In Fireside Bank v. Superior Court (Gonzalez), No. S139171 (___ Cal.4th ___), decided today, the California Supreme Court first examined the precedents regarding procedures for class actions in the State, specifically regarding the "one-way intervention" problem, and then wrote:
From these precedents we glean the following rules governing the parties’ and trial court’s orderly conduct of putative class action cases. First, a defendant must actively preserve its protection against one-way intervention by objecting [to any pre-certification motion on the merits]. If it fails to timely object, or affirmatively seeks resolution of the merits before certification, it will be deemed to have waived its rights. (See Civil Service Employees Ins. Co., supra, 22 Cal.3d at pp. 373-374; Employment Development Dept. v. Superior Court, supra, 30 Cal.3d at pp. 262-265.) Second, plaintiffs should seek certification before moving for any resolution of the merits. (Cf. Cal. Rules of Court, rule 3.764(b) [“A motion for class certification should be filed when practicable”].) If they seek certification after seeking resolution of the merits then, in the absence of a defense waiver, they must demonstrate changed circumstances or other good cause justifying the belated motion before the trial court may consider it. (See Green, supra, 29 Cal.3d at p. 148.) Third, though trial courts generally have broad discretion to manage and order class affairs, in the absence of a defense waiver they should not resolve the merits in a putative class action case before class certification and notice issues absent a compelling justification for doing so.
The Court described the "one-way intervention" problem it sought to resolve as follows:
As a result of the lack of procedural rules early in the history of class actions in California:
"One party could style the case a ‘class action,’ but the missing parties would not be bound. A victory by the plaintiff would be followed by an opportunity for other members of the class to intervene and claim the spoils; a loss by the plaintiff would not bind other members of the class. (It would not be in their interest to intervene in a lost cause, and they could not be bound by a judgment to which they were not parties. [Citation].) So the defendant could win only against the named plaintiff and might face additional suits by other members of the class, but it could lose against all members of the class. This came to be known as ‘one-way intervention,’ which had few supporters.” (Premier Electrical Construction Co. v. National Electrical Contractors Assn., Inc. (7th Cir. 1987) 814 F.2d 358, 362; see also American Pipe & Construction Co. v. Utah (1974) 414 U.S. 538, 545-547.) One-way intervention left a defendant open to “being pecked to death by ducks. One plaintiff could sue and lose; another could sue and lose; and another and another until one finally prevailed; then everyone else would ride on that single success. This sort of sequence, too, would waste resources; it also could make the minority (and therefore presumptively inaccurate) result the binding one.” (Premier Electrical Construction Co., at p. 363.)
* * *
"[W]hile 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." [quoting Home Sav. & Loan Assn. v. Superior Court (1974) 42 Cal.App.3d 1006, 1011 (Home Savings I).]
Presumably the "new" rule of Fireside Bank, which seems clear, will prevent this problem. We'll see how it plays out.