Tuesday, April 26, 2011

Fourth District Holds Court Erred in Ordering Replacement-Rep Discovery in “Headless” Class Action Case: Starbucks Corp. v. Super. Ct.

On April 26, 2011, the Fourth District (Division 3) issued a second appellate opinion in an action alleging Starbucks violated Labor Code sections 432.7 and 432.8 by using a preprinted job application inquiring into applicant’s prior drug marijuana convictions. See Starbucks Corp. v. Super. Ct., __ Cal.App. 4th __ (2011). The Court's opinion considered the propriety of a trial court order directing Starbucks to produce class member contact information to facilitate the replacement of the named plaintiffs who, due to the Court's prior opinion construing these statutory provisions, now lacked standing to bring the claims alleged due to never having been convicted of any such crime. The Court concluded that the trial court necessarily erred, as (1) the “Parris balancing test” could not be satisfied in light of the complete lack of the named plaintiff’s standing, coupled fact the remedial discovery violated the very privacy protections the action aimed to protect [Slip Opinion, at 5-10], and (2) that the factual scenario in this case did not implicate the “headless” class action exception detailed in CashCall, Inc. v. Superior Court, 159 Cal. App. 4th 273 (2008) insofar as the class was comprised of people who themselves necessarily where consciously “aware” of Starbuck’s activities. Slip Opinion, at 10-13.

In addition to the fact the Court fails to address the import of the fact that it was the Court's prior opinion that caused the named plaintiffs to lose standing (a fact relevant to whether granting discovery would amount to "abuse" of the class action process under Paris), the Court’s opinion also contains two points that I believe are worth comment. The first relates to the Court’s critique of using the class mechanism to enforce penalty claims under Labor Code Section 432.7 and 432.8:
We recognize class counsel’s tactical motivations to increase their side’s bargaining leverage, but the argument militates against a class action, rather than in its favor. The excessive penalties sought by class counsel bear little relationship to any true public interest for what, at most, appears to be a technical violation of Labor Code section 432.8 by Starbucks. The strength that may be gained in numbers also may produce the “absurd result of turning the statute into the veritable, adding machine” that has been decried by our Supreme Court.” (Starbucks I, supra, 168 Cal.App.4th at p. 1451.) The proper exercise of the Parris balancing test requires precertification discovery to be denied “in those cases in which that potential abuse of the class action procedure outweighs the rights of the class members.” (CashCall, supra, 159 Cal.App.4th at p. 295.)
Slip Opinion, at 11-12.

The Court’s policy analysis here is somewhat troubling, as the proposed class was actually limited solely to individuals who sustained an arguable violation of Section 432.7/432.8 to conform with the Court’s own construction of these statutes in Starbucks I.  Thus, the Court’s criticism of the proposed class being comprised of persons sustaining only “technical violations” or labelling the statutorily proscribed remedy as being “excessive” is necessarily rested upon a critique of the substantive merit of the underlying statutory law (criticisms which were not expressed within the Court’s statutory construction analysis in Starbucks I). Of course, it is the province of the Legislature to enact laws which impose penalties, which may be set aside by a reviewing court as exceeding the “public interest” only upon a clear showing that the Legislature exceeded its constitutional bounds. See e.g. Home Depot U.S.A., Inc. v. Superior Court, 191 Cal. App. 4th 210, 225-26 (2010) (rejecting argument that penalty provisions of Wage Orders pertaining to “suitable seating” exceeded “the Legislature's broad authority to enact civil penalty statutes”). Absent such a showing, it would seem that aggregating pentality claims could only further the public interest of “securing obendience” that necessarily underpins the penalty statute. See id. (“‘Civil penalties are inherently regulatory, not remedial,’ and are intended to secure obedience ‘to statutes and regulations validly adopted under the police power.’”).  With all due respect to the Court, its analysis on this point would seem to be logically defective.

Second, the Court opined at the close of its opinion that a class action may be uncertifiable, per se, when identification of class members implicates privacy issues:
With no readily apparent means by which class members may be identified without also violating their statutory privacy rights, there may well be no ascertainable class, let alone a class representative plaintiff. But these matters are not currently before us on this challenge to the discovery order.
Slip Opinion, at 12-13.

Significantly, such a proposition – which seemingly would completely wipe out class litigation of claims implicating any financial and/or medical issue – was recently rejected by the Second District in Los Angeles Gay & Lesbian Center v. Superior Court, __ Cal. App. 4th __ (2011), previously discussed in a post here. As the LA Gay & Lesbian Center case demonstrates, it is possible to construct means of effecting notice in cases where the most sensitive forms of medical information is at issue.  Although the Starbucks Court's above supposition on this point is just dicta, it nonetheless seeks to tee up an issue which the Court believes is created by its opinion.

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