Tuesday, August 24, 2010

Second District Reaffirms Strict Limitations on Disposing of Proposed Wage Class Actions By Way of Demurrer: Gutierrez v. Cal. Commerce Club

On August 23, 2010, the Second District (Division One) issued an order changing the publication status of Gutierrez v. Cal. Commerce Club, __ Cal. App. 4th __ (2010) from unpublished to published. The opinion deals with the impropriety of forcing a named plaintiff to establish an entitlement to certification of a class through allegations in the operative complaint.

At issue was a trial court order sustaining a demurrer to the plaintiff’s third amended complaint (alleging meal/rest period claims) without leave “on the ground the plaintiffs had failed to show the existence of a class….” Slip Opinion, at 2. Significantly, the trial court had previously overruled demurrer to the plaintiff’s first amended complaint, finding the allegations of that pleading minimally adequate. See id., at 3-4. The third amended complaint came about after the plaintiff had sought, and obtained, leave from the court to file a second amended complaint.  Id.

In reversing, the Court of Appeal concluded that “[i]n this action, as in the vast majority of wage and hour disputes, class suitability should not be determined on demurrer.” Slip Opinion, at 2. As reasoned by the Court, a demurrer can be used to dispose of class allegations only when class certification can be shown, based on the face of the complaint, that that there is no reasonable possibility a class will be certified (which is the applicable standard for dismissal by way of demurrer). See id., at 7-10. Importantly, the Court concluded that in actions involving claims in the wage and hour context – which have historically been recognized as especially amenable to class-wide adjudication – class allegations should not be disposed by way of demurrer:
We return again to and rely upon the well-established principle, that “only in mass tort actions (or other actions equally unsuited to class action treatment) [should] class suitability . . . be determined at the pleading stage. In other cases, particularly those involving wage and hour claims, [such as the instant action,] class suitability should not be determined by demurrer.” (Prince, supra, 118 Cal.App.4th at p. 1325, italics added; see also Tarkington, supra, 172 Cal.App.4th at p. 1512.)
Slip Opinion, at 11.

Moreover, the Court further noted that the trial court abused its discretion by doing an about-face on the sufficiency of the plaintiff’s complaint without any change in circumstances:
The trial court found far the less specific allegations minimally adequate when it overruled the Club‘s demurrer to the FAC. At that time it noted, correctly, that there would be “ample time later to determine whether there is a single class, several classes and whether this plaintiff can represent some or all of the classes . . . [and that,] in this case, the statement that defendant has not provided its employees with proper rest periods states both the facts and the theory.” The record reveals no explanation for the court‘s abrupt reversal of course in sustaining demurrers to the SAC and TAC, which contain virtually identical (or more specific) allegations.
Slip Opinion, at 10 n.5.

This line of analysis, which also was at issue in the Fourth District’s opinion in Weinstat v. Dentsply Internat., Inc, 180 Cal.App.4th 1213 (2010), demonstrates that a trial court use of its discretion to change its mind must be rooted in a legitimate change in circumstances capable of justifying the reversal in position.

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