Wage Law

The Supreme Court is in session this afternoon in Sacramento, and on the 1:00 p.m. calendar is a case regarding a trial court's ability to make rulings on the merits in a class action which has not been certified: Fireside Bank v. Superior Court (Gonzalez), S139171, H027976; 133 Cal.App.4th 742; Superior Court of Santa Clara County; CV817959. The grant of review framed the issue like this:

Petition for review after the Court of Appeal denied a petition for peremptory writ of mandate. This case includes the following issue: Can a trial court ever depart from the preferred practice of deciding whether to certify a class action before adjudicating any class claims on the merits, or is the rule against such "one-way intervention" in class actions a firm prohibition applicable in all circumstances?

The "one-way intervention" doctrine was set forth in a pair of cases involving class actions against a bank. Home Sav. & Loan Assn. v. Superior Court (1974) 42 Cal.App.3d 1006, and Home Sav. & Loan Assn. v. Superior Court (1976) 54 Cal.App.3d 208 stand for the proposition that a merits ruling may not be made until after class certification if the defendant objects.

The vice in the procedure followed by the trial court is that it allows so-called "one-way intervention," a procedure under which potential members of the class can reserve their decision to become part of the class until the validity of the cause asserted by the named plaintiffs on behalf of the class has been determined. While one-way intervention has obvious attractions for members of the class on whose behalf an action has been brought in that it creates for them a no-lose situation, for a defendant it holds the terrors of an open-ended lawsuit that cannot be defeated, cannot be settled, and cannot be adjudicated. To him it presents a classic no-win option.

Essentially, it lets class members find out whether they win or lose on certain issues -- maybe even the biggest issues -- before they have to commit to being part of the class. If the class is going to lose, most reasonable class members would opt out and wait for a case with a better trial court ruling. If they class has been declared a winner, most will join.

In Fireside Bank, the trial court granted the borrower's motion for judgment on the pleadings against the bank's complaint on the basis that the bank failed to comply with the notice requirements under the Rees-Levering Motor Vehicle Sales and Finance (Rees-Levering) Act. The bank argued that by ruling on that motion before notice was given to the class, the trial court impermissibly provided class members an opportunity for one-way intervention. The Court of Appeal disagreed, holding that there was no categorical rule against one-way intervention, just a general preference against such proceedings. Beyond that, the preference for resolving class issues before entering a dispositive order on the merits of class claims was not triggered because the judgment on the pleadings did not address the class causes of action but rather addressed the claim that the bank brought against the borrower.