Luckey v. Superior Court , 174 Cal. Rptr. 3d 906 ( 2014 )

Filed 7/22/14
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
ROMAN LUCKEY, B253892
Petitioner, (Los Angeles County
Super. Ct. No. BC508484)
v.
SUPERIOR COURT OF THE
STATE OF CALIFORNIA, COUNTY OF
LOS ANGELES,
Respondent;
COTTON ON USA, INC. et al.,
Real Parties in Interest.
ORIGINAL PROCEEDINGS in mandate. Daniel J. Buckley and Lee Smalley
Edmon, Judges. Petition denied.
Wucetich & Korovilas, Jason M. Wucetich and Dimitrios V. Korovilas for
Petitioners.
Sedgwick and Douglas J. Collodel for Respondent.
Kelley Drye & Warren and Edward E. Weiman for Real Parties in Interest.
_______________________________________
Petitioner Roman Luckey brought a putative class action against real parties in
interest Cotton On USA, Inc. and Cotton On Clothing Pty Ltd. (collectively Cotton On)
for violations of the federal Fair and Accurate Credit Transactions Act (FACTA). Prior
to class certification, Luckey and Cotton On mediated their dispute and reached a class
settlement agreement. Pursuant to the settlement agreement, Luckey and Cotton On
stipulated to the appointment of a temporary judge for the purpose of ruling on the
motions for preliminary and final approval of the settlement. This stipulation was
presented to respondent Superior Court of California, County of Los Angeles (Superior
Court), which declined to appoint the temporary judge, on the basis that counsel for
Luckey had no authority to sign the stipulation on behalf of the absent putative class
members. Luckey filed a petition for writ of mandate, challenging this ruling. We
conclude that the California Constitution, the California Rules of Court, and public
policy concerns all preclude the appointment of a temporary judge for purposes of
approving the settlement of a pre-certification class action. When the class has not yet
been certified, the putative class representative has no authority to consent to a
temporary judge on behalf of the absent putative class members.1 We therefore deny
the writ petition.
1
This is not to say that, following class certification, the class representative has
authority to consent to a temporary judge on behalf of absent class members. That issue
is not before this court, and we express no opinion on it. (See also, fns. 16 and 23,
post.)
2
FACTUAL AND PROCEDURAL BACKGROUND
1. Allegations of the Complaint
On May 5, 2013, Luckey filed the instant action in Superior Court; the operative
complaint is the first amended complaint, filed September 5, 2013. Under FACTA, it is
prohibited for a person accepting credit or debit cards for the transaction of business to
print “more than the last 5 digits of the card number or the expiration date” on an
electronically printed receipt provided to the cardholder at the point of the transaction.
(15 U.S.C. § 1681c(g).) Any person who willfully fails to comply with this requirement
is liable to the consumer for actual damages of not less than $100 and not more than
$1,000, as well as punitive damages and reasonable attorney’s fees. (15 U.S.C.
§ 1681n(a)(1).) Luckey alleged that, on April 18, 2013, he made a credit card purchase
at a Cotton On store, and received an electronically printed receipt that showed the first
four and last four digits of his credit card number as well as the card’s expiration date.
Luckey alleged, on information and belief, that Cotton On’s stores across the county
similarly electronically print eight digits of purchasers’ credit card numbers and
expiration dates upon their receipts. Luckey alleged that Cotton On knew or should
have known of the FACTA requirements. The operative complaint alleged causes of
action for violation of FACTA, negligence, and declaratory relief.
Luckey sought to proceed in a class action, defining the putative class as “All
individuals who purchased merchandise using a personal credit card or personal debit
card at any retail store operated by Defendant within the United States during the
3
Class Period[2] who: [¶] Subclass A: Were issued an electronically printed receipt that
reflected more than the last five digits of the card; and/or [¶] Subclass B: Were issued
an electronically printed receipt that reflected the card’s expiration date . . . . ” Luckey
sought, on behalf of the class, damages of between $100 and $1000 for each receipt
which violated FACTA (with separate damages for each violation), punitive damages,
and reasonable attorney fees. Luckey also sought an order declaring that Cotton On’s
credit and debit card receipt practices violate FACTA and an order enjoining Cotton On
from continuing to do so.
We take judicial notice of the Superior Court docket sheet. No responsive
pleading was filed. The only other documents filed in this case consisted of stipulations
for continuance of the initial status conference, and the stipulation for appointment of
a temporary judge which is at issue in this writ proceeding. Luckey represents that,
from the time the complaint was filed, the parties engaged in “informal discovery and
exchanged information” in preparation for a mediation held on October 28, 2013.
2
Luckey defines the “Class Period” as beginning five years prior to the date of the
filing of the complaint. As the complaint was filed May 5, 2013, the class period would
begin in May 2008. FACTA provides something of a safe harbor ending June 3, 2008 –
any person who printed a credit card expiration date on a receipt provided to a consumer
cardholder prior to June 3, 2008, but who otherwise complied with FACTA, is not
considered to be in willful noncompliance by reason of printing the expiration date.
(15 U.S.C. § 1681n(d).) Luckey alleges that the safe harbor does not apply even to the
transactions at issue prior to June 3, 2008, as Cotton On allegedly printed both
expiration dates and eight digits of the credit card numbers on its receipts throughout the
class period.
4
2. The Settlement
The mediation was held before a retired superior court judge. A settlement was
reached at the mediation, and memorialized in a written settlement agreement.3 It is
a class settlement, defining the settlement class as “all individuals who purchased
merchandise using a personal credit card or personal debit card at any retail store
operated by Cotton On within the United States since May 9, 2008, who were issued an
electronically printed receipt that reflected more than the last five digits of the card
and/or were issued an electronically printed receipt that reflected the card’s expiration
date.” It excludes persons who validly opt out of the class.
Under the terms of the settlement, the class is to receive compensation in the
form of “Merchandise Credits,” although the term is something of a misnomer. The
compensation consists of a $5 credit on a transaction at or exceeding $25 at one of
Cotton On’s retail stores, during one pre-selected week.4 The credits will apply to
“every transaction in excess of $25.00, exclusive of tax, during this seven day period.”
Only one credit will be provided per transaction or per customer. In other words, each
person buying something in excess of $25 at Cotton On, during the designated week,
will receive a $5 discount – regardless of whether that person is a member of the class.
3
The copy of the settlement agreement provided as part of the record in the instant
writ petition is not executed. Luckey represents, with the purported consent of counsel
for Cotton On, that it is the final version of the settlement agreement with all terms
agreed upon and finalized, although not fully executed.
4
The parties have not yet agreed upon the particular week; apparently, they want
to select a week which will be far enough in the future that the settlement will receive
final approval before the week occurs.
5
Moreover, each such shopper will receive a single $5 discount, regardless of how many
FACTA violations Cotton On may have committed against that person. (We refer to
this compensation as the “$5 off $25 sale.”) Notice is to be provided to the class by
means of e-mail notice to be provided “to all [Cotton On]’s customers in the United
States for whom [Cotton On] possesses a valid e-mail address.”5 Notice would also be
given on Cotton On’s website and near each of its retail stores’ cash registers. Class
members would be given an opportunity to opt out of the class by means of a written
request for exclusion. If class members sought to object to the settlement, they could do
so by means of filing “signed, written objection[s].” The notice to be sent to the class,
attached as an exhibit to the settlement agreement, provided that objecting class
members could attend the final fairness hearing and request to be heard, but explained,
“If you submit a written objection, you do not have to come to Court to talk about it. As
long as you submitted your written objection on time, the Court will consider it.”
Cotton On agreed to fund the settlement in the amount of $1,000,000. Of that
amount, the parties agreed that Luckey’s counsel could seek an award of attorney’s fees
and costs in an amount of $302,000. The parties also agreed that Luckey himself could
receive a payment of $5,000 as class representative, and that $135,000 would be
allocated to the administrative costs of the settlement.
In short, Luckey and Cotton On agreed to settle Cotton On’s liability to the
nationwide class in exchange for: (1) $5,000 paid to Luckey (whereas each class
member would receive, at most, a merchandise credit for one one-thousandth of that
5
This is represented to be 345,000 people.
6
amount);6 (2) $302,000 paid to Luckey’s counsel (for work which, to that point,
consisted of filing a complaint and amended complaint, and preparing for and attending
a one-day mediation); and (3) a one-week $5 off $25 sale,7 of which Cotton On would
send notice to its e-mail customer list. The parties also agreed to a stipulated injunction
enjoining Cotton On from including on its electronically-printed receipts either the
cards’ expiration dates or more than the last five digits of the cards’ numbers, although
the settlement agreement provides no time frame for when Cotton On would comply
with this requirement. Pursuant to the settlement agreement, Cotton On would be
released from any liability to the class for the FACTA violations alleged in Luckey’s
complaint.
In the settlement agreement, the parties agreed to stipulate, for the purposes of
settlement only, to provisional certification of the class. The parties also agreed to
stipulate to the appointment of a temporary judge for purposes of ruling on the motions
for preliminary approval and final approval “to facilitate the expeditious resolution of
these motions . . . . ”
6
As Luckey did not allege any actual damages, if he successfully prosecuted the
FACTA action to completion, he would be entitled to, at the very most, $200 in
statutory damages, unless he could establish a right to punitive damages.
7
We note that, while the $5 off $25 credit would apply to any and all
merchandise, “including merchandise already offered at a discounted sale price or other
promotional price,” there is nothing in the settlement agreement indicating that the
one-week $5 off $25 sale must be in addition to, and not in lieu of, any other sale Cotton
On would normally schedule.
7
3. The Stipulation for Appointment of a Temporary Judge
Pursuant to the settlement agreement, the parties stipulated for appointment of
a temporary judge to hear the matter “until final determination thereof.” Specifically,
the parties intended to submit to the temporary judge the issues related to preliminary
and final approval of the class action settlement. The same retired judge who had
served as the mediator in this matter was identified by the parties as the proposed
temporary judge.8 The temporary judge would be privately compensated by the
parties.9
The stipulation was presented to the Supervising Judge of the Civil Division, as
required by the Superior Court of Los Angeles County, Local Rules, rule 2.24(a)(1). On
June 2, 2014, the court issued a minute order declining to approve the stipulation. The
court’s analysis explained that, although Luckey’s counsel could stipulate to the
appointment of the temporary judge on behalf of Luckey, the “submitted papers do not
demonstrate that the named plaintiffs or the attorneys are authorized to speak for all
8
We asked the parties to brief whether there are any ethical issues raised by
having the same individual who mediated a settlement agreement act as a temporary
judge in the matter. As we shall discuss, we have substantial concerns regarding the
propriety of such an arrangement (see fn. 14, post), although this is not the basis for our
holding in this matter.
9
There is some ambiguity as to which party would compensate the temporary
judge. The parties’ stipulation provides that the temporary judge shall be paid a flat fee
of $5,000 plus case management fees. It further provides that the compensation of the
temporary judge “shall be part of taxable costs herein, and shall be split equally into two
payments between Plaintiffs and Defendants.” However, the stipulation also provides
that plaintiffs “shall bear and pay all taxable costs herein for the compensation to the
[t]emporary [j]udge . . . . ” Thereafter, the same document provides that “[t]he
compensation of the [t]emporary [j]udge . . . shall be allocated by the [t]emporary
[j]udge as a part of the judgment herein.”
8
class members.” Without the stipulation of all putative class members, the case could
not be transferred to a temporary judge.10
4. The Instant Writ Proceeding
On January 24, 2014, Luckey filed a petition for writ of mandate challenging the
trial court’s order denying approval of the stipulation. On February 25, 2014, real party
in interest Cotton On filed a statement of non-opposition. We issued an order to show
cause and requested a response from the Superior Court. The response was filed and
Luckey filed a reply, arguing, among other things, that the Superior Court lacked
standing to file a brief in response to the writ petition.11
CONTENTIONS OF THE PARTIES
Preliminarily, we address, and reject, Luckey’s contention that respondent
Superior Court lacked authority to file a response in this matter. We then turn to the
main issue raised by this writ petition: whether, in a putative class action, settled prior
to certification, counsel for the named plaintiff has the authority to enter into
a stipulation, on behalf of the class, for the matters relating to settlement approval to be
heard before a temporary judge. We conclude that counsel does not have this authority,
and therefore deny the petition.
10
The court’s order stated, “If the named parties so desire, they may file a noticed
motion seeking to have this court to sign the Stipulation, with appropriate citation to any
authorities in conflict with the” court’s analysis. The parties did not do so.
11
Cotton On filed a continued statement of non-opposition to the writ petition.
9
DISCUSSION
1. Class Action Settlement Approval Procedures
Before we can address any of the issues raised by this writ proceeding,
a discussion of the relevant class action procedures is helpful.
“ ‘ “Section 382 of the Code of Civil Procedure authorizes class suits in
California when ‘the question is one of a common or general interest, of many persons,
or when the parties are numerous, and it is impracticable to bring them all before the
court.’ The burden is on the party seeking certification to establish the existence of both
an ascertainable class and a well-defined community of interest among the class
members. [Citation.]” ’ [Citation.]” (Global Minerals & Metals Corp. v. Superior
Court (2003) 113 Cal. App. 4th 836, 848.) “ ‘ “The community of interest requirement
[for class certification] embodies three factors: (1) predominant common questions of
law or fact; (2) class representatives with claims or defenses typical of the class; and
(3) class representatives who can adequately represent the class.” ’ ” (Ibid.)
“A proponent of class certification must also demonstrate that the proposed class is
manageable.” (Ibid.)
In moving for class certification, “[t]he parties should endeavor to resolve any
uncontroverted issues by written stipulation before the hearing. If all class issues are
resolved by stipulation of the named parties and approved by the court before the
10
hearing, no hearing on class certification is necessary.”12 (Cal. Rules of Court,
rule 3.764(e).)
As a general rule, settlement of a class action requires the approval of the court
after a hearing. (Cal. Rules of Court, rule 3.769(a).) This is in order to “prevent fraud,
collusion or unfairness to the class.” (Dunk v. Ford Motor Co. (1996) 48 Cal. App. 4th
1794, 1800.) “The court must determine the settlement is fair, adequate, and
reasonable. [Citations.] The purpose of the requirement is ‘the protection of those class
members, including the named plaintiffs, whose rights may not have been given due
regard by the negotiating parties.’ [Citation.]” (Id. at p. 1801, fn. omitted.)
California Rules of Court, rule 3.769 sets forth the procedure to be followed
when a class action is provisionally settled prior to class certification. In that case,
certification and settlement approval occur simultaneously. First, a party to the
settlement moves for “preliminary approval of the settlement.” (Cal. Rules of Court,
rule 3.769(c).) After the hearing, the court makes an order approving or denying
“certification of a provisional settlement class.” (Cal. Rules of Court, rule 3.769(d).) If
the court grants preliminary approval, it must set a final approval hearing, and provide
for notice to be given to the class. (Cal. Rules of Court, rule 3.769(e).) “The notice
must contain an explanation of the proposed settlement and procedures for class
members to follow in filing written objections to it and in arranging to appear at the
12
Luckey notes that class certification may be resolved by stipulation of the named
parties. We emphasize that, pursuant to California Rules of Court, rule 3.764(e),
a stipulation regarding class certification must be “approved by the court” in order to
foreclose a hearing on certification.
11
settlement hearing and state any objections to the proposed settlement.” (Cal. Rules of
Court, rule 3.769(f).) At the final approval hearing, “the court must conduct an inquiry
into the fairness of the proposed settlement.” (Cal. Rules of Court, rule 3.769(g).) If
the court approves the settlement agreement, it enters judgment accordingly. (Cal.
Rules of Court, rule 3.769(h).)
Because a court evaluating certification of a class action which settled prior to
certification is considering certification only in the context of settlement, the court’s
evaluation of the certification issues is somewhat different from its consideration of
certification issues when the class action has not yet settled. In some ways, the court’s
review of certification of a settlement-only class is lessened; as no trial is anticipated in
a settlement-only class case, “the case management issues inherent in the ascertainable
class determination need not be confronted.” (Global Minerals & Metals Corp. v.
Superior Court, supra, 113 Cal.App.4th at p. 859.) However, other certification issues,
“those designed to protect absentees by blocking unwarranted or overbroad class
definitions” require heightened scrutiny in the settlement-only class context “for a court
asked to certify a settlement class will lack the opportunity, present when a case is
litigated, to adjust the class, informed by the proceedings as they unfold.” (Amchem
Products, Inc. v. Windsor (1997) 521 U.S. 591, 620.)
Moreover, “class action settlements should be scrutinized more carefully if there
has been no adversary certification.” (Dunk v. Ford Motor Co., supra, 46 Cal.App.4th
at p. 1803, fn. 9, italics added; see also 7-Eleven Owners for Fair Franchising v.
Southland Corp. (2000) 85 Cal. App. 4th 1135, 1161-1162.) “This reflects concerns that
12
the absent class members, whose rights may not have been considered by the
negotiating parties, be adequately protected against fraud and collusion.” (Wershba v.
Apple Computer, Inc. (2001) 91 Cal. App. 4th 224, 240.) “[T]hese concerns are satisfied
by a careful fairness review of the settlement by the trial court.” (Ibid.)
As we are concerned in this case with the process of the fairness determination,
and not the fairness determination itself, we need not address the factors to be
considered in such a determination.13 Ultimately, “ ‘in the final analysis it is the court
that bears the responsibility to ensure that the recovery represents a reasonable
compromise, given the magnitude and apparent merit of the claims being released,
discounted by the risks and expenses of attempting to establish and collect on those
13
“The trial court has broad discretion to determine whether the settlement is fair.
[Citation.] It should consider relevant factors, such as the strength of plaintiffs’ case,
the risk, expense, complexity and likely duration of further litigation, the risk of
maintaining class action status through trial, the amount offered in settlement, the extent
of discovery completed and the stage of the proceedings, the experience and views of
counsel, the presence of a governmental participant, and the reaction of the class
members to the proposed settlement. [Citation.] The list of factors is not exhaustive
and should be tailored to each case. Due regard should be given to what is otherwise
a private consensual agreement between the parties.” (Dunk v. Ford Motor Co., supra,
48 Cal.App.4th at p. 1801.) The Dunk court concluded that a presumption of fairness
arises where (1) the settlement is reached through arm’s length bargaining;
(2) investigation and discovery are sufficient to allow the court and counsel to act
intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of
objectors is small. (Id. at p. 1802.) Later authority “emphasizes that this is only an
initial presumption; a trial court’s approval of a class action settlement will be vacated if
the court ‘is not provided with basic information about the nature and magnitude of the
claims in question and the basis for concluding that the consideration being paid for the
release of those claims represents a reasonable compromise.’ [Citation.] In short, the
trial court may not determine the adequacy of a class action settlement ‘without
independently satisfying itself that the consideration being received for the release of
the class members’ claims is reasonable in light of the strengths and weaknesses of the
claims and the risks of the particular litigation.’ [Citation.]” (Munoz v. BCI Coca-Cola
Bottling Co. of Los Angeles (2010) 186 Cal. App. 4th 399, 408.)
13
claims by pursuing the litigation. “The court has a fiduciary responsibility as guardians
of the rights of the absentee class members when deciding whether to approve
a settlement agreement.” ’ [Citation.]”14 (Munoz v. BCI Coca-Cola Bottling Co. of
Los Angeles, supra, 186 Cal.App.4th at p. 408, fn. 5.)
2. The Superior Court Properly Filed a Responsive Brief
We now turn to Luckey’s challenge to the Superior Court’s appearance in this
writ proceeding. Luckey contends that the Superior Court lacks standing to file
a responsive brief.
The “Superior Court is a ‘party’ in an original mandate proceeding before this
court; Superior Court is named as the ‘Respondent.’ As such, proof of service must be
served upon it, and it is authorized by statute to file points and authorities in opposition.
[Citation.]” (James G. v. Superior Court (2000) 80 Cal. App. 4th 275, 279.) “This
notwithstanding, . . . California case law provides that a trial court may not initiate writ
14
It is for these reasons that we have concerns regarding the propriety of having the
individual who mediated a class settlement act as a temporary judge to rule on the
fairness and reasonableness of that same settlement. A class member objecting to the
settlement as unfair will certainly believe he or she is facing an uphill battle in
convincing the temporary judge of the merits of the objection; the temporary judge
clearly believed in the propriety of the settlement when acting as a mediator. This could
well raise a question of an appearance of impropriety. Canon 6D(3)(a)(vii)(C) provides
that a temporary judge shall disqualify himself or herself for any reason “a person aware
of the facts might reasonably entertain a doubt that the temporary judge would be able
to be impartial.” Indeed, the court in Dunk v. Ford Motor Co., supra, 48 Cal.App.4th at
pp. 1802-1803 noted, in support of its conclusion that a class settlement was fair and
reasonable, that “[t]he independent mediator, a retired superior court judge and
appellate justice with substantial experience and respect in the legal community,
recommended the settlement.” Surely, in the instant case, it would be problematic for
the temporary judge to rely on a similar fact – that a respected retired superior court
judge had recommended the settlement in mediation – when the temporary judge had
been the mediator making that recommendation.
14
proceedings and may appear to defend itself in a writ proceeding only in a limited
number of circumstances.” (Ibid.) Such limitations are imposed for two reasons: first,
the trial court is generally a neutral party and must remain impartial; and second, it is
generally the real party in interest, not the court, that has the beneficial interest in the
litigation and is therefore the aggrieved party. (Id. at p. 280.)
The mere fact that the real party in interest does not oppose a writ petition is not,
standing alone, sufficient to justify the trial court in assuming an advocacy position in
the Court of Appeal. (Ng v. Superior Court (1997) 52 Cal. App. 4th 1010, 1019,
disapproved on another ground in Curle v. Superior Court (2001) 24 Cal. 4th 1057,
1069.) Lower courts may appear to defend their actions on appeal when the real party
in interest does not appear; and (1) the issue involved directly impacts the operations
and procedures of the court, or (2) potentially imposes financial obligations which
would directly affect the court’s operations. (Ibid.) Additionally, a trial court can be
permitted to appear on appeal when, due to unique circumstances, the real party in
interest cannot “meaningfully oppose the petition.” (James G. v. Superior Court, supra,
at p. 282 [real party in interest could not oppose the petition because the proceedings in
question were confidential].) When a potentially adverse act occurred and no party
other than the Superior Court can adequately defend or explain the act, the Superior
Court’s appearance is essential for meaningful appellate review. (Ibid.)
In this case, Luckey suggests that the Superior Court lacked standing to oppose
his writ petition because the Superior Court “has presented no evidence that the issues
presented impact the operations or procedures of the Court or that the decision will
15
impose any financial obligations on the court’s operations.” The argument is puzzling
given the arguments Luckey makes in support of his petition. First, Luckey argues that
he is, in fact, challenging a procedure of the court, not merely an isolated ruling.15
Luckey represents that the Superior Court previously “routinely issued orders
appointing temporary judges to preside over class action matters,” but, “in or around
November 2013,” the court “stopped” approving those stipulations and began denying
them. Second, Luckey argues at length, although without evidentiary basis, that the
court’s financial obligations are, in fact, at issue. Luckey argues that lengthy delays are
now the reality in class action litigation, and that parties should be permitted to avoid
these delays by the use of temporary judges – a procedure which, according to Luckey,
would “alleviate[] space for other litigants” at Superior Court. Indeed, Luckey
represents that the Superior Court previously appointed temporary judges to serve in
class action matters “in part[] due to congested and backlogged dockets.” As the
Superior Court’s procedures and financial obligations are at issue, the Superior Court
has a right to appear.
Moreover, due to the unique procedural circumstances of the case, the Superior
Court is the only party in a position to defend the ruling below. At the heart of this case
is a class action settlement reached by the named plaintiff and the defendant.
A determination will have to be made as to whether that settlement is fair and
reasonable to the absent class members; we are called upon to determine whether
15
Indeed, the “Introduction” section of Luckey’s petition states that the petition
“raises issues of first impression that are of great importance to the management of the
state’s trial courts.”
16
a temporary judge can make that determination. While the named plaintiff and the
defendant may agree that a temporary judge is appropriate, absent class members may
not agree. The Superior Court denied approval of the stipulation for this very reason;
the court was concerned that there was no agreement by the absent class members. But,
by the very nature of the procedural history of this case – the class has not yet been
certified – no absent class member has notice of this writ petition and can appear to
defend his or her right to have the reasonableness of the settlement agreement
determined by a trial court judge. As such, the Superior Court is the only party who can
appear and represent the interest of the absent class members; its appearance is therefore
essential for meaningful appellate review.
Finally, if we are mistaken in the above analysis and the Superior Court lacks
standing to appear, we will simply consider the Superior Court’s brief as an amicus
brief. (Entente Design, Inc. v. Superior Court (2013) 214 Cal. App. 4th 385, 389, fn. 2;
Zilog, Inc. v. Superior Court (2001) 86 Cal. App. 4th 1309, 1315, fn. 2.)
3. The Trial Court Did Not Err in Denying Approval of the
Stipulation to a Temporary Judge
The main issue presented by this writ petition is whether the trial court erred in
denying approval of the stipulation to a temporary judge in this pre-certification
settlement class action. Specifically, the named plaintiff and the defendant sought to
stipulate to a temporary judge for resolution of the certification and settlement approval
issues which would be considered at the preliminary and final approval hearings. The
trial court denied approval on the basis that the absent class members had not joined in
17
the stipulation. In order to review the propriety of this order, we will consider: (1) the
constitutional provision providing for the use of temporary judges; (2) the applicable
rules of court; and (3) public policy concerns. We will conclude that each of these
sources of authority supports the trial court’s ruling.
a. The Constitution
“The judicial power of the state is vested in the Supreme Court, Courts of
Appeal, superior courts, municipal courts, and justice courts. [Citations.] The
California Constitution provides that the Governor appoints superior court judges when
there are vacancies, but that after appointment, on completion of the term, superior court
judges must sit for nonpartisan election. [Citations.] It also provides for qualifications
[citation], a six-year term [citation], and limited grounds for removal [citation].” (In re
Horton (1991) 54 Cal. 3d 82, 89-90.) “Since 1862, our Constitution has contemplated
the use of court commissioners to perform ‘chamber business’ [citations], now referred
to as ‘subordinate judicial duties.’ [Citations.] In addition, since 1879, our Constitution
has permitted a cause to be tried in the superior court by a temporary judge.
[Citations.]” (Id. at p. 90.)
California Constitution, article VI, section 21 provides, “On stipulation of the
parties litigant the court may order a cause to be tried by a temporary judge who is
a member of the State Bar, sworn and empowered to act until final determination of the
cause.” “The delegation of judicial power is constitutionally limited and can only be
effected by a ‘stipulation of the parties litigant.’ [Citation.] In the absence of the
parties’ consent, the Constitution only allows the delegation of the performance of
18
subordinate judicial duties, which do not include deciding questions of law. [Citation.]”
(Kim v. Superior Court (1998) 64 Cal. App. 4th 256, 259-260.) “Absent a valid
stipulation, a temporary judge has no jurisdiction to act and any actions purportedly
taken are therefore void.” (Del Real v. City of Riverside (2002) 95 Cal. App. 4th 761,
765.)
In this case, counsel for Luckey attempted to enter into the stipulation for
a temporary judge on behalf of the entire putative class. This case, therefore, raises the
issue whether absent class members in a pre-certification class are considered “parties
litigant,” within the meaning of California Constitution, article VI, section 21, who must
stipulate to the temporary judge in order for such a stipulation to be effective.
A similar issue was considered by our Supreme Court in Estate of Kent (1936)
6 Cal. 2d 154, which decided the issue of whether individuals and entities (heirs,
devisees, and creditors) in a probate action who had been given notice but failed to
appear were required to join in a stipulation to a temporary judge in order for that
stipulation to be effective. The court first considered which individuals and entities are
considered “parties” in a probate proceeding (id. at p. 160) and then considered the
further meaning of “parties litigant” (id. at pp. 162-163).
The court first concluded that, in a probate matter, many individuals and entities
must be given notice, and have the right to appear and become parties in the action. If,
however, they fail to appear in the action, they cannot be considered parties. (Id. at
pp. 160-161.) As to the issue of “parties litigant,” the court stated: “ ‘Under the
customary rules of constitutional interpretation each word should be given some value.
19
In the constitutional provision the word “litigant” qualifies the word “parties” and the
two words must be given some value beyond the one word “parties”. Obviously the
phrase “parties litigant” means the parties who are taking part in the litigation,—those
who have appeared therein. There are many causes at law and in equity where the
rights of parties are determined although the parties themselves do not conduct the
litigation. These actions, where contested, proceed under the direction of parties to the
controversy who have appeared—who are “parties litigant”. At the same time the
proceeding determines the rights of other parties in interest but not litigant. Among
such cases are receiverships, representative suits, actions by and against trustees, and,
assuming that nonappearing heirs and devisees and creditors are parties, then the several
proceedings in probate.’ ” (Estate of Kent, supra, 6 Cal.2d at p. 162.) “Active parties to
the litigation may bind passive parties by stipulation.” (Id. at p. 163.)
The law is clear, however, that in order for passive parties to be bound, they must
have had notice and chosen not to appear or otherwise litigate. “It has repeatedly been
held that the term ‘ “parties litigant” means the parties who are taking part in the
litigation,—those who have appeared therein.’ [Citation.] A party who has notice of
a proceeding but fails to appear or otherwise take part loses the status of party litigant.
[Citation.]” (Reisman v. Shahverdian (1984) 153 Cal. App. 3d 1074, 1089.) “Party
litigant status can be lost by a party who fails to appear at trial despite receipt of proper
notice.” (Id. at p. 1092.)
An application of the Estate of Kent analysis to the instant case is complicated by
the fact that, in a class action context, whether non-representative class members are
20
considered “parties” is not a question easily answered. In Earley v. Superior Court
(2000) 79 Cal. App. 4th 1420, we explained that “[a]bsent class members may be
‘parties’ for certain purposes, but for other purposes they are not.” (Id. at p. 1434,
fn. 11.) What is clear, however, is that absent class members in a post-certification
class – those who have received notice and elected not to appear or opt out – are not
“parties litigant.” In such a situation, the court has made a finding that the named
plaintiff can adequately represent the absent class members, and the absent class
members, by declining to intervene or opt out, have impliedly consented to be
represented by the named plaintiff. “A class action is a representative action in which
the class representatives assume a fiduciary responsibility to prosecute the action on
behalf of the absent parties. [Citation.] The representative parties not only make the
decision to bring the case in the first place, but even after class certification and notice,
they are the ones responsible for trying the case, appearing in court, and working with
class counsel on behalf of absent members.”16 (Id. at p. 1434.)
16
For this reason, an argument could be made that class counsel can stipulate to
a temporary judge on behalf of an already certified class. As the class in this case was
not yet certified, the issue is not before this court. We do note, however, that Luckey
interprets the argument that a class action must already be certified before class counsel
can stipulate to a temporary judge as implying that the stipulation could come in the
instant action after the preliminary approval hearing. This is incorrect; after preliminary
approval, a settlement class is only provisionally certified (Cal. Rules of Court,
rule 3.769(d)) and the class members have not yet received notice and an opportunity to
appear in the action (Cal. Rules of Court, rule 3.769(f)). It may well be that class
counsel can stipulate to a temporary judge on behalf of an already certified class
because the class members have received notice and chosen not to appear. This
rationale simply does not exist with a provisionally certified class following
a preliminary approval hearing.
21
We, however, do not have such a circumstance before us in this case. No class
has been certified; no notice has been given absent class members; no absent class
members have been given the opportunity to appear. “ ‘After the members of the class
have been properly notified of the action, they are required to decide whether to remain
members of the class represented by plaintiffs’ counsel and become bound by
a favorable or unfavorable judgment in the action, whether to intervene in the action
through counsel of their own choosing, or whether to “opt out” of the action and pursue
their own independent remedies, such as negotiation with defendants, initiation of their
own action, or intervention in some other action.’ [Citations.]” (Carter v. City of
Los Angeles (2014) 224 Cal. App. 4th 808, 818.) None of this has yet occurred in the
instant action. Some members of the putative class, upon receiving notice, may choose
to intervene in the action and become parties litigant. Other members of the putative
class, upon receiving notice, may choose to opt out. At this stage of the proceeding, it is
simply unknown which members of the putative class will choose to become parties
litigant, which members will choose to opt out, and which members will choose to be
absent class members bound by the actions taken by class counsel. Any identification
of the “parties litigant” in this case is, therefore, premature. When notice has not yet
been given to the putative class members, it cannot be determined who will be the
parties litigant.
Thus, we conclude that, while Luckey and Cotton On were the only “parties
litigant” at the time of the stipulation to the temporary judge, they were also the only
parties who could be bound by such a stipulation. As the conceded purpose of the
22
stipulation was to bind all putative class members to the stipulation,17 and they could
not be bound until they had been given notice and an opportunity to appear, the
stipulation was ineffective. The state Constitution provides that, for a stipulation to
a temporary judge to be effective, that stipulation must be made by the parties litigant.
In a pre-certification class action, the parties litigant have not yet been identified; thus,
no such stipulation can be effectively made.18
b. The Applicable Rules of Court
Our consideration of the applicable rules of court leads us to the same
conclusion. California Rules of Court, rule 2.835(b) governs requests to intervene in
matters pending before temporary judges. It states, in pertinent part, “A motion for
leave to file a complaint for intervention in a case pending before a temporary judge
requested by the parties must be filed with the court and served on all parties and the
temporary judge. The motion must be heard by the trial court judge to whom the case is
17
Luckey takes the position that if, after receiving notice, any class member sought
to object to the use of a temporary judge, that class member could make that objection
to the temporary judge. In other words, Luckey takes the position that the temporary
judge could rule on a class member’s objection to the use of the temporary judge,
despite the fact that the objecting class member never stipulated to the temporary judge
having jurisdiction to hear that objection. This cannot be. The only plaintiff to stipulate
to the temporary judge is Luckey; he could not speak for the class members who never
even had notice that he purported to speak for them.
18
Luckey argues that, taken to its logical extreme, this rationale would lead to the
conclusion that putative class counsel could never stipulate to anything in
a pre-certification class, including “issues regarding hearing dates, deadlines for
amendments to the pleadings, and a wide range of other case management issues.” We
disagree. There is a fundamental difference between stipulating to a continuance and
stipulating to waive an absent putative class member’s constitutional right to have the
matter heard by a duly appointed trial court judge.
23
assigned or, if the case has not been assigned, by the presiding judge or his or her
designee. If intervention is allowed, the case must be returned to the trial court docket
unless all parties stipulate . . . to proceed before the temporary judge.” In other words,
when a party seeks to intervene in a matter pending before a temporary judge, that
party’s right to intervene must be determined by the trial court, not the temporary judge.
Furthermore, if intervention is permitted, the case must be returned to trial court unless
the intervenor also agrees to the temporary judge.
As we have discussed above, a class member receiving notice of a class action
can choose to intervene in the action. Moreover, “[i]n the context of a class settlement,
objecting is the procedural equivalent of intervening.” (Wershba v. Apple Computer,
Inc., supra, 91 Cal.App.4th at p. 253.) As such, in the context of a class settlement, if
a class member seeks to object, the class member has the right to have his or her
objection heard before the trial judge, unless that class member specifically stipulates to
the temporary judge hearing the matter. As class member objections to the settlement
are heard at the final approval hearing, it would be a useless act for a named plaintiff
and class action defendant to stipulate to a temporary judge to preside over the final
approval hearing – at least until such time as it has been determined that there will be no
class member objections.19
19
In our request for letter briefing, we asked the parties to address the effect of
California Rules of Court, rule 2.835(b) on Luckey’s argument. In response, Luckey
conceded that, if a class member sought to intervene, that motion would be heard by the
trial court, and, if granted, the matter must be returned from the temporary judge to the
trial court judge. However, Luckey argued that a different result would occur with
a class member who merely filed a written objection and did not formally appear.
24
Indeed, because the presence of intervenors requires a matter before a temporary
judge to be returned to the trial court, the Superior Court has established a local rule
indicating that when parties stipulate to a temporary judge, “the parties and their
attorneys represent that (1) they are the only parties to the case, and (2) no new parties
will be added.” (Super. Ct. L.A. County, Local Rules, rule 2.24(g).) In
a pre-certification class action, no party could honestly make such a representation, as it
Luckey takes issues with the proposition that a class member who files a written
objection, but does not appear, should be considered an intervenor for the purposes of
this rule. In some ways, the issue is not technically before us – the fact that any class
members who may file motions to intervene have not yet been identified is itself
dispositive. Nonetheless, we reject Luckey’s argument and conclude that an objector is
the equivalent of an intervenor in this context for two reasons. First, in Wershba v.
Apple Computer, Inc., supra, 91 Cal.App.4th at p. 253, the court held that objecting was
the procedural equivalent of intervening in a case where the class notice did not inform
the class members of their right to seek intervention, but only “presented the options of
accepting the benefits of the settlement, objecting or opting out.” (Ibid.) Similarly, the
notice to be sent to the class in this case, pursuant to the settlement agreement, informs
class members of their rights to object or opt out and does not otherwise inform them of
intervention as an option. Thus, Luckey’s notice to the class treats objection as the
equivalent of intervention; we do the same. Second, a class member objecting to the
settlement is taking an active part in the litigation and becomes a party litigant. (This is
especially so in this case, where the class notice specifically informs the class members
that they need not come to the hearing in order for their written objections to be
considered by the court.) Luckey suggests that a class member merely objecting to the
settlement does not become a party litigant unless that objector makes a formal
appearance in the case. We disagree. The law does not define “parties litigant” as those
who have formally appeared and non-parties litigant as those who have notice but have
not formally appeared. Instead, the focus is on whether the parties “are taking part in
the litigation”; the question is whether, once a party has notice, the party “fails to appear
or otherwise take part.” (Reisman v. Shahverdian, supra, 153 Cal.App.3d at p. 1089,
italics added.) A class member who, upon receiving notice, files a written objection is
clearly taking part in the litigation. He or she is therefore a party litigant.
25
is unknown which, if any, class members will chose to intervene once the class is
certified and notice is given to the class members.20
Therefore, California Rules of Court, rule 2.835(b) and Superior Court, Local
Rules, rule 2.24(g) both lead to the conclusion that, in a pre-certification class, there can
be no stipulation to a temporary judge which can bind the absent class members.21
20
In his writ petition, Luckey affirmatively represented that the stipulation in this
case “complied with the provisions of . . . Los Angeles Superior Court Local Rule,
Rule 2.24.” By request for additional briefing, we called the parties’ attention to the
fact that subdivision (g) of that rule provides that, by submitting a stipulation, the parties
and their attorneys represent that no new parties will be added to the case, and
specifically asked the parties to brief the issue of whether this rule precluded
a stipulation in the context of a pre-certification settlement class. While Luckey’s
response simply stated that the local rule did not prevent such a stipulation, the response
failed to address how any such stipulation could be in compliance with the cited
subdivision. As discussed above, Luckey took the position that an objection to
a stipulated judgment is not the equivalent of a request to intervene, but he conceded
that both are possible responses to receipt of class notice. As Luckey concedes that, at
a minimum, class members may move to intervene upon receiving class notice, neither
Luckey nor his counsel could have represented, at the time of the stipulation, that no
new parties would be added to the case.
21
It could be argued that the rules of court (and local rules) relating to temporary
judges are not mandatory. The rules of court provide that a stipulation to a temporary
judge must be in writing. (Cal. Rules of Court, rule 2.831(a).) However, several cases
have concluded that such a stipulation need not be in writing or even expressly made,
but can be implied by the conduct of the parties. (Gridley v. Gridley (2008)
166 Cal. App. 4th 1579-1580; Estate of Fain (1999) 75 Cal. App. 4th 973, 988-989.)
These cases have concluded that the requirements of the rules of court, in excess of the
requirements of the Constitution, are “directory rather than mandatory.” (Gridley v.
Gridley, supra, 166 Cal.App.4th at p. 1579; Estate of Fain, supra, 75 Cal.App.4th at
p. 989.) “ ‘[T]he “mandatory” or “directory” designation does not refer to whether
a particular statutory requirement is obligatory or permissive, but instead denotes
“ ‘whether the failure to comply with a particular procedural step will or will not have
the effect of invalidating the governmental action to which the procedural requirement
relates.’ ” [Citation.]’ [Citation.]” (People v. Gray (2014) 58 Cal. 4th 901, 909.) In
other words, while it is not reversible error for a case to proceed before a temporary
judge on an oral or implied stipulation, it is nonetheless required that such a stipulation
26
c. Public Policy Concerns
Finally, we consider the impact of public policy concerns. First, we examine the
public policy issues raised by the unique context of a pre-certification settlement class.
Second, we consider policy arguments regarding due process protections. Third, we
consider policy arguments regarding the constitutional right to choose a temporary
judge. Fourth and finally, we discuss Luckey’s argument regarding the policy in favor
of allowing parties to resolve their disputes as they wish.
First, we again note the procedural posture of the case at the time of the
stipulation. Luckey and Cotton On had reached a pre-certification settlement of the
putative class action. They sought appointment of a temporary judge to preside over the
preliminary and final approval hearings, at which class certification issues and the
fairness of the settlement would be considered. In the context of pre-certification
settlement, both of these determinations require the trial court to exercise heightened
scrutiny to protect the interests of absent class members. In its certification inquiry, the
court is required to ensure that the class definition is not unwarranted or overbroad. In
its fairness inquiry, the court must be vigilant against fraud and collusion. The court is,
in short, acting in a fiduciary capacity as guardian of the rights of absentee class
members. Luckey would have the court delegate this fiduciary responsibility to
a temporary judge of Luckey’s selection, purely on Luckey’s agreement that this is
acceptable. But the trial court should not be required to yield its fiduciary responsibility
be in writing. Thus, even if the rule of court and local rule discussed above (regarding
intervenors) are directory rather than mandatory, a trial court must still comply with
them, and certainly does not err by doing so.
27
to any member of the State Bar22 so quickly. We do not, by this opinion, mean to
impugn the qualifications or good faith of the parties’ chosen temporary judge in this
22
In response to our request for additional briefing, the Superior Court argued that
California Rules of Court, rule 2.811(b) “grants the presiding judge sole discretion in
making temporary judge appointments” and that California Rules of Court,
rule 2.812(b)(5) “allows the presiding judge to assess whether a proposed temporary
judge: ‘Has satisfied any additional conditions that the court may require for an
attorney to be appointed as a temporary judge for a particular assignment or type of case
in that court.’ ” At the hearing on the order to show cause, Luckey agreed, arguing that
California Rules of Court, rule 2.812 imposes numerous experience and education
requirements on a temporary judge. Both parties are in error. As explained in
California Rules of Court, rule 2.810(a), the requirements of California Rules of Court,
rules 2.810 through 2.819 “apply to attorneys who serve as court-appointed temporary
judges in the trial courts. The rules do not apply to . . . attorneys designated by the
courts to serve as temporary judges at the parties’ request.”
This is not to say that the presiding judge is required to approve any temporary
judge designated by the parties if the stipulation is otherwise proper. Indeed, Luckey
concedes that the presiding judge retains discretion to consider the qualifications and
experience of a proposed temporary judge. We agree. California Constitution, article
VI, section 21 provides that “[o]n stipulation of the parties litigant the court may order
a cause to be tried by a temporary judge who is a member of the State Bar . . . . ”
(Italics added.) The use of “may” implies discretion; the Constitution could have stated
“must,” if it was believed the courts lacked discretion to deny approval of a stipulation.
Moreover, prior to a 1966 repeal and reenactment, the constitutional provision
governing temporary judges provided, in pertinent part, that “[t]he selection of such
judge pro tempore shall be subject to the approval and order of the court in which said
cause is pending . . . . ” (Cal. Const., art. VI, fmr. § 5.) “The purpose of the [1966]
revision was to state the substance of the prior provision ‘concisely in modern terms.’
[Citation.]” (In re Horton, supra, 54 Cal.3d at p. 90, fn. 1.) Thus, it would appear that
the use of “may” was, in fact, intended to retain the provision that the selection of
a temporary judge “shall be subject to the approval . . . of the court.” Moreover, logic
supports the argument. The Constitution permits the parties to stipulate to any member
of the State Bar as a temporary judge. Surely, a trial court must have discretion to
refuse approval of a stipulation for a temporary judge if, for example, the identified
temporary judge has a lengthy record of discipline, is related to one of the parties, is
a member of the class, has factual knowledge of the dispute, or has no relevant
experience in the type of case at issue. A proceeding before a temporary judge is still
a proceeding with the court’s imprimatur; a court should not be forced to allow an
action to proceed before an obviously unqualified temporary judge simply because the
parties wish it.
28
case. However, just because the parties may have chosen a qualified temporary judge in
the instant action does not mean that a trial court should be required to cease protecting
the interests of absent class members on nothing more than the mere request of the
named plaintiff.
Second, Luckey argues that, if the stipulation to the temporary judge is approved,
the class members will suffer no deprivation of their due process rights because all
statutes, rules of court, rules of judicial ethics, and case law remain applicable to the
proceedings before a temporary judge. Yet this argument proves too much; if there is
no deprivation of rights worked by proceeding before a temporary judge, parties could
be ordered to proceed before a temporary judge in the absence of a stipulation, and,
indeed, against their will. This is clearly not the case; our Constitution requires
a stipulation before a matter can be heard before a temporary judge because the parties
have a right to have their dispute heard before a duly appointed judge. Absent class
members cannot be deprived of their constitutional right to have their class rights
determined by a duly appointed judge without, at the very least, a certification order,
notice, and the opportunity to appear.23
Third, Luckey argues that “absent the relief requested herein, [petitioners] will be
deprived of their constitutional right to have their case resolved by a privately
compensated judge.” On the contrary, if Luckey and Cotton On wish to resolve their
dispute by a privately compensated temporary judge, they are free to do so. However, if
23
As already noted, the issue of whether a representative plaintiff may stipulate to
a temporary judge on behalf of a post-certification class is not before us.
29
they wish to resolve the dispute between the entire putative class and Cotton On, they
cannot do so in the absence of a certification order and notice to the class.24 It is the
putative class that is at risk of losing its constitutional right, not Luckey.
Fourth, Luckey argues that, based on Neary v. Regents of University of
California (1992) 3 Cal. 4th 273 (Neary), the policy of California courts is to respect the
parties’ decisions regarding how they would like their litigation to proceed. It is true
that, as a general rule, “[t]he courts exist for litigants. Litigants do not exist for courts.”
(Id. at p. 280.) Therefore, when the parties seek to resolve their disputes amicably, the
courts should respect the parties’ choice and assist them in settlement. (Ibid.) This does
not mean, however, that when the named parties seek to agree to a temporary judge on
behalf of a pre-certification settlement class, the courts must approve the agreement.
“Unlike Neary, this is not an ordinary civil action.” (Consumer Advocacy Group, Inc. v.
Kintetsu Enterprises of America (2006) 141 Cal. App. 4th 46, 63 [distinguishing the
policy in Neary in a Proposition 65 case, because the public interest is implicated in the
latter].) The interests of unnamed pre-certification class members are present in this
case, and the courts cannot permit their respect for the litigants’ rights to agree on how
to resolve their dispute to outweigh the court’s responsibility to protect the rights of
absent class members.
24
We again emphasize that the only basis on which Luckey seeks to bind the class
is the fact that Luckey filed a putative class action. Luckey has not been found to be
a proper representative of the putative class; the class has not been certified; and the
class members have been given no opportunity to opt out. Luckey seeks to waive, on
behalf of hundreds of thousands of people, their right to have their dispute heard before
a duly-appointed trial court judge simply on the basis that he has filed a complaint in
which he seeks to represent them.
30
DISPOSITION
The writ petition is denied.
CERTIFIED FOR PUBLICATION
CROSKEY, Acting P. J.
WE CONCUR:
KITCHING, J.
ALDRICH, J.
31