Source: http://www.lawlink.com/research/CaseLevel3/60517
Timestamp: 2019-04-26 16:31:11+00:00

Document:
MARK SIMONS et al., Plaintiffs and Respondents, v. BENJAMIN HOROWITZ et al., Defendants and Appellants.
Slaff, Mosk & Rudman, George Slaff and Marc R. Stein for Defendants and Appellants.
Morgan, Morgan, Towery, Morgan & Spector, W. Robert Morgan and James E. Towery for Plaintiffs and Respondents.
In a class action for damages and an injunction under the California Resale Royalties Act, Civil Code section 986 (the Royalties Act), the trial court entered judgment against the defendant class, ordering each defendant class member to account for and pay each member of the plaintiff class commissions due on sales of fine art in California occurring from [151 Cal.App.3d 838] January 1, 1977, to the date of the judgment. From this judgment Benjamin Horowitz appeals, both as an individual and on behalf of the defendant class.
On February 9, 1978, respondents Mark Simons and Craig Moore filed a complaint for damages and an injunction under Civil Code section 986, claiming to be fine artists within the meaning of the Royalties Act. Simons and Moore also alleged that they were representative of a class of all fine artists who sell their art in California, and that they could fairly represent the interests of that class. The original defendants named in this complaint were Chabot Galleries of Fine Art, Rubicon Gallery of Art, and "Does One to Five Thousand." On March 23, 1978, respondents filed an amended complaint seeking to bring into the action as class defendants under Code of Civil Procedure section 382 "all other persons similarly situated" with the previously named defendants. On March 5, 1979, Upstairs Gallery, Inc., one of the defendants sued and previously served as a Doe, filed an answer to the complaint, "for itself alone."
Nevertheless, on August 20, 1979, the superior court entered an order finding, inter alia, that "there are common issues of fact and law among the plaintiffs' class and the defendants' class; that the plaintiffs and the defendants are each representative of the class"; that "[t]he main plaintiffs and defendants can fairly represent and adequately protect the interests of the class"; and that "[t]he claims and defenses of the representative plaintiffs and defendants respectively are typical of the claims or defenses of the class." The court did not, however, actually define or describe either the plaintiff or the defendant class. Neither did the court indicate who "the main defendants" were, even though the only defendant represented at the August 2 hearing was not one of the named defendants, and had answered the complaint on behalf of itself alone and for no other defendants.
The record does not contain any copy of a "notice" published and mailed pursuant to the August 22, 1979, order. The only evidence regarding notification of the defendant class consists of two declarations of John Dickey, dated January 29, 1980, and September 9, 1981, entered in the record on appeal by stipulation of the parties and order of this court. The September 9, 1981, declaration states that Mr. Dickey mailed "a copy of Judge Allen's Order to those museums and galleries who are listed in the yellow pages of the seven counties in which publication was ordered." There is no evidence of when this "order" was sent; neither is there any evidence that the "order" referred to is the supplemental order of August 22, 1979, rather than one of the several other orders issued by Judge Allen in this matter. The earlier Dickey declaration, dated January 29, 1980, and filed with the superior court on February 5, 1980, states that on January 29, 1980, "2029 copies of the hereto-attached 'Notice to Members of Defendant Class'" were mailed, using addresses "obtained from the yellow page listings, under the headings of 'Art Galleries and Dealers' and 'Museums,' of all California phone directories deposited for public use at the Main City of San Jose Public Library, located at 180 West San Carlos Street." In fact, there is no "Notice to Members of Defendant Class" attached to this declaration, and there is no indication whether this "Notice" is the same as the "order" mentioned in the later September 1981 Dickey declaration. Moreover, there is absolutely no evidence before this court that any of the class defendants were actually served, as had been required by the lower court's supplemental order.
On July 21, 1980, respondents filed an at-issue memorandum and certificate of readiness, showing service on four attorneys and two individual defendants. The next day, an amended at-issue memorandum was filed, omitting the name and address of one of the defense attorneys previously listed. The record does not contain a copy of any notification of the date of trial, or any evidence that such trial notice was provided to any defendants aside from the five listed on the amended at-issue memorandum.
At the proceedings held thereafter on October 10, 1980, only three parties were represented: respondents, and defendants Upstairs Gallery and Cory [151 Cal.App.3d 841] Galleries. Three witnesses were called: the two named plaintiffs, and their attorney. Neither of the defendants present and represented by counsel offered any defense on behalf of the class whatsoever. The court entered judgment on October 23, 1980, ordering each member of the defendant class, apart from the two defendants which had appeared on October 10, to "account for and pay, pursuant to California Civil Code section 986, each artist, or the Arts Council if the artist is not locatable, commissions due on sales of fine art which occurred from January 1, 1977, to date." The court further awarded substantial attorneys' fees and costs to respondents' counsel, to be secured by a lien on payments by the class defendants to artists or the Arts Council. The court also reserved jurisdiction for a period of one year from the date of judgment "to consider the propriety of further relief in the form of an injunction ...." In contrast, respondents' claims against Upstairs Gallery and Cory Galleries were settled by stipulation; and pursuant to agreement, both of these defendants were relieved of any liability for attorneys' fees, costs, or any sales of fine art made between January 1, 1977, and the date of the judgment. From this judgment, appellant Horowitz appealed, "as an individual and on behalf of the defendant class."
 At the threshold, we are confronted with two procedural issues. First, respondents urge that appellant Horowitz has no standing to appeal on his own behalf as an individual. They point out that on March 9, 1981, they filed a voluntary dismissal, ex parte, specifically dismissing Horowitz from the action. This dismissal was filed after Horowitz filed his notice of appeal. Barely two weeks later, respondents moved this court to dismiss the appeal on the grounds that Horowitz had been dismissed from the lawsuit. We denied that motion on May 22, 1981.
 Respondents also argue that because Horowitz did not intervene in the lower court and was never designated a class representative, he has no standing to appear before this court on behalf of the interests of the rest of the alleged defendant class. We do not agree.
The federal courts have upheld the standing of absent individual class members to represent the interests of an entire class on appeal, and to assert "a wrongful denial of the opportunity to participate in the class action." (Greenfield v. Villager Industries, Inc. (3d Cir. 1973) 483 F.2d 824, 829 [32 A.L.R. Fed. 83]; Sertic v. Cuyahoga, Lake, etc., Carpenters Dist. Coun. (6th Cir. 1972) 459 F.2d 579, 581-582; United States v. American Soc. of Composers, Auth. & Pub. (2d Cir. 1971) 442 F.2d 601, 605-606.) Horowitz's principal contention on appeal is that the defendant class was effectively denied the opportunity to participate in this litigation as a result of lack of notice and inadequate representation in the proceedings below. The circumstances of the "representative" defendants' settlement of respondents' claims against them, together with their failure to appeal the adverse judgments against the rest of the defendant class, are convincing evidence of the merit of this contention.
In Gonzales v. Cassidy (5th Cir. 1973) 474 F.2d 67, 75, the Fifth Circuit Court of Appeals specifically held, under circumstances strikingly similar to those before us, that the principles of res judicata did not bar collateral attack on a class action judgment by an absent individual member of the plaintiff class acting on behalf of that class, where the failure of the representative [151 Cal.App.3d 843] plaintiff to prosecute an appeal of the judgment on behalf of the other members of the class rendered the representation of the class inadequate. The court acknowledged the general rule that a class action judgment is binding on absent members of the class. However, it found that there is an exception to this principle based on the constitutional right to due process. "Due process of law would be violated for the judgment in a class suit to be res judicata to the absent members of a class unless the court applying res judicata can conclude that the class was adequately represented in the first suit." (Gonzales, supra, 474 F.2d at p. 74.) Although in the instant case we are faced with an issue of standing on an appeal from a challenged judgment rather than the scope of res judicata in a collateral attack on the judgment, we find the reasoning and holding in Gonzales persuasive.
Respondents urge that Horowitz failed to make any appearance prior to filing his notice of appeal, did not obtain "permission" to intervene in the matter, made no motion for a new trial, and was never "designated" as a class representative. Putting aside the very real question of whether Horowitz had any notice of this lawsuit prior to judgment, we find that he was not required to undertake any of these procedural steps prior to appeal.
One of the key contentions in this appeal is the failure of the designated class representatives to provide adequate representation to the class, including the failure to prosecute an appeal. "The purpose of rule 23 would be subverted by requiring a class member who learns of a pending suit involving a class of which he is a part to monitor that litigation to make certain that his interests are being protected; this is not his responsibility--it is the responsibility of the class representative to protect the interests of all class members." (Gonzales v. Cassidy, supra, 474 F.2d at p. 76.) In the absence of effective representation of the defendant class by the designated representative, only the vigilance of absent class members such as Horowitz can protect those interests. It would simply be inequitable to foreclose Horowitz from representing the interests of the heretofore unrepresented defendant class in appealing the judgment in this case, and we hold that he may do so.
Turning to the merits, we note first that there is a dearth of authority on defendants' class suits, the proper procedures to be followed in such actions, and the limitations thereon. (1 Newberg, supra, Prerequisites for Maintaining a Class Action, ? 1148, p. 249.)  The most familiar kind of representative suit, of course, is the plaintiffs' class action. Actions against a class of defendants are also authorized by Code of Civil Procedure section 382, which provides, in pertinent part: "[W]hen 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, one or more may sue or defend for the benefit of all."
 A defendant class should be certified and such an action tried only after the most careful scrutiny is given to preserving the safeguards of adequate representation, notice and standing. (Marchwinski v. Oliver Tyrone Corp. (W.D.Pa. 1979) 81 F.R.D. 487, 489.) Failure to insure any one of these essentials would require reversal of a judgment against a defendant class. In this case, there was an almost total lack of attention given to any of these vital protections.
[6a] First, respondents were without standing to represent the plaintiff class against the members of the defendant class.
 Putting aside the serious difficulty we have with the trial court's total failure to provide any clear definition or description of the defendant class in this case, we may assume for purposes of this appeal that the "class" consisted of those persons or entities who were to be mailed notification; i.e., "all art galleries and dealers, art dealers wholesale, art museums, and auctioneers as shown in the yellow pages of the telephone books issued to the public in the State of California." fn. 3 [6b] There is no evidence, or indeed any allegation, that the named plaintiffs have any claim against any of the unnamed individual members of this presumed defendant class.
The court's order of August 22, 1979, although not sufficiently clear in setting forth the precise wording of the notice required, did state that notice should be sent "to all art galleries and dealers, art dealers wholesale, art museums, and auctioneers as shown in the yellow pages of the telephone books issued to the public in the State of California." (Italics added.) The September 1981 Dickey declaration states that copies of "Judge Allen's order" (unspecified) were mailed only to "museums and galleries" listed in the yellow pages of "the seven counties in which publication was ordered." On its face, this was not in compliance with the court's August 22, 1979, order, since notice was not sent to all of the defendants listed throughout California. The earlier Dickey declaration of January 1980 states that notice was addressed to individuals and entities under the headings of "Art Galleries and Dealers" and "Museums" listed in the yellow pages of all California telephone directories deposited for public use at the main branch of the City of San Jose public library. There is no indication that the telephone directories used were actually all of the "telephone books issued to the public in the State of California," as required by the terms of the lower court's order. Neither do the categories of addressees listed in this declaration include all the entities in the defendant class, as enumerated in the court's order.
Moreover, the August 22, 1979, order required the respondents "to make actual service upon those defendants against whom he [sic] seeks monitary [sic] damages as compared to injunctive relief." (Italics added.) There is no evidence in the appellate record whatsoever that any members of the defendant class were actually served, either with process or class notification.
 Finally, it is patently clear that the members of the defendant class have not been adequately represented at any point during the proceedings in this matter.
The judgment against the class of defendants is reversed and the cause remanded with directions to enter judgment in favor of the class of defendants.
White, P. J., and Feinberg, J., concurred.
More important, the fact that the court nowhere defined the "defendant class" has resulted in substantial ambiguity in its various orders. By specifically enumerating various entities and individuals in its orders, the trial court created confusion as to just what parties were meant to be included in the presumed defendant class. Thus, the court ordered notice to be mailed "to all art galleries and dealers, art dealers wholesale, art museums, and auctioneers" listed in the telephone yellow pages. Because the trial court never defined any of the terms used in its orders, it is not at all clear whether the term "auctioneers" was meant to be limited to art auctioneers. The Royalties Act, by its terms, applies to all "sellers" of fine art. Thus, this notice list clearly does not include all persons covered by the Royalties Act. Moreover, the notice list is different from the group that the court states may be excluded upon written request, which consists of "any agent for the seller, any auctioneer, gallery, dealer, broker or museum ...." It is unlikely that the court seriously intended that only some class members could "opt out" while others could not, or that only some class members would receive notification by mail, and that these would be a different group from those who might exclude themselves. Nevertheless, the imprecision in the court's orders lends itself to just this kind of confusion.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.