The California Supreme Court lays down the law on "ascertainability" in Noel v. Thrifty Payless, Inc.


I’m testing out opening sentences. The first candidate is: “The objective import of Noel v. Thrifty Payless, Inc. (July 29, 2019) is easy to ascertain.” You can see how that’s an option. It includes “objective,” as in the class definition must state the class with objective characteristics. And it drops in “ascertain,” as in this is a decision about the ascertainability requisite for certification. I like it. No second option for you.

Noel is a putative class action brought on behalf of retail purchasers of an inflatable outdoor pool sold in packaging that was allegedly misleading about the pool’s characteristics. The trial court denied the representative plaintiff’s motion for class certification on the basis that the plaintiff did not supply evidence showing how class members might be individually identified when the time came to do so. The Court of Appeal upheld the trial court, reasoning that such evidence was necessary to ensure that proper notice would be given to the class. The Supreme Court said, “Nah, brah.”

The Supreme Court reviewed the history of the “ascertainability” requisite. The first view of the requisite focuses on the nature of the definition of the class:

One view of ascertainability concentrates on the proposed class definition itself. This viewwas applied in Bartold v. Glendale Federal Bank (2000) 81Cal.App.4th 816 (Bartold), superseded by statute on another point as stated in Markowitz v. Fidelity Nat. Title Co. (2006) 142Cal.App.4th 508, 524. The Bartold court explained that “[a] class is ascertainable if it identifies a group of unnamed plaintiffs by describing a set of common characteristics sufficient to allow a member of that group to identify himself or herself as having a right to recover based on the description.” (81 Cal.App.4th at p.828.) This basic view of ascertainability has been reiterated by numerous other Courts of Appeal, including the courts in Estrada, supra, 154 Cal.App.4th at page 14 and Aguirre, supra, 234 Cal.App.4th at pages 1299 to 1300. (See also Aguirre, at p. 1300 [listing cases].) A similar formulation regards a class as ascertainable when it is defined “in terms of objective characteristics and common transactional facts” that make “the ultimate identification of class members possible when that identification becomes necessary.” (Hicks, supra, 89Cal.App.4that p.915.)

Slip op., at 21. The second formulation of the requisite was summarized as follows:

The second basic view of ascertainability entails a more exacting inquiry. One such articulationregards the ascertainabilityrequirementas calling for an examination into“(1) the class definition, (2) the size of the class and (3) the means of identifying class members.” (Miller v. Woods (1983) 148 Cal.App.3d 862, 873 (Miller); see also Noel, supra, 17 Cal.App.5th at p. 1324, Sotelo, supra, 207 Cal.App.4th at p. 648; Reyes v. Board of Supervisors (1987) 196 Cal.App.3d 1263, 1274.) Consistent with this view, it has been said that “[c]lass members are ‘ascertainable’ where they may be readily identified without unreasonable expense or time by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 932 (Rose).) On its face, the quoted language from Rose could be understood as specifying a sufficient, as opposed to a necessary, basis for finding an ascertainable class within the Miller framework. But some courts, drawing from Rose’s focus on the mechanics of identifying class members, have gone further and required a class plaintiff to make a specific factual or evidentiary showing in order to show an ascertainable class.

Slip op., at 21-22. The Court then looked at the similar divide in the federal system, focusing extensively on the Seventh Circuit’s analysis of the requisite in Mullins v. Direct Digital, LLC, 795 F.3d 654 (7th Cir. 2015). After that extensive review of competing approaches, the Supreme Court concluded that the process protection provided by an objective and clear class definition was more significant to the ascertainability requirement than the goal of notice to each class member. From that conclusion a clear rule followed:

As a rule, a representative plaintiff in a class action need not introduce evidence establishing how notice of the action will be communicated to individual class members in order to show an ascertainable class.

Slip op., at 38. The Court expressly disapproved of strict reliance upon Rose as stating the requirement for an ascertainability showing. Slip op., at 41, n. 15.

The Court observed that a trial court could consider how notice will be provided to a class as a separate inquiry into, e.g., manageability. Slip op., at 42. It emphasized, however, that notice was not an aspect of the ascertainability showing. The decision of the Court was unanimous.

Christopher Wimmer and Peter Roldan of Emergent Legal and Leslie Brueckner and Karla Gilbride of Public Justice represented the successful Plaintiff and Appellant.

Ninth Circuit begins to define scope of Mazza in Ruiz Torres v. Mercer Canyons Inc.

In Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), the Ninth Circuit Rule 23 predominance was defeated where many (or even most) class members “were never exposed to the allegedly misleading advertisements” (666 F.3d at 597) because the defendant subjected only a small segment of an expansive class of car buyers to misleading material as part of a “very limited” advertising campaign (id. at 595).  This decision raised questions about how federal courts in the Ninth Circuit would actually evaluate UCL claims when faced with reconciling In re Tobacco II and Mazza.  In Ruiz Torres v. Mercer Canyons Inc. (9th Cir. Aug. 31, 2016), a wage & hour suit in which the District Court certified a class, the Ninth Circuit analyzed Mazza in a manner demonstrating that it may be constrained in its application moving forward.

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District Court (N.D. Cal.) certifies class of consumers claiming Dell, Inc. misrepresented savings by stating false former prices

United States District Court Judge Ronald M. Whyte (Northern District of California) granted in part a motion to certify a class of citizens of California who on or after March 23, 2003, purchased via Dell's web site Dell-branded products advertised with a represented former sales price.  Brazil v. Dell, Inc., 2010 WL 5387831 (N.D. Cal. Dec. 21, 2010) [not to be confused with the Court's Order on a motion for judgment on the pleadings filed the same day].  The Court offered this interesting discussion concerning reliance:

In California, “a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material,” In re Tobacco II Cases, 466 Cal.4th 298, 397 (2009). Materiality is an objective standard, see U.S. v. Watkins, 278 F.3d 961, 967-68 (9th Cir.2002), and is susceptible to common proof in this case. There is no dispute that the alleged misrepresentations were communicated to all class members, because the representations were made at the point of sale as part of a standardized online purchasing process.

Plaintiffs point to common evidence sufficient to show that the representations were material to plaintiffs. Although Dell points to some testimony from plaintiffs that it says “fails to establish legally sufficient reliance for even their individual claims,” the court finds that testimony read in context sufficiently indicated that the plaintiffs relied. There is evidence that Dell considered the representations material, and that external reference prices and semantic clues impact customers' perceptions of value and purchase decisions. Dell's marketing expert contends that while some purchasers may attach importance to a discount off Dell's list price, others will base their decision on wholly unrelated factors. But under California law, plaintiffs need not establish that each and every class member based his or her decision on the represented discounts. Plaintiffs' common evidence that the representations were material satisfies California's reliance presumption and Rule 23(b) (3)'s predominance requirement.

Slip op., at 5.

A similar practice by Dell almost caught me about a year ago.  I ordered a computer on the basis of a claim that I was receiving a special, limited-time discount.  I then discovered through another source that the prevailing price at the time was lower.  I cancelled the order before it shipped and re-ordered at a significantly lower price.  I'm pretty happy with Dell computers from a hardware standpoint, but their sales tactics have some room for improvement.

In Sevidal v. Target Corporation, an unascertainable class dooms plaintiff

The purpose of the ascertainability requirement in class actions is to ensure that it is possible to give adequate notice to class members and to determine after the litigation has concluded who is barred from relitigating the resolved issues.  The ascertainability requirement can be satisfied either by defining a class in objective terms such that a review of the defendant's records or if the class definition would "allow a member of that group to identify himself or herself as having a right to recover based on the description." Bartold v. Glendale Federal Bank, 81 Cal. App. 4th 816, 828 (2000); and see Ghazaryan v. Diva Limousine, Ltd., 169 Cal. App. 4th 1524, 1533 (2008).  In Sevidal v. Target Corporation (October 29, 2010), the Court of Appeal (Fourth Appellate District, Division One) affirmed a trial court order denying certification on the ground that the class was hopelessly unascertainable.

Sevidal sued Target after he purchased through Target's website some clothing items misidentified as made in the United States.   Sevidal specifically argued that, under the California Supreme Court's recent opinion, In re Tobacco II Cases, 46 Cal. 4th 298 (2009) (Tobacco II), "the class could be certified on his unfair competition claim even if most of the proposed class members never relied on the 'Made in USA' designation in deciding to make their online purchases."  Slip op., at 2.  The trial court did not take issue with this contention.  Instead, the trial court found the class definition to be significantly overbroad and the class itself to be unascertainable.

Sevidal's difficulties in defining the class arose because a website coding error caused the Target website to misidentify the county of origin on some clothes on some occasions, but not on others.  This computer bug made it impossible to ascertain class membership:

In the proceedings below, Sevidal made clear that only those who purchased an item when the country of origin was misidentified are part of the proposed class. But he also defined the proposed class to include consumers who purchased an item from without selecting the " 'Additional Info' " icon, and thus who were never exposed to the country-of-origin information. These consumers would, by definition, have no way of knowing whether he or she purchased an item when it was misidentified, and thus would have no way of knowing whether he or she is a member of the class. And these individuals (those who would have no way of knowing he or she was a class member) represent a significant portion of the overall proposed class. Target's statistical evidence shows that approximately 80 percent of the proposed class falls within this category — individuals who purchased an item without viewing the country-of-origin information.

Slip op., at 19-20.  The Court found this degree of overbreadth sufficient to support the trial court's ruling:

Although class certification should not be denied on overbreadth grounds when the class definition is only slightly overinclusive (ibid.; see Aguiar, supra, 144 Cal.App.4th at p. 136), in this case the overbreadth is significant. The unrefuted evidence showed that approximately 80 percent of the online purchasers did not select the " 'Additional Info' " icon and were never exposed to the alleged misrepresentation.

Slip op., at 20.  A useful observation for both plaintiffs and defendants; slight overbreadth will not defeat certification, but overbreadth of this magnitude will support a denial of certification.

The Court went on to reject Sevidal's attempt to extend by analogy the evidentiary presumptions that can be imposed for failure to follow Labor Code record-keeping requirements.   The Court observed that Target had no statutory or contractual obligations to maintain records about who selected which links on its site.

Finally, the Court discussed the overbreadth issue under the UCL, separate from the ascertainability problem created by the class definition and the lack of records to identify class membership.  Treading gingerly into the minefield of Tobacco II, the Court said:

But the Tobacco II court did not state or suggest there are no substantive limits on absent class members seeking restitution when a defendant has engaged in an alleged unlawful or unfair business practice. Instead, the court recognized that under the UCL's statutory language, a person is entitled to restitution for money or property "which may have been acquired" by means of the unfair or unlawful practice. (§ 17203, italics added; see Tobacco II, supra, 46 Cal.4th at p. 320.) Although this standard focuses on the defendant's conduct and is substantially less stringent than a reliance or "but for" causation test, it is not meaningless. To conclude otherwise would violate the statutory interpretation principle that every word in a statute must be given operative effect. Even after the Tobacco II decision, the UCL and FAL still require some connection between the defendant's alleged improper conduct and the unnamed class members who seek restitutionary relief.

Slip op., 25.  Analyzing the post-Tobacco II cases, the Court concluded that undisputed evidence showed that most of the defined class never viewed the country-of-origin information.   Unlike Weinstat v. Dentsply Internat., Inc., 180 Cal. App. 4th 1213 (2010), there were no direct communications to every class member.  Unlike In re Steroid Hormone Product Cases, 181 Cal. App. 4th 145 (2010), there was no illegal conduct (inclusion of undisclosed controlled substances) to supply the means for unlawful acquisition of money from the class.  In essence, the Court concluded that, as to the majority of the defined class, Target didn't do anything wrong (again, the key issue being that, at many times, the Target website may was displaying the correct information - but most people didn't look at it in either case).

While the Court appears to favor the "conservative" line of post-Tobacco II cases (or, as some might say, the reactionary revolt line), the Court doesn't embroil itself too deeply into the post-Tobacco II cases, attempting as much as possible to harmonize the two lines of cases with each other and the record before it.  In this case, the Court's task is much easier as a result of the unique factual record.

Court of Appeal reverses trial court and directs certification of a negligence class action

Now don't go all wobbly.  Sure, in a negligence case, the trial court denied plaintiffs' motion to certify a class, finding that no community of interest existed and that the class action vehicle was not a superior method of resolving the claims of putative class members.  But that doesn't mean that California is suddenly a hotbed of negligence class actions.  Negligence claims are still notoriously difficult to certify.  Despite all that, this decision is worth a read.

In Bomersheim v. Los Angeles Gay And Lesbian Center (May 26, 2010), the Court of Appeal (Second Appellate District, Division One) reviewed a trial court order denying class certification.  Concluding that the order was based on improper criteria and was not supported by substantial evidence, the Court reversed and directed the trial court to grant the motion.

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District Court certifies a class of Penske Logistics delivery drivers and installers

United States District Court Judge Janis Sammartino (Southern District of California) granted plaintiff's motion to certify a class of California-based logistics employees that drove delivery trucks or rode along as installation helpers.  Dilts v. Penske Logsiticcs, LLC (S.D. Cal. Apr. 26, 2010) 2010 WL 1709807.  The analysis was long but not unusual in the wage & hour setting.  The Court offered these comments about its decision to certify the meal period subclass:

The first issue to deal with is the employer's obligation with respect to meal periods under California law. The legal uncertainty about this issue has been a recent source of heartburn for courts. Although it is presently before the California Supreme Court in Brinker Restaurant v. Superior Court, until that decision has issued this Court must proceed as best it can.

As such, the Court finds that California meal break law requires an employer to affirmatively act to make a meal period available where the employee are relieved of all duty. See Cicairos v. Summit Logistics, Inc., 133 Cal.App.4th 949, 35 Cal.Rptr.3d 243, 252-53 (Cal.Ct.App.2006) (“[T]he defendant's obligation to provide the plaintiffs with an adequate meal period is not satisfied by assuming that the meal periods were taken, because employers have ‘an affirmative obligation to ensure that workers are actually relieved of all duty.’ ”); Brown v. Fed. Express Corp., 249 F.R.D. 580, 585 (C.D.Cal.2008) (“It is an employer's obligation to ensure that its employees are free from its control for thirty minutes.”). An illusory meal period, where the employer effectively prevents an employee from having an uninterrupted meal period, does not satisfy this requirement. Cicairos, 35 Cal.Rptr.3d at 252-53; Brown, 249 F.R.D. at 585. However, the employee is not required to use the provided meal period.

Slip op., at 11.

More on the Vioxx decision

In December, I promised more detailed comments about In re Vioxx Class Cases (December 15, 2009), decided by the Second Appellate District, Division Three.  As promised, I provide more pithy commentary (or blather, as you see fit to classify it).  The Court's discussion began with a reminder that is worth repeating.  The standard of review on a appeal challenging a trial court's decision to grant or deny certification is reviewed for an abuse of discretion, absent certain specific errors:

“ ‘Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification. . . . "[I]n the absence of other error, a trial court ruling supprted by substantial evidence generally will not be disturbed “unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation].” ’ ”

Slip op., at 14, citing Tobacco II.  Next, the Court stated the requisites for class certification.  The discussion was the usual stuff, but for one statement regarding predominance of common issues of law or fact:  "To determine whether the questions of fact and law at issue in the litigation are common or individual, it is necessary to consider the individual causes of action pleaded, and the issues raised thereby."  Slip op., at 15.  It is difficult to find any guidance about how to assess predominance.  Here, the Court indicates that the analysis proceeds on a cause-of-action by cause-of-action basis.

Turning to the various casues of action, the Court first addressed the claim arising under the CLRA.  The Court followed decisions that permit an inference of reliance when a misrepresentation is material:

The language of the CLRA allows recovery when a consumer “suffers damage as a result of” the unlawful practice. This provision “requires that plaintiffs in a CLRA action show not only that a defendant’s conduct was deceptive but that the deception caused them harm.” (Massachusetts Mutual Life Ins. Co. v. Superior Court, supra, 97 Cal.App.4th at p. 1292.) Causation, on a class-wide basis, may be established by materiality. If the trial court finds that material misrepresentations have been made to the entire class, an inference of reliance arises as to the class. (Id. at p. 1292.) This is so because a representation is considered material if it induced the consumer to alter his position to his detriment. (Caro v. Proctor & Gamble Co., supra, 18 Cal.App.4th at p. 668.) That the defendant can establish a lack of causation as to a handful of class members does not necessarily render the issue of causation an individual, rather than a common, one. “ ‘[P]laintiffs [may] satisfy their burden of showing causation as to each by showing materiality as to all.’ ” (Massachusetts Mutual Life Ins. Co. v. Superior Court, supra, 97 Cal.App.4th at p. 1292.) In contrast, however, if the issue of materiality or reliance is a matter that would vary from consumer to consumer, the issue is not subject to common proof, and the action is properly not certified as a class action. (Caro v. Proctor & Gamble Co., supra, 18 Cal.App.4th at p. 668.)

Slip op., at 16.

The Court then discussed claims arising under the UCL. The authority cited by the Court was described in a manner that was fairly favorable to consumers.  For example, the Court said, "Consumer class actions under the UCL serve an important role in the enforcement of consumers’ rights."  And, as to remedies, the Court observed, "The UCL balances relaxed liability standards with limits on liability."  Slip op., at 18.  The fraudulent prong of the UCL received a similarly broad construction through the authority noted by the Court:

In order to obtain a remedy for deceptive advertising, a UCL plaintiff need only establish that members of the public were likely to be deceived by the advertising.  (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267; Massachusetts Mutual Life Ins. Co. v. Superior Court, supra, 97 Cal.App.4th at p. 1290.) The question has arisen as to which members of the public need be likely to be deceived. The law focusses on a reasonable consumer who is a member of the target population. (Lavie v. Proctor & Gamble Co. (2003) 105 Cal.App.4th 496, 508.) “Where the advertising or practice is targeted to a particular group or type of consumers, either more sophisticated or less sophisticated than the ordinary consumer, the question whether it is misleading to the public will be viewed from the vantage point of members of the targeted group, not others to whom it is not primarily directed.”

Slip op., at 18.  The Court then discussed the countours of the restitution remedy under the UCL.  Here, Tobacco was cited, but the Court's summary of the extent of restitution foreshadowed the Court's determination that a means for proving a restitutionary value were lacking:

As to restitution, the UCL provides that “[t]he court may make such orders or judgments . . . as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.”15 (Bus. & Prof. Code, § 17203.) This language, providing restitution of funds which “may have been acquired,” has been interpreted to allow recovery without proof that the funds were lost as a result of actual reliance on defendant’s deceptive conduct. (Tobacco II, supra, 46 Cal.4th at p. 320; Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d at p. 450-451; Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1144.) While the “may have been acquired” language of Business and Professions Code section 17203 is so broad as to allow restitution without individual proof of injury, it is not so broad as to allow recovery without any evidentiary support. (Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663, 697.) The difference between what the plaintiff paid and the value of what the plaintiff received is a proper measure of restitution. (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 174.) In order to recover under this measure, there must be evidence of the actual value of what the plaintiff received. When the plaintiff seeks to value the product received by means of the market price of another, comparable product, that measure cannot be awarded without evidence that the proposed comparator is actually a product of comparable value to what was received. (Colgan v. Leatherman Tool Group, Inc., supra, 135 Cal.App.4th at p. 675.)

Slip op., at 19.

Having discussed what must be established for CLRA and UCL claims, the Court then analyzed predominance as to each cause of action.  For the CLRA, the Court agreed that reliance/materiality issues could not be resolved on a classwide basis:

The trial court found that the decision to prescribe Vioxx is an individual decision made by a physician in reliance on many different factors, which vary from patient to patient. The trial court quoted from Dr. Silver’s declaration, indicating eight individual factors which a physician must assess in determining whether and what to prescribe for pain.

Slip op., at 22.  In reality, this decision is an example of why tort-type issues frequently undermine attempts to certify classes.  The Court noted some of the complicated reliance variables:

On appeal, plaintiffs draw this court’s attention to Merck’s alleged common campaign of hiding the cardiovascular risks of Vioxx, arguing that such common misrepresentations support a common inference of reliance. Plaintiffs suggest that Merck hid “an increased risk of death,” associated with Vioxx, and argue, “there can be nothing more material than an increased risk of death.” Plaintiffs’ argument is a vast oversimplification of the matter, and one which overlooks all of the evidence to the contrary on which the trial court relied.

First, evidence indicated that Vioxx did not present “an increased risk of death” compared to traditional NSAIDs for all patients. Traditional NSAIDs killed 16,500 people per year due to gastrointestinal bleeds. For patients with stomach ulcers or other gastrointestinal risk factors, traditional NSAIDs presented a higher risk of death than the risk of cardiovascular death posed by Vioxx. Second, evidence indicated that the cardiovascular risks of Vioxx were not material for all patients. Some patients would still take Vioxx today if it were on the market; some physicians would still prescribe it regardless of risks. Indeed, it cannot be disputed that other drugs pose similar, or even greater, risks of death than Vioxx, but are still in use – because, for some patients, the benefits outweigh the risks. Third, Merck introduced substantial evidence that all physicians are different and obtain their information about prescriptions from myriad sources. For those physicians with a distrust of statements made by the pharmaceutical industry, Merck’s statements could not have been material. For those patients whose TPPs required pre-approval of Vioxx (or would only pay for Vioxx under certain circumstances), the TPP’s decision likely would override any patient or physician reliance on Merck’s statements. Fourth, physicians consider many patient-specific factors in determining which drug to prescribe, including the patient’s history and drug allergies, the condition being treated, and the potential for adverse reactions with the patient’s other medications – in addition to the risks and benefits associated with the drug. When all of these patient-specific factors are a part of the prescribing decision, the materiality of any statements made by Merck to any particular prescribing decision cannot be presumed. All of this evidence supports the trial court’s conclusion that whether Merck’s misrepresentations were material, and therefore induced reliance, is a matter on which individual issues prevailed over common issues, justifying denial of class certification with respect to the CLRA claim.

Slip op., at 23-24.

Similar problems with the UCL were then discussed by the Court:

[T]he court specifically found that class damages are not subject to common proof. The court concluded that the monetary value plaintiffs wish to assign to their claim – the difference in price between Vioxx and a generic, non-specific NSAID, implicates a patient-specific inquiry and therefore fails the community of interest test. In short, the trial court rejected the entire premise of plaintiffs’ class action. While the trial court allowed the possibility that plaintiffs could recover for having been exposed to misrepresentations, the trial court concluded that the theory that the entire class was harmed because Vioxx was no more effective, and less safe, than naproxen implicated individual issues of proof.

On appeal, plaintiffs mount a two-pronged challenge to the trial court’s conclusions. First, they argue that they offered sufficient factual evidence that naproxen is a valid comparator to Vioxx. Specifically, they rely on the declaration of their medical expert to the effect that, based on the VIGOR study, Vioxx was, overall, no more effective, and less safe, than generic naproxen. The trial court did not err in rejecting naproxen as a valid class-wide comparator. Defendants introduced substantial evidence that, after Vioxx was withdrawn from the market, most Vioxx patients switched to another COX-2 inhibitor, not a generic NSAID such as naproxen. As this evidence indicates that Vioxx was worth more than naproxen to a majority of class members, it is more than sufficient to support the trial court’s conclusion that naproxen is not a valid comparator on a class-wide basis.

Plaintiffs’ second argument is that the validity of naproxen as a comparator goes to the merits of the action, and should not be addressed on a motion for class certification. Plaintiffs argue that since the UCL and FAL allow an award of restitution without individualized proof of deception, reliance and injury, the trial court should not have been considering the validity of naproxen as a comparator. We do not disagree that a trial court has discretion to order restitution even in the absence of individualized proof of injury. (Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d at p. 452.) However, in order to obtain class wide restitution under the UCL, plaintiffs need establish not only a misrepresentation that was likely to deceive (Corbett v. Superior Court, supra, 101 Cal.App.4th 649, 670) but the existence of a “measurable amount” of restitution, supported by the evidence. (Colgan v. Leatherman Tool Group, Inc., supra, 135 Cal.App.4th at p. 698.) The failure of naproxen as a viable class-wide comparator thus defeats the claim for class-wide restitution.

Slip op., 26-27.  With accepted reasons for denying certification as to each cause of action, the trial court was affirmed.  I skipped one other basis for the Court's decision that a denial of certification was appropriate.  The Court found that a typicality problem was created by the interaction with third-party payors.  Some TPPs would only pay for Vioxx when other NSAIDs did not work for the patient.  Some co-pay situations with flat rate copays rendered the economic comparison argument moot.  Generally, the Court noted that the defined class was overbroad, creating a number of problems for itself that could not be reconciled.  See, Slip op, at 20-22.  Here is yet another example why tort-type issues routinely sink class actions.

Seventh Circuit provides sharply defined view on class member standing in Kohen, et al. v. Pacific Investment Management Company LLC, et al.

I don't follow the Seventh Circuit's decisions closely.  It's a bit outside my regular commute.  But it has served up an educational opinion about class member standing that is too intriguing to pass up without comment.

Kohen v. Pacific Investment Management Co. (7th Cir. Jul. 7, 2009) follows from a successful Rule 23(f) petition by defendants for permission to appeal a District Court's order certifying a class.  The suit, based on section 22(a) of the Commodity Exchange Act, 7 U.S.C. § 25(a), accuses the defendants (referred to in the appeal as “PIMCO”) of having violated section 9(a) of the Act, 7 U.S.C. § 13(a), by cornering a futures market.  What's a cornered futures market?  Glad you asked.  Circuit Judge Posner explains in a very educational discussion that breaks down how a short seller can monopolize a futures market:

Changes in the demand for or the supply of the underlying commodity will make the price of a futures contract change over the period in which the contract is in force. If the price rises, the “long” (the buyer) benefits, as in our example, and if it falls the “short” (the seller) benefits. But a buyer may be able to force up the price by “cornering” the market—in this case by buying so many June contracts for 10-year Treasury notes that sellers can fulfill their contractual obligations only by dealing with that buyer.

Slip op. at 4.  But defendants were trying to corner financial commodities, and you can't corner the money supply...except in one particular instance involving Treasury notes:

Board of Trade v. SEC, supra, 187 F.3d at 725, remarks that since the possibility of manipulation “comes from the potential imbalance between the deliverable supply and investors’ contract rights near the expiration date[,] . . . [f]inancial futures contracts, which are settled in cash, have no ‘deliverable supply’; there can never be a mismatch between demand and supply near the expiration, or at any other time.” But while it is correct that most financial futures contracts are settled in cash, CFTC v. Zelener, 373 F.3d 861, 865 (7th Cir. 2004); Kolb, supra, at 16, and that if a cash option exists there is no market to corner (no one can corner the U.S. money supply!), futures contracts traded on the Chicago Board of Trade for ten-year U.S. Treasury notes are an exception; they are not “cash settled.” Short sellers who make delivery must do so with approved U.S. Treasury notes; otherwise they must execute offsetting futures contracts.

Slip op. at 5.  The class certified by the district court consisted of all persons who between May 9 and June 30, 2005, bought a June Contract in order to close out a short position.  PIMCO challenged the definition on the ground that it includes persons who lack “standing” to sue because they did not lose money in their speculation on the June Contract.  For example, some of the class members might have taken both short and long positions (in order to hedge—that is, to limit their potential losses) and made more money in the long positions by virtue of PIMCO’s alleged cornering of the market than they lost in their short positions. The plaintiffs acknowledged this possibility but argued that its significance was best determined at the damages stage of the litigation.  The Court rejected PIMCO's contention:

PIMCO argues that before certifying a class the district judge was required to determine which class members had suffered damages. But putting the cart before the horse in that way would vitiate the economies of class action procedure; in effect the trial would precede the certification. It is true that injury is a prerequisite to standing. But as long as one member of a certified class has a plausible claim to have suffered damages, the requirement of standing is satisfied. United States Parole Commission v. Geraghty, 445 U.S. 388, 404 (1980); Wiesmueller v. Kosobucki, 513 F.3d 784, 785-86 (7th Cir. 2008).  This is true even  if the named plaintiff (the class representative) lacks standing, provided that he can be replaced by a class member who has standing. “The named plaintiff who no longer has a stake may not be a suitable class representative, but that is not a matter of jurisdiction and would not disqualify him from continuing as class representative until a more suitable member of the class was found to replace him.” Id. at 786.

Slip op. at 7.  Thus far, the Court has stated little more than settled principles about the ability to substitute class representatives after certification.  But the Court also commented on pre-certification standing:

Before a class is certified, it is true, the named plaintiff must have standing, because at that stage no one else has a legally protected interest in maintaining the suit. Id.; Sosna v. Iowa, 419 U.S. 393, 402 (1975); Walters v. Edgar, 163 F.3d 430, 432-33 (7th Cir. 1998); Murray v. Auslander, 244 F.3d 807, 810 (11th Cir. 2001). And while ordinarily an unchallenged allegation of standing suffices, a colorable challenge requires the plaintiff to meet it rather than stand mute. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). PIMCO tried to show in the district court that two of the named plaintiffs could not have been injured by the alleged corner. We need not decide whether it succeeded in doing so, because even if it did, that left one named plaintiff with standing, and one is all that is necessary.

Slip op. at 7-8.  The Court then explained that it is unnecessary to know whether all class members have standing to bring claims prior to certification:

What is true is that a class will often include persons who have not been injured by the defendant’s conduct; indeed this is almost inevitable because at the outset of the case many of the members of the class may be unknown, or if they are known still the facts bearing on their claims may be unknown. Such a possibility or indeed inevitability does not preclude class certification, Carnegie v. Household Int’lsupra, 376 F.3d at 661; 1 Alba Conte & Herbert Newberg, Newberg on Class Actions § 2:4, pp. 73-75 (4th ed. 2002), despite statements in some cases that it must be reasonably clear at the outset that all class members were injured by the defendant’s conduct. Adashunas v. Negley, 626 F.2d 600, 604 (7th Cir. 1980); Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir. 2006). Those cases focus on the class definition; if the definition is so broad that it sweeps within it persons who could not have been injured by the defendant’s conduct, it is too broad.

Slip op. at 9-10.  Later, California authority received a nod from the Court:

At argument PIMCO’s lawyer told us that he could obtain names of class members. If so, he can, as in Bell v. Farmers Ins. Exchage, 9 Cal. Rptr. 3d 544, 550-51, 568, 571 (Cal. App. 2004), and Long v. Trans World Airlines, Inc., 1988 WL 87051, at *1 (N.D. Ill. Aug. 18, 1988), depose a random sample of class members to determine how many were net gainers from the alleged manipulation and therefore were not injured, and if it turns out to be a high percentage he could urge the district court to revisit its decision to certify the class. Cf. Hilao v. Estate of Marcos, 103 F.3d 767, 782-84 (9th Cir. 1996); Long v. Trans World Airlines, Inc., 761 F. Supp. 1320, 1325-30 (N.D. Ill. 1991); Marisol A. v. Giuliani, 1997 WL 630183, at *1 (S.D.N.Y. Oct. 10, 1997). PIMCO has not done this; should it take the hint and try to do so now, this will be an issue for consideration by the district judge.

Slip op. at 13.  The Opinion finishes with a sharp kick to the shins: "PIMCO’s attempt to derail this suit at the outset is ill timed, ill conceived, and must fail. The district court’s class certification is AFFIRMED."  Slip op. at 15.  Nothing like an educational and blunt opinion to keep legal discourse interesting.

My thanks to Kimberly Kralowec for the mention at UCL Practitioner.  And thanks to some guy whose name sounds like "I am - saw the end" for directing me to the case.

Tarkington v. California Unemployment Insurance Appeals Board (Albertson’s, Inc.) strictly limits instances where class actions can be decided on the pleadings

Greatsealcal100On April 13, 2009, the Court of Appeal (Second Appellate District, Division One) ordered the publication of its March 12, 2009 opinion in Tarkington v. California Unemployment Insurance Appeals Board (Albertson’s, Inc.). The appeal followed a somewhat complex effort to obtain unemployment insurance benefits by locked-out employees of Albertsons, Inc. If you are curious about such things as writ petitions following adverse administrative ruling and the disdainful lack of honor by defendants that demand procedural compliance only to throw that compliance in the plaintiffs’ face when they satisfy those demands, then I urge you to read the opinion since I won’t be discussing those niceties here.

The very basic procedural summary of the case is as follows:

This is an appeal from the denial of a writ petition, styled as a class action, filed by employees of Albertson’s Inc. (Albertson’s) seeking to reverse an administrative decision denying them unemployment insurance benefits during an 18-week lockout by Albertson’s. On demurrer, the trial court ruled that the employees failed to allege sufficient facts supporting equitable tolling. The trial court also struck the class allegations as overly broad. The employees elected not to amend their petition in order to pursue the present appeal. We reverse and remand for further proceedings.

(Slip op., at p. 2.) The aspect of the opinion of interest in the context of class action litigation is the near-adamant holding that class actions should be decided at the pleading stage only in mass tort and similar actions not well-suited to class treatment. That section is quoted here in full:

“California’s judicial policy [is to allow] potential class action plaintiffs to have their action measured on its merits to determine whether trying their suits as a class action would bestow the requisite benefits upon the litigants and the judicial process to justify class action litigation.” (Beckstead v. Superior Court (1971) 21 Cal.App.3d 780, 783.) “In order to effect this judicial policy, the California Supreme Court has mandated that a candidate complaint for class action consideration, if at all possible, be allowed to survive the pleading stages of litigation.” (Id. citing La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 868-869 [reversing trial court’s sustaining of demurrer against class action suit]; Vasquez v. Superior Court (1971) 4 Cal.3d 800, 816 [same]; Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 716-717 [same]; Jones v. H. F. Ahmanson & Co. (1969) 1 Cal.3d 93, 121 [affirming trial court’s overruling of demurrer attacking class allegations].)

“The wisdom of allowing survival is elementary. Class action litigation is proper whenever it may be determined that it is more beneficial to the litigants and to the judicial process to try a suit in one action rather than in several actions . . . . It is clear that the more intimate the judge becomes with the character of the action, the more intelligently he may make the determination. If the judicial machinery encourages the decision to be made at the pleading stages and the judge decides against class litigation, he divests the court of the power to later alter that decision . . . Therefore, because the sustaining of demurrers without leave to amend represents the earliest possible determination of the propriety of class action litigation, it should be looked upon with disfavor.” (Beckstead, supra, 21 Cal.App.3d at p. 783.) Despite the policy disfavoring the determination of class suitability issues at the pleading stage, several cases, including those cited by Albertson’s, have done exactly that. (See, e.g, Silva v. Block (1996) 49 Cal.App.4th 345, 348 [trial court properly determined class issues on demurrer, since it was apparent from the face of the pleading that issues requiring separate adjudication—both of liability and damages—predominated over common questions]; Clausing v. San Francisco Unified School Dist. (1990) 221 Cal.App.3d 1224, 1234 [in this mass-tort action, “it would be a waste of time and judicial resources to require a full evidentiary hearing [on class suitability] when the matter can properly be disposed of by demurrer”; Brown v. Regents of University of California (1984) 151 Cal.App.3d 982, 990-991 [determination of class status by demurrer proper in mass-tort action].)

In Prince v. CLS Transportation, Inc. (2004) 118 Cal.App.4th 1320, after an exhaustive review of the relevant case law, this division determined that the apparent conflict was in fact not a conflict at all: “[I]t is only in mass tort actions (or other actions equally unsuited to class action treatment) that class suitability can and should be determined at the pleading stage. In other cases, particularly those involving wage and hour claims, class suitability should not be determined by demurrer.” (Id. at p. 1325.) We reasoned that in mass tort actions individual questions of liability and damages frequently predominate over common questions and resolving class suitability at the pleading stage is therefore proper. (Id. at pp. 1327-1328.) In contrast, we explained, “wage and hour disputes (and others in the same class) routinely proceed as class actions” because they usually involve “’a single set of facts applicable to all members’,” and “’one question of law common to all class members.’” (Ibid.) As long as a plaintiff “alleges institutional practices . . . that affected all of the members of the potential class in the same manner, and it appears from the complaint that all liability issues can be determined on a class-wide basis,” we held that “no more is required” at the pleading stage. (Id. at p. 1329.)

In our view, the petition in this case is more like a wage and hour case than a mass-tort action. It involves a single set of facts (i.e., those allegations pertaining to Albertson’s selective lockout and illegal hiring of locked out employees), one question of law common to all class members (i.e., whether employees who could not work because of Albertson’s lockout fall under the ambit of section 1262), and one institutional practice (i.e., the denial of benefits to locked out employees by the EDD and CUIAB Board). While there may be individual questions of the amount of benefits, if any, to which each claimant is entitled, we do not see these questions as predominant over the common factual allegations and legal questions cited above. (Accord Vasquez v. Superior Court (1971) 4 Cal.3d 800, 809 [“the fact that each member of the class must prove his separate claim to a portion of any recovery by the class is only one factor to be considered in determining whether a class action is proper”]; Reyes v. Board of Supervisors (1987) 196 Cal.App.3d 1263, 1272, 1279 [rejecting county’s argument that denial of governmental benefits was not suitable for class treatment because “each recipient’s right to recover depends on the facts peculiar to his/her case” and noting that “it is especially appropriate to proceed with a class action to provide effective relief when, as here, a large number of [class members] have been allegedly, improperly denied governmental benefits on the basis of an invalid administrative practice”].)

In line with our decision in Prince, we conclude that it was premature for the trial court to make determinations pertaining to class suitability on demurrer. We reverse the court’s order granting Albertson’s motion to strike and the court’s accompanying legal ruling that the class definition was “too broad.” The putative class definition alleged in the petition, which we cite here, is sufficient to move forward past the pleading stage:

“Petitioners . . . bring this petition for writ of administrative mandamus on behalf of the entire class of individuals who were employed by Albertson’s at any time during the period October 11, 2003 through February 26, 2004, and who filed timely claims with the EDD for unemployment insurance benefits for all or some of this period, and were denied such benefits on the basis of the trade dispute exception, California Unemployment Insurance Code § 1262 . . . .”

(Slip op., at pp. 17-20.) This holding is likely to see immediate use in every class action challenged by way of demurrer or motion to strike, and it may deter these procedural wastes of time.  At least I hope so.  Nothing ruins a perfectly good day like receiving the obligatory demurrer to class allegations.

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Cristler v. Express Messenger says more about the standard of review on appeal than it does about class actions or employee misclassification

Greatsealcal100When does a class action go to trial? That’s not an easy question to answer. The potential recovery is a factor, but not always. Personalities involved in the litigation are a factor, but not always. The jury pool is factor, but not always. However, when the class is seeking to declare unlawful a delivery company’s classification of delivery drivers as “independent contractors,” it looks like a sure bet that the class action will go to trial.

In Christler v. Express Messenger Systems, Inc. (February 11, 2009), the Court of Appeal (Fourth Appellate District, Division One) considered challenges to a number of rulings surrounding the trial of plaintiffs’ claim that defendant misclassified its delivery drivers as “independent contractors.” While this opinion does discuss the legal standard for determining employment, the Court of Appeal limited its review, based upon what appellant presented:

Cristler emphasizes throughout its briefing that other cases addressing the proper classification of package delivery drivers have resulted in findings that the drivers were employees, rather than independent contractors. (See Estrada, supra, 154 Cal.4th at pp. 11-12 [reciting litany of factors that provided substantial evidence to support trial court's finding that FedEx drivers were employees, including "FedEx's control over every exquisite detail of the drivers' performance, including the color of their socks and the style of their hair"]; JKH Enterprises, Inc. v. Department of Industrial Relations (2006) 142 Cal.App.4th 1046, 1065 [listing factors that provided substantial evidence for trial court's conclusion that drivers were employees and thus "reject[ing] JKH's contention" that the evidence "dictate[d] but one conclusion here — that the drivers are independent contractors"]; Air Couriers, supra, 150 Cal.App.4th at p. 938 [same].) The simple answer to these references is that these cases concerned different circumstances presented to a different finder of fact. Indeed, even if the facts of this case were identical to those in the cases Cristler cites (and they are not), we would not be authorized to overrule the determination of the jury to achieve conformity with other cases — particularly as Cristler does not even argue that the jury's verdict is unsupported by substantial evidence.

(Slip op., at p. 8, fn. 2.) If nothing else, this certainly suggests a trend when suing delivery companies who have, as their business model, decided to classify delivery drivers as “independent contractors.”

As part of the appeal, plaintiffs contended that the trial court erred by failing to continually review the class definition to ensure that class members were not inappropriately excluded: “In the instant case, regardless of whether the trial court erred in defining the class, Cristler fails to carry its burden of establishing reversible error as there is no showing of prejudice from the trial court's assertedly erroneous rulings.” (Slip op., at p. 11.) Continuing, the Court explained: “In light of the trial court's refusal to expand the class definition, the drivers who remained in the class — those without any employees of their own and who did not deliver even an occasional package for clients other than Express Messenger — were the most likely to be characterized as Express Messenger's employees rather than as independent contractors.” (Ibid.) Losing at trial with a narrow class didn’t do much for the plaintiffs’ arguments.

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