If you have insomnia or just want to test the lower bounds of your will to live, you can view the text of the proposed rules from the Consumer Financial Protection Bureau (along with about 350 pages of commentary before you actually get to the proposed rules - it's a lot like the longest law review article you've ever read).
Nothing says Cinco de Mayo like arbitration. I have no idea what that means, so don't ask. Anyhow, the Consumer Financial Protection Bureau will propose a regulation today that will ban contract terms that prohibit consumers from filing class action lawsuits. And the Chamber of Commerce is none to happy about this development. You can read the details at politico.com, which posted an opinion piece by Lisa A.Rickard, the president of the U.S. Chamber of Commerce's Institute for Legal Reform and David Hirschmann, the president and CEO of the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness. If you don't have time to read the article, allow me to paraphrase: "Damn trial lawyers! Get off my lawn!"
Every now and then I look at a new appellate decision and experience the shock of reading something that I would have guessed was certain to never come up before seeing it in print. So I was helping my daughter study for a history test the other day. Her fifth grade class was in a chapter about American industrialization and the expansion of the United States to the Pacific (manifest destiny and all that). The war with Mexico received a mention in her study guide, along with a treaty entered into with Mexico at the end of the war, the Treaty of Guadalupe Hidalgo. Trick question: what are the chances that an appellate decision today would rest, in part, on the need to examine the Treaty of Guadalupe Hidalgo? You should say "zero," but, since I asked, you know that's not the answer. The correct answer is, ding ding ding, 100%.
In Friends of Martin's Beach v. Martin's Beach 1 LLC (April 27, 2016) the Court of Appeal (First Appellate District, Division Two) considered issues arising in a dispute between private land owners and the public over an area of inland dry sand at a popular beach. Here is the paragraph that resulted in my double-take:
The case presents a number of intriguing issues, among them the meaning of Article X, section 4 of the California Constitution and its application, if any, to lands for which title is derived from a provisional Mexican land grant confirmed by a federal patent issued in the 19th century. These issues require consideration of a federal statute known as the Act of 1851 and the Treaty of Guadalupe Hidalgo, which that Act implemented. The case also concerns the common law theory of dedication of land to public use and what facts suffice to establish the elements of such a claim. Creating yet additional interest, the State of California and its agencies contend in an amicus brief that they were indispensable parties to this action because it involves California tidelands and that the judgment rendered without them is void.
Slip op., at 1-2. As an aside, if these issues also sound "intriguing" to you, you are officially a law nerd.
Today's lesson: Never say never.
Normal people see laws as barriers. Lawyers see laws as an agility course. After Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011) and Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), aff’d, 136 S. Ct. 663 (2016), you'd have to forgive ordinary citizens for thinking that the question of whether you can moot a class action by offering up full individual relief to the putative class representative was pretty well settled. But where some see finality, Allstate insurance saw...opportunity. Specifically, Allstate looked to Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016) for the secret to mooting class representative claims. In Chen v. Allstate Inc. Co. (9th Cir. Apr. 12, 2016), the Ninth Circuit sent the wily insurance coyote back to the drawing board.
The plaintiffs filed a class action complaint against Allstate, alleging he received unsolicited automated telephone calls to his cellphone, in violation of the Telephone Consumer Protection Act (TCPA). Before a motion for class certification had been made, Allstate made an offer of judgment to the plaintiffs under Rule 68 of the F.R.C.P., depositing $20,000 in full settlement of individual monetary claims in an escrow account “pending entry of a final District Court order or judgment directing the escrow agent to pay the tendered funds to Pacleb, requiring Allstate to stop sending non-emergency telephone calls and short message service messages to Pacleb in the future and dismissing this action as moot.” Slip op. at 4, 7. Allstate extended the Rule 68 offer beyond 14 days and then moved for entry of judgment and dismissal. One plaintiff accepted the offer while the motion was pending.
The district court denied the motion, holding that, under Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011), the plaintiff's class allegations presented a justiciable controversy and rejected the notion that Pitts was no longer good law. The district court later certified the issue for interlocutory appeal.
On appeal, Allstate asked the Court to take up the hypothetical issue raised in Campbell-Ewald, which was whether the deposit of the full amount of a plaintiff's individual claim in an account payable to the plaintiff, followed by entry of judgment for the plaintiff in that amount, is sufficient to moot the case. Allstate argued that the judgment it consented to would offer complete relief, the district should be compelled to enter judgment on those terms, mooting the plaintiff's individual claims, and the remaining class allegations would then be insufficient to preserve a live controversy. While the Court agreed with the first contention, it rejected the second and third contentions.
The Court began by reviewing the relief that Allstate had consented to in the district court. Considering both the monetary and injunctive aspects of that relief, the Court found that complete individual relief was offered. Slip op., at 12-14.
Next, the Court considered whether the decision in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) vitiated Pitts. The Court concluded that it did not:
In Gomez, 768 F.3d at 875–76, however, we squarely rejected that very argument. Because Genesis Healthcare concerned collective actions brought under the Fair Labor Standards Act (FLSA) rather than class actions under Federal Rule of Civil Procedure 23, Gomez held Pitts was not clearly irreconcilable with Genesis Healthcare. See id. Although Genesis Healthcare “undermined some of the reasoning employed in Pitts . . . , courts have universally concluded that the Genesis discussion does not apply to class actions.” Id. at 875. “In fact, Genesis itself emphasizes that ‘Rule 23 [class] actions are fundamentally different from collective actions under the FLSA.’” Id. at 875–76 (alteration in original) (quoting Genesis Healthcare, 133 S. Ct. at 1529).
Slip op., at 16. The Court then held that it was bound by Gomez, which was decided en banc.
Next, the Court went further, holding that even if Pitts were not controlling, the Court would reject an attempt to moot the action prior to a fair opportunity to move for class certification. The Court noted that placing funds in an escrow account was not the same as the actual receipt of all relief by a plaintiff. This will likely just bait the next enterprising defendant into actually tendering the funds into an account in the name of the plaintiff to see if the outcome is any different (remember, there are no obstacles, only new paths).
Finally, the Court considered whether to order the district court to enter judgment. The Court concluded that doing so would be inconsistent with Campbell-Ewald, which affords a putative class representative with a live claim a fair opportunity to show certification is warranted:
Even if that is true, however, Campbell-Ewald clearly suggests it would be inappropriate to enter judgment under these circumstances. As Campbell-Ewald explained, “[w]hile a class lacks independent status until certified, a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” Campbell-Ewald, 136 S. Ct. at 672 (emphasis added) (citation omitted) (citing Sosna, 419 U.S. at 399). Accordingly, when a defendant consents to judgment affording complete relief on a named plaintiff’s individual claims before certification, but fails to offer complete relief on the plaintiff’s class claims, a court should not enter judgment on the individual claims, over the plaintiff’s objection, before the plaintiff has had a fair opportunity to move for class certification.
Slip op., at 22-23. The Court noted the long-recognized principle that class relief is the only feasible relief in many circumstances and concluded that "a district court should decline to enter a judgment affording complete relief on a named plaintiff’s individual claims, over the plaintiff’s objection, before the plaintiff has had a fair opportunity to move for class certification." Slip op., at 26.
The Court affirmed the district court.
If you anticipate that the Supreme Court will take up the first case to test its Genesis Healthcare hypothetical, don't hold your breath. If anything, the Supreme Court would want to see more than one Circuit tackle the issue and see if a significant split develops before wading back into these waters. That doesn't mean that enterprising defendants won't look for another way to moot class claims before certification.
I can still remember when the first suitable seating cases were filed. I reckon' it happened right about the time that the wage & hour landscape became unsettled in the meal period and rest break areas, class certification decisions were all over the place prior to Brinker, and PAGA claims were getting a long look as an alternative and supplemental approach to class claims. The suitable seating cases went through an initial wave of appellate court analysis, but, without California Supreme Court guidance on the issue, federal courts were left to speculate about what the California Supreme Court would say on the matter. The Ninth Circuit addressed that lack of clarity by certifying questions to the California Supreme Court. In Kilby v. CVS Pharmacy, Inc. (April 4, 2016), the California Supreme Court answered those questions.
The questions, as posed by the Ninth Circuit were:
(1) Does the phrase “nature of the work” refer to individual tasks performed throughout the workday, or to the entire range of an employee’s duties performed during a given day or shift?
(2) When determining whether the nature of the work “reasonably permits” use of a seat, what factors should courts consider? Specifically, are an employer’s business judgment, the physical layout of the workplace, and the characteristics of a specific employee relevant factors?
(3) If an employer has not provided any seat, must a plaintiff prove a suitable seat is available in order to show the employer has violated the seating provision?
Slip op., at 2. The short answers (which were followed by an extensive discussion) are:
(1) The “nature of the work” refers to an employee’s tasks performed at a given location for which a right to a suitable seat is claimed, rather than a “holistic” consideration of the entire range of an employee’s duties anywhere on the jobsite during a complete shift. If the tasks being performed at a given location reasonably permit sitting, and provision of a seat would not interfere with performance of any other tasks that may require standing, a seat is called for.
(2) Whether the nature of the work reasonably permits sitting is a question to be determined objectively based on the totality of the circumstances. An employer’s business judgment and the physical layout of the workplace are relevant but not dispositive factors. The inquiry focuses on the nature of the work, not an individual employee’s characteristics.
(3) The nature of the work aside, if an employer argues there is no suitable seat available, the burden is on the employer to prove unavailability.
Slip op., at 2. Before looking at any of the more interesting parts of the Court's discussion, we now know with certainty that suitable seating is a task-based, not a position-based, requirement. And I immediately concluded after reading this opinion that I wanted to start a business that specializes in making narrow and light barstool-style swivel chairs for cashiers in the retail and grocery sectors. That's where the real money is going to be found.
Anyhow, chair empire plans aside, the Court began by explaining the history of the IWC and the suitable seating provision in the various wage orders. Next, the Court looked at pronouncements on the most recent standard by the IWC and DLSE. For instance, the Court took note of a DLSE amicus curiae brief filed in a federal action:
[T]he DLSE filed an amicus curiae brief in Garvey v. Kmart Corp. (N.D.Cal. Dec. 18, 2012, No. CV 11-02575 WHA) 2012 WL 6599534 (Garvey), a federal class action suit claiming Kmart cashiers were entitled, under section 14(A), to seats while working. The DLSE emphasized reasonableness as the guiding standard: “If called upon to enforce Section 14, DLSE would apply a reasonableness standard that would fully consider all existing conditions regarding the nature of the work performed by employees. Upon an examination of the nature of the work, DLSE would determine whether the work reasonably permits the use of seats for working employees under subsection (A) of Section 14, and whether proximate seating has been provided for employees not engaged in active duties when such employees are otherwise required to stand under subsection (B).”
Slip op., at 11. After reviewing the DLSE and IWC commentary on the suitable seating requirement, the Court then set about the task of examining the IWC wage order language. After reviewing the language, the Court rejected the defendants' position that jobs should be classified as "sitting" jobs or "standing" jobs:
Defendants’ argument sweeps too broadly and is inconsistent with the purpose of the seating requirement. As discussed, the IWC’s wage orders were promulgated to provide a minimum level of protection for workers. The requirement’s history reflects a determination by the IWC that “humane consideration for the welfare of employees requires that they be allowed to sit at their work or between operations when it is feasible for them to do so.” (IWC, Statement of Findings by the Industrial Welfare Commission of the State of Cal. in Connection with the Revision in 1976 of its Orders Regulating Wages, Hours, and Working Conditions (Aug. 13, 1976) p. 15.) Defendants’ proposed consideration of all tasks included in an employee’s job description ignores the duration of those tasks, as well as where, and how often, they are performed. This all-or-nothing approach could deprive an employee of a seat because most of his job duties are classified as “standing” tasks, even though the duration, frequency, and location of the employee’s most common tasks would make seated work feasible while performing them. There is no principled reason for denying an employee a seat when he spends a substantial part of his workday at a single location performing tasks that could reasonably be done while seated, merely because his job duties include other tasks that must be done standing.
Slip op., at 14. The Court expressed concern that the all-or-nothing approach could result in a situation where two employees performing the same task could have different seating rights, based on the overall classification of their job. Yet, the Court also found the plaintiffs' position too narrow, focusing on a single task to determine if that one task could be performed seated. The Court found that focusing on the work done and the tasks performed in a location alleviated the problems created by both the defendants' approach and the plaintiffs' approach.
The Court then examined the "reasonably permits" portion of the seating requirements. The Court found that the employer's assessment of overall job performance (its business judgment) was a factor that could be considered, as was the physical layout of the workplace . These factors, however, must be considered "in light of the overall aims of the regulatory scheme, which has always been employee protection." The Court disagreed that differences between employees was a factor, since the regulation focused on the "work," and not the "worker."
Finally, the Court swiftly rejected the idea that a plaintiff must prove that a suitable seat is available, after showing that the nature of the work would reasonably permit the use of a seat.
The Court concluded by saying, "Sit on that." No, not really. But the Court was unanimous.
While getting a class certified is often a serious fight, defeating class allegations at the demurrer stage is generally rare. But never say never. In Schermer v. Tatum (March 18, 2016), the Fourth Appellate District, Division One, affirmed a trial court ruling sustaining a demurrer to class allegations in the plaintiffs' second amended complaint (SAC). The plaintiffs brought a class action on behalf of residents who live in the 18 mobilehome parks. The plaintiffs alleged they were subjected to uniform unconscionable lease agreements and leasing practices by a collection of related defendants. The SAC involved 18 mobilehome parks allegedly owned and/or operated by two defendants (Tatums and Kaplan), and were managed through defendant Mobile Community Management Company (MCM). The plaintiffs also named as defendants the 18 "single-purpose" business entities that are each described as the owners of one of the mobilehome park in California.
The Court of Appeal began by summarizing the first amended complaint, the demurrer hearing related to it, and the SAC. And that summary is all you need to read to know where things are headed. The Court described the "highlights" of the FAC as follows:
In the FAC, plaintiffs again alleged defendants Tatum and Kaplan, through MCM, engaged in unlawful conduct at each of the 18 mobilehome parks. Specifically, they alleged defendants "charg[ed] excessive rent, pursu[ed] arbitrary evictions, and implement[ed] unreasonable polices." Plaintiffs further alleged in their FAC that defendants Tatum and Kaplan took "advantage of vulnerable prospective and current residents" including "non-[E]nglish speaking and elderly residents" who, plaintiffs claimed, were "especially susceptible" to defendants' unlawful business practices. Plaintiffs alleged defendants "most egregious practice" was the use of a "one-sided, standardized lease" agreement. Plaintiffs provided 32 examples of lease clauses that allegedly violated California's Mobilehome Residency Law (Civ. Code, § 798 et seq.; MRL).
Plaintiffs' FAC also set forth about 11 "factors" that plaintiffs alleged showed procedural unconscionability between plaintiffs and the putative class, on the one hand, and defendants, on the other. Such factors included among others "residents' poor socio-economic background" and defendants' "knowledge of residents' vulnerability to oppression." Plaintiffs also listed about 17 examples of substantive unconscionability in their FAC in connection with defendants' use of the standardized lease agreement in the 18 mobilehome parks. As before, plaintiffs' class action allegations included any person who had an ownership interest in a mobilehome in any of the 18 parks, and a senior citizen and non-English-speaking subclass.
Slip op., at 3-4. Then, discussing the hearing on the demurrer to the FAC, the Court said, "At the demurrer hearing, plaintiffs' counsel agreed with the court that plaintiffs' FAC was 'a mess' and counsel admitted they 'did a horrible job in succinctly and systematically putting forth facts that show what the [FAC] -- what the case is about and how it shows a pattern of conduct that is deserving of being treated in a class action.' " Slip op., at 4. Not looking good.
Describing the subsequently issued Order on the demurrer to the FAC, the Court set forth key parts of the trial court's ruling:
"Plaintiffs allege multiple causes of action, all of which related in some way to the Lease Agreements utilized at the Defendants['] parks. Based upon the allegations in the [FAC], it appears that some of the claims involved the alleged unconscionability of the contracts themselves, while others involve each Defendant's alleged actions in executing or enforcing the individual contracts as to individual Plaintiffs. [¶] The Court finds that multiple factual allegations predominate. Plaintiffs['] measure of damages will be unique to each park. The proposed class does not all reside at the same location or under the same circumstances. Each putative class member is/was a resident at one of the eighteen separate mobilehome parks located throughout the State of California, giving rise to individualized factual questions related to causation, liability, and damages.
"Example of the individualized issues include the remedy (determining excess rents paid at each space requires a factual showing of fair market values for rents in a particular area [at] a particular time and park-by[-]park appraisal). Further, there appear to be multiple lease agreements. Although Plaintiffs allege Defendants used a 'standardized' Lease Agreement, they attach at least five different variations of the Lease Agreement and/or Amendments to the Lease Agreement. (See Exhibits 'A,' 'B,' 'C,' 'D,' and 'E,' attached to the [FAC].)
Slip op., at 5. The trial court went on to identify additional issues, including the fact that many class members would not be able to state certain claims if they had not attempted to sell their homes, and there were no putative class representative plaintiffs for many of the mobilehome parks.
The SAC filed by the plaintiffs attempted to address many of the trial court's concerns, but a number of its allegations were found by the trial court to be conclusory assertions about defendants, and not allegations of fact. The SAC did not address damage issues that would arise, which included the fact that several of the mobilehome parks were in cities with their own rent control ordinances. The trial court was particularly concerned by the fact that each agreement at each park with each potential class member was individually negotiated and by the fact that a unique damage calculation would be required for each park and each person at each park. Moreover, the trial court took notice of the fact that many individuals were involved in their own litigation with their own park.
After discussing the procedural background, the Court made sure to note that it is undisputed that class allegations can be decided on demurrer:
It is beyond dispute that trial courts are permitted to decide the issue of class certification on demurrer. (Tucker, supra, 208 Cal.App.4th at p. 212; see Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 440 [noting the issue is "settled" that courts are authorized to "weed out" legally meritless class action suits prior to certification by demurrer or pretrial motion].) A trial court may sustain a demurrer to class action allegations where " 'it concludes as a matter of law that, assuming the truth of the factual allegations in the complaint, there is no reasonable possibility that the requirements for class certification will be satisfied. [Citations.]' [Citations.]" (Tucker, at p. 211, italics added; see Canon U.S.A., Inc. v. Superior Court (1998) 68 Cal.App.4th 1, 5 [noting that when the "invalidity of the class allegations is revealed on the face of the complaint, and/or by matters subject to judicial notice, the class issue may be properly disposed of by demurrer or motion to strike," and noting that "[i]n such circumstances, there is no need to incur the expense of an evidentiary hearing or class-related discovery"].)
Slip op., at 14. Much of the discussion that follows is unsurprising, given the discussion of the trial court's analysis. The Court did wade into the murky waters of attempting to categorize an allegation as either an "ultimate fact" or a "conclusion":
We conclude plaintiffs' allegations in their SAC—which were noticeably absent from their original complaint—that defendants implemented a uniform policy and procedure in each and every lease transaction with plaintiffs and the putative class members over a four-year period (i.e., the proposed class period), in each of the 18 mobilehome parks owned and/or operated by Tatum and Kaplan, are not properly admitted for purposes of demurrer because such allegations are not ultimate facts but rather merely contentions and/or improper factual conclusions.
Slip op., at 17-18. In my experience, this is very much an eye-of-the-beholder call that deserves a clarifying opinion with more objective guidance as to how to distinguish between the two.
In any event, the Court agreed with the trial court's assessments, finding, in particular, that the individual nature of the transactions was such that each course of dealing is unique, and damages, because of different circumstances, park locations, and local ordinances, are also unique to each potential class member. The Court declined to grant leave to amend to the plaintiffs, agreeing with the trial court that the problems were insurmountable. The lesson here is that overreach can be fatal. It might have been more workable to describe uniform leasing practices at one mobilehome park and seek class relief for the aspects of the transaction that were common to all of the residents, while, at the same time, addressing how damages will be calculated and distributed.
The "separate location" argument seems better suited to this sort of consumer circumstance than it is in the wage & hour context, where defendants nevertheless try the "each of our stores is unique and different" argument, as if they have no uniform policies regulating employees and allow each store to run their own affairs like the wild West. Hey, at least this Court cited Brinker (but it felt like an ironic cite to me).
We all need a bit of levity on Friday, so take a moment and enjoy one paragraph from City of Palm Springs v. Luna Crest (March 17, 2016), a recent opinion from the Fourth Appellate District, Division Two, that captures the humor sometimes hidden in the law.
Luna Crest, Inc. opened a medical marijuana dispensary in the City of Palm Springs without obtaining a permit to test whether the Palm Springs ordinance requiring such a business to have a permit was invalid. Luna Crest sought an injunction against further enforcement, claiming that federal drug laws preempt the City’s ordinance. The Court observed:
To be sure, as the City points out, there is a certain irony, if not hypocrisy, in Luna’s invocation of federal drug laws as a basis for invalidating the City’s permitting requirements, given Luna’s intention to operate a medical marijuana dispensary in violation of those very federal drug laws. The City cites no authority, however, for the proposition that irony or hypocrisy alone may vitiate standing, and we are aware of none. We turn, therefore, to the merits of Luna’s claims.
Slip op., at 5. Never let someone challenge your standing just because of the irony or hypocrisy of your position. Never.
Have a great weekend, and, as they say, smoke 'em if you got 'em.
I frequently contemplate things without any real expectation that I will get an answer. One thing I wonder about in the practice of law is whether California Courts of Appeal develop cultures as an institution (i.e., whether each Appellate District has a significant impact on its constituent members over time), or whether the tendencies are happenstance of the appointments (i.e., whether the tendencies of each Appellate District -- and Division therein -- is just the sum of random events like the preferences of the appointing administration and the timing of open seats). An application of this pondering occurred to me mere moments ago, when I read Hernandez v. Restoration Hardware, Inc. (March 14, 2016), in which the Fourth Appellate District, Division One, held that named party status is required to appeal a class action judgment. Jinkies!
In Hernandez v. Restoration Hardware, a bench trial resulted in a class recovery of up to $36,412,350. The class representatives requested fees of $9,103,087.50 (25 percent of the total maximum fund). Francesca Muller, a class members, requested that the court order notice of the fee motion be sent to all class members. The court denied the request, awarded the fees, and entered judgment. Muller filed a notice of appeal. Class representative Hernandez substantively opposed the appeal but argued that Muller lacked standing to appeal at all. The Court of Appeal addressed the threshold issue of whether Muller had standing to appeal.
Recognizing that only an aggrieved party has standing to appeal, the Court began by recognizing the distinction between names class representatives and absent class members:
Indeed, "[t]he structure of the class action does not allow absent class members to become active parties, since 'to the extent the absent class members are compelled to participate in the trial of the lawsuit, the effectiveness of the class action device is destroyed.' " (Ibid., fn. omitted.) Although unnamed class members may be deemed "parties" for the limited purposes of discovery (Southern California Edison Co. v. Superior Court (1972) 7 Cal.3d 832, 840), unnamed class members are not otherwise considered "parties" to the litigation. (Cf. National Solar Equipment Owners' Assn. v. Grumman Corp. (1991) 235 Cal.App.3d 1273, 1282 ["unnamed class members do not 'stand on the same footing as named parties' "].)
Slip op., at 9. The Court then began its analysis by considering Eggert v. Pac. States S. & L. Co., 20 Cal. 2d 199 (1942), which considered the same issues presented here. Concluding that Eggert was factually almost identical, theCourt concluded that Eggert required dismissal of the action:
Eggert appears to be on "all fours" with the present action: both involved a class action; both involved a matter litigated to judgment; both involved a challenge to the postjudgment attorney fee award to the counsel for the named plaintiff; both involved appellants who were members of the class, but not named parties, and who had appeared through counsel to object to the attorney fee award; and both involved members who took no steps to be added as named plaintiffs. Accordingly, under Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, we must adhere to Eggert and dismiss the appeal.
Slip op., at 11. The Court then commented on several decisions from Courts of Appeal that permitted appeals by non-party class members:
Muller also cites several cases in which California appellate courts stated a class member who was not a party to the action obtains appellate standing to challenge the judgment merely by interposing an objection to the judgment below. However, neither of the cases cited by Muller, Consumer Cause, Inc. v. Mrs. Gooch's Natural Food Markets, Inc. (2005) 127 Cal.App.4th 387 and Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, made any effort to reconcile their conclusions with Eggert, and instead rooted their conclusions in the analysis contained in Trotsky v. Los Angeles Fed. Sav. & Loan Assn. (1975) 48 Cal.App.3d 134 (Trotsky). (See Wershba, at pp. 235-236 [citing only Trotsky on issue of standing]; Consumer Cause, at pp. 395-396 [citing Trotsky and Wershba on issue of standing].) Accordingly, we examine Trotsky.
Slip op., at 12. That examination of Trotsky was not flattering, and the Court quickly concluded that Trotsky had failed to consider the "party" element of section 902:
Trotsky focused primarily on whether an objector to a settlement was "aggrieved" within the meaning of Code of Civil Procedure section 902, concluding objectors were aggrieved because " '[i]t is possible that, within a class, a group of small claimants might be unfavorably treated by the terms of a proposed settlement. For them, the option to join is in reality no option at all,' " and reasoning that because those claimants might be forced to choose between "equally unpalatable alternatives"—of accepting either nothing or an unfair settlement—those parties were sufficiently aggrieved for purposes of the right to appeal. (Trotsky, supra, 48 Cal.App.3d at pp. 139-140.) However, Trotsky did not examine the distinct "party" element of Code of Civil Procedure section 902, nor make any effort to reconcile its conclusion with Eggert's holding that unnamed class members whose only appearance was to object to the attorneys' fees had no standing to appeal because they were not "parties" and did not avail themselves of the "ample opportunity . . . to become parties of record . . . ." (Eggert, supra, 20 Cal.2d at p. 201.) Because Eggert teaches the "party" requirement of Code of Civil Procedure section 902 is not met merely because the "aggrieved" requirement of section 902 might also be satisfied as to a nonparty class member, we conclude Trotsky's analysis of standing is flawed and that Trotsky and its progeny (which includes both Consumer Cause, Inc. v. Mrs. Gooch's Natural Food Markets, Inc., supra, 127 Cal.App.4th 387 and Wershba v. Apple Computer, Inc., supra, 91 Cal.App.4th 224) should not be followed.
Slip op., at 13-14. Well now. That's....interesting. The Court went on to point out that federal courts handle this differently, but California courts aren't federal courts, and there is no requirement that California follow the federal approach. You have to at least respect the cut of this Court's jib to state that they are bound to follow a factually similar 1942 decision and reject much more recent decisions for failing to address the California Supreme Court's Eggert decision. That said, of the many things I ponder, one is whether this case case more than 90 days of shelf life.
You thought you could figure this one out all by yourself, right? You can read Code of Civil Procedure section 1032. It's written in English (sort of). You know what a "prevailing party" is without some Supreme Court telling you what it means. But this is law, and when we are talking about the law, you can guarantee that somebody figures out how to find that exception that threads the needle. Thus, we have DeSaulles v. Community Hospital of the Monterey Peninsula (March 10, 2016), in which the Supreme Court had to determine whether a plaintiff who voluntarily dismisses an action after obtaining a monetary settlement on a few of the claims remaining in the case is the "prevailing party" for purposes of section 1032.
The Court of Appeal held that the plaintiff was a prevailing party because he received a net monetary recovery as consideration for his dismissal. In so holding, the Court of Appeal disapproved of Chinn v. KMR Property Management, 166 Cal. App. 4th 17 (2008), which held that settlements were not net monetary recoveries. The Supreme Court affirmed. In affirming, the Supreme Court also did everyone a favor by saying that the presumption of section 1032 could be altered by agreement of the settling parties. Regardless, it's a good thing the Supreme Court held as it did; given the sorry state of our court funding, we don't need more issues complicating settlement discussions.
The doctrine of continuous accrual serves to prevent the inequitable circumstance where one act of malfeasance is used to create immunity in perpetuity for even very recent bad acts. In Gilkyson, et al. v. Disney Enterprises, Inc., et al., the Court of Appeal (Second Appellate District, Division Seven) found that the doctrine of continuous accrual should apply to a royalty contract for song reproduction rights.
Terry Gilkyson, a successful songwriter in the 1950’s and 1960’s. He wrote a number of songs for the animated film The Jungle Book, one of which was used in the movie. Gilkyson signed single-song contracts with Disney’s predecessor-in-interest, Walt Disney Productions, that obligated it to pay Gilkyson specified royalties for sales of sheet music and for licensing or other disposition of the mechanical reproduction rights. Disney paid Gilkyson over the years and, after his death in 1999, his heirs royalties for sheet music and for audio reproductions of Gilkyson’s songs (vinyl records, compact discs (CDs) and digital downloads). However, Disney did not pay, and has never paid, Gilkyson or his heirs royalties for the use of his songs in any audiovisual medium, including digital video disc recordings (DVDs). The heirs of Gilkyson sued Disney Enterprises, Inc. and other entities, alleging Disney had breached its contractual obligation to pay royalties in connection with the licensing or other disposition of the mechanical reproduction rights to Gilkyson’s songs. The trial court dismissed the lawsuit after sustaining Disney’s demurrer to the first amended complaint without leave to amend, ruling the Gilkyson heirs’ causes of action were barred by the applicable statutes of limitations.
The Court of Appeal first explained the continuous accrual doctrine as an exception to statutes of limitation:
Under the continuous accrual doctrine each breach of a recurring obligation is independently actionable. (Aryeh, supra, 55 Cal.4th at p. 1199 [“‘[w]hen an obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period’”]; see ibid. [“[b]ecause each new breach of such an obligation provides all the elements of a claim—wrongdoing, harm, and causation [citations]—each may be treated as an independently actionable wrong with its own time limit for recovery”]; Howard Jarvis, supra, 25 Cal.4th at p. 809 [same]; Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004) 116 Cal.App.4th 1375, 1388 (Armstrong) [continuous accrual applies to contract where performance is severed into intervals, such as installment contracts, leases with periodic rental payments and periodic pension payments]; Wells Fargo Bank v. Bank of America (1995) 32 Cal.App.4th 424, 439, fn. 7 [“a new breach occurs each month the bank persists in its refusal to pay [monthly] rent at the gold clause rate”].) The effect of the doctrine is that “a suit for relief may be partially time-barred as to older events but timely as to those [acts of wrongdoing occurring] within the applicable limitations period.” (Aryeh, at p. 1192; accord, Howard Jarvis, at p. 809.) In this way, the doctrine represents an equitable “response to the inequities that would arise if the expiration of the limitations period following a first breach of duty or instance of misconduct were treated as sufficient to bar suit for any subsequent breach of misconduct; [absent the doctrine,] parties engaged in long-standing misfeasance would thereby obtain immunity in perpetuity from suit even for recent and ongoing misfeasance. In addition, where misfeasance is ongoing, a defendant’s claim to repose, the principal justification underlying the limitations defense, is vitiated.” (Aryeh, at p. 1198.)
Slip op., at 6-7. The Court then concluded that the continuous accrual doctrine applied to the contractual obligation to pay periodic royalties under a licensing arrangement:
Here, as in Aryeh, Disney’s obligation to pay royalties based on its licensing or other disposition of the mechanical reproduction rights to Gilkyson’s songs was unquestionably a continuing one. As alleged in the first amended complaint (consistent with the original complaint), the parties agreed in paragraph 6 of the single-song agreements that Gilkyson “will receive as a royalty ‘[an] amount of money equal to Fifty Percent (50%) of the net amount received by our music publisher on account of licensing or other disposition of mechanical reproduction rights in and to material so written by you.’” The first amended complaint also alleged Disney had issued quarterly royalty statements to Gilkyson and, after his death, to his heirs. The continuing nature of the obligation to pay periodic royalties renders each breach of that obligation separately actionable. (Aryeh, supra, 55 Cal.4th at p. 1201; see Armstrong, supra, 116 Cal.App.4th at p. 1392 [contract to provide periodic oil and gas royalties was severable, with each failure of the continuing obligation to pay a proper royalty separately actionable and subject to its own limitation period].) The result is that, while portions of the Gilkyson heirs’ contract claim are undoubtedly time-barred, the action is timely as to those breaches occurring within the four-year limitations period preceding the filing of the original lawsuit.
Slip op., at 8-9. The Court noted that it was not resolving the substantive issue, raised by Disney, of whether use of songs in DVDs and other audiovisual media was governed by the same portion of the agreement that governed mechanical reproduction.