Hernandez v. Restoration Hardware, Inc.
Hernandez v. Restoration Hardware, Inc.
Opinion of the Court
*653In this class action, the class representatives alleged defendant Restoration Hardware, Inc. (RHI), committed numerous violations of Civil Code section 1747.08, also known as the Song-Beverly Credit Card Act. After a bench trial, the trial court found RHI was liable for as many as 1,213,745 violations of that statute and set a penalty recovery in the amount of $30 per violation, subject to RHI's right to dispute any specific claim. Under that judgment, RHI faced a total maximum liability of $36,412,350.
In posttrial proceedings, class representatives requested the court order an award of attorney fees of $9,103,087.50 (25 percent of the total maximum fund of $36,412,350 created by the judgment) to be payable to class counsel from the fund. RHI agreed it would not contest that request. Francesca Muller, a class member and the person prosecuting the present appeal, requested the court order notice of the attorney fee motion be sent to all class members. The court denied Muller's request, granted the attorney fee motion, and entered judgment in the action. Muller then filed a notice of appeal from the judgment.
Muller asserts the court erred when it declined to order that notice be given to all class members of the hearing on the attorney fee award, and that the *654award was calculated in violation of applicable standards *721and procedures. Muller also claims the court's award was an abuse of its discretion. Class representative Hernandez asserts Muller does not have standing to appeal the judgment and that the appeal should therefore be dismissed. Hernandez alternatively argues (1) no notice to the class of the attorney fee hearing was mandated and (2) the amount awarded as fees, as well as the procedure employed by the trial court for determining the amount of the attorney fees award, was proper.
I
FACTUAL AND PROCEDURAL BACKGROUND
A. The Class Action
Michael Hernandez filed this action in 2008 alleging defendant RHI violated Civil Code section 1747.08 by requesting and recording ZIP codes from consumers who used a credit card in purchase transactions in RHI's California retail stores. After years of litigation, the court ultimately certified the case as a class action, appointed Michael Hernandez and Amanda Georgino as class representatives (together Hernandez), and appointed Patterson Law Group and Stonebarger Law as counsel for the class.
The June 2013 notice to potential class members advised them of the pending class action and explained they had the option of (1) remaining as part of the class and being bound by the judgment, or (2) excluding themselves from the class and not being bound by any judgment. It also advised that, if they elected to remain in the class, they had the option of entering an appearance through counsel. Two weeks later, attorney Schonbrun entered an appearance in the action on behalf of Muller. However, Muller did not move to intervene in the action, or to join as an additional class representative, or to be substituted for Michael Hernandez and Amanda Georgino as class representative.
B. The Verdict and Common Fund Award
After a bench trial, the court issued its decision in favor of the class. The court found RHI committed "as many as" 1,213,745 violations of section 1747.08, subdivision (a)(2), for credit card transactions that occurred during the class period because RHI requested, obtained and recorded the customer's ZIP code as part of the credit card transaction.
Because the court's decision ordered the parties to meet and confer regarding an appropriate claims process, the parties met and agreed on a claims process, and a process for distributing the total award (the claims procedures). The parties' stipulation proposed the final judgment award of $36,412,350 be "treated as a common fund inclusive of any attorneys' fees, costs, and class representative enhancements"
*722subsequently ordered by the court, and also include administrative costs associated with administering the claims process. The parties proposed that, after deduction of attorney fees, costs, and class representative enhancements, the net remaining fund (the Net Fund) would be distributed to class members as (1) a prorated share of the Net Fund up to $30 per violation cash payment to persons submitting valid claims and who elected cash payments, and (2) the "coupon option" to persons submitting valid claims (if they did not elect the cash award) for 33 percent off of an up to $10,000 purchase of nonexcluded RHI merchandise valid for one year from issuance of the coupon. The parties' proposal also contained a provision that, at the end of coupon period, if the payouts from the Net Fund in cash or from coupon savings did not exhaust the Net Fund, an additional coupon would be issued with a dollar cap sufficient to exhaust the Net Fund.
C. The Attorney Fees Determination
Hernandez subsequently moved for an attorney fees award seeking an award of attorney fees equivalent to 25 percent of the total judgment recovered for the class.
Muller, who was served with the attorney fee motions, did not file any objection contesting the propriety of the amount sought by Hernandez as attorney fees. Instead, Muller filed an August 29, 2014, "Request for Clarification," asking for clarification on whether class members would receive notice of the fee application and the right to appear and comment on the application.
At the hearing on the attorney fee application, Muller objected that considering the attorney fees application without first giving class members notice of the fee application and the right to appear and comment on the application was a violation of class action procedures because this fee award was "a settlement as regards to the attorneys' fees ... [because] [class] counsel and defendants negotiated a settlement *723on the question of attorneys' fees." Muller also argued, for the first time at the hearing, that a court must use the "lodestar multiplier approach" (rather than a percentage of the fund approach) when calculating the fee award, but did not argue the amount the court's tentative ruling proposed to award was excessive.
D. The Judgment
The court's final judgment, which apparently tracked the parties' proposed claims procedures process, provided for awarding $36,412,350, to be "treated as a common fund inclusive of any attorneys' fees, costs, and class representative incentive enhancements ordered by the Court and any administrative costs associated with administering the claims process...." The court awarded attorney fees of $9,103,087.50, or 25 percent of the total maximum fund of $36,412,350 created by the judgment, as well as litigation costs and class representative incentive enhancements, and directed the remainder of the fund (less administrative costs of administering the claims process) be distributed as specified by the judgment. Muller filed her notice of appeal within the time specified by law.
*657II
ANALYSIS
Muller raises numerous claims of alleged error in the judgment entered below. First, she claims the court could not adjudicate the attorney fee motion without first giving notice to the class of Hernandez's motion to set the appropriate attorney fee award, and giving all class members an opportunity to object to the motion, and the failure to do so in this case violated both due process protections and California's class action procedures. Second, Muller argues the court, by calculating the award based on a percentage of the common fund rather than by a properly rigorous lodestar multiplier approach, transgressed controlling California precedent. Finally, Muller argues class counsel breached its fiduciary duty to the class by "negotiating" with RHI over the amount of fees to be paid by the common fund.
Hernandez contests each of Muller's claims of error. However, Hernandez raises a jurisdictional challenge to this court's ability to entertain the appeal, arguing that because Muller was neither a "party" nor "aggrieved" by the judgment, she does not have standing to pursue this appeal and the appeal must therefore be dismissed. Because this claim is jurisdictional (Life v. County of Los Angeles (1990)
A. General Principles
Only a "party aggrieved may appeal" from a judgment. (Code Civ. Proc., § 902.) As a general rule, only parties of record may appeal (County of Alameda v. Carleson (1971)
A class action is one prosecuted by named representative plaintiffs, who have a fiduciary responsibility to prosecute *724the action on behalf of the absent parties. (Earley v. Superior Court (2000)
B. Analysis
Hernandez argues that, because Muller is not a party, the appeal should be dismissed under Eggert v. Pac. States S. & L. Co. (1942)
Eggert appears to be on "all fours" with the present action: both involved a class action; both involved a matter litigated to judgment; both involved a challenge to the postjudgment attorney fee award to the counsel for the named plaintiff; both involved appellants who were members of the class, but not named parties, and who had appeared through counsel to object to the attorney fee award; and both involved members who took no steps to be added as named plaintiffs.
Muller argues we may disregard Eggert and entertain this appeal, but we are unpersuaded by her arguments. Muller argues, for example, that Eggert was decided before the 1966 revisions to Rule 23 of the Federal Rules of Civil Procedure and those federal rules are persuasive in modern California class action jurisprudence (see, e.g., Arias v. Superior Court (2009)
Muller also cites several cases in which California appellate courts stated a class member who was not a party to the action obtains appellate standing to *660challenge the judgment merely by interposing an objection to the judgment below. However, neither of the cases cited by Muller, Consumer Cause, Inc. v. Mrs. Gooch's Natural Food Markets, Inc. (2005)
"[A]ppellant is a party aggrieved, and has standing to appeal. [Citing Code of Civil Procedure section 902.] This is true even though appellant could instead have 'opted out,' I.e., requested exclusion from the judgment. [Citation.] As stated by the court in Ace Heating & Plumbing [Co. ] v. Crane [Co. ] [3d Cir. 1971] [453 F.2d 30 , 33], deciding a similar question under rule 23 of the Federal rules of Civil Procedure, '... It is possible that, within a class, a group of small claimants might be unfavorably treated by the terms of a proposed settlement. For them, the option to join is in reality no option at all. Rule 23 recognizes the fact that many small claimants frequently have no litigable claims unless aggregated. So, without court approval and a subsequent right to ask for review, such claimants would be faced with equally unpalatable alternatives-accept either nothing at all or a possibly unfair settlement. We conclude that appellants have standing to appeal....' [Citations.] Were the rule otherwise, a class member who objected in the trial court to the terms of the settlement would be unable to secure appellate review of the court's order approving the settlement." (Trotsky, supra, 48 Cal.App.3d at pp. 139-140,121 Cal.Rptr. 637 .)
Thus, Trotsky focused primarily on whether an objector to a settlement was "aggrieved " within the meaning of Code of Civil Procedure section 902, concluding objectors were aggrieved because " '[i]t is possible that, within a class, a group of small claimants might be unfavorably treated by the terms of a proposed settlement. For them, the option to join is in reality no option at all,' " and reasoning that because those claimants might be forced to choose between "equally unpalatable alternatives"-of accepting either nothing or an unfair settlement-those parties were sufficiently aggrieved for purposes of the right to appeal. (Trotsky, supra, 48 Cal.App.3d at pp. 139-140,
Trotsky 's analysis is also flawed because it relied primarily on federal cases, including Ace Heating & Plumbing Co. v. Crane Co., supra,
DISPOSITION
The appeal is dismissed. Class representatives shall recover costs on appeal.
WE CONCUR:
HUFFMAN, Acting P.J.
NARES, J.
However, the court's decision specified the maximum number of violations was "subject to reduction" if information obtained during the claims process provided RHI with evidence to show that a particular credit card transaction did notresult in a violation of section 1747.08, subdivision (a)(2), because RHI inaccuratelyrecorded the customer's ZIP code. The court accepted class counsel's suggestion that RHI could be given the opportunity to challenge an individual class member's claim during the claims process if RHI could show the ZIP code recordedby RHI for the particular customer did not match the customer's actualZIP code. The court ordered the parties to meet and confer "on the scope and particulars of an appropriate claims process, including a means for RHI to challenge the accuracy of any recorded ZIP codes."
Class counsel declared RHI agreed not to oppose a court award of the requested amount as long as class counsel sought the minimum 25 percent amount and, absent that stipulation, class counsel would have requested a higher amount. Analogous "clear sailing" stipulations have been determined to be appropriate by other courts. (See, e.g., Consumer Privacy Cases(2009)
Muller also sought clarification of whether class counsel would be required to file "lodestar information." However, the court had already ordered class counsel to file lodestar information and, on August 29, 2014, Hernandez did file and serve the required lodestar information.
Hernandez also argues the appeal should be dismissed because Muller was not "aggrieved" by any of the purported errors committed below, and the parties vigorously contest whether the "aggrieved" element is satisfied here. It is unnecessary to address the "aggrieved" element of appellate standing, and we do not examine the bulk of the cases relied on by Muller addressing that issue, because we conclude the separate "party" element is absent here. (See, e.g., Marsh, supra,43 Cal.App.4th at p. 295,
On appeal, Muller asserts Hernandez has "ignore[d] the legal ramifications" of entering an appearance and of objecting to the attorney fees award and "never ... provide[d] legal authority ... for a proposition that [such actions are] insufficient to confer appellate standing." However, we believe Eggert doesexplain the legal effect such actions have on appellate standing, and is fatal to Muller's contrary argument.
We acknowledge the federal decisions, even from the United States Supreme Court (compare Marino v. Ortiz(1988)
Reference
- Full Case Name
- Mike HERNANDEZ, and Francesca Muller, and Appellant v. RESTORATION HARDWARE, INC., and
- Cited By
- 2 cases
- Status
- Published