The Assembly Judiciary Committee, by a 7 to 3 vote, failed to pass Assembly Bill 298. The bill, authored by Assemblyman Van Tran (in photo), would have given defendants in a class action lawsuit the same right plaintiffs have, the right to appeal the class certification decision.
Under California law, cases may only be appealed after they are over. When a class certification decision is denied, the case is over for the plaintiff, so the plaintiff may appeal. But when a class certification decision is granted, the case is not over for the defendant so the defendant may not yet appeal. The only way to appeal a class action certification is to take the case to trial and wait to lose at trial. Only then, hundreds of thousands of dollars later, could a defendant appeal the class certification decision. That situation ignores the reality of class actions, most of which settle after certification. Assembly Bill 298 would have allowed defendants to appeal that all-important decision.
This bill is particularly important now as California's economy continues to struggle. This change would be noticed nationally by decision makers and is something California could do to signal to business leaders that state leaders are willing to make changes to attract and maintain business here. California's legal system is currently ranked sixth from the bottom by national business leaders and is part of the reason the state is viewed as so unfriendly to business.
There are numerous examples of class action lawsuits of dubious merit -- a friend last week received a notice in the mail about a class action against a major high-end retailer for failing to have the proper font on a rewards club card notice. Many class action lawsuits are lawyer-driven, because the lawyers end up with millions while the class members, who they supposedly represent, get pennies or coupons.
For several examples of such lawsuits, see our earlier blog posts on a lawsuit against large retailers in which the attorneys requested $24 million while the class members received one cosmetic product or a separate suit against a clothes retailer in which the class members received a $10 gift card. (An innovative judge in the latter case decided that the attorney's fee would be paid with $125,000 worth of gift cards.)
A study by the California Judicial Council found that class action lawsuits are booming in California, but that only a small percentage (0.7%) ever go to trial. The study found a 63% increase in class action filings between 2000 and 2005 in the 12 courts reviewed. Employment class actions rose dramatically -- from 29 cases in 2000 to 120 cases in 2005, an overall increase of 313.8%!
CJAC conducted its own study of class action lawsuits and found results similar to the Judicial Council report. Our study revealed an increase in class action filings in the six largest counties in each year from 2004 to 2006. In those six counties, there were an average of more than four class action lawsuits filed each day the courthouses were open. Nearly half of those suits (47%) involved employment laws. The second largest group (36%) was in the consumer action category.
While there have been legitimate class action lawsuits -- particularly in the areas of civil rights and discrimination -- right now there are too many consumer class actions of dubious merit.
Eight other states and the federal system allow either automatic or discretionary appeal of the class certification decision. In California, all defendants could do about a class certification decision is use a writ -- which is discretionary and extraordinary. In other words, the judge can decide whether to grant the writ and hear the challenge to the certification decision. Writs are designed only for very unusual circumstances and are not frequently used or granted.
Assembly Bill 298 simply provides defendants what plaintiffs already have.
Click here to listen to Kim Stone testify on AB 298.