NEW SUPREME COURT CLASS ACTION DECISION AFFIRMS CONTINUING VALIDITY OF RULE AGAINST "ONE-WAY INTERVENTION"

April 16, 2007 – In Fireside Bank v. Superior Court, S139171, the California Supreme Court reinforced the rule that in class action cases, the class must be certified and given notice before the trial court rules on the merits of the claims made by the asserted class. The purpose of this rule against “one-way intervention” is to avoid giving members of the asserted class a preview of how the action is unfolding so that they can choose to join the class only if early rulings on the merits are favorable. The rule also discourages the filing of multiple class actions by those who might repeatedly opt out of class actions in which unfavorable merits rulings are obtained.

In this case, a car buyer accused a bank of unlawful sales and financing practices, and sought to certify the case as a class action. The buyer also sought a dispositive ruling on the substantive merits of the action. The trial court ruled first on the substantive merits of the action and then later certified a class. The bank filed a writ petition raising the rule against one-way intervention. The Court of Appeal rejected the petition, finding no more than a “weak general preference for deciding class issues first.” (Typed opn., p. 15.)

The Supreme Court reversed. A trial court may depart from the rule against one-way intervention only with “compelling justification” as necessary “to avoid inequitable outcomes in a given case.” (Typed opn., 15.) “[T]rial courts may not depart from the usual order of decision for simply any reason that seems appropriate at the time,” (id. at p. 16), and no compelling justification was shown here. (Id. at pp. 19-20.)

For additional information contact Brad Pauley or Lisa Perrochet at (818) 995-0800 or at bpauley@horvitzlevy.com or lperrochet@horvitzlevy.com.

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