New California Case Further Restricts Class Actions

In a somewhat surprising case published today by California's Second Appellate District, the court held that the denial of a motion for class certification in one case will apply to bar any future cases involving the same class and the same claims through the doctrine of collateral estoppel.

In 1997, plaintiffs' counsel filed a purported wage-and-hour class action on behalf of a class of Area Sales Managers ("ASMs") who worked for Robinsons-May, Inc. The trial court denied a motion to certify the class.

In 1999, the same counsel filed a new case that was essentially the same, but had different named plaintiffs/class representatives. The trial court denied a motion to certify the class.

In September 2003, the same counsel filed a third case that was also the essentially the same, but again named different class representatives. The defendant demurred (i.e., moved for judgment on the pleadings) based on the doctrine of collateral estoppel, and the trial court sustained the demurrer without leave to amend.

The Court of Appeal affirmed, stating:

Appellants seek reversal of the order, claiming that the doctrine of collateral estoppel is inapplicable to an order denying class certification in another lawsuit brought by other plaintiffs because absent putative class members are not bound prior to the certification of a class. Alternatively, appellants contend that the doctrine of collateral estoppel was erroneously applied to the facts of this case. For the reasons set forth below, we affirm the order.

Alvarez v. May Department Stores Company, No. B184504 (2nd App. Dist, Div. 4, Oct. 11, 2006).

It is already the rule in California that denial of a motion for class certification is a "death knell" to the claims of the absent class members, and is thus an immediately appealable order. Further, failure to timely appeal the denial (generally within 60 days) will divest both the appellate court and the trial court of jurisdiction to reconsider or reverse the denial of class certification, thus permanently barring the class's claims in that case. Stephen v. Enterprise Rent-a-Car (1991) 235 Cal.App.3d 806, 812. See my earlier posts here and here.

Now, with the new Alvarez decision, failure to timely (or successfully) appeal the denial of a class certification motion will permanently bar the absent class members' claims in any subsequent case class action as well.