If At First You Don't Succeed, You Don't Succeed

In Alvarez v. May Department Stores Co., the Second District Court of Appeal has upheld a demurrer to a wage and hour class action on the basis of collateral estoppel arising out a previous denial of class a certification motion in another matter, brought by other employees of the same employer, seeking the same class order and asserting the same claims.

In Alvarez, other plaintiffs had filed previous wage and hour class actions against May Department Stores seeking overtime pay for area sales managers. The first two were commenced in 1997 and 1999. Alvarez filed in 2003. The first plaintiffs tried and failed to certify a class. Alvarez never got past the demurrer stage.

Instead, the employer successfully demurred to the class allegations on the ground of collateral estoppel, based upon the prior denial of certification motions on other class representatives' claims. The Alvarez plaintiffs appealed, arguing that the doctrine of collateral estoppel "is inapplicable to an order denying class certification in another lawsuit brought by other plaintiffs because absent putative class members are not bound prior to the certification of a class.”

The Court of Appeal framed the issue by determining the "precise nature of appellants’ right at issue" in the new case, and finding the issue limited to whether the right to represent others can be disposed of without notice and hearing if, after balancing all parties' interests, the court finds it appropriate to relieve the defendant from defending a series of identical representative actions.

Our decision will not eliminate appellants’ substantive right to bring their lawsuit. Instead, it could potentially deny them the ability to serve as a representative of other litigants. The distinction may be crucial when we balance appellants’ due process rights against the competing interests promoted by the doctrine of collateral estoppel. If the right to proceed as a class plaintiff is a property right, we must keep in mind the general principle “in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.”

Ordinarily, to apply collateral estoppel: (1) the issue must be identical to that decided in the prior proceeding; (2) the issue must have been actually litigated in the prior proceeding; (3) the issue must have been necessarily decided in the prior proceeding; (4) the decision must have been final and on the merits; and (5) preclusion must be sought against a person who was a party or in privity with a party to the prior proceeding. Here, the Court held that the right to proceed as a class representative had been adjudicated and that the prior adjudication was binding upon other putative class members.

In analyzing the facts, we conclude the Duran plaintiffs were the “virtual representatives” of appellants. The only difference we can discern between the parties is the name of the representative plaintiff. The interested parties, their claims, and their counsel are the same.

It is unclear how other courts would apply these facts. Some of the facts of this case could be troublesome. Had the classes been truly identical, rather than "approximately" the same, and had the prior class certification been based upon inability of the putative class to present common claims in a single action, the decision would seem more fair. But here, the classes were not actually identical. The first case was four years old by the time the Alvarez case was filed. The time periods overlapped, but were not identical. Moreover, one of the two bases for denying class certification in the first case was that the proposed class representatives were unsuitable because they had unsatisfactory employment histories. On the other hand, the fact that the same counsel had brought both the previously unsuccessful actions and the new action -- including yet another case now pending in the Orange County Superior Court -- seemed to be one of the driving forces behind the decision, if not the single overriding factor. The court notes: "When appellants’ counsel was asked in oral argument when the string of unsuccessful lawsuits would end, his answer in essence was - when the pursuit is no longer economically feasible.”

Can a defendant avoid a meritorious class action simply by showing that an unpaid wage claimant was a job-hopper? Can they avoid meritorious certifiable class actions by delaying one action, perhaps brought by a suitable representative, while encouraging an early certification motion in another action with a less suitable representative? The answers to both questions should be no, but in some trial courts, the answer might be yes. Others disagree. at The UCL Practitioner, Kimberly Kralowec writes:

It does nothing to prevent copycat actions filed by new attorneys who can argue that the prior lawyers failed to adequately represent the putative class. The opinion is quite clear that under such circumstances, the doctrine of collateral estoppel would not apply.

You can download the full text of Alvarez v. May Department Stores here in pdf or Word format.