May a trial court deny a motion to certify a class if the defendants are able to show there was antagonism to the lawsuit on behalf
I.
Tahoe Donner Subdivision is a recreational home site with approximately 6,000 lots near Truckee, California. Dart Industries, Inc. (Dart) developed the subdivision in 1971 and sold approximately 2,600 lots by 1976. Then, 157 past and present owners at Tahoe Donner
The record indicates that the development of these lots at Tahoe Donner engendered a great deal of public controversy. When Dart attempted to draw water for the subdivision from Donner Lake, the Attorney General's office filed suit and successfully enjoined this activity. In order to deal with the sewage from these lots and others, a new agency was established and new sewage treatment facilities were developed. As late as February of 1976, the Department of Real Estate issued a cease and desist order banning further sales of lots at Tahoe Donner until the adequacy of the sewage connections could be assured. This order remained in effect for 18 months.
In their complaint, plaintiffs alleged that Dart or its subsidiary, Dart Resorts, failed to plan and provide for adequate water supply, sewage treatment facilities, recreational facilities, and maintenance.
Plaintiffs filed a class certification motion under Code of Civil Procedure section 382 which authorizes class action suits.
Plaintiffs based their motion for class certification on the allegations of their complaint, their declarations, exhibits incorporated in the record, and points and authorities. The thrust of their argument was that a class action was proper since they had established an ascertainable class and a well-defined community of interest among the class members. (See Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 704 [63 Cal.Rptr. 724, 433 P.2d 732].) The ascertainable class, they maintained, consisted of the record owners of lots at Tahoe Donner who had received the Final Subdivision Public Report and since each member of the class was affected by the failure of Dart to meet the needs of the subdivision, the requirement of a community of interest was also met.
In order to prove that they could adequately represent the entire class, the plaintiffs filed declarations by their attorneys as to the attorneys' experience with class action suits. Individuals who were personally aware of the attorneys' prior experience, also filed declarations.
The Tahoe Donner Association (TDA), interveners in this lawsuit, opposed the motion to certify the class. This association automatically includes in its membership any purchaser of a lot at Tahoe Donner. At the time TDA decided to intervene, Dart had a controlling interest in the association since a majority of the Tahoe Donner lots were still owned by Dart. Furthermore, Dart then had three representatives on the five-member board of directors of this association and the president of TDA was Mr. Sid Karsh, president of Dart Resorts.
The flyer accused plaintiffs of damaging the Dart project by filing their lawsuit. It was claimed that the lawsuit was "more emotional than factual." There was no attempt to present the opposite viewpoint or even to list the factual allegations contained in the complaint that there had been problems with adequate water and sewage connections. The flyer boldly stated: "Dart has gone the distance, plus the extra mile, to meet their [sic] commitments to us, the property owners."
The pamphlet invited each property owner to return to Mr. Huffman the lower portion of the flyer after checking one of the boxes which indicated that (1) the owner felt that "Tahoe Donner is a fine project and Dart is meeting their [sic] commitments"; or (2) the owner was "not satisfied with Dart's efforts to meet their [sic] commitments"; or (3) the owner could be "counted on to contribute some funds towards the `support Tahoe Donner' effort."
Of the 2,600 lot owners to whom it was mailed, only 325 responded. Testimony was adduced which indicated that 266 of those who responded checked the first alternative, 41 checked the second, and 18 simply returned the flyer unmarked. Some of the responses asked for more information and indicated they were unaware of the lawsuit. In comments appended to the returned flyers, some owners indicated support for the project but wished more information about the lawsuit and others endorsed Mr. Huffman's approach.
The trial court denied class certification on July 11, 1978. The order of the court rested primarily on the results of the Huffman/Dart survey and the opposition of the Tahoe Donner Association to the suit. The court concluded that plaintiffs had not "carried the burden of proving
This appeal followed.
II.
"Class actions serve an important function in our judicial system. By establishing a technique whereby the claims of many individuals can be resolved at the same time, 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." (Eisen v. Carlisle & Jacquelin (2d Cir.1968) 391 F.2d 555, 560.) Because of these important dual functions, courts and legislators have looked with increasing favor on the class action device. Dramatic developments in class action procedure have marked the last two decades, with the expansive amendments in 1966 of rule 23 of the Federal Rules of Civil Procedure (28 U.S.C.)
If the vast majority of the class do not oppose the suit, the minority may have its views presented either as a subclass or as interveners. (See 7 Wright & Miller, supra, at p. 639; Developments — Class Actions, supra, 89 Harv.L.Rev. at pp. 1490-1492.)
In Fanucchi v. Coberly-West Co. (1957) 151 Cal.App.2d 72 [311 P.2d 33], the court held that even though one-third of the proposed class signed affidavits stating that they did not wish to be a part of the class, the class action suit could not be barred. "If [the opponents of the class] do not want to be paid they need not claim their share of any recovery which may result, but they may not thus defeat the right of the remaining growers to maintain a class action...." (Id., at p. 82.) Quite clearly, the Fanucchi court felt that class members who opposed the suit should not be able to defeat the right of the remaining members of the class to maintain a representative action.
Neither Dart nor the trial court addressed this state precedent. Instead, a federal case was cited to support the assertion that if there were any antagonism to a class action suit, this factor automatically signifies that there was not adequate representation by the named plaintiffs. The trial court relied on the two-pronged test for adequate representation outlined in Shulman v. Ritzenberg, supra, 47 F.R.D. 202. There, the court held that "(1) the representative party must be interested enough to be a forceful advocate and his chosen attorney must be qualified, experienced and generally able to conduct the litigation, and (2) the representative party must have interests which are compatible with and not antagonistic to those whom he would represent." (Id., at p. 207.)
The trial court's reliance on the holding in Shulman is misplaced since that case involved only a six-member class excluding the antagonistic class members. Certification would not have fulfilled the basic purpose of class adjudication because joinder was possible. Contrary to the defendant's view, Shulman provides support for the plaintiffs' position that class status may be denied only if antagonism of such a substantial degree is shown that the purpose of class certification would be defeated if the motion were granted. (See also Knuth v. Erie-Craw-ford Dairy Coop. Association (3d Cir.1968) 395 F.2d 420, 428.)
The essential question presented by this case is whether antagonism per se by members of a class should automatically preclude the certification of a class. Since this state has a public policy which encourages the use of the class action device, rules promulgated by this court should reflect that policy. One scholarly commentary suggests that "[d]ifferences which do not raise questions as to the very legitimacy of the class action process, ... but which merely reflect variances in view as to the proper outcome of a suit, do not provide reason for a court to refuse to hear a class suit." (Developments — Class Actions, supra, 89 Harv.L.Rev. at p. 1490.)
Further, "[m]ost differences in situation or interest among class members ... should not bar class suit. If the factual circumstances underlying class members' claims differ, or if class members disagree as to the proper theory of liability, the trial judge, through use of techniques like subclassing or intervention, may incorporate the class differences into the litigative process, and give all class members their due in deciding what is the proper outcome of the litigation. Even if differences among class members are more fundamental, having to do with the type of relief which should be sought or indeed with whether the class opponent ought to be held liable at all, judicial accommodation appears to provide a sufficient mechanism for the protection of absentee interests. So long as a dispute concerns the outcome of litigation, the trial judge is in a position to isolate the differing positions, judge their validity in light of the substantive law governing the case, and shape the outcome of the suit to give the various class interests the weight to which the law entitles them." (Id., at pp. 1490-1492 (fns. omitted).)
When a class contains various viewpoints, the courts may ensure that these viewpoints are represented by allowing them to join as interveners (as TDA did in this case) or as additional representatives of subclasses
Since the judicial system substantially benefits by the efficient use of its resources, class certifications should not be denied so long as the absent class members' rights are adequately protected. Additionally, there is great value in including the differing viewpoints, rather than precluding the class suit. Inclusion will have the secondary effect of giving the trier of fact more information which should ultimately result in a more informed decision.
In La Sala v. American Sav. & Loan Assn. (1971) 5 Cal.3d 864, 875, footnote 10 [97 Cal.Rptr. 849, 489 P.2d 1113], this court urged trial courts to define classes in such a manner as to "`permit utilization of the class action procedure.'" If this court were to adopt a rule that any antagonism (6 percent in this case) by class members to the lawsuit is sufficient to defeat class treatment, it would bar a large number of class suits. Furthermore, such a rule would encourage defendants to exploit this loophole by seeking out or attempting improperly to sow dissension within a class. (Cf. La Sala v. American Sav. & Loan Assn., supra, 5 Cal.3d at p. 873; Weeks v. Bareco Oil Co. (7th Cir.1941) 125 F.2d 84, 90.) Divergent viewpoints can be brought into the litigation when the trial court allows intervention and/or well-defined subclasses within the class.
This policy is in accord with the decisions of our Courts of Appeal in Fanucchi and Hebbard. Since the defendants did not establish in the trial court that there was either a conflict of interest
The results of the flyer questionnaire show no more than approximately 6 percent of the class of some 4,000 persons antagonistic to the class action suit. This small number should not be sufficient to defeat the motion for certification. Similarly, the intervention of an association which is largely under the control of Dart should not be sufficient evidence of antagonism to deny the certification. Any property owners whose interests differ from those of the named plaintiffs can be adequately protected by the interveners and the representatives of subclasses, if the trial court finds it appropriate to set up subclasses. A sizeable number of owners of Tahoe Donner lots have chosen to join as named plaintiffs in this suit. This large group should not be denied the opportunity to proceed as a class simply because 6 percent of the potential class members may be antagonistic to their lawsuit.
This issue appears to be one of first impression in this state. Although Vasquez v. Superior Court, supra, 4 Cal.3d 800, involved prayers for damages and rescission in a class action context, that case is not dispositive of the issue here since no continuing relationship existed between the parties. In Tober v. Charnita, Inc. (M.D.Pa. 1973) 58 F.R.D. 74, the federal court faced a similar issue. That court's holding is instructive. "The named plaintiffs do not seek common relief for the
The defendants ask this court to reject the Tober rule and to follow Young v. Trailwood Lakes, Inc. (E.D.Ky. 1974) 61 F.R.D. 666. In Young, the plaintiff sought class certification in a controversy arising out of alleged misrepresentations in the sale of subdivision lots. The plaintiff charged a violation of the Consumer Credit Protection Act (15 U.S.C. § 1601 et seq.) and the Interstate Land Sales Full Disclosure Act (15 U.S.C. § 1701 et seq.). The court found that the claims were not proper as class actions. The Young court went on to cite Tober but then ignored its holding by stating that "conceivably antagonistic goals" of rescission and damages "preclude effective administration as a class action." (Id., at p. 667.)
To rule otherwise would invite the kind of speculation that went on in the trial court below. To illustrate "ambivalence" by a named plaintiff, the trial court relied on the deposition of a lot owner, Mr. Warren Estes, who testified that he would be most pleased if the project could go forward without the many problems which the lawsuit sought to remedy. This testimony was used as evidence that there was an inconsistency between the position of the named plaintiffs and their attorneys regarding rescission and punitive damages.
However, this assertion of inconsistency overlooks the obvious. There is no inconsistency between the filing of a lawsuit to remedy an alleged fraud and the hope that the subdivision will be completed in conformity with the original promises made by Dart. Both the named plaintiffs and the absent class members seek the benefit of the bargain they made with the defendants. Why else would the plaintiffs have asked for the imposition of a constructive trust on any profits from the development in order to ensure that adequate facilities were provided? Nevertheless, some plaintiffs may have suffered damage not capable of remedy under that trust, e.g., those owners who faced foreclosure after the Department of Real Estate's ban on the sale of lots. Since the seeking of common relief is no longer a prerequisite to a class suit (Daar v. Yellow Cab Co., supra, 67 Cal.2d at pp. 707-713), a prayer for relief that includes rescission and a request for punitive damages should not bar certification for a class suit.
Reviewing courts consistently look to the allegations of the complaint and the declarations of attorneys representing the plaintiff class to resolve this question. (See, e.g., Vasquez v. Superior Court, supra, 4 Cal.3d at p. 810; Occidental Land, Inc. v. Superior Court, supra, 18 Cal.3d at pp. 361-362; Petherbridge v. Altadena Fed. Sav. & Loan Assn., supra, 37 Cal.App.3d 193.) The issue of ascertainability of the class is a relatively simple matter. In this case, the record owners of the lots at Tahoe Donner are easily identified and located. Joinder of all the potential plaintiffs would not be practicable in a case involving over 2,600 sales of lots.
The thrust of this suit is the inadequacy of the plans for necessities such as adequate water and sewage removal. If there is such a violation, it will affect every lot owner within the subdivision. The named plaintiffs may plead their additional individual claims or they may waive them. The absent class members have the option of dropping out of the lawsuit to protect their separate claims. Since individual claims of the class members are adequately protected, there is no reason to place an obstacle in the path of plaintiffs' suit.
There is no issue of collusion here since none was raised. Plaintiffs established that 242 lot owners seek to represent the class and that their attorneys have substantial experience in class action litigation. Since the plaintiffs need not show that "every member of the class [is] enthusiastic about the maintenance of the lawsuit" (Shulman v. Ritzenberg, supra, 47 F.R.D. at p. 207 (fn. omitted)), they have met their burden in this regard. Further, no present and substantial conflict between the interests of the absent class members and the named plaintiffs was shown.
Since plaintiffs have met the legal tests set forth for class certification, it was error for the trial court to deny their motion to certify based on antagonism within the class.
III.
A motion for certification of a class should not be denied by a trial court because some members of the potential class are antagonistic to the lawsuit. To permit a dissident group within the class to preclude maintenance of a representative suit would unnecessarily interfere with the rights of the class members to use this equitable procedure. The dissident's views may be asserted within the lawsuit by way of intervention or subclassing. To rule otherwise would eliminate a substantial number of class action suits in this state.
The trial court in this case refused to certify this ascertainable class of property owners at Tahoe Donner because it believed that the plaintiff's motion had to be denied if the defendant showed any antagonism between the members of the class and the named plaintiffs. This was an error of law. Consequently, the order denying certification is reversed.
Tobriner, J., Mosk, J., Richardson, J., Newman, J., Rattigan, J.,
FootNotes
"(a) Any consumer entitled to bring an action under Section 1780 may, if the unlawful method, act, or practice has caused damage to other consumers similarly situated, bring an action on behalf of himself and such other consumers to recover damages or obtain other relief as provided for in Section 1780.
"(b) The court shall permit the suit to be maintained on behalf of all members of the represented class if all of the following conditions exist:
"(1) It is impracticable to bring all members of the class before the court.
"(2) The questions of law or fact common to the class are substantially similar and predominate over the questions affecting the individual members.
"(3) The claims or defenses of the representative plaintiffs are typical of the claims or defenses of the class.
"(4) The representative plaintiffs will fairly and adequately protect the interests of the class."
Although section 1781 is not directly applicable to the present action because of the definition of a consumer as an "individual who seeks or acquires ... goods or services ..." (Civ. Code, § 1761, subd. (d)), this court has suggested that section 1781 and rule 23 may be used as procedural guidelines to ensure fairness in class action suits. (Vasquez v. Superior Court (1971) 4 Cal.3d 800, 821 [94 Cal.Rptr. 796, 484 P.2d 964, 53 A.L.R.3d 513].)
Moreover, it is inappropriate to limit Fanucchi since the present case also fits within the language of waiver of explicitly mentioned claims. The fact that 266 members of the present class "Support Tahoe Donner" and think that Dart is "meeting its commitment" does not prove that they have waived their rights to adequate amenities or damages in the absence of adequate facilities.
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