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Class Action Defense Issues–In re Natural Gas: Objecting Class Members To Class Action Settlements Not Exempt From Being Declared Vexatious Litigants California Court Holds

California Appellate Court Confirms that One Who, as a Nonrepresentative Class Member, Repeatedly Objects to Class Action Settlements may be Deemed a Vexatious Litigant, But Reverses Court Designation for Lack of Evidence

Based on a request that came not from the class action defense but from the class action plaintiffs’ attorneys, a California trial court declared a lawyer, Ernest M. Thayer, a vexatious litigant, see California Code Civ. Proc., §§ 391-391.7, “based on his history of filing objections to class action settlements . . . in which he was a member of the plaintiff class or represented a member of such a class.” In re Natural Gas Anti-Trust Cases I, II, II & IV, 137 Cal.App.4th 387, 390 (Cal.App. 2006). The Court of Appeal agreed that one who engages in conduct that falls within the scope of California’s vexatious litigant statutes is not insulated from being declared a vexatious litigant by virtue of his or her role in a class action as a nonrepresentative class member. Id.

The Court began its analysis with the definition of a vexatious litigant, and then addressed each subsection of the applicable statute in turn. Under California Code of Civil Procedure section 391(b), “a vexatious litigant is a person who does any of the following:

‘(1) In the immediately preceding seven-year period has commenced, prosecuted, or maintained in propria persona at least five litigations other than in a small claims court that have been (i) finally determined adversely to the person . . . .

‘(2) After a litigation has been finally determined against the person, repeatedly relitigates or attempts to relitigate, in propria persona, either (i) the validity of the determination against the same defendant or defendants as to whom the litigation was finally determined or (ii) the cause of action, claim, controversy, or any of the issues of fact or law, determined or concluded by the final determination against the same defendant or defendants as to whom the litigation was finally determined.

‘(3) In any litigation while acting in propria persona, repeatedly files unmeritorious motions, pleadings or other papers, conducts unnecessary discovery, or engages in other tactics that are frivolous or solely intended to cause unnecessary delay. . . .’” In re Natural Gas, at 394.

First, the appellate court held that objections to class action settlements do not fall within the scope of Section 391(b)(1): “A nonrepresentative class member who exercises his or her due process rights by filing such an objection does not commence, institute or maintain a civil action or proceeding.” Id., at 395 (citation omitted). But it reached a different conclusion as to Sections 391(b)(2) and (3). Because Section 391(b)(2) concerns whether a person is relitigating “a claim or an issue previously determined against him or her and in favor of the same defendant,” and Section 391(b)(3) concerns whether a person is engaging in conduct that is frivolous or a delay tactic, a class member could, by filing objections or challenging court orders on appeal, commit acts that fall within the scope of either of these subsections. Id., at 396.

Nonetheless, on the facts of the case before it, the California appellate court reversed. With respect to Section 391(b)(2), the Court observed that Thayer acted as a lawyer in some cases, and so there was no determination against him – only his client. The Court further observed that plaintiffs’ counsel did not qualify as a “defendant” within the meaning of the statute, and so Section 391(b)(2) could not be used to support a vexatious litigant designation. In re Natural Gas, at 397-98. With respect to Section 391(b)(3), the Court held that the record was insufficient to support a vexatious litigant finding because plaintiffs’ counsel “did not attempt to establish on the proceedings below that Thayer engaged in the conduct specified in this statute in this case,” id., at 398. Accordingly, while holding that nonrepresentative class members could be deemed vexatious litigants in the proper case, it reversed that designation as to Thayer.

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