Wednesday, April 21, 2010

Fourth District Rules Longstanding Class Principle Precluding Defendant From “Picking Off” Named Plaintiff Applies to UCL, Post Prop 64: Wallace v. GEICO Gen. Ins. Co.

On April 19, 2010, the Fourth District Court of Appeal concluded that Prop 64 did not render the “pick off” doctrine inapplicable to class action claims brought under the UCL. See Wallace v. GEICO Gen. Ins. Co., __ Cal.App.4th __ (2010). In its ruling striking the class allegations, the trial court rejected the plaintiff’s citation to the principle expressed in La Sala v. American Sav. & Loan Assn., 5 Cal.3d 864 (1971), which precludes a defendant from “picking off” the named plaintiff by unilaterally settling out his or her claims to avoid a class action. See Slip Opinion, at 14. The trial court reasoned that “‘[t]he La Sala case relied on by [Wallace] is not persuasive in this setting, in light of the requirement under section 17200 that the plaintiff must have actually suffered injury.’” See id., at 14-15.

The Court of Appeal disagreed, reasoning that the “pick off” doctrine is an established part of class action procedure that was not altered Prop 64’s amendments to standing (which were focused on the “filing” of UCL lawsuits):
We see no indication in this statement of intent that Proposition 64 was intended to render the pick off cases inapplicable in class actions brought under section 17200 et seq. The voter’s focus was instead on the filing of lawsuits by attorneys who did not have clients impacted by the defendant’s conduct. Here, Wallace’s lawsuit was filed by a client directly impacted by GEICO ’s conduct. Further, as our Supreme Court stated in another case in which it reviewed evidence of the voter’s intent, the ballot materials for Proposition 64 contain no “indication that the purpose of the initiative was to alter the way in which class actions operate in the context of the [unfair competition law]” and there is no “indication that Proposition 64 was intended in any way to alter the rules surrounding class action certification.” (In re Tobacco II Cases (2009) 46 Cal.4th 298, 318 [].) Because the doctrine expressed in the pick off cases is an established part of class action procedure, there is no reason to believe that Proposition 64 was intended to alter that doctrine in the context of suits brought under section 17200 et seq.
Slip Opinion, at 16-17.

In the case at hand, the Court concluded that insofar as the defendant voluntarily offered to settle with plaintiff after she filed a class action lawsuit, the trial court erred by granting the motion to strike class allegations on the ground that the lawsuit lacked a representative plaintiff.  See id., at 17-19.

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