Source: https://scocal.stanford.edu/opinion/state-california-v-levi-strauss-co-30734
Timestamp: 2020-08-10 11:57:33
Document Index: 401683615

Matched Legal Cases: ['§ 16720', '§ 4620', '§ 1', '§ 16750', '§ 16760', '§ 4620', '§ 207', '§ 16760', '§ 16750', '§ 1', '§ 1']

State of California v. Levi Strauss & Co. - 41 Cal.3d 460 - Thu, 03/20/1986 | California Supreme Court Resources
Home > Opinions > State of California v. Levi Strauss & Co.
Citation 41 Cal.3d 460
State of California v. Levi Strauss & Co.
State of California v. Levi Strauss & Co. (1986) 41 Cal.3d 460 , 224 Cal.Rptr. 605; 715 P.2d 564
(Opinion by Bird, C. J., with Broussard, Reynoso, JJ., and Sutter (John), J., concurring. Separate concurring opinions [41 Cal.3d 461]
Carlyle W. Hall, Jr., Bill Lann Lee and Marilyn O. Tesauro as Amici Curiae on behalf of Intervener and Appellant. [41 Cal.3d 464]
As finally approved, the settlement yielded between 35 and 40 cents per pair of jeans, an average individual recovery of $2.60-$3. The Attorney General's office was awarded $1.2 million in attorney fees, and the costs of administration were estimated at $1.8-$2.2 million. The total amount allocated to consumers was approximately $9.3 million. This amount, plus accumulated [41 Cal.3d 465] interest, is currently deposited with the state pending the outcome of this appeal.
Some time later, the then Attorney General, Evelle Younger, obtained the results of the Commission's investigation and began his own inquiry into the impact of the company's activities on California consumers. On the basis of the information thus acquired, he tentatively decided to bring suit alleging [41 Cal.3d 466] violations of the Cartwright Act (Bus. & Prof. Code, § 16720 et seq.), fn. 2 California's antitrust law. He informed the company of his intent and began negotiations for a settlement.
In January of 1980, then Attorney General George Deukmejian moved to certify a class consisting of all current California residents who purchased [41 Cal.3d 467] Levi Strauss products at retail during the 1972-1975 period. At various times, the Attorney General estimated that this class consisted of from several to 7 million households.
The legal notice of settlement, which set forth the terms of the agreement and the options available to class members, was sandwiched between an introductory letter, signed by the Attorney General, and a claim form for those class members who desired to participate in the settlement. The Attorney General's letter, labeled "Cash Refund Notice," urged eligible consumers to claim their cash refunds by returning the enclosed claim form. It stated that the Attorney General "has settled" the action and that purchasers are now eligible for a cash refund of up to $2.00 per pair." It did not mention the legal requirement that the court approve. [41 Cal.3d 468]
In January of 1981, the court approved the distribution plan, including the notice as revised by the Attorney General. A hearing on the fairness of [41 Cal.3d 469] the settlement was set for April 27, 1981. The Attorney General was granted $1.2 million out of the settlement fund to cover preliminary expenses.
The Attorney General recommended that the top 1 percent of the claims be treated as suspect. fn. 6 Each person submitting a suspect claim would be required to submit a notarized confirmation that the information contained [41 Cal.3d 470] in the claim was accurate. Failure to do so would result in denial of compensation.
The course of events described above presents this court with a difficult problem. Nearly $1.5 million of the settlement fund has already been spent on the present distribution plan. Intervener criticizes this expenditure, but does not contend that reversal would somehow restore the funds. Further, over 1 million household claims have been received and processed, thereby inducing legitimate expectations of compensation among class members. Intervener remains critical of this method of distribution to individual consumers [41 Cal.3d 471] on the basis of largely unverified claims. Nonetheless, at oral argument, intervener joined amici Consumers Union et al. in urging that -- with some additional security precautions -- these claims be honored. However, this court can preserve the present claims only by upholding the settlement. [1] (See Trotsky v. Los Angeles Fed. Sav. & Loan Assn. (1975) 48 Cal.App.3d 134, 153 [121 Cal.Rptr. 637], [a settlement must be approved or rejected as a whole since it is impossible to determine whether the parties considered the different portions of the agreement to be interdependent].) In view of the concessions made by intervener at oral argument, it would serve no practical purpose to invalidate the settlement in this six-year-old class action.
[2] Since the pathbreaking case of Vasquez v. Superior Court (1971) 4 Cal.3d 800 [94 Cal.Rptr. 796, 484 P.2d 964, 53 A.L.R.3d 513], the California courts have recognized that the consumer class action is an essential tool for the protection of consumers against exploitative business practices. The Vasquez decision challenged the trial courts to develop "pragmatic procedural devices" to "simplify the potentially complex litigation while at the same time protecting the rights of all the parties." (Id., at p. 820; cf. Sindell v. Abbott Laboratories (1980) 26 Cal.3d 588, 610 [163 Cal.Rptr. 132, 607 P.2d 924, 2 A.L.R.4th 1061], cert. den. 449 U.S. 912 [66 L.Ed.2d 140, 101 S.Ct. 286] [courts must fashion consumer class action remedies to meet the changing needs of modern industrial society].)
Damage distribution, the crux of the present case, poses special problems in consumer class actions. Often, proof of individual damages by competent evidence is not feasible. Each individual's recovery may be too small to [41 Cal.3d 472] make traditional methods of proof worthwhile. In addition, consumers are not likely to retain records of small purchases for long periods of time.
In response to these problems, the courts have turned to the equitable doctrine of cy pres. This doctrine originated in the law of charitable trusts. Where compliance with the literal terms of a charitable trust became impossible, the funds would be put to "the next best use," in accord with the dominant charitable purposes of the donor. (See Estate of Tarrant (1951) 38 Cal.2d 42, 49 [237 P.2d 505, 28 A.L.R.2d 419], and cases cited.) [3] In the class action context, the cy pres doctrine is generally denominated "fluid recovery."
[4] The propriety of fluid recovery in a particular case depends upon its usefulness in fulfilling the purposes of the underlying cause of action. (Bruno v. Superior Court (1981) 127 Cal.App.3d 120, 129 [179 Cal.Rptr. 342] [hereafter Bruno], citing Simer v. Rios (7th Cir. 1981) 661 F.2d 655, 676; Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 389 [134 Cal.Rptr. 393, 556 P.2d 755] (conc. opn. of Tobriner, J.).) Fluid recovery may be essential to ensure that the policies of disgorgement or deterrence are realized. (Simer v. Rios, supra, 661 F.2d at p. 676.) Without fluid recovery, defendants may be permitted to retain ill gotten gains simply because their conduct harmed large numbers of people in small amounts instead of small numbers of people in large amounts.
[6] The implementation of fluid recovery involves three steps. (See generally, Malina, Fluid Class Recovery as a Consumer Remedy in Antitrust Cases (1972) 47 N.Y.U. L.Rev. 477, 482.) First, the defendant's total damage liability is paid over to a class fund. Second, individual class members are afforded an opportunity to collect their individual shares by proving their particular damages, usually according to a lowered standard of proof. Third, any residue remaining after individual claims have been paid is distributed [41 Cal.3d 473] by one of several practical procedures that have been developed by the courts.
[8] Under the price rollback approach, the uncollected portion of the fund is distributed through the market by lowering the price of the defendant's product for a specified period. fn. 8 For example, the class action in Daar v. Yellow Cab (1967) 67 Cal.2d 695 [63 Cal.Rptr. 724, 433 P.2d 732] was resolved by "refunding" taxicab overcharges through a court-ordered reduction in fares. (See Blue Chip Stamps v. Superior Court, supra, 18 Cal.3d at p. 388, fn. 1 (conc. opn. of Tobriner, J.).)
None of the parties has proposed a price rollback in the present action. This method is not appropriate in nonmonopoly markets like the jeans market since it compels consumers to collect their refunds by making further [41 Cal.3d 474] purchases of the defendant's products, to the detriment of the defendant's competitors. (See 3 Newberg, Class Actions, supra, § 4620, p. 85; Cy Pres Remedy, supra, 39 U.Chi. L.Rev. at pp. 462-463.) Further, the price of jeans to the consumer is fixed not by the defendant, but by independent retailers. Hence, a price rollback would pose difficult if not insuperable management problems.
Market St. Ry. Co. v. Railroad Commission (1946) 28 Cal.2d 363 [171 P.2d 875], though not a class action, provides an example of this method. In that case, this court was faced with the problem of how to refund over $700,000 in streetcar overcharges. Individual riders had been offered an opportunity to collect refunds by submitting sworn applications, but less than $15,000 had been claimed. This court awarded the remaining funds to the City and County of San Francisco, which had purchased the railway subsequent to the overcharges, for the improvement of street car services. The court reasoned that the people of San Francisco, who had paid the overcharges in the first place, would benefit from the improvements. (Id., at pp. 366, 372-373.) fn. 9
Earmarked escheat provides indirect compensation to silent class members. The recipient governmental body may use class funds to ameliorate the effects of past harm and to reduce the risk of future harm. Administrative costs are minimized by utilizing already extant governmental bodies to administer the fund. fn. 10 [41 Cal.3d 475]
Like earmarked escheat, the consumer trust fund device uses the residue to further the purposes of the substantive law and provide indirect compensation to class members. Unlike earmarked escheat, there is no danger that the recovery will be submerged in the state's general fund. However, the consumer trust fund device does entail the establishment of a new organization with its own administrative expenses. To avoid this additional cost, some courts have allocated the funds directly to responsible private organizations. (For examples of this approach, see cases cited in In re Folding Carton Antitrust Litigation (N.D.Ill. 1983) 557 F.Supp. 1091, 1109, fn. 10, affd. in part and revd. in part (7th Cir. 1984) 744 F.2d 1252.) fn. 11
[11a] Finally, the residue, or the fund itself, may be divided among the individual claimants. As initially approved, the present settlement incorporated [41 Cal.3d 476] this "claimant fund sharing" approach. (See generally, Economic Analysis, supra, 34 Stan.L.Rev. at pp. 177-178.) fn. 12
This problem was, according to intervener, exacerbated by widespread fraud. The settlement provided no safeguard against fraud for 95 percent of the claims. The 5 percent of claimants who alleged the largest number of jeans were required to resubmit their claims with a sworn statement. Over 80 percent of these claimants preferred to abandon their refunds rather than confirm their claims on pain of perjury. The magnitude of this negative [41 Cal.3d 477] response casts doubt on the accuracy of claims beyond the top 5 percent as well.
Further, there appears to be no reported decision in any jurisdiction approving a plan so lacking in safeguards against fraud. The Attorney General cites In re Coordinated Pretrial Proceedings, etc. (D.Minn. 1975) 410 F.Supp. 706. However, the distribution plan in that case required proof for all above-average claims. (Id., at p. 713.) The opinion does not reveal whether notarization or other sworn verification was required.
The concurring and dissenting opinion's reliance on the parens patriae statute finds no justification in law or policy. Far from being intended to supersede or restrict the private consumer class action, the parens patriae action is designed to provide a means of redress where a private class action is not viable. (See generally, Jones, Perspectives in Consumer Advocacy: [41 Cal.3d 478] Antitrust Parens Patriae Suits Pursuant to the Hart-Scott-Rodino Antitrust Improvements Act -- A Solution for Wrongs Without Redress (1977) 5 Pepperdine L.Rev. 77, 78.) fn. 13
The Court of Appeal's well-reasoned opinion in Bruno, supra, 127 Cal.App.3d 120 is instructive on the relation between the parens patriae power and private class actions. In that case, the plaintiff class proposed that damages be distributed by a price rollback or earmarked escheat. The defendant sought to strike these methods from the complaint, arguing that the parens patriae statute prohibited them in private consumer class actions. (Id., at p. 133.) The court held that the proposed methods should not be stricken from the complaint and stated: "The fact that the law empowers the Attorney General ... to bring parens patriae antitrust lawsuits and specifies the methods for distributing the damages they recover evidences no legislative intent to prohibit fluid class recovery in private antitrust class actions." (Ibid.)
Nor should the courts seek guidance from the parens patriae statute. The two-pronged approach of the statute -- individual distribution or general escheat -- is overly restrictive in the class action context. It would disfavor or preclude two of the most widely used and effective methods of fluid recovery -- the earmarked escheat and the consumer trust fund. Moreover, general escheat, the residue distribution method mandated by the statute, provides the least focused compensatory effect of any of the various methods of fluid recovery. (See ante, at p. 475.) To compel the use of this method would be to cripple the "substantial compensatory function" of the private class action (Bruno, supra, 127 Cal.App.3d at p. 134). fn. 15 [41 Cal.3d 479]
The disposition of the residue on remand is a matter within the discretion of the trial court. However, it should be noted that under the criteria set forth here, amici's suggestion that the residue should be used to establish a consumer trust fund has considerable merit. It is estimated that up to one-half of the original group of claimants may have moved since 1981. Claimants who have moved may be difficult to locate. Hence, further attempts to distribute the entire fund to individual claimants would result in an even lower rate of participation than did the original plan. Amici's consumer [41 Cal.3d 480] trust fund plan -- or a plan employing earmarked escheat in place of the consumer trust fund -- would provide some indirect compensation for silent class members, while ensuring that the residue of the recovery is used on projects designed to effectuate the aims of the Cartwright Act.
Trial courts face the difficult task of managing class actions so that both of these purposes are fulfilled. An overemphasis on class participation can [41 Cal.3d 481] be costly and may render an action unmanageable. On the other hand, an exclusive concern with enforcement of the law may deprive class members of their rights to influence the conduct of actions brought on their behalf.
Trial courts are accorded broad discretion in organizing pretrial proceedings in complex class actions. (See, e.g., Grunin v. International House of Pancakes (8th Cir. 1975) 513 F.2d 114, 121 [notice]; Cotton v. Hinton (5th Cir. 1977) 559 F.2d 1326, 1333 [discovery].) fn. 2 However, viewed in the light [41 Cal.3d 482] of the preceding discussion and the applicable case law, it is apparent that the trial court's procedural rulings, taken together, exceeded the bounds of that discretion.
However, the record lacked information that was essential to the court's assessment of the distribution plan. Most important, there were no facts on which to base a finding of class size. Yet, class size is of the essence in determining the compensatory effectiveness of a claimant fund sharing plan. [41 Cal.3d 483] Such a plan can scarcely be considered reasonable as the sole means of distributing a class fund if the overwhelming majority of class members recover nothing. (See Durand, An Economic Analysis of Fluid Class Recovery Mechanisms (1981) 34 Stan.L.Rev. 173, 178.)
Further, the over 300 objections actually received were not included in the record or accorded a reasonable response. It is well established that before a settlement may be approved, "[e]ach objection ... must become a part of the record of the case [and] [t]he trial court ... must review carefully these objections." (Mandujano, supra, 541 F.2d at p. 835; see also Boyd v. Bechtel Corp. (N.D.Cal. 1979) 485 F.Supp. 610, 617.) "The Court should examine the settlement in light of the [substantial] objections raised and set forth on the record a reasoned response to the objections including findings of fact and conclusions of law necessary to support the response." (Cotton v. Hinton, supra, 559 F.2d at p. 1331, citing Mandujano, supra, 541 F.2d 832.) A trial court's failure to perform these duties has been held to warrant reversal. (Id., at pp. 836-837.)
The Attorney General argues that inclusion of the objections in the record would have served no purpose. He points out that the court had before it his two-page summary of objections and argues that an examination of this summary is enough to show that all of the objections either were baseless or were argued vigorously by intervener. [41 Cal.3d 484]
Intervener further contends that the trial court should have granted her request for $12,000 to conduct studies, including a survey of class preferences. The breadth and depth of class opposition is clearly relevant in assessing the fairness and reasonableness of a settlement, particularly where alternative remedies are available. (See, e.g., Flinn v. FMC Corporation (4th Cir. 1975) 528 F.2d 1169, 1173, cert. den. (1976) 424 U.S. 967 [47 L.Ed.2d 734, 96 S.Ct. 1462]; Bryan v. Pittsburgh Plate Glass Co. (PPG Indus., Inc.) (3d Cir. 1974) 494 F.2d 799, 803, cert. den., 419 U.S. 900 [41 Cal.3d 485] [42 L.Ed.2d 146, 95 S.Ct. 184].) fn. 4 Courts have relied upon class elections to reject the remedial proposals advanced by class representatives. (See, e.g., East Texas Motor Freight v. Rodriguez (1977) 431 U.S. 395, 405 [52 L.Ed.2d 453, 463, 97 S.Ct. 1891]; see generally, Garth, supra, 77 Nw. U.L. Rev. at p. 532.)
The class notice must "fairly apprise the class members of the terms of the proposed compromise and of the options open to dissenting class members." (Trotsky v. Los Angeles Fed. Sav. & Loan Assn. (1975) 48 Cal.App.3d 134, 151-152 [121 Cal.Rptr. 637].) It must be "'scrupulously neutral' and emphasize that the court is expressing no opinion on the merits of the case or the amount of the settlement." (Grunin v. International House of Pancakes, supra, 513 F.2d at p. 122, citing Philadelphia Housing Auth. v. American R. & S. San. Corp. (E.D.Pa. 1970) 323 F.Supp. 364, 378, and Cannon v. Texas Gulf Sulphur Company (S.D.N.Y. 1972) 55 F.R.D. 308, 313, fn. 2.) The court should clearly indicate that it has done nothing more than determine that "there is, in effect, 'probable cause' to submit the proposal to members of the class and to hold a full-scale hearing on its fairness ...." (Manual for Complex Litigation, supra, § 1.46, p. 55.)
The requirement of neutral notice is particularly important where -- as here -- there has been no ongoing communication between attorneys and class members, and the notice constitutes the first and only official communication to the overwhelming majority of class members. [41 Cal.3d 486]
However, the notice of proposed settlement must be viewed as a whole and assessed in light of its impact on the ordinary class member. Common sense suggests that cover labels and introductory letters are generally intended to describe and introduce the entire contents of a communication. The assertions that the Attorney General "has settled" the action and that certain purchasers "are now eligible" for refunds strongly implied that the settlement had already been approved and all that remained was to distribute the refund. Hence, readers might well conclude from the labels and the [41 Cal.3d 487] letter that they were being asked only to fill out the claim form. They might see no need to plow through the tedious "Legal Notice." fn. 6
In line with the need for pragmatic procedural devices to solve the complex problems of class actions (see Vasquez v. Superior Court (1971) 4 Cal.3d 800, 820 [94 Cal.Rptr. 796, 484 P.2d 964, 53 A.L.R.3d 513]), the court could have provided the class members with some description of the actual consequences of acquiescence or objection. For example, the court could have permitted intervener and the Attorney General to include in the notice brief arguments for their remedial proposals. Further, the court could have given some indication of the likely consequences of proceeding to trial. For example, according to the Attorney General's own estimate, the action might have yielded $20 to $80 million in damages prior to trebling had a trial occurred.
In conclusion, the trial court unduly restricted the class members' participation. Where -- as here -- there is a substantial intra-class dispute over alternative, legally permissible remedies, trial courts should make special efforts to ascertain class preferences and promote effective participation. In this light, the trial court's procedural rulings, taken together, unduly discouraged class participation. [41 Cal.3d 488]
I concur in the majority opinion to the extent that it affirms the judgment and remands the cause to the trial [41 Cal.3d 489] court for further proceedings, including disposition of the settlement "residue" in an appropriate manner.
By way of background, the Court of Appeal in Bruno v. Superior Court (1981) 127 Cal.App.3d 120, 123-124 [179 Cal.Rptr. 342], explained the concept of "fluid recovery" as follows: "The topic of fluid class recovery regularly arises in class actions ... where the class has many members with relatively small individual claims. In such circumstances, if the class recovers a favorable judgment, it is likely that only a fraction of the class members will have the desire, and documentation, to file an individual claim for part of the damages. Fluid class recovery is thus invariably suggested as a way to distribute the usually substantial amount of remaining damages. The theory underlying fluid class recovery is that since each class member cannot be compensated exactly for the damage he or she suffered, the best alternative is to pay damages in a way that benefits as many of the class members as possible and in the approximate proportion that each member has been damaged, even though, most probably, some injured class members will receive no compensation and some people not in the class will benefit from the distribution; or, as one commentator states it, 'where funds cannot be delivered precisely to those with primary legal claims, the money should if possible be put to the "next best" use.' [Citation.]
Here, however, the trial court specifically found: "The proposed plan of distribution is the best feasible method of giving each class member a reasonable opportunity to claim his or her respective share of the settlement fund; the proposed plan of distribution has adequate safeguards to insure against any undue or fraudulent claims being paid from the settlement fund; there is no basis for concluding that the proposed plan of distribution discriminates [41 Cal.3d 490] against any class members ...." Clearly, the trial court did not abuse its discretion in rejecting alternative proposals.
Although it is unclear the extent to which the parens patriae provisions of the Cartwright Act apply to this case, those provisions afford guidance to the trial courts (see Vasquez v. Superior Court (1971) 4 Cal.3d 800, 820 [94 Cal.Rptr. 796, 484 P.2d 964, 53 A.L.R.3d 513]), and they reflect a policy favoring individual recovery wherever possible. Among other things, those provisions (1) limit recovery of damages to "Any person who is injured in his business or property ..." (Bus. & Prof. Code, § 16750, subd. (a)), (2) authorize the Attorney General "to secure monetary relief ... for injury sustained by ... natural persons to their property ..." (§ 16760, subd. (a)(1)), and (3) mandate that each injured person be given "a reasonable opportunity to secure his appropriate portion of the monetary relief" so awarded (id., subd. (e)(1)). Finally, the act provides that any funds awarded by the court as monetary relief which are not "exhausted by distribution ... [to injured persons] shall be treated ... as ... unclaimed property" subject to escheat to the state. (Id., subd. (e)(3).)
Applying the considerations previously set forth in Bruno, supra, to the present case, the trial court's distribution plan reasonably assures that the settlement fund will be paid to those consumers actually injured by Levi Strauss' alleged misconduct, thereby obviating any resort to a trust fund remedy. The size of individual claims evidently was not so trivial as to discourage their filing, as approximately 1.3 million claims were filed; the average family ultimately may recover from $10 to $12 according to Levi Strauss' calculations. Moreover, lack of documentation was no obstacle to individual recovery in this case, for the trial court relieved claimants of that obligation, recognizing the likelihood that few potential class members [41 Cal.3d 491] would have retained any proof of purchase or similar confirmatory documents.
The majority, characterizing the consumer trust fund device as "increasingly popular" and "widely used" (ante, pp. 475, 478), cites no case, and our research has uncovered none, that overturned a trial court's settlement distribution plan in favor of a consumer trust fund or other "fluid recovery" long after claims had been filed and substantial monies expended in administering claim procedures. Indeed, our research has uncovered no California case in which the trial court has ever found a consumer trust fund to be appropriate. In the federal courts, several circuits have held or implied that fluid class recovery is never permissible. (Eisen v. Carlisle & Jacquelin (2d Cir. 1973) 479 F.2d 1005, vacated on other grounds (1974) 417 U.S. 156 [40 L.Ed.2d 732, 94 S.Ct. 2140]; Windham v. American Brands, Inc. (4th Cir. 1977) 565 F.2d 59, cert. den. (1978) 435 U.S. 968 [56 L.Ed.2d 58, 98 S.Ct. 1605]; In re Hotel Telephone Charges (9th Cir. 1974) 500 F.2d 86.) At least one federal appellate court has overturned a trial court's decision to create a consumer trust fund. (In re Folding Carton Antitrust Litigation (7th Cir. 1984) 744 F.2d 1252.) Apart from this lack of support for fluid recovery in general, requiring such a recovery here would be unwise in light of the present status of this case. To declare nugatory at this late stage the trial court's efforts to achieve an equitable distribution directly to injured claimants would serve no overriding public purpose. Indeed, it would result in an inexcusable waste of time, money and effort heretofore expended by the settling parties.
First, the majority opinion appears to adopt the intervener's assertion that "only a minority of class members bothered to file claims." (Ante, p. 476.) Yet by the April 6, 1981, deadline, 1.3 million claims for 37 million pairs of men's and boys' jeans had been received, a substantial number of claims given the relatively small amounts which were involved. The majority also seems to credit the intervener's argument that "a large percentage of the [41 Cal.3d 492] recovery went to pay inflated or baseless claims," and that "widespread fraud" took place. (Ibid.) I cannot agree.
­FN 1. Intervener's attorneys represent eight organizational and eleven individual objectors. The organizational objectors are the American G.I. Forum, Chinese for Affirmative Action, Glide Memorial Methodist Church, League of United Latin American Citizens, Los Padrinos, Mexican American Political Association, National Association for the Advancement of Colored People -- Western Region, and Oakland Citizens Committee for Urban Renewal.
­FN 2. Unless otherwise noted, all statutory references are to the Business and Professions Code.
­FN 3. Substantially reduced, the proposed cover appeared as depicted:
­FN 4. The cover letter, signed by then Attorney General Deukmejian, read as follows:
­FN 5. Television station "KPIX" filed objections on behalf of 155-165 persons. The Attorney General maintains that these objections were not submitted in compliance with the terms of the notice. Because the trial court did not include in the record any objections other than intervener's, this court is unable to judge the merits of the Attorney General's argument.
­FN 6. Claims submitted by households of more than 12 persons, a much smaller proportion of the total claims, were also to be deemed suspect.
­FN 7. The concurring and dissenting opinion concedes that fluid recovery may be employed in an appropriate Cartwright Act case. (See conc. & dis. opn., post, at pp. 489-490.) The concurring and dissenting opinion also implicitly approves two other aspects of the Bruno opinion: the rejection of federal precedents holding fluid recovery to be unlawful (Bruno, supra, 127 Cal.App.3d at pp. 128-129), and the determination that fluid recovery is not barred under Blue Chip Stamps v. Superior Court, supra, 18 Cal.3d 381 (Bruno, supra, 127 Cal.App.3d at p. 126).
­FN 8. The following discussion owes much to the scholarly brief submitted by amici Consumers Union et al.
­FN 9. Similarly, the settlement in a more recent case provided for the defendant oil company to make annual contributions both to the State Department of Health Services, earmarked for environmental health purposes, and to the State Water Pollution Cleanup and Abatement Account. (People ex rel. George Deukmejian v. Occidental Petroleum Corp. (E.D.Cal. Feb. 6, 1981) Civ. No. 5-79-989 [unpublished stipulated settlement included in the record of the present case].) Other examples abound. (See, e.g., United States v. Exxon Corp. (D.D.C. 1983) 561 F.Supp. 816, 856-857, affd. in relevant part (T.E.C.A. 1985) 773 F.2d 1240, pp. 1280-1287 [recovery in oil overcharge case paid to the United States Treasury for future distribution to states for use in state and federal energy conservation and related programs]; see generally, 3 Newberg, Class Actions, supra, § 4620, p. 86.)
­FN 10. Some commentators have suggested that the benefits of earmarked escheat may be diluted since there is nothing to prevent the Legislature from reducing appropriations to the recipient agency by the amount of the damage award. (See, e.g., Durand, An Economic Analysis of Fluid Class Recovery Mechanisms (1981) 34 Stan.L.Rev. 173, 180-181 [hereafter Economic Analysis].) However, earmarked escheats can be conditioned on the state's promise not to divert previously budgeted funds. (See Cy Pres Remedy, supra, 39 U.Chi. L.Rev. at p. 458, fn. 42.) Though the court's ability to enforce such conditions may be limited, there is no reason to assume that the state would act in bad faith.
­FN 11. Of course, a court considering the allocation of funds to an existing private body must be mindful of possible conflicts of interest. An organization seeking the right to administer class funds may view a large recovery as a pot of gold to fund projects ranked high on the group's own agenda but of little or no benefit to the class. Trial courts are frequently called upon to make similar assessments when deciding whether a plaintiff seeking to maintain an action on behalf of a class will fairly and adequately represent the interests of all members of the class. (See4 Witkin, Cal. Procedure (3d ed. 1985) Pleading, §§ 207-209, pp. 245-248.) Where such a conflict is identified, earmarked escheat or the creation of a new body to administer the consumer trust fund may provide suitable alternatives.
­FN 12. Claimant fund sharing can be used as a method for distributing the residue -- that portion of the fund that remains after class members have proved their actual damages. It also can be employed, as here, to distribute the entire fund to individual claimants on a pro-rata basis. Had distribution in this case not been delayed by the appellate process, the class fund would have been distributed pro-rata, leaving little if any residue.
­FN 13. The reserve role of the parens patriae action is readily apparent from the fact that it, unlike the private class action, does not provide for the recovery of treble damages. (§ 16760, subd. (a)(2); § 16750, subd. (a).)
­FN 14. This conclusion is in no way altered where, as here, the two types of action are brought together and settled together. To hold otherwise would penalize the Attorney General and the class for employing the parens patriae action in its intended role as a backup for private class actions. In view of this conclusion, it is not necessary to decide whether the parens patriae statute operates retroactively to cover this action. The alleged violations occurred in 1972-1976. Section 16760 was enacted in 1977. (Stats. 1977, ch. 543, § 1, p. 1747.)
­FN 15. By contrast, the statute's approach is consistent with the character of the parens patriae action, which is less concerned with compensation. "The most reasonable interpretation of section 16760, subdivision (e) is that the Legislature has sanctioned the use of a civil action by the Attorney General ... regardless of the compensatory effect of the action." (Bruno, supra, 127 Cal.App.3d at pp. 133-134.)
­FN 1. By comparison, the concerns weighing against an emphasis on class participation and dissent are far stronger at the class certification stage. If the class is not certified, the harm caused by the defendant's violation may never be remedied in any fashion. (Cf. Johnson v. Georgia Highway Express, Inc. (5th Cir. 1969) 417 F.2d 1122, 1124 [differences among class members held not to warrant denial of certification, but subclassing and intervention might be necessary at the remedial stage].)
­FN 2. Though not binding on this court, federal law concerning class action procedures has been applied where consistent with California law and policy. (See La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 872 [97 Cal.Rptr. 849, 489 P.2d 1113]; compare Bruno v. Superior Court (1981) 127 Cal.App.3d 120, 128 [179 Cal.Rptr. 342] [rejecting federal case law that was inconsistent with California policy].)
­FN 3. According to the record, up to 344 persons may have informed the court that they wished to object at the fairness hearing.
­FN 4. It should be noted that the courts are not mechanically bound by expressions of class opposition. (Flinn, supra, 528 F.2d at p. 1173; Bryan, supra, 494 F.2d at p. 803.) The many arguments against placing undue reliance on majority sentiment are discussed in Rhode, supra, 34 Stan.L.Rev. at pages 1232-1242.
­FN 5. The cover letter, signed by then Attorney General Deukmejian, read as follows:
­FN 6. It is instructive to compare the notice in the present case with the "Sample Class Action Notice ... with Proof of Claim Form" provided in the Manual for Complex Litigation. The sample notice begins with an announcement of the action. It then sets forth briefly the positions of the parties and the options available to class members. The instructions concerning the filing of proofs of claim come last. (Manual for Complex Litigation, supra, § 1.45(II), pp. 217-222.)
­FN 1. I suggest that the "price rollback" remedy is not a method of distributing "residue" (majority opn., p. 473), but an alternative to the creation of residue.
­FN 1. Business and Professions Code section 16760, subdivision (g) authorizes district attorneys as well as the Attorney General to file parens patriae actions.
Thu, 03/20/1986 41 Cal.3d 460 Review - Criminal Appeal Opinion issued
1 THE STATE OF CALIFORNIA, Plaintiff and Respondent, v. LEVI STRAUSS & CO. (Defendant and Respondent)
2 ; HANNAH KERNER, Intervener and Appellant (; HANNAH KERNER)
3 LEVI STRAUSS & CO. (Defendant and Respondent)
4 ; HANNAH KERNER, Intervener and Appellant (; HANNAH KERNER)
Mar 20 1986 Opinion: Affirmed
SCOCAL, State of California v. Levi Strauss & Co. , 41 Cal.3d 460 available at: (https://scocal.stanford.edu/opinion/state-california-v-levi-strauss-co-30734) (last visited Monday August 10, 2020).