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Class Action Defense Cases–Harper v. 24 Hour Fitness: California State Court Reverses Decertification Of Class Action Holding Trial Court’s Analysis Of UCL Class Action Claims Was “Legally Incorrect”

Trial Court Erred in Decertifying UCL Class Action because Post-Proposition 64 UCL Relief does not Extend Beyond Named Plaintiffs Absent Class Action Treatment and because Attorney Fees Generally not Recoverable Absent Class-Wide Relief California State Court Holds

Plaintiffs filed a class action against 24 Hour Fitness alleging violations of California’s unfair competition law (UCL) and Consumers Legal Remedies Act (CLRA), and false advertising; the class action complaint asserted that their health club memberships allowed them to renew for an additional three years – the same period as their original membership contract – “at the same rate if they renewed their membership when the initial term expired,” but defendant asserted that the membership contracts permitted “renewals at the specified rate for an annual term only.” Harper v. 24 Hour Fitness, Inc., ___ Cal.App.4th ___ (Cal.App. October 22, 2008) [Slip Opn., at 2-3]. The class action argued that “24 Hour Fitness’s contracts and sales techniques were deceptive and falsely implied that members who prepaid their dues for the entire contract term were entitled to keep their dues at the same rate if they renewed their membership when the initial term expired.” Id., at 2. In March 2003, the trial court granted plaintiffs’ motion to certify the litigation as a class action, id., at 3-4, but plaintiffs thereafter made seven (7) attempts to modify the definition of the class, each of which were rejected by the trial court, id., at 4-5. In January 2006, defense attorneys moved the trial court to decertify the class, which the trial court granted. Id., at 5-7. The Court of Appeal reversed.

The trial court’s class action decertification order was based on the court’s reexamination of whether a class action was a superior means for resolving the UCL claims and whether – with the benefit of three (3) years of class discovery – plaintiffs could establish commonality and typicality. Harper, at 5-6. The trial court concluded that class action treatment was no longer warranted; on the contrary, it found that class action treatment “has ceased to be beneficial” and that class action treatment had “become an obstacle to the prompt, fair, and (reasonably) economical resolution of this matter.” Id., at 6.. The Court of Appeal summarized the court’s ruling at page 6 as follows:

To the extent individualized review of each member’s class claim now seemed to be required, the court was not persuaded by [plaintiffs’] contention that common questions predominated sufficiently for the continued use of a class action. More significantly, the court questioned the continued benefit or superiority of class treatment. Emphasizing the lack of progress since the original class certification order, the court found the unceasing process of attempting to define and redefine the class demonstrated the ineffectiveness of the class action: “At this point we are less than two months from the running of the five years for bringing this action to trial under CCP § 583.310. The Court issued the Certification Order over 34 months ago, but class notice still has not gone out. Indeed, to hear plaintiffs, we are today farther from giving class notice than we were on March 3, 2003 [the date of the original class certification order], because we still need to revisit the issue of class definition. [¶] . . . [¶] As this chronology makes clear, the issues of class definition and identification of the members of the class have taken on a life independent of the merits of the litigation, and indeed have apparently become the driving force.”

The Court of Appeal reversed. After summarizing the standards for reviewing class certification orders, see Harper, at 7-9, the appellate court identified the grounds underlying the decertification order, id., at 9. It summarized them as (1) that the injunctive relief sought by the class action was available equally in a representative action, because it “may extend beyond the named parties,” (2) that class action treatment was not necessary because the deterrent effect “would be equally well served by injunctive relief against a practice by defendant and a restitutionary remedy, both of which are available under sections 17200 and 17500 even without class certification,” and (3) that decertification of the class action will not impact prosecution of the case because attorney fees are recoverable under Sections 17200 and 17500. Id., at 9. The Court of Appeal held that each of these findings was “legally incorrect,” id. Specifically, it held that the passage of Proposition 64 restricted available relief to the named plaintiffs unless a class action was certified, id., at10, thus undermining the first and second bases for the trial court’s order. The appellate court also held that recovery of attorney fees under the UCL generally was “dependent on the existence of class-wide relief,” id., thus undermining the final ground for the trial court’s order. Going further, the appellate court concluded that “the need to individually examine each member’s contract to ultimately determine whether he or she qualifies for inclusion in the class does not…demonstrate a lack of ascertainability or manageability or establish that common questions of fact or law do not predominate.” Id., at 11. And finally, the Court of Appeal held that commonality existed because the trial court had restricted the class definition to “issues appearing on the face of the [member’s] contract without reference to oral representations,” id., at 12. Accordingly, the Court of Appeal reversed the class decertification order and remanded the class action to the trial court for further proceedings. Id., at 13.

NOTE: One justice dissented, agreeing with the trial court that “after five years of class status discovery it no longer appears that the individual class members share a community of interests.” Harper, at 1 (Woods, J., dissenting).

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