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Williams v. U.S. Bancorp Investments, Inc. ( 2020 )


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  • Filed 6/8/20
    CERTIFIED FOR PUBLICATION
    IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
    FIRST APPELLATE DISTRICT
    DIVISION FOUR
    SCOTT WILLIAMS,
    Plaintiff and Appellant,
    A156226
    v.
    U.S. BANCORP INVESTMENTS,                     (City & County of San Francisco
    INC., et al.,                                 Super. Ct. No. CGC10499011)
    Defendants and Respondents.
    In a class action, an order denying certification to a proposed class does
    not preclude an absent member of the putative class from later seeking to
    certify an identical class in a second action. (Smith v. Bayer Corp. (2011) 
    564 U.S. 299
    , 312–316 (Smith); Bridgeford v. Pacific Health Corp. (2012) 
    202 Cal.App.4th 1034
    , 1041–1044 (Bridgeford).) In this case, we are called upon
    to decide a closely related question: whether collateral estoppel bars an
    absent member in a putative class that was initially certified, but later
    decertified, from subsequently pursuing an identical class action. We
    conclude that the rule of Smith and Bridgeford applies equally in this
    context. Accordingly, we reverse the trial court’s order dismissing plaintiff’s
    class claims and compelling arbitration of his individual claims.
    FACTUAL AND PROCEDURAL BACKGROUND
    The Burakoff Action
    Two lawsuits are at issue here. The first of them, Burakoff et al. v.
    U.S. Bancorp (Super. Ct., L.A. County, 2008, No. BC341430) (Burakoff), was
    1
    a class action brought in the Los Angeles County Superior Court in 2005 by
    Robert Burakoff and Mohamed Alakozai, seeking restitution of overtime
    wages and wage deductions, waiting time penalties, and meal and rest
    breaks. In the Burakoff action, the named plaintiffs alleged they worked for
    U.S. Bancorp. Subclass A was those “who worked more than 40 hours in a
    week or 8 hours in a day, but did not receive overtime pay,” and Subclass B
    was those who were illegally required to bear the cost of their business
    expenses.
    On May 8, 2008, the Los Angeles County Superior Court granted
    Burakoff and Alakozai’s motion for class certification, certifying a class of
    “[a]ll individuals who are or were employed by Defendant as Investment
    Financial Consultants in the State of California” for a period running
    through the date of the order, and certifying the two requested subclasses.
    The court ordered that notice be given to class members.
    Williams Files the Present Action
    The plaintiff in the present action, Scott Williams, joined U.S. Bancorp
    as a financial consultant in May 2007. He immediately became a member of
    the Burakoff putative class, and presumably received notice after that class
    was certified the following year. Then on April 23, 2010, he filed his own
    class action against U.S. Bancorp Investments, Inc. and U.S. Bancorp
    (collectively, U.S. Bancorp) in the San Francisco Superior Court, similarly
    alleging causes of action for unpaid overtime, unpaid meal-period premiums,
    unpaid rest-period premiums, unpaid business expenses, wages not timely
    paid, non-compliant wage statements, and unfair business practices. He
    alleged U.S. Bancorp employed him as a financial advisor and investment
    financial consultant, which are commission-paid positions. His complaint
    proposed a class period beginning the day after the Burakoff class period
    2
    ended, and two subclasses consistent with those in Burakoff: (1) the “Unpaid
    Wages Subclass,” defined as “All commission paid employees who worked for
    Defendants in California from May 9, 2008 until the date of certification,”
    and (2) the “Unreimbursed Business Expenses Subclass,” defined as “All
    employees of Defendants who paid for business-related expenses, including
    expenses for assistants, client or prospect beverages or meals, or cell phone
    expenses, in California from May 9, 2008 until the date of certification.”
    U.S. Bancorp demurred to the first amended complaint on the ground
    Williams was part of the certified class in the Burakoff action then pending in
    the Los Angeles Superior Court. The trial court determined Williams’s case
    was “founded upon the same primary rights, states substantially the same
    causes of action, and involves substantially the same parties” as the Burakoff
    action, and so it stayed the case until the proceedings in Burakoff concluded.
    Decertification and Settlement in Burakoff
    After the parties in Burakoff engaged in extensive discovery around
    class issues, U.S. Bancorp moved to decertify the class. In May 2011, the Los
    Angeles Superior Court granted the motion as to Subclass A, decertifying this
    overtime subclass on the ground its alleged members lacked sufficient
    commonality. The court concluded it would be required to conduct numerous
    case-by-case inquiries into such matters as the amount of time the individual
    class members spent on various job duties and their level of autonomy in
    carrying out their work in order to determine whether each individual
    member fell within various exemptions from state and federal overtime pay
    laws. The court denied the motion as to Subclass B, allowing the claims for
    unreimbursed business expenses to go forward on a class-wide basis.
    The following year, the parties settled Burakoff. The named plaintiffs
    agreed to release all their claims against U.S. Bancorp, and the members of
    3
    Subclass B released their claims for unpaid business expenses. The trial
    court approved the settlement agreement and entered judgment accordingly.
    Williams participated in the Burakoff settlement and received compensation
    as a member of Subclass B. But he did not, nor did any of the other absent
    members of alleged Subclass A, release his wage and hour claims.
    Arbitration Demand and Earlier Appeal
    U.S. Bancorp then demanded in the present action that Williams drop
    his class claims and arbitrate his individual claims. U.S. Bancorp cited an
    agreement Williams had signed that required arbitration of individual
    disputes and that prohibited arbitration of claims alleged as class claims
    until class certification had been denied, or the class decertified.1 When
    Williams did not agree to arbitrate his individual claims, U.S. Bancorp
    brought a motion to compel arbitration and to dismiss the first amended
    complaint. It argued the Burakoff decertification order collaterally estopped
    Williams from relitigating the appropriateness of class certification because
    he was a member of the Burakoff class, and because the two cases raised
    substantially the same claims and identical class certification issues.
    Williams agreed to the dismissal of his claim for unpaid business expenses
    only.
    Specifically, Williams had signed a “Form U4” at the outset of his
    1
    employment, which included an agreement to arbitrate claims against U.S.
    Bancorp “under the rules of the self-regulatory organizations with which you
    are registering.” The applicable Financial Industry Regulatory Authority’s
    Code of Arbitration Procedure for Industry Dispute (FINRA rules) prohibits
    enforcement of an arbitration agreement against “a member of a certified or
    putative class action with respect to any claim that is the subject of the
    certified or putative class action” until, inter alia, certification is denied or
    the class is decertified. (Former FINRA rule 13204(d) [now FINRA rule
    13204(a)(4)].)
    4
    The trial court initially denied U.S. Bancorp’s motion to compel
    arbitration and dismiss the remaining class claim, concluding that Burakoff’s
    Subclass A and the putative class in this case were not identical. They were
    comprised of different class members during different time periods, so
    collateral estoppel did not apply, the trial court ruled.
    U.S. Bancorp appealed, and a different panel of this division affirmed
    the trial court’s order. (Williams v. U.S. Bancorp Investments, Inc. (June 27,
    2016, A141199) [nonpub. opn.] (Williams I).) We noted that no record had yet
    been developed in connection with a motion for class certification, and
    concluded that U.S. Bancorp had not met its burden to show that the job
    duties of members of the Burakoff class were identical to those of the current
    putative class, covering a later period, or that any differences between the
    Burakoff class and the proposed class were immaterial.
    The Present Dispute
    On remand, U.S. Bancorp renewed its motion to compel arbitration of
    Williams’s individual claims after conducting discovery relevant to class
    certification. The trial court granted the motion on October 25, 2018,
    concluding that a class decertification order may have collateral estoppel
    effect, and that the decertification order in Burakoff barred Williams’s claims
    because facts developed in discovery showed brokers’ job duties and time
    spent performing those duties were materially the same during both class
    periods. On November 21, 2018, the trial court dismissed Williams’s class
    claims with prejudice, and then added that it was making no “order
    regarding the class claims of absent putative class members.”
    5
    DISCUSSION
    I. Appealability—Death Knell Doctrine
    A threshold question is whether the order compelling plaintiff to
    arbitrate his individual claims is immediately appealable. Normally, an
    order compelling arbitration may be challenged only in an appeal from the
    ensuing judgment. (Nelsen v. Legacy Partners Residential, Inc. (2012) 
    207 Cal.App.4th 1115
    , 1121–1122.) But an exception to this rule is found in the
    death knell doctrine.
    According to this doctrine, “ ‘an order which allows a plaintiff to pursue
    individual claims, but prevents the plaintiff from maintaining the claims as a
    class action, . . . is immediately appealable because it “effectively r[ings] the
    death knell for the class claims.” ’ ” (Miranda v. Anderson Enterprises, Inc.
    (2015) 
    241 Cal.App.4th 196
    , 200; accord In re Baycol Cases I & II (2011) 
    51 Cal.4th 751
    , 759 (Baycol Cases).) An order directing a plaintiff to arbitrate
    his or her claims individually, rather than pursuing class claims in court,
    falls within the scope of the death knell doctrine. (Phillips v. Sprint PCS
    (2012) 
    209 Cal.App.4th 758
    , 766.)
    The scope of the death knell doctrine is limited, however. When an
    order does not terminate an action’s class claims entirely, but merely limits
    the scope of the class or the claims available, the order does not act as a
    death knell and is not immediately appealable. (Baycol Cases, 
    supra,
     51
    Cal.4th at pp. 757–758.) This may occur, for instance, when a trial court
    certifies a class of a lesser size than requested. (General Motors Corp. v.
    Superior Court (1988) 
    199 Cal.App.3d 247
    , 249, 251 [court certified statewide,
    rather than nationwide, class]; Green v. Obledo (1981) 
    29 Cal.3d 126
    , 149,
    fn. 18 [court decertified only a portion of class]; Shelley v. City of Los Angeles
    (1995) 
    36 Cal.App.4th 692
    , 694, 697 [certification order limited class to 469
    6
    members].) It may also occur when the court denies class certification of only
    some causes of action (General Motors, at pp. 250–251, citing Vasquez v.
    Superior Court (1971) 
    4 Cal.3d 800
    , 806–807), or when other representative
    claims remain (Cortez v. Doty Bros. Equipment Co. (2017) 
    15 Cal.App.5th 1
    ,
    8–9; Young v. RemX, Inc. (2016) 
    2 Cal.App.5th 630
    , 634–635). Where no
    other representative claims are pleaded, the “determinative issue is whether
    any ‘viable class claim remains pending in the trial court’ after the
    challenged order.” (Williams v. Impax Laboratories, Inc. (2019) 
    41 Cal.App.5th 1060
    , 1068.)
    U.S. Bancorp argues the death knell doctrine is inapplicable here
    because the trial court expressly “d[id] not make an order regarding the class
    claims of absent putative class members.” Thus, U.S. Bancorp contends, the
    order merely limits the scope of the putative class by removing plaintiff from
    it, without affecting the class claims of other putative class members.
    This argument is unpersuasive for two reasons. First, Williams is the
    only named plaintiff in this case. No other purported class members are
    present to assert class claims. Thus, the effect of the order terminating
    Williams’s class claims is to terminate the action as a class action, leaving no
    viable class claims pending. (Baycol Cases, supra, 51 Cal.4th at pp. 757–758.)
    Second, the trial court’s statement that it made no order regarding
    absent class members has no legal significance. Having refused to certify the
    class, the trial court could make no ruling that would bind absent members of
    the purported class. (See Bridgeford, supra, 202 Cal.App.4th at p. 1044.)
    The trial court’s comment, effectively denying U.S. Bancorp’s request that the
    court dismiss the class claims of absent class members without prejudice,
    merely acknowledged the limits of the trial court’s authority. Nothing about
    the court’s refusal to enter a meaningless order alters the scope of the order it
    7
    did enter, which dismissed all pending class claims and allowed plaintiff to
    proceed only on his individual claims.
    Because this order was immediately appealable under the death knell
    doctrine, we now turn to the merits of the appeal.
    II. Collateral Estoppel Effect of Decertification Order
    The trial court concluded that, as a member of the certified class in the
    Burakoff action, Williams was bound by the order decertifying Subclass A of
    that class. Williams makes two challenges to this ruling: first, that
    collateral estoppel does not apply to orders decertifying a class as a matter of
    law; and second, that even if collateral estoppel may apply to such an order, it
    does not apply in this case. Because we agree with Williams on the first
    point, we have no occasion to discuss the second.
    A. General Principles
    Class certification requires proof of three things: (1) “ ‘a sufficiently
    numerous, ascertainable class,’ ” (2) “ ‘a well-defined community of interest,
    and (3) that certification will provide substantial benefits to litigants and the
    courts, i.e., that proceeding as a class is superior to other methods.’ ”
    (Bridgeford, supra, 202 Cal.App.4th at p. 1041.) The required community of
    interest exists when common questions of law or fact predominate, the class
    representatives have claims and defenses typical of the class, and the class
    representatives can adequately represent the class. (Ibid.) This community
    of interest and, in particular, evidence that common questions of law or fact
    predominate, is what the Burakoff court found was missing with regard to
    Subclass A.
    Collateral estoppel, or issue preclusion, bars relitigation of issues
    argued and decided in a prior proceeding. (Johnson v. GlaxoSmithKline, Inc.
    (2008) 
    166 Cal.App.4th 1497
     (Johnson).) Five threshold requirements must
    8
    be met: “ ‘First, the issue sought to be precluded from relitigation must be
    identical to that decided in a former proceeding. Second, this issue must
    have been actually litigated in the former proceeding. Third, it must have
    been necessarily decided in the former proceeding. Fourth, the decision in
    the former proceeding must be final and on the merits. Finally, the party
    against whom preclusion is sought must be the same as, or in privity with,
    the party to the former proceeding.’ ” (Id. at pp. 1507–1508; Ayala v. Dawson
    (2017) 
    13 Cal.App.5th 1319
    , 1326.) Even if these threshold requirements are
    met, a court may look “ ‘to the public policies underlying the doctrine before
    concluding that collateral estoppel should be applied in a particular setting.’ ”
    (Pacific Lumber Co. v. State Water Resources Control Bd. (2006) 
    37 Cal.4th 921
    , 943–944; Lucido v. Superior Court (1990) 
    51 Cal.3d 335
    , 343 (Lucido).)
    In particular, “ ‘courts will not apply the doctrine . . . if the party to be
    estopped had no full and fair opportunity to litigate the issue in the prior
    proceeding.’ ” (Bridgeford, supra, 202 Cal.App.4th at p. 1042.) The parties
    dispute whether Williams was a party to, or in privity with, the named
    plaintiffs in Burakoff, such that he had a full and fair opportunity to litigate
    class certification in that case.
    U.S. Bancorp, as the party asserting collateral estoppel, has the burden
    of establishing it. (Johnson, supra, 166 Cal.App.4th at p. 1508.) And because
    the trial court’s application of collateral estoppel is a question of law, our
    review is de novo. (Union Pacific Railroad Co. v. Santa Fe Pacific Pipelines,
    Inc. (2014) 
    231 Cal.App.4th 134
    , 179; Johnson, at p. 1507.)
    B. Collateral Estoppel Effect of Order Denying Certification
    The question before the court is whether these claim preclusion
    principles may operate to preclude an unnamed class member in a first action
    from relitigating the question of class certification in a second action, if the
    9
    trial court in the original case certified but then decertified a class. We begin
    by reviewing the law on a closely related question, to wit, whether the
    unnamed class member may relitigate certification in a subsequent case if
    the original trial court simply denied class certification, rather than first
    certifying and later decertifying the class.
    A line of cases has considered, and ultimately resolved, this simpler
    question. California courts initially adopted the view that an order denying
    class certification could preclude absent members of a putative class from
    relitigating certification in a subsequent case. (Alvarez v. May Dept. Stores
    Co. (2006) 
    143 Cal.App.4th 1223
    , 1233–1238; Bufil v. Dollar Financial Group,
    Inc. (2008) 
    162 Cal.App.4th 1193
    , 1202, disapproved on another ground in
    Noel v. Thrifty Payless, Inc. (2019) 
    7 Cal.5th 955
    , 986, fn. 15; see Johnson,
    supra, 166 Cal.App.4th at p. 1510, fn. 8 [noting rule of Alvarez and
    expressing reservations].)
    Then the United States Supreme Court weighed in, reaching the
    opposite conclusion as a matter of federal common law. Smith held that
    putative class members in a case where the court refused to certify a class are
    not bound by that decision; they may relitigate certification in a subsequent
    case. (Smith, 
    supra,
     564 U.S. at pp. 312–316.) This conclusion was a specific
    application “ ‘of the general rule’ that only parties can be bound by prior
    judgments,” a principle the Court called “ ‘fundamental.’ ” (Id. at p. 313,
    citing Taylor v. Sturgell (2008) 
    553 U.S. 880
    , 898 (Taylor).) The Court
    acknowledged a few well-established exceptions to this general rule, most
    importantly that unnamed class members in a “ ‘properly conducted class
    action[]’ ” are bound by a judgment when they bring subsequent litigation.
    (Smith, at p. 314, citing Taylor, at p. 894.)
    10
    In Smith, the trial court in a prior case had refused to certify a
    comparable class because it found that individual issues predominated.
    (Smith, 
    supra,
     564 U.S. at p. 304.) Final judgment was entered in the earlier
    case, but that judgment did not bind absent members of the putative class.
    The high court reasoned, “If we know one thing about the [prior] suit, we
    know that it was not a class action. Indeed, the very ruling that Bayer
    argues ought to be given preclusive effect is the District Court’s decision that
    a class could not properly be certified. So Bayer wants to bind Smith as a
    member of a class action . . . to a determination that there could not be a
    class action.” (Id. at p. 314.) “In these circumstances,” the Court explained,
    “we cannot say that a properly conducted class action existed at any time in
    the litigation.” (Id. at p. 315.)
    The Supreme Court rejected Bayer’s argument that the named plaintiff
    in the prior case had been “ ‘act[ing] in a representative capacity when he
    sought class certification.’ ” (Smith, supra, 564 U.S. at p. 314.) “Neither a
    proposed class action nor a rejected class action may bind nonparties,” the
    Court emphasized. (Id. at p. 315.) “What does have this effect is a class
    action approved under [Federal Rules of Civil Procedure] Rule 23 [(Rule 23)].
    But [the prior] lawsuit was never that.” (Smith, at p. 315.)
    Although Smith was decided under federal law, its reasoning has since
    been applied to class actions brought under California law. In Bridgeford,
    the court found Smith’s reasoning persuasive and concluded, as a matter of
    California law, that “the denial of class certification cannot establish
    collateral estoppel against unnamed putative class members on any issue.”
    (Bridgeford, supra, 202 Cal.App.4th at p. 1044.) Following Smith, the
    Bridgeford court reasoned that unnamed members of the putative class in a
    prior proceeding “were neither parties to the prior proceeding nor represented
    11
    by a party to the prior proceeding so as to be considered in privity with such a
    party for purposes of collateral estoppel.” (Bridgeford, at p. 1044.)
    Smith and Bridgeford do not directly answer the question before us,
    but they light our way as we explore an issue of first impression in California.
    C. Collateral Estoppel Effect of Order Decertifying a
    Previously Certified Class
    Williams characterizes this case as controlled by Smith and Bridgeford.
    He argues that as to Subclass A, Burakoff was both “a proposed class action”
    and “a rejected class action” not, in the end, a “ ‘properly conducted class
    action[]’ ” able to preclude absent class members from relitigating
    certification. (Smith, supra, 564 U.S. at pp. 314–315.) Taking the opposite
    view, U.S. Bancorp follows the trial court in relying on three facts said to
    distinguish this case from those precedents: that absent class members in
    Burakoff “were in fact parties, were in fact represented, and did in fact have
    an opportunity to litigate the certification issue.” Focusing on Subclass A, we
    disagree on all three points.
    First, we reject the view that absent class members in Burakoff were
    parties, for purposes of assessing that case’s preclusive effects. As in Smith,
    we start with the general proposition that “ ‘[a] “party” to litigation is “[o]ne
    by or against whom a lawsuit is brought” ’ [citation], or one who ‘become[s] a
    party by intervention, substitution, or third-party practice.’ ” (Smith, supra,
    564 U.S. at p. 313.) Williams filled no such role in Burakoff. Smith went on
    to conclude that, as a matter of federal law, the “definition of the term ‘party’
    can on no account be stretched so far as to cover a person . . . whom the
    plaintiff in a lawsuit was denied leave to represent.” (Smith, at p. 313.)
    Here, Williams is a person whom, in the final analysis, Burakoff and
    Alakozai were denied leave to represent.
    12
    To the extent California law differs, it is even stricter than federal law
    in requiring formal intervention before an absent class member may be
    considered a party. For example, federal law considers “an unnamed member
    of a certified class” to be “ ‘a “party” for the [particular] purpos[e] of
    appealing’ an adverse judgment,” (Smith, supra, 564 U.S. at p. 313, quoting
    Devlin v. Scardelletti (2002) 
    536 U.S. 1
    , 7), but the California Supreme Court
    has long held the opposite view as a matter of California law. In Hernandez
    v. Restoration Hardware, Inc. (2018) 
    4 Cal.5th 260
    , our high court reaffirmed
    that an unnamed member of a certified class is not a party with a right to
    appeal, unless the absent class member has filed a complaint in intervention
    (or an appealable motion to set aside class judgment). (Id. at pp. 263, 267,
    citing Eggert v. Pac. States S. & L. Co. (1942) 
    20 Cal.2d 199
    , 201.) Similarly,
    absent class members are not parties for purposes of assessing diversity, for
    awarding defense costs, or for obligating class counsel to convey a settlement
    offer. (Hernandez v. Vitamin Shoppe Industries Inc. (2009) 
    174 Cal.App.4th 1441
    , 1460–1461.) Indeed, “[t]he very purpose of the class action is to ‘relieve
    the absent members of the burden of participating’ ” as parties. (Earley v.
    Superior Court (2000) 
    79 Cal.App.4th 1420
    , 1434.) For that reason, for
    almost all purposes “unnamed parties are not considered ‘parties’ to the
    litigation,” even after a class is certified. (Hernandez v. Restoration
    Hardware, Inc., at p. 266.)
    Second, we reject U.S. Bancorp’s argument that Williams was
    adequately represented by class counsel in litigating whether Burakoff’s
    Subclass A was properly certified. U.S. Bancorp points out that once a class
    is certified, class counsel have a duty to represent the interests of absent
    class members competently. (See Janik v. Rudy, Exelrod & Zieff (2004) 
    119 Cal.App.4th 930
    , 937.) But although Subclass A was certified for a period, it
    13
    was ultimately decertified. Only final decisions have preclusive effect
    (Johnson, supra, 166 Cal.App.4th at p. 1508), and the final determination of
    the trial court in Burakoff was that proposed Subclass A could not properly
    be certified. Burakoff produced a final judgment and therefore also a final
    ruling decertifying the subclass,2 as the trial court correctly understood. The
    trial court’s mistake was to analyze collateral estoppel based on the original
    certification ruling, instead of from the perspective of this final ruling that
    decertified the subclass because common issues did not predominate.
    This lack of common issues meant that Burakoff’s named plaintiffs and
    their attorneys may not have adequately represented Williams’s interests. In
    a “properly conducted class action[],” “a nonparty may be bound by a
    judgment because she was ‘adequately represented by someone with the
    same interests who [wa]s a party’ to the suit.” (Taylor, supra, 553 U.S. at
    p. 894.) But preclusion requires a “properly certified class” precisely “because
    only in those circumstances can the court in the later proceeding conclude
    that [prior class members’] interests were adequately represented in the prior
    proceeding.” (Bridgeford, supra, 202 Cal.App.4th at pp. 1043–1044.) Where,
    as here, the trial court in the prior proceeding determined that individual
    issues predominated over common ones, there could be no community of
    interest. And where there is no community of interest, a later court can only
    speculate as to the extent to which the interests of the named plaintiffs and
    2  Although an order may be “ ‘sufficiently firm to be accorded conclusive
    effect’ ” before final judgment (Border Business Park, Inc. v. City of San Diego
    (2006) 
    142 Cal.App.4th 1538
    , 1564), the facts of this case show the danger of
    according any such finality to an order addressing class certification. A class
    once certified may be decertified, at least if there has been a change in the
    law or—as in Burakoff—newly discovered evidence. (Green v. Obledo, supra
    29 Cal.3d at p. 148; Weinstat v. Dentsply Internat., Inc. (2010) 
    180 Cal.App.4th 1213
    , 1226.).
    14
    the absent class members conflicted or aligned. The mechanism of a class
    action serves to “ ‘insure that those present are of the same class as those
    absent and that the litigation is so conducted as to insure the full and fair
    consideration of the common issue.’ ” (Richards v. Jefferson County (1996)
    
    517 U.S. 793
    , 801 (Richards).) Without this mechanism—i.e., where common
    issues do not predominate and no class remains certified—there is no such
    insurance.
    Because Burakoff’s Subclass A was, in the end, “a rejected class,” no
    judicial finding that the named plaintiffs adequately represented the absent
    members of that subclass survived to become final. (Smith, supra, 564 U.S.
    at p. 315.) For that reason, the decisions of the Burakoff court can have no
    preclusive effect on the absent members of that subclass. (Ibid.; see also
    Richards, 
    supra,
     517 U.S. at p. 801; Johnson, supra, 166 Cal.App.4th at
    pp. 1510–1512, fn. 8 [“concept of a ‘properly conducted class action’ suggests a
    class action that has been certified . . . and then litigated to judgment or
    settled”].) U.S. Bancorp would have us simultaneously accord preclusive
    effect to the initial certification order finding that the representative
    plaintiffs and their counsel adequately represented absent members of
    Subclass A and to the later order reversing certification of that subclass. The
    inconsistency in this position should be apparent.
    Third, we disagree with U.S. Bancorp and the trial court that Williams
    had an adequate opportunity to litigate class certification here. As we have
    seen, we cannot assume that Williams was adequately represented by class
    counsel in Burakoff with regard to his Subclass A claims. And as a nonparty
    he had no opportunity, once the trial court decertified Subclass A, to appeal
    that decertification ruling. (See Hernandez v. Restoration Hardware, Inc.,
    supra, 4 Cal.5th at pp. 273–274.) In sum, we reject all three attempts by the
    15
    trial court and U.S. Bancorp to distinguish this case from Smith and
    Bridgeford.
    Instead, we conclude the logic of Smith controls this case, even as we
    recognize a factual difference between the two cases. Williams, unlike the
    plaintiff in Smith, had notice of the prior class action and an opportunity to
    opt out. (Cf. Smith, supra, 564 U.S. at p. 304.) This difference is not
    dispositive, however, because Williams, believing Burakoff was properly
    handled as a class action, had no occasion to opt out. The fact that he
    remained an absent member of Burakoff’s Subclass A until the trial court
    decertified it does not change the fact that the Burakoff court ultimately
    concluded, on the basis of newly discovered evidence, that the sub-class was
    never proper. U.S. Bancorp now seeks to bind Williams “as a member of a
    class action . . . to a determination that there could not be a class action.”
    (Smith, at p. 314.) As that was improper in Smith, so it is improper here.
    That the Burakoff court originally believed Subclass A met the standard for
    certification changes nothing, since in the final analysis it concluded
    otherwise.
    In U.S. Bancorp’s attempt to find federal authority3 for the proposition
    that decertification is different, it overlooks the most closely analogous
    federal case. In Thorogood v. Sears (7th Cir. 2012) 
    678 F.3d 546
     (Thorogood),
    the Seventh Circuit Court of Appeals also considered the preclusive effect of
    an order decertifying a class, and reached a conclusion similar to ours.
    To simplify the procedural posture in Thorogood somewhat, plaintiff
    Thorogood brought a putative class action that was certified in the district
    court, but then decertified on appeal on the ground that there were no
    3 “Where California courts have not addressed an issue, they look to
    federal cases as persuasive authority on class action questions.” (Collins v.
    Safeway Stores, Inc. (1986) 
    187 Cal.App.3d 62
    , 73, fn. 6.)
    16
    common issues of law or fact. An absent member of Thorogood’s putative
    class, Murray, brought a copycat class action suit, which, at the direction of
    the appellate court, was enjoined as collaterally estopped by the judgment in
    the original suit. But the United States Supreme Court granted certiorari
    and directed the Seventh Circuit to reconsider the case in light of Smith.
    (Thorogood, 
    supra,
     678 F.3d at pp. 547–549.) In then concluding that Murray
    was not bound by the first judgment, the Seventh Circuit reasoned that a
    class action “ ‘existed’ ” for a time but was never “ ‘properly conducted,’ for the
    class was decertified on appeal.” (Id. at p. 551.) “If the district judge had, as
    we held he should have, refused to certify the class, there would be no
    obstacle to Murray’s filing his own class action—and it would be odd if by
    virtue of a mistaken ruling by the district judge Murray is barred.” (Ibid.)
    Similarly in Burakoff, the trial court ultimately determined the
    unnamed class members did not have the community of interest necessary for
    class certification, and it would be “odd” if the court’s originally mistaken
    ruling acted to bar Williams from bringing an action he otherwise was
    entitled to pursue.
    U.S. Bancorp relies primarily on federal cases that apply collateral
    estoppel to decertification orders in collective actions brought under the Fair
    Labor Standards Act, 
    29 U.S.C. § 201
     et seq. (FLSA), rather than class
    actions under Rule 23. But because of significant differences between FLSA
    cases and class actions—most notably that FLSA collective actions require
    members affirmatively to opt into the action—these cases are less helpful.
    (See Belle v. University of Pittsburgh Med. Ctr. (W.D.Pa. Sep. 29, 2014, Civil
    Action No. 13-1448) 2014 U.S.Dist.Lexis 136936 [vast majority of plaintiffs
    opted into previous FLSA action]; Adkins v. Ill. Bell Tel. Co. (N.D.Ill. Mar. 24,
    2015, No. 14 C 1456) 2015 U.S.Dist.Lexis 40246, *19–32 [plaintiffs in joint
    17
    action had opted into earlier FLSA collective action]; but see Velasquez v.
    Costco Wholesale Corp. (C.D.Cal. July 14, 2011, No. SACV 11-508 JVS
    (RNBx)) 2011 U.S.Dist.Lexis 161590, *3, 9–11 [following Smith to find prior
    FLSA decertification order lacked collateral estoppel effect even for opt-in
    plaintiffs]; see also Halle v. West Penn Allegheny Health Sys. (3rd Cir. 2016)
    
    842 F.3d 215
    , 224-225 [discussing differences between class certification
    under Rule 23 and conditional certification of collective action under FLSA].)
    We conclude, therefore, that under California law, an order decertifying
    a class has no preclusive effect on absent class members. The trial court’s
    order dismissing Williams’s class claims with prejudice and compelling
    Williams’s individual claims to arbitration must be reversed.
    DISPOSITION
    The order dismissing class claims and compelling arbitration is
    reversed. The matter is remanded for further proceedings consistent with
    this opinion. Williams shall recover his costs on appeal.
    18
    _________________________
    TUCHER, J.
    I CONCUR:
    _________________________
    BROWN, J.
    Williams v. U.S. Bancorp Investments, Inc. et al., (A156226)
    19
    POLLAK, P. J., Dissenting.
    I respectfully dissent. I do agree that the order in question is
    appealable under the death knell doctrine, but believe that the trial court
    properly applied the doctrine of collateral estoppel (or “issue preclusion”) to
    deny class certification.
    “[I]n deciding whether to apply collateral estoppel, the court must
    balance the rights of the party to be estopped against the need for applying
    collateral estoppel in the particular case, in order to promote judicial economy
    by minimizing repetitive litigation, to prevent inconsistent judgments which
    undermine the integrity of the judicial system, or to protect against vexatious
    litigation.” (Clemmer v. Hartford Ins. Co. (1978) 
    22 Cal.3d 865
    , 875, overruled
    on another ground in Ryan v. Rosenfeld (2017) 
    3 Cal.5th 124
    , 131–132.) Here,
    Williams seeks to relitigate an issue previously considered at length in a
    prior proceeding in which he was at the time a member of a certified class
    represented by class counsel.
    There is no dispute that a final determination made in a properly
    certified class action binds unnamed members of the class, and that collateral
    estoppel, or issue preclusion, precludes them from relitigating issues litigated
    and decided in that action. (Taylor v. Sturgell (2008) 
    553 U.S. 880
    , 894;
    Cooper v. Federal Reserve Bank (1984) 
    467 U.S. 867
    , 874; Martorana v.
    Marlin & Saltzman (2009) 
    175 Cal.App.4th 685
    , 694; Alvarez v. May Dept.
    Stores Co. (2006) 
    143 Cal.App.4th 1223
    , 1235; see generally 7 Witkin,
    Cal. Procedure (5th ed. 2020) Judgment, § 464.) The majority concludes that
    because the class in the prior Burakoff1 litigation ultimately was decertified,
    Burakoff was not a “properly conducted class action” and, under the rationale
    Burakoff v. U.S. Bancorp (Super. Ct., L.A. County, 2008,
    1
    No. BC341430) (Burakoff).
    1
    of Smith v. Bayer Corp. (2011) 
    564 U.S. 299
     (Smith) and Bridgeford v. Pacific
    Health Corp. (2012) 
    202 Cal.App.4th 1034
     (Bridgeford), rulings in that action
    do not have collateral estoppel effect. In my view, the majority focuses on the
    wrong point in time in concluding that the class in “in the end [was] ‘a
    rejected class’ ” precluding application of collateral estoppel. (Maj. opn. ante,
    at p. 15.) The relevant time, I submit, is the point at which the decertification
    motion in Burakoff was argued and considered. At that point, the class had
    been certified and class counsel had been found to adequately represent the
    interests of all class members and authorized to act on their behalves. After
    the conduct of discovery, both sides fully presented the question of whether
    common issues predominate and, as the trial court’s order in that case
    demonstrates, the court carefully and thoroughly considered that question.
    Under these circumstances, absent a material difference in the facts, there is
    no reason to give Williams, a member of the certified class when the issue
    was decided, a second bite at the same apple.
    The fact that the class in Burakoff was ultimately decertified does not
    mean that Williams, as a class member, was not fairly and adequately
    represented when the predominance issue was considered and decided. Smith
    held that because the putative class in that case had never been certified, the
    court could not “say that a properly conducted class action existed at any time
    in the [prior] litigation.” (Smith, 
    supra,
     564 U.S. at p. 315, italics added.)
    When our sister Court of Appeal followed Smith in Bridgeford, it denied
    collateral estoppel effect to the order in the prior litigation because the prior
    court had never certified a class, and so the unnamed members of the
    putative class were neither a party nor represented by a party to the prior
    proceedings. (Bridgeford, supra, 202 Cal.App.4th at p. 1044.) In Burakoff, in
    contrast, the court had certified a class of which Williams was a member,
    2
    after determining that class members’ interests were the same and that class
    counsel adequately represented them. When the motion to decertify the class
    was argued and considered, both class counsel and the court bore a fiduciary
    obligation to act in the best interests of the class. (E.g., Hernandez v.
    Restoration Hardware, Inc. (2018) 
    4 Cal.5th 260
    , 266, 273.) Thus, unlike the
    situation in Smith and Bridgeford, Williams’ interests were adequately
    represented when the court determined in the prior proceedings that common
    issues do not predominate.
    The prior court’s ultimate determination that common issues do not
    predominate was not a rejection of its earlier finding that the interests of
    class members do not differ or conflict, or that class counsel could adequately
    represent those interests. Rather, based on additional evidence, the court
    made a pragmatic determination that resolving the class claims will require
    more consideration of factual issues unique to each member than of issues
    common to all members of the class. The court’s ruling was the final
    determination of that issue. As the majority acknowledge, “a prior
    adjudication may be sufficiently final to support preclusion if it ‘is determined
    to be sufficiently firm to be accorded conclusive effect.’ ” (Schmidlin v. City of
    Palo Alto (2007) 
    157 Cal.App.4th 728
    , 774, citing Rest.2d, Judgments, § 13.)
    The fact that Williams was not a party entitled to appeal the
    predominance ruling is irrelevant. For policy reasons explained in Hernandez
    our Supreme Court has decided that, to obtain the right to appeal, an absent
    class member must either move to intervene or move to set aside the trial
    court’s judgment. (Hernandez v. Restoration Hardware, Inc., supra, 4 Cal.5th
    at p. 267.) Neither this long-standing rule reaffirmed in Hernandez nor the
    reasons for the rule are inconsistent with the fundamental principle that
    class members whose interests have been represented by court-designated
    3
    class counsel are bound by resulting decisions in the action. Class members
    are bound by rulings on the merits of the class claims despite their inability
    to appeal those rulings. In my view there is no reason why they should not be
    equally bound by a ruling on the issue of predominance, made after
    exhaustive consideration was given to the issue in the prior proceedings.
    The decision of the federal court in Thorogood v. Sears (7th Cir. 2012)
    
    678 F.3d 546
     not only is not controlling on this court, but also is plainly
    distinguishable. In that case, the decertification order in the prior
    proceedings was based on the fact that the class had been improperly
    certified in the first instance, so that counsel had never properly represented
    members of the putative class. Moreover, notice of the pendency of the
    putative class action was never given, so that the putative class member who
    brought the later action was never notified of his ability to opt out. (Id. at
    pp. 551–552.) Here, in contrast, there is no suggestion that the trial court
    erred in originally certifying the class and designating class counsel, and
    proper notice of the prior action, including presumably of the right to opt out,
    was given to all members of the class, including Williams. Thereafter,
    additional evidence led the court to determine that common issues do not in
    fact predominate, but that determination did not retroactively invalidate the
    prior designation of counsel to represent the class so long as the certification
    remained in effect.
    For several reasons, denying Williams the right to relitigate this issue
    does not violate his right to due process. As just indicated, his interests (and
    the interests of the class) were properly presented and advanced in the prior
    proceedings by counsel authorized to act on behalf of the class. Williams had
    the right to request intervention had he wished to appeal that ruling, but he
    did not do so. And, in all events, he retains the right to pursue his personal
    4
    claim for relief; he has been denied only the right to pursue a claim on behalf
    of others, which is hardly a fundamental right warranting constitutional
    protection. (See, e.g., Alvarez v. May Dept. Stores Co., supra, 143 Cal.App.4th
    at pp. 1233–1234.)
    Before the trial court’s ruling applying collateral estoppel could be
    affirmed, it would be necessary to confirm that there is no material difference
    between the factual issues considered in Burakoff and those applicable in this
    case relating to the similarly described class in a subsequent time period.
    Since the majority does not reach this issue and the ruling is not to be
    affirmed, there is no need to expand on that question at length. Suffice it to
    say that, after careful review of the record before the trial court, I believe
    there was ample support for the court’s conclusion that no material
    differences would justify denying application of collateral estoppel.
    In short, the issue of predominance has been litigated in prior class
    action proceedings in which counsel fairly represented the class of which
    Williams was a member, and the court considered at length the contention
    that common issues predominate and rejected it. For all of the reasons
    underlying the doctrine of collateral estoppel (or “issue preclusion”), I would
    affirm the trial court’s order.
    _________________________________
    POLLAK, P. J.
    5
    Trial Court:                                    City & County of San Francisco Superior Court
    Trial Judge:                                    Hon. Curtis E.A. Karnow
    Counsel for Appellant:                          Capstone Law APC, Ryan H. Wu; and John E.
    Stobart
    Counsel for Respondents:                        K&L Gates LLP, Paul W. Sweeney, Jr.;
    Christina N. Goodrich; Kate G. Hummel; and
    Zach T. Timm
    Williams v. U.S. Bancorp Investments, Inc. et al., (A156226)