In Alvarez v. May Department Stores Co. (— Cal.Rptr. 3d —, 2006 WL 2874907, Cal.App. 2 Dist., Oct. 11, 2006), a California Court of Appeal affirmed a trial court’s decision to deny class action status to a group of employees based on another state court’s judgment in a similar case denying class certification. The Court of Appeal applied the legal doctrine of “collateral estoppel” and denied the formation of a class based solely on resolution of the same issue in the previous litigation.
Plaintiffs consist of 56 past and present “area sales managers” (“Employees”) employed by May Department Stores Co. (“Employer”). In September 2003, Employees filed a lawsuit alleging individual and class-action claims for failure to pay overtime compensation, conversion, and violation of California unfair business practices and labor laws.
Employer sought dismissal of the class action aspect of the case, arguing Employees were barred from bringing a class action based on the refusal by another California court, only a few months earlier, to certify a class action in two similar cases against Employer. Each of the previous cases had asked to certify a class of current and former area sales managers for Employer, and each case had asserted claims for alleged unfair labor practices. The trial court relied on the legal doctrine of “collateral estoppel,” sustained Employer’s demurrer, and denied class certification prior to conducting an evidentiary hearing on the issue. Plaintiffs appealed.
Under the doctrine of collateral estoppel, a party may not relitigate an issue that was already litigated or decided in a prior proceeding between the same parties. Though Employees claimed that collateral estoppel did not apply because the previous cases were brought by different individuals, the Court of Appeal disagreed.
The Court compared the complaints in each of the cases, and found similar if not identical descriptions of the claims and of the potential plaintiff class in each complaint: Each defined the potential class as “all current and former employees of [Employer] holding the position of a salaried manager . . . designated as an area sales manager”; and each case made essentially the same allegations concerning entitlement to overtime pay and other alleged wrongdoing by Employer. In essence, the Court said, the plaintiffs from the previous lawsuit acted as the “virtual representatives” of Employees. Applying collateral estoppel to prevent formation of a class was not unfair, the Court said, because each Employee remained free to pursue his or her individual claims against Employer.
The Court also found it significant that the same attorney had represented the plaintiffs in each of the previous cases, and that none of the plaintiffs claimed their legal representation had been inadequate. It strongly disagreed with the reasoning of Employees’ counsel, however, because such reasoning would allow every order denying class certification to be relitigated merely by inserting the name of a different individual as the named plaintiff — a result the Court found untenable. It therefore affirmed the trial court’s decision.
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