Opinion ID: 2636870
Heading Depth: 2
Heading Rank: 2

Heading: Benefits of Certification

Text: The trial court denied class certification for the additional reason that class members would not receive any substantial benefit. While the court did not address potential recoveries of penalty class members, it did conclude that the individual damages of surcharge class members, if any, would be small, perhaps not enough to support the required mailings to and from the class. The Court of Appeal agreed, finding that the surcharge claim, even if legally correct, would not confer substantial benefits because the burden of identifying class members and providing notice would be too high in relation to the small amount of each member's potential recovery. In reaching its conclusion, the appellate court assumed the surcharge class would require individual notice by first class mail. The issue of the appropriate form of notice to class members was not before the trial court when it ruled on certification. Hence, that court has yet to determine whether individual notice by mail, or notice by publication, or some other type of notice, is proper in this case. Because the record remains factually undeveloped regarding the necessity, feasibility and costs of any particular form of notice, we decline the parties' invitation to speculate whether or not notice by first class mail may be constitutionally required. [9] Viewed in context, the trial court's reference to the required mailings to and from the class simply alluded to mailings that inevitably would occur in the event proofs of claims and checks for damage awards were sent. The court's point was that, even if members of the proposed class were to prevail on the surcharge claim, they would not receive a substantial benefit because their potential monetary recovery would be small. We now turn to the question before us: Was adequate consideration given to the possible benefits of class action in this case? In concluding that no substantial benefit would result from certification, both the trial court and the Court of Appeal focused narrowly on each putative class member's potential recovery under the surcharge claim. Setting aside the fact that class members who were repeat customers might be entitled to recover far more than the minimal 80-cent damage figure noted by the trial court, it is firmly established that the benefits of certification are not measured by reference to individual recoveries alone. Not only do class actions offer consumers a means of recovery for modest individual damages, but such actions often produce 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. ( Vasquez, supra, 4 Cal.3d at p. 808, 94 Cal.Rptr. 796, 484 P.2d 964.) In Blue Chip Stamps, supra, 18 Cal.3d 381, 134 Cal.Rptr. 393, 556 P.2d 755, we held that a trial court abused its discretion in ordering certification of a class comprised of persons who sought recovery of excess tax reimbursements that they paid to the defendant trading stamp company while redeeming stamps for merchandise. In finding that no substantial benefit would result from certification, we found several circumstances relevant. First, the potential recovery of each class member was minimal (some as little as 18 cents), thus making it doubtful that members would come forward ultimately to prove their individual claims. (See id. at pp. 384-386, 134 Cal.Rptr. 393, 556 P.2d 755.) Second, the defendant had ended its allegedly wrongful practice long before the action was filed, which rendered the request for injunctive relief a rather empty prayer. ( Id. at p. 386, 134 Cal.Rptr. 393, 556 P.2d 755.) Third, the defendant had not retained the disputed reimbursement payments but instead paid them over to the public treasury. ( Id. at p. 387, 134 Cal. Rptr. 393, 556 P.2d 755.) Fourth, the plaintiffs' proposed form of fluid recovery, i.e., repayment of excess tax collections by reducing future charges, would not have compensated class members in a rational fashion and was problematic given the great decline of the stamp business; hence, leaving the overpayments in the public treasury seemed a fair solution. ( Id. at pp. 386-387, 134 Cal.Rptr. 393, 556 P.2d 755.) 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 (cone. 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. (See Vasquez v. Superior Court [, supra, ] 4 Cal.3d 800, 808, 94 Cal.Rptr. 796, 484 P.2d 964; Daar v. Yellow Cab Co. [, supra, ] 67 Cal.2d 695, 715, 63 Cal.Rptr. 724, 433 P.2d 732.) 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. (See Daar v. Yellow Cab Co., supra, 67 Cal.2d at p. 715, 63 Cal.Rptr. 724, 433 P.2d 732; Cartt v. Superior Court [, supra ,] 50 Cal.App.3d 960, 971, 124 Cal. Rptr. 376.) ( Ibid. ) Thus, the facts before the court in Blue Chip Stamps did not support certification because group action would neither serve to deter wrongdoing nor result in any added compensation for class members. ( Id. at p. 389, 134 Cal. Rptr. 393, 556 P.2d 755 (cone. opn. of Tobriner, J.); see also Caro v. Procter & Gamble Co., supra, 18 Cal.App.4th at p. 660, 22 Cal.Rptr.2d 419.) The views expressed by Justice Tobriner were entirely consistent with the holding and recognition of the majority that class actions are appropriate when numerous parties suffer injury of insufficient size to warrant individual action and when denial of class relief would result in unjust advantage to the wrongdoer. [Citations.] ( Blue Chip Stamps, supra, 18 Cal.3d at pp. 385-386, 134 Cal.Rptr. 393, 556 P.2d 755.) Indeed, since Blue Chip Stamps was decided, we have affirmed the principle that defendants should not profit from their wrongdoing simply because their conduct harmed large numbers of people in small amounts instead of small numbers of people in large amounts. ( State of California v. Levi Strauss & Co. (1986) 41 Cal.3d 460, 472, 224 Cal.Rptr. 605, 715 P.2d 564 [discussing fluid recovery in class actions].) The benefits and burdens of a proposed class action must be evaluated under correct legal standards. While the potential amount of each individual recovery is a significant factor in weighing the benefits of a class action, it is not the only factor requiring consideration. By incorrectly limiting the scope of the relevant inquiry, the lower courts here did not evaluate whether the proposed class suit is the only effective way to halt and redress the alleged wrongdoing, or to prevent unjust advantage to Thrifty. Moreover, the Court of Appeal assumed that substantial time and expense would be required to provide legally adequate notice to class members, even though the trial court had yet to take evidence and rule on the matter. Accordingly, without intimating any view on the matter, we find it appropriate to leave this issue to the trial court for reexamination.