valley & Region
California Car Retailers Association
Opposition
California Conference Board of Amalgamated Transit Union
California Conference of Machinists
California Employment Lawyers Association
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California Rural Legal Assistance Foundation
California Teamsters Public Affairs Council
Consumer Attorneys of California
Disability Rights California
Disability Rights Education and Defense Fund
Engineers and Scientists of CA
International Longshore and Warehouse Union
Jockeys' Guild
Legal Aid Association of California
Professional and Technical Engineers, Local 21
Public Counsel
Law Foundation of Silicon Valley
Impact Fund
UNITE HERE
United Food and Commercial Workers - Western States Conference
Utility Workers Union of America, Local 132
Western Center on Law and Poverty
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334