Thursday, April 14, 2016

Class Action Objectors Get No Ticket to the Appellate Party

Hernandez v. Restoration Hardware, No. D067091 (D4d1 Mar. 14, 2016)

Plaintiff won a $36.4 million bench verdict in a rare class action that actually went to trial. The court awarded 25 percent of the judgment as a fee award to the plaintiffs’ attorneys. Subject to the parties post-trial “clear sailing” agreement, the Defendant didn’t contest the award. But a class member objected, both on the basis that the court didn’t give the class notice of the fee hearing, and on the merits of the award itself. The trial court rejected the objection and entered a judgment including the 25 percent award. The objector appealed.

As a threshold matter, the lead plaintiffs (or more accurately, their counsel) object to the objector’s having standing to prosecute the appeal. They argue that Code of Civil Procedure § 902 permits only a “party aggrieved” to appeal and since the objector wasn’t a “party,” she can’t appeal. Somewhat surprisingly (at least to me) the court here agrees.

It relies
on Eggert v. Pac. States S. & L. Co., 20 Cal. 2d 199 (1942), where—almost 75 years ago—the California Supreme Court dismissed an appeal of an unnamed class member’s objections to a post-trial fee award. The opinion is a somewhat terse two-page order written by Justice Traynor. It contains almost no analysis, and certainly nothing specifically about the role of objectors in class action cases. And none of the case Eggert cites for the “you need to be a party to appeal” point have anything to do with class actions.

The court recognizes that there is quite a bit of authority at the Court of Appeal level standing generally for the proposition that a class action objector can appeal an adverse decision, so long as it is sufficiently adverse for her to be “aggrieved” by it. Indeed, a few word basic searches results in quite a few cases that at least touch on the point. See Luckey v. Superior Court, 228 Cal. App. 4th 81, 101 (2014); Consumer Cause, Inc. v. Mrs. Gooch’s Nat. Food Markets, Inc., 127 Cal. App. 4th 387, 395-96 (2005); Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224, 253 (2001); Rebney v. Wells Fargo Bank, 220 Cal. App. 3d 1117, 1128–1132 (1990); Trotsky v. L.A. Fed. Sav. & Loan Assn., 48 Cal. App. 3d 134, 139 (1975); see also Devlin v. Scardelletti, 536 U.S. 1, 14 (2002) (“[N]onnamed class members . . . . who have objected in a timely manner to approval of the settlement at the fairness hearing have the power to bring an appeal without first intervening.”). There’s not much in California since the advent of modern class action practice that goes the other way. But absent some intervening authority from the California Supreme Court, the court finds that the state’s stare decisis rules, see Auto Equity Sales, Inc. v. Superior Court, 57 Cal. 2d 450 (1962), nonetheless make Eggert binding precedent.

The court further notes that the result it thinks is compelled by Eggert isn’t really that all that problematic, because an objector who wants to maintain her right to appeal can always formally intervene. Fair enough. Although that’s really just creating a bunch of needless work for the trial court and the parties to handle.

Interestingly, although the court suggests that the federal precedent is split on the issue, the U.S. Supreme Court resolved this exact issue back in 2002 in the Devlin case. In a 6-3 opinion by Justice O’Connor, the Court rejected the idea that an objector needs to formally intervene to appeal a final ruling negatively disposing of issues raised in the objection. Provided the objector has standing to object—i.e., she’s actually a member of the class—she’ll also invariably have enough of an interest in the underlying litigation to intervene. So, according to the Court, “it is difficult to see the value” of requiring a formal intervention motion.
The federal circuit split cited by the court pre-dates Devlin, a point that seems to be lost in the opinion.

But for the time being in California, we’re apparently stuck with a rule that doesn’t have a whole lot of purpose other than that the California Supreme Court arguably decided the issue long before most class action procedure existed. Or at least there's a split of authority on the point. So until the Supremes step back in to clear things up, careful class action objectors would be well-served to formally intervene in order to preserve their rights to appeal.

Appeal dismissed.

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