Yesterday, while perusing the Daily Journal's March 20, 2008 issue, I stumbled across a Forum column that addressed a topic near and dear to me: class action law in California. As an aside, that column did a fine job at evoking sufficient scorn to push me out onto the dance floor with the rest of the blawgers. Entitled "No Class," John H. Sullivan purports to explain why California has one of the five worst class action laws in the United States (evidently, the characteristic necessary to achieve that honor is the relative effectiveness of California's class action law). Some of that article's assertions are noteworthy for their disconnect with the facts:
Lest you think we are looking at only a few icons gone bad, note that when it comes to plaintiff-hiring, San Diego's Lerach claimed that "Everybody was paying plaintiffs ... it was an industry practice."
Mr. Sullivan would have one believe, on the strength of an assertion by the discredited Bill Lerach, that it is common practice for class action lawyers to pay to find plaintiffs. Setting aside the fact that the "industry" referred to by Mr. Lerach was probably the narrow field of shareholder derivative class actions, Mr. Sullivan's assertion about plaintiff-hiring is just that, an assertion, with little to back it up. Instead, this manipulation of the truth sets the tone for what is a political agenda posing as a reasoned editorial, and I'm offended by it. I've litigated class actions as an attorney since 1999, and for years before that as a clerk. I've never "hired" a plaintiff. I've never known another class action attorney that did so. I've personally enjoyed several white-knuckle rides as I've hoped that a plaintiff would step forward to spearhead a class when the initial lead plaintiff had second thoughts. Ad hominem commentary about all plaintiff-side class action practitioners has no place in a debate about how California implements its class action procedural mechanism.
[I]t's not surprising that the plaintiffs' class action lawyers, once they lock onto their defendant targets, aim to win every possible procedural advantage over their adversaries and fight on every front to preserve that edge.
And other lawyers don't? Recall the defense bar's victory when it successfully engineered the passage of Proposition 64, which extracted a few teeth from California's Unfair Competition Law (Bus. & Prof. Code § 17200, et seq.). If you take Mr. Sullivan literally, it is (1) bad to zealously represent your client, and (2) only plaintiff-side class action attorneys actually accomplish that goal.
In California, only the plaintiff has a right to appeal [a decision regarding] class certification. For plaintiffs' lawyers, this is a wonderful double standard.
Let's review how class actions work. When class certification is denied, the bulk of the claim is essentially extinguished. Absent class members must decide whether to file a tidal wave of individual suits. Allowing an appeal of the denial of certification is comparable to the right of appeal following the termination of a claim. A defendant, on the other hand, retains the right to challenge a claim on the merits after certification is granted. If the defendant prevails, that victory is enforceable against the entire class. If the defendant loses on the merits after certification, the defendant can then challenge both the certification order and the order on the merits on appeal. And if the defendant can't beat certification and doesn't prevail on the merits and can't convince a court of appeal that any error of significance was responsible for the result below, then the system operated correctly.
The alternative is what the Civil Justice Association of California wants: the immediate cessation of litigation in the trial court upon the issuance of an order granting or denying certification. And the class that may have been victimized by a defendant gets to sit and wait several more years for recompense.
California has the fifth-worst class action law in the country.
According to whom? The U.S. Chamber's Institute for Legal Reform. In other words, if it in any way facilitates the assertions of rights against defendant businesses, it must, by definition, be bad and need fixin'.
Senate Bill 1202, authored by Sen. Tom Harman, will help ensure that settlement funds are not misused. The bill allows judges to withhold part of the plaintiff's attorney's fees until class members have been contacted and have received their share of the settlement.
Why is it reasonable for attorneys in every other area of practice to expect payment for their services upon completion of the professional service? Certainly the attorneys representing the defendant in a class action will expect to be paid, even though they were unsuccessful in opposing certification or defending against the merits. SB 1202 is unnecessary and creates more problems than it solves. First, judges have wide latitude. Some already hold back a portion of fees as an incentive to wrap up a class action. Second, what happens when the class counsel can't locate every class member? Answer: class counsel will get to spend additional, uncompensated time, pleading with the trial court for their earned fees on the ground that they have made reasonable efforts to locate class members.
The 2005 federal Class Action Fairness Act has begun to shift national class actions into federal courts, but plaintiffs' lawyers have strong incentives to avoid the act if there is any way they can file and keep their case before California judges and juries.
Once again, more half-truths to create the impression of unfairness. What is true in California is true in most states: plaintiffs prefer to be in state court and defendants want to be in federal court. It is true for individual actions just like it is for class actions. That CAFA was not the panacea hoped for by the defense (business) bar does not call into question California's class action procedural device. And anyone that has some experience with CAFA removal knows that federal judges are doing everything in their power to find ways to justify remand to state courts.
Statistics also make great fodder for pressing an agenda. Consider the following passage in Mr. Sullivan's column:
The study of six major California counties, commissioned by the Civil Justice Association of California, detected 3,400 class actions filed in superior courts from July 2004 through June 2007. That's nearly five new class action suits every day the courthouses are open.
Viewed in isolation, those numbers sound shocking. What will our system of justice do under the weight of so many class actions? It likely won't notice them, as suggested by these additional statistics from the 2007 Court Statistics Report Introduction:
Civil filings totaled 1,418,490, and civil dispositions totaled 1,268,153 in FY 2005–2006.
One and one-half million civil filings in a one year period in California. Would our justice system be better off in California if any significant number of absent class members had to file individual suits to assert their rights?
Our unbalanced rules are sending a message every day that California is a dangerous place to hire employees and do business.
If a business abides by the law, it won't have anything of consequence to fear, at least from class actions. Our high state taxes send the message that businesses (and residents) aren't welcome. Our inflated real estate prices don't help. If the Civil Justice Association of California wants to do something good for business, it can start lobbying for budgetary responsibility in Sacramento, followed by tax rate reductions for all Californians.