Opinion ID: 2570216
Heading Depth: 2
Heading Rank: 1

Heading: Class Action Law Suits and Class Action Arbitration

Text: Before addressing the questions at issue in this case, we first consider the justifications for class action lawsuits. These justifications were set forth in Justice Mosk's oft-quoted majority opinion in Vasquez v. Superior Court (1971) 4 Cal.3d 800, 808, 94 Cal.Rptr. 796, 484 P.2d 964 ( Vasquez ): Frequently numerous consumers are exposed to the same dubious practice by the same seller so that proof of the prevalence of the practice as to one consumer would provide proof for all. Individual actions by each of the defrauded consumers is often impracticable because the amount of individual recovery would be insufficient to justify bringing a separate action; thus an unscrupulous seller retains the benefits of its wrongful conduct. A class action by consumers produces several salutary by-products, including a therapeutic effect upon those sellers who indulge in fraudulent practices, aid to legitimate business enterprises by curtailing illegitimate competition, and avoidance to the judicial process of the burden of multiple litigation involving identical claims. The benefit to the parties and the courts would, in many circumstances, be substantial. We quoted much of the above language with approval almost 30 years later in Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 445, 97 Cal.Rptr.2d 179, 2 P.3d 27 ( Linder ). We also quoted with approval Justice Tobriner's concurring opinion in Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 387, 134 Cal.Rptr. 393, 556 P.2d 755. In the latter case, this court rejected a class action certification against a trading stamp company that allegedly had collected excess taxes, but had given over the excess tax collected to the public treasury and had discontinued the practice before the suit was filed. Although the majority in Blue Chip Stamps placed utmost significance on the small amount of potential individual recovery (18 Cal.3d at pp. 385-386 [134 Cal.Rptr. 393, 556 P.2d 755]), Justice Tobriner's separate opinion effectively clarified that trial courts remain under the obligation to consider `the role of the class action in deterring and redressing wrongdoing.' (18 Cal.3d at p. 387 [134 Cal.Rptr. 393, 556 P.2d 755] (conc. opn. of Tobriner, J.).) Invoking settled principles, Justice Tobriner emphasized: `A company which wrongfully exacts a dollar from each of millions of customers will reap a handsome profit; the class action is often the only effective way to halt and redress such exploitation. [Citations.] The problems which arise in the management of a class action involving numerous small claims do not justify a judicial policy that would permit the defendant to retain the benefits of its wrongful conduct and to continue that conduct with impunity.' ( Linder, supra, 23 Cal.4th at pp. 445-446, 97 Cal.Rptr.2d 179, 2 P.3d 27.) These same concerns were acknowledged by the United States Supreme Court: `The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone's (usually an attorney's) labor.' ( Amchem Products, Inc. v. Windsor (1997) 521 U.S. 591, 617, 117 S.Ct. 2231, 138 L.Ed.2d 689.) It is this important role of class action remedies in California law that led this court to devise the hybrid procedure of classwide arbitration in Keating, supra, 31 Cal.3d 584, 183 Cal.Rptr. 360, 645 P.2d 1192. In that case, plaintiff 7-Eleven franchisors sought to invalidate an arbitration agreement between them and Southland Corporation and proceed with class action litigation to redress Southland's alleged systemic misconduct. This court held that the arbitration agreement was enforceable for most of the claims. In considering the impact that enforcement of the arbitration agreement would have on class action claims, the Keating court stated: This court has repeatedly emphasized the importance of the class action device for vindicating rights asserted by large groups of persons. We have observed that the class suit `both eliminates the possibility of repetitious litigation and provides small claimants with a method of obtaining redress for claims which would otherwise be too small to warrant individual litigation. [Citation.]' [Citation.] Denial of a class action in cases where it is appropriate may have the effect of allowing an unscrupulous wrongdoer to `retain[] the benefits of its wrongful conduct.' [Citation.] [Moreover,] `[c]ontroversies involving widely used contracts of adhesion present ideal cases for class adjudication; the contracts are uniform, the same principles of interpretation apply to each contract, and all members of the class will share a common interest in the interpretation of an agreement to which each is a party.' ( Keating, supra, 31 Cal.3d at p. 609, 183 Cal.Rptr. 360, 645 P.2d 1192, fn. omitted.) The Keating court recognized that [w]ithout doubt a judicially ordered classwide arbitration would entail a greater degree of judicial involvement than is normally associated with arbitration, ideally 'a complete proceeding, without resort to court facilities.' [Citation.] The court would have to make initial determinations regarding certification and notice to the class, and if classwide arbitration proceeds it may be called upon to exercise a measure of external supervision in order to safeguard the rights of absent class members to adequate representation and in the event of dismissal or settlement. A good deal of care, and ingenuity, would be required to avoid judicial intrusion upon the merits of the dispute, or upon the conduct of the proceedings themselves and to minimize complexity, costs, or delay. [Citation.] [¶] An adhesion contract is not a normal arbitration setting, however, and what is at stake is not some abstract institutional interest but the interests of the affected parties. ( Keating, supra, 31 Cal.3d at p. 613, 183 Cal.Rptr. 360, 645 P.2d 1192.) Keating's endorsement of classwide arbitration has been echoed by subsequent Court of Appeal decisions. (See, e.g., Sanders v. Kinko's, Inc. (2002) 99 Cal.App.4th 1106, 121 Cal.Rptr.2d 766; Blue Cross of California v. Superior Court (1998) 67 Cal.App.4th 42, 78 Cal. Rptr.2d 779.)