Wage Law

The other big opinion handed down by the Supreme Court on Monday was Fireside Bank v. Superior Court (Gonzalez) .The order granting review framed the issue as follows:

May 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 short answer was "no, the rule is always applicable." The long answer, however, was quite interesting. The holding is stated as follows:

A largely settled feature of state and federal procedure is that trial courts in class action proceedings should decide whether a class is proper and, if so, order class notice before ruling on the substantive merits of the action.  (See Green v. Obledo (1981) 29 Cal.3d 126, 146 (Green); Fed. Rules Civ.Proc., rule 23(c)(1)(A), 28 U.S.C.; Hickey v. Duffy (7th Cir. 1987) 827 F.2d 234, 237.) The virtue of this sequence is that it promotes judicial efficiency, by postponing merits rulings until such time as all parties may be bound, and fairness, by ensuring that parties bear equally the benefits and burdens of favorable and unfavorable merits rulings. The rule stands as a barrier against the problem of “one-way intervention,” whereby not-yet-bound absent plaintiffs may elect to stay in a class after favorable merits rulings but opt out after unfavorable ones.

Here, over class defendant Fireside Bank’s objections and to class representative Sandra Gonzalez’s surprise, the trial court ruled on the substantive merits concurrent with deciding that a class could be certified and before class notice had gone out. The Court of Appeal denied writ relief, concluding the rule we endorsed in Green governing the order of operations in class action proceedings was largely a matter of discretion and was not violated by the trial court, and also rejecting Fireside Bank’s substantive challenges to class certification.

We reverse. While the Green rule is subject to exceptions, leaving trial courts vested with a certain degree of discretion in its application, no such exception is applicable here and thus the trial court abused its discretion in acting as it did. On the merits, however, its class certification order was correct. Accordingly, we leave in place the trial court’s class certification order, direct that the trial court’s entry of judgment on the pleadings in favor of Gonzalez be vacated, and remand for further proceedings.

In class action litigation, any significant ruling on the merits should be deferred, absent a request for a ruling by the defendant (which, oddly enough, we see quite frequently in our own practice), until after certification, notice to the class and expiration of the opt-out period. Here, the class action came on a cross-complaint, and there was a motion for judgment on the pleadings regarding the complaint filed by the plaintiff, which was also the cross-defendant in the class action cross-complaint. The ruling would significantly affect the liability on the class action cross-complaint. Over the objection of the defense -- with the plaintiff's counsel in agreement with the defense -- the trial court promised not to rule on the motion for judgment on the pleadings until after certification notices were given and the time to opt-out had expired. Nonetheless, when the order was issued, it included a ruling on the motion for judgment on the pleadings. The defense appealed, and one of the remedies that they sought was a vacation of the certification order and a bar of any further class proceedings. The Supreme Court found that to be too harsh.

Here, although Gonzalez moved for judgment on the pleadings before seeking class certification, this order of filing was justified by changed circumstances. Moreover, Gonzalez thereafter agreed to have all class issues resolved before any ruling on the merits. Given the trial court’s express acknowledgment that class issues should be resolved first and its indication it would do so, Gonzalez had no reason to withdraw her motion for judgment on the pleadings. She bears no responsibility for the trial court’s subsequent error.

On these facts, to bar Gonzalez from pursuing a class action in response to the trial court’s error would be inequitable.  Instead, vacating the trial court’s premature merits ruling and ordering the trial court to disregard it and decide any future motion de novo will reduce the risk of one-way intervention for Fireside Bank without unduly punishing plaintiffs.

Thus, the judgment on the pleadings shall be relitigated after the class is notified of the certification. Presumably, the defense will have the opportunity to file a peremptory challenge and obtain a new judge. You can read the full text of Fireside Bank here in pdf or Word format.