November 07, 2018

California Supreme Court: Unnamed Class Members Must Intervene or Move to Vacate to Gain Right to Appeal Class Settlements

Adam E. Polk – May 8, 2018

On January 1, 2018, the California Supreme Court issued its decision in Hernandez v. Restoration Hardware, confirming that, to gain the right to appeal a class settlement, judgment, or attorney fees award, unnamed class members must first: (1) formally intervene in the class action; or (2) file a motion to vacate the judgment. The Hernandez decision is distinct from federal practice, which permits absent class members whose objections are overruled to appeal the ruling, even where the objector did not formally seek intervention.

Hernandez arises out of alleged violations of the Song-Beverly Credit Card Act—the plaintiff alleged that Restoration Hardware violated the act when it asked for and recorded its credit card customers’ zip codes. The trial court certified a class after years of litigation, and notice went out in June 2013. After a bench trial, the court rendered a judgment against Restoration Hardware for $36 million. The plaintiff’s lawyers then separately moved for attorney fees. On receipt of that motion, appellant Francesca Muller—who had neither opted out of the class action nor sought to intervene—filed a request for clarification asserting that unnamed class members were not notified of the attorney fee request. Muller than appeared telephonically at the fairness hearing and lodged a corresponding objection that there had not been sufficient notice of the fee application. The court granted plaintiff’s fee application, denying Muller’s request for clarification, and distributed a notice of judgment to class members. Muller did not move to vacate the judgment.

Muller appealed the attorney fee awards based on lack of notice. The plaintiff responded by asserting Muller had no right to appeal because she was not a party or aggrieved by the trial court’s decision as is required under the California Code of Civil Procedure and longstanding California Supreme Court precedent. The Court of Appeal agreed with the plaintiff, and dismissed Muller’s appeal for lack of standing. Muller then petitioned the California Supreme Court for review of the right to appeal issue.

Since the 1940s, California courts have followed a bright-line rule—to become a party to a class action, absent class members must either file a timely complaint in intervention or file an appealable motion to vacate a class judgment. See Eggert v. Pac. States S & L. Co., 124 P.2d 815 (1942). In Hernandez, the California Supreme Court declined to carve out an exception to Eggert, finding that persuasive policy considerations support maintaining the rule. Specifically, the court found that requiring absent class members to intervene or file a motion to vacate to have the right to appeal will discourage meritless objections filed by professional objectors. Because such objections (and their appeal) often delay relief to class members, weeding out meritless objections will help expedite relief to class members who often have already waited years for resolution. Similarly, the court recognized that it is in the public interest to incentivize class action plaintiffs’ lawyers to “take on risky matters” on a contingent basis, and that the proliferation of professional objectors discourages them from doing so.

 

Adam E. Polk is a partner with Girard Gibbs LLP in San Francisco, California.

Adam E. Polk – May 8, 2018