AB 1505, Assembly Member Nicole Parra's attempt to rewrite California's class action procedural rules, died in the Assembly Judiciary Committee yesterday. Parra's proposed legislation, backed by California Chamber of Commerce organizations, would have made it more difficult to file and succeed in class-action lawsuits, including wage and hour claims against large employers who violate the California Labor Code. The issue in committee was framed as follows:
ARE THE STANDARDS FOR CERTIFYING AND ADMINISTERING CLASS ACTION LAWSUITS SO UNCLEAR OR UNFAIR TO DEFENDANTS THAT THEY SHOULD BE REPEALED AND REWRITTEN IN A WAY THAT SUBSTANTIALLY DEPARTS FROM LONGSTANDING STATE AND FEDERAL PRACTICE?
The most glaring problems with the bill included:
- It eliminates California's long standing public policy in favor of class actions. Section 1(d). This policy has been upheld consistently for over 30 years by judges appointed by Republican and Democratic Governors. See Sav-On Drug Stores v. Superior Court (2004) 34 Cal. 4th 319, 340.
- It would require each individual class member to prove his or her claim and extent of damages. 383(c)(4). This essentially would make any large class case impossible since it would require an individual trial for each class member. No court - federal or state - has ever adopted this radical notion. Imagine what this means in the classic case where a company has committed widespread fraud in small amounts. For example, years ago a lot of lenders fraudulently increased loan fees by using a 360 day year (rather than 365) to compute interest. Individual amounts of loss were miniscule--maybe a few dollars per loan, but cumulatively the loss was great. There would be no way to challenge this conduct in a class case under this bill unless millions of individuals came in and proved their claims. But this is the point of class cases--by aggregating claims, an efficient means of redress is established and wrongdoing is punished and deterred.
- It imposes all the costs of notice on the plaintiffs, even if the defendant's conduct made expensive notice necessary (i.e. it destroyed records that would allow identification of class members), 383( c)(5)(C). This is of particular concern to nonprofit organizations whose funding is limited.
- It creates a novel right for a defendant to bypass class counsel and communicate directly with class members to make a settlement offer. 383(d)(2)(C). This would allow great mischief -- it would undermine the attorney client relationship of class counsel to the class and allow a defendant to "divide and conquer". Such conduct would never be permitted in an individual case. In a class case it would further undermine the role of class counsel as a representative of the class. No case we are aware of --federal or state - has ever allowed this overreach.
- It allows for a stay of all discovery directed to merits until class is certified. 383(d)(6) -- a classic catch 22 since in (c)(3) the merits can be considered -- except plaintiffs can now be barred from discovery into the merits.
- It allows a direct appeal from an order granting class certification. 383(f). California law only allows appeal when a class motion is denied, essentially dismissing the case. Under federal law, there is no automatic appeal - only a right to request leave to appeal, which is supposed to be rarely granted. See FRCP 23(f). This provision thus goes beyond federal and state law.
- It requires class counsel's attorney's fee motion to be served on all class members. 383((h)(1). This would raise substantial expense in any large class since voluminous motions would have to be mailed to all class members at plaintiff's expense. Neither federal nor state law requires this.
- The expense of seeking attorney's fees, which can be substantial, would not be recoverable if the plaintiff prevails. 383((h)(5). This is contrary to both federal and state law which recognizes that if "fees on fees" are not awarded when a defendant refuses to pay fees, a defendant has an incentive to litigate and drag out the proceedings, and class lawyers are forced to work for free to obtain their rightful fees.
The bill was opposed by AARP, Amalgamated Transit Union, California American Civil Liberties Union, American Television and Radio Artists, Asian Law Caucus, Asian Pacific American Legal Center, CALPIRG, California Applicant Attorneys Association, California Conference of Machinists, California Employment Lawyers Association, California Federation of Teachers, California Labor Federation, California Nurses Association, California Teamsters, Congress of California Seniors, Consumer Action, Consumer Attorneys of California, Consumer Federation of California, Consumers for Auto Reliability and Safety, Disability Rights Advocates, Engineers and Scientists of California, IFPTE Local 20, Equal Rights Advocates, Fair Housing Law Project, Foundation for Taxpayer and Consumer Rights, Gray Panthers of California, Impact Fund, International Longshore and Warehouse Union, Jockeys' Guild, Legal Aid Society of San Francisco - Employment Law Center, Mexican American Legal Defense and Educational Fund, National Center for Lesbian Rights, National Association of Consumer Advocates, Older Women's League, Professional and Technical Engineers, IFPTE Local 20, Protection and Advocacy, Inc., Public Counsel SEIU, California State Council Sierra Club, California Speak Out, California United Food and Commercial Workers, Western States UNITE-HERE!, Utility Consumers' Action, Network Western Center on Law and Poverty, and the Women's Employment Rights Clinic.