In re. Baycol Cases I and II: Cal. Supreme Court Clarifies Class Action "Death Knell" Doctrine

In re Baycol Cases I and II (2/28/11) --- Cal.4th ----, 2011 WL 682378, clarifies issues regarding the “death knell” doctrine in class actions. In Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, the Supreme Court adopted a “death knell” doctrine that allowed a party to appeal immediately orders dismissing class action claims. In Baycol, the Court considered whether the doctrine extends to orders that simultaneously terminate individual claims as well, or does it apply only where, as in Daar itself, individual claims survive?

We conclude the preservation of individual claims is an essential prerequisite to application of the death knell doctrine: the doctrine renders appealable only those orders that effectively terminate class claims but permit individual claims to continue. When instead an order terminates both class and individual claims, there is no need to apply any special exception to the usual one final judgment rule to ensure appellate review of class claims. Instead, routine application of that rule suffices to ensure review while also avoiding a multiplicity of appeals. Because the Court of Appeal misapplied these principles in dismissing an appeal from the sustaining of a demurrer to class claims here, we reverse.

Slip op. at 1. The Court explained, and I'll quote it at some length because I find it interesting:

Two procedural circumstances were critical to our decision in Daar: first, that the appealed-from order was the practical equivalent of a final judgment for some parties, and second, that in the absence of our treating the order as a de facto final judgment, any appeal likely would be foreclosed. On the first point, the order “virtually demolished the action as a class action” and was in “ ‘legal effect’ ... tantamount to a dismissal of the action as to all members of the class other than plaintiff”. In cases decided since Daar, we and the Courts of Appeal have emphasized that orders that only limit the scope of a class or the number of claims available to it are not similarly tantamount to dismissal and do not qualify for immediate appeal under the death knell doctrine; only an order that entirely terminates class claims is appealable.

Equally important in Daar was the circumstance that the order appealed from was essentially a dismissal of everyone “ other than plaintiff.” We emphasized that permitting an appeal was necessary because “[i]f the propriety of [a disposition terminating class claims] could not now be reviewed, it can never be reviewed”, and we were understandably reluctant to recognize a category of orders effectively immunized by circumstance from appellate review. This risk of immunity from review arose precisely, and only, because the individual claims lived while the class claims died. As the United States Supreme Court has explained, “[t]he ‘death knell’ doctrine assumes that without the incentive of a possible group recovery the individual plaintiff may find it economically imprudent to pursue his lawsuit to a final judgment and then seek appellate review of an adverse class determination.” This concern-that an individual plaintiff may lack incentive to pursue his individual claims to judgment, thereby foreclosing any possible appellate review of class issues-is present in cases such as Daar, where individual claims persist but remain unresolved, but is wholly absent in cases where a final judgment resolving all claims will follow as a matter of course without further action by the individual plaintiff. Consistent with this understanding, decisions in other jurisdictions specially permitting appeal of orders terminating class claims routinely rely on the assumption that appeal is warranted because review otherwise would be foreclosed by the persistence of individual claims.

Thus understood as requiring an order that (1) amounts to a de facto final judgment for absent plaintiffs, under circumstances where (2) the persistence of viable but perhaps de minimis individual plaintiff claims creates a risk no formal final judgment will ever be entered, the death knell doctrine fits comfortably within the existing statutory framework. In Daar itself, we described the class certification denial order as “in legal effect a final judgment” settling the respective rights of the absent class members vis-à-vis the defendant, and thus within the settled rule that orders amounting to de facto judgments as to some but not all parties could be treated as final judgments and appealed under former section 963.

Slip op. at 3-4.

Justice Werdegar wrote for a unanimous Court. The opinion is available here.