California Won’t Join Federal Courts on Objector Appeals

By Perry Cooper

California won’t join federal courts in allowing unnamed class members to appeal decisions they oppose without formally joining the case, the California Supreme Court held Jan. 29 in a dispute over a $36.4 million judgment against Restoration Hardware.

The court must follow its 75-year-old precedent that requires objectors to intervene if they want to appeal, Justice Ming W. Chin wrote for the unanimous court.

The California rule is at odds with federal law. The U.S. Supreme Court held in 2002 in Devlin v. Scardelletti that unnamed class members are parties to proceedings—and therefore able to appeal—because they are bound by the settlement.

But the California court distinguished this case, finding that class members in Devlin weren’t given the ability to opt out and therefore had no way to avoid being bound by a disposition they don’t like.

Meritless objections can disrupt settlements and delay payment to class members, the court said. That can “create a disincentive for class counsel to take on such risky matters.”

Reactions

Class counsel in the case agreed. “This decision will help address the real problem of professional objectors who hold up relief to class members with frivolous appeals,” Allison Goddard told Bloomberg Law.

At the same time it will preserve “the ability of those with legitimate objections to raise them and if necessary, to appeal,” plaintiffs’ attorney Kimberly A. Kralowec in San Francisco told Bloomberg Law. Kralowec, who wasn’t involved in the case, blogs about California consumer law at http://www.uclpractitioner.com/.

But requiring intervention has no benefit other than putting up another roadblock to objectors, the objector’s attorney, Lawrence W. Schonbrun, said at oral argument. Schonbrun didn’t respond to an email request for comment.

Another sometime-objector agrees. The decision “makes it harder for objector appeals with no countervailing benefit,” Brian Wolfman said in a tweet. Wolfman is a consumer advocate who runs the Georgetown University Law Center appellate courts immersion clinic in Washington.

Wolfman also challenged the court’s reading of Devlin, saying appeals courts tend to agree that it applies in both mandatory and opt-out class actions.

75-Year-Old Ruling

Class member Francesca Muller wanted to appeal the judgment in a California consumer credit case over the Restoration Hardware’s use of ZIP codes.

Muller objected, but didn’t intervene in the case at the trial court level, arguing that class members weren’t given notice of the lead counsel’s application for $9.1 million in attorneys’ fees.

Under Eggert v. Pacific States Savings and Loan Co., a 1942 California Supreme Court case, unnamed class members must intervene to appeal. An intermediate court ruled on that basis that she couldn’t participate in the appeal.

The court’s ruling here ends her challenge to the fee award.

Justices Tani Gorre Cantil-Sakauye, Carol A. Corrigan, Mariano-Florentino Cuéllar, Leondra R. Kruger, and Judge George Nicholson, sitting by designation from the California Court of Appeals, joined the opinion.

Justice Goodwin H. Liu concurred to argue that the state legislature should consider changing the Eggert rule based on the “significant changes in class action litigation practice” since it came down.

Allison Goddard of Patterson Law Group in San Diego argued for the class.

Lawrence W. Schonbrun of Berkeley, Calif., argued for the objector.

The case is Hernandez v. Restoration Hardware, Inc. , Cal., No. S233983, 1/29/18 .

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editor responsible for this story: Steven Patrick at spatrick@bloomberglaw.com

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