Hewlett-Packard Co. v. Superior Court discusses important distinction between certification issues and merits issues

Greatsealcal100Hewlett-Packard makes very nice laser printers.  And really important class action appellate decisions.  In fact, I wanted to direct attention to this decision when it was released on Friday because it confronts a point of class certification jurisprudence that I have long thought was overlooked: what should the trial court do in the event that a possible defense to a claim exists that could defeat some or all of the class claims?  The Court of Appeal answered this question (in my opinion, correctly) with a resounding "Nothing."

In Hewlett-Packard Co. v. Superior Court (September 26, 2008), the Court of Appeal (Sixth Appellate District) reviewed a petition for a peremptory writ of mandate after a Trial Court refused to decertify a class on the ground that the decision in Daugherty v. American Honda Co., Inc. (2006) 144 Cal.App.4th 824 provided a partial or complete defense to claims, destroying predominance.  Summarizing the core allegation of the complaint, the Court said:

The complaint alleged that HP had marketed and distributed Pavilion Series Notebook computers, knowing that the computers had defective inverters that could potentially cause dim displays, but without disclosing such defects to consumers; the complaint asserted causes of action for violation of the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), violation of the Consumer Legal Remedies Act (Civ.Code, § 1750 et seq.), breach of express warranty and “Unjust Enrichment.”

(Slip op., at p. 2.)

The decision includes some discussion of warranty claims.  That's not the good part.  The important aspect of Hewlett-Packard Co. is its concise explanation about the demarcation between merits issues and certification issues:

The crux of plaintiffs’ claim is that certain HP notebook computers contained types of inverters that HP knew would likely fail and cause the screens to dim and darken at some time before the end of the notebook’s “useful life.” HP asserts that under Daugherty, this claim would not establish its liability. Daugherty holds there can be no claim for breach of express warranty or UCL violations arising from proof that the manufacturer knew at the time of the sale that the component part might fail at some point in the future. (Daugherty, supra, 144 Cal.App.4th at pp 838-839.)

While Daugherty may have implications for the merits of underlying action, and indeed may serve to bar claims by plaintiffs that occurred outside the warranty period, it does not affect a determination of class certification. Daugherty is distinguished from the present action because it related to a substantive question on demurrer rather than a procedural question as here on a motion for class certification. And the question in a determination of class certification is “essentially . . . procedural . . . [and] does not ask whether an action is legally or factually meritorious.” (Linder, supra, 23 Cal.4th 429, 439-440, emphasis added.)

If we were to accept HP’s argument regarding the application of Daugherty to the present action, we would be considering the merits of the underlying action. And the question of class certification “does not ask whether an action is legally or factually meritorious.” (Linder, supra 23 Cal.4th at pp. 439-440.) Rather, a ruling on a certification motion determines whether “the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.” (Rocha, supra, 7 Cal.3d at p. 238.)

(Slip op., at pp. 8-9.)  Continuing, the Court said:

In this writ, HP requests that we order the trial court to vacate its order certifying the class because some of the plaintiffs’ claims may be substantively invalid under Daugherty. This is not a proper consideration on the question of class certification. The merits of the case can and will be decided at a later point in this case. Indeed, the trial court noted that stating with regard to Daugherty that it was “neither ruling on the merits of the causes of action not what limits to recovery for any class member might be.”

(Slip op., at p. 10.)  In other words, even if there is a substantial likelihood that the class members' claims will fail due to some defense, consideration of that fact is a merits analysis and ultimately improper.  That, in my experience, is not how trial courts customarily view this situation.

I recall suggesting to one trial court that if the defendant were truly sincere that it was factually innocent, it should stipulate to certification and obtain a defense verdict against the entire class, rather than just one plaintiff.  The court scoffed at my suggestion.  But that, and other certification experiences, has led me to the conclusion that when a trial court perceives a likely defense to claims, certification approaches the impossible.  I've been waiting for a decision that, in plain language, said success or failure of claims is irrelevant to the question of certification.  So there you have it.